Today, we’re releasing the third publication in a series of deeper insights into selected topics based on the findings of MMU’s 2013 State of the Industry Report on Mobile Financial Services. This publication, ‘Beyond vouchers: Meeting growing demand for off-net P2P transfers’, examines the changing dynamics of P2P transactions in mature, competitive markets, and suggests that vouchers (money sent as a coupon or ‘token’ to an unregistered recipient along with a code to withdraw the funds) may no longer be an adequate tool for meeting demand for P2P transfers across networks.
In October 2014, 57 markets were home to more than two mobile money services. Thirty-three of these markets have three or more live services, while another 115 services worldwide plan to launch within the next year. Yet, the majority of mobile money deployments today offer direct transfers and transactions only between customers who subscribe to the same mobile money scheme. Vouchers currently remain the primary way to send money to a customer who is ‘off-net’, regardless of whether or not that customer is an existing mobile money user of another scheme.
As providers look for new ways to develop the mobile money ecosystem and increase the number of digital transactions using customer wallets, P2P transfers across different mobile money schemes represents a potential avenue for further growth, and provides an opportunity to deliver greater value to both customers and ecosystem users of mobile money. Interviews with service providers suggest that it may in fact be vouchers, rather than a lack of demand, which are limiting the growth of off-net P2P transfers. Voucher volumes in wallet-based deployments remain low even in mature markets — in many cases, less than 2% of all P2P transaction volumes in 2013 [1].
To gain a better understanding of the function of off-net transfers in today’s mobile money industry, MMU conducted 12 interviews with mobile money providers for whom vouchers have played an important role in their service offering.
Highlights from the paper:
Future P2P growth in mature markets may come from cross-network transfers
In early stage markets, vouchers play an important customer acquisition role in providing “first touch” interactions with potential new users who are required to come to an agent to cash-out their money. But, as the market matures and more users join mobile money schemes, the relative importance of vouchers will continue to diminish as the potential growth opportunities offered by unregistered users are reduced (since fewer potential new mobile money clients within the natural limits of the GSM-base would exist).
Some mobile operators are starting to recognise that new growth opportunities lie in direct wallet-to-wallet P2P transactions between mobile money users of different schemes. This has the dual effect of helping to reduce pressure on providers to manage liquidity distribution for cash-outs, while keeping money in digital form on customer wallets and offering an appealing proposition to merchants and other ecosystem entities who may look towards mobile money as a payment platform/mechanism.
Vouchers are becoming an increasingly cumbersome tool for mobile money providers.
Vouchers will continue to play a role in addressing the needs of customers who are unlikely to ever open a mobile wallet account, but their limitations are becoming increasingly apparent to providers. Interviews with service providers revealed four main drawbacks to using vouchers as a solution for sending money to unregistered users:
- Low awareness of vouchers contributes to low usage– users are not always aware of the availability and purpose of vouchers for sending money to anyone in the market with a mobile phone.
- Poor instructions and lack of choice lead to a poor customer experience – the only choice a recipient of a voucher has is to cash-out the funds immediately, forgoing the opportunity to transact in the wider mobile money ecosystem. Poor instructions on KYC requirements or agents who don’t know how to process a voucher can also dissuade potential new customers from signing up.
- Negative price perception may be limiting usage of vouchers – tariff sheets showing off-net transfer (voucher) fees at higher rates than fees for sending “on-net” may be discouraging customers from using this feature; yet this difference is smaller when the actual end-to-end costs are compared. Such discriminatory pricing may eventually hurt a service as new network-agnostic mobile money services enter the market offering direct P2P transfers across any network.
- Lack of choice may encourage unexpected behaviour – Not offering more choice in transactions may encourage the churn behaviour seen with GSM voice and text: customers who are accustomed to carrying multiple SIMs to send texts and make calls to people on other networks will likely do the same with multiple mobile money SIMs.
As with the other publications in this series, this paper is not intended to be seen as best practice guidelines, and MMU does not advocate any of the tactics featured here as proven strategies for success. Rather, these unique, market-specific approaches are examples of innovation for mobile money managers seeking to learn from the experiences of their peers.
We encourage you to share your thoughts on the role of vouchers in today’s mobile money industry and your comments on the potential for A2A interoperability between mobile money schemes.
[1] Claire Pénicaud and Arunjay Katakam (2014), “State of the Industry 2013: Mobile Financial Services for the Unbanked”