This is a guest post written by Michelle Kaffenberger, a Research Manager at InterMedia, who is conducting applied quantitative and qualitative research on financial inclusion and the private sector’s role in international development.
While demand-side data on the business uses of mobile money is limited, the data that we do have shed a hopeful light. InterMedia conducted a number of studies over the past year that touch on this topic, covering Tanzania (here and here), Uganda, the Democratic Republic of Congo (DRC), and Pakistan. In the first three markets, opportunities exist for expanding business use of mobile money, although the potential varies according to the stage of development of mobile money in the market. In contrast, Pakistan holds fewer opportunities currently, as the mobile money market is driven by conducting transactions over-the-counter (OTC) through agents, which is less conducive for tapping into the needs of businesses.
Looking first at Tanzania and Uganda, the research shows some interesting parallels in these more advanced markets. The Financial Inclusion Tracker Study (FITS), a three-year panel study tracking household financial behaviors in Tanzania, Uganda, and Pakistan, found that in Tanzania 21% of M-PESA users and 12% each of Airtel and Tigo Pesa users use mobile money for business transactions. Most of these (74%) use it to pay suppliers, while 23% use it for receiving customer payments and 7% use it to pay employees. Equally, in the FITS Uganda study, 19% of mobile money users said they use mobile money as part of their business. Most of these received payments from customers through mobile money, or used mobile money to pay suppliers for inventory.
These levels of current use are promising, showing that, in these advanced markets, business owners are beginning to take on mobile money as a payment method. Further research into the opportunities in salary payments or merchant payments may help operators better accelerate usage of small businesses.
The story is a bit different in the DRC where the market is more nascent.  In a study conducted with GSMA we found that while mobile money use is low, small business owners are interested in using the services, indicating market potential. About a fifth of the small business owners we interviewed thought mobile money would be useful for their business, and 23% of business owners had tried mobile money (though not necessarily for business purposes).
However, unlike Tanzania and Uganda, small business owners in DRC remain reticent about the concept of mobile money and have concerns about incorporating mobile money into their regular business operations. Some of the common concerns include the inability to send payments to suppliers or employees who use different GSM networks, network failures, fear of forgetting their PIN or having their phone stolen, lack of payment proof if SMS messages are deleted, and limits on withdrawals of US$500 per day.
In addition to addressing these concerns, small business owners suggested mobile money providers invest in awareness campaigns to increase understanding and trust in the new service. Business owners also said suppliers generally choose the payment method owners must use, so operators may need to target suppliers in order to increase use among small business owners. Some of these issues could be attributable to the nascent context of the DRC mobile money market. Nonetheless, it is clear that operators will need to focus on understanding the needs of and developing trust with business owners in order to capture the commercial potential of this segment.
Finally, Pakistan shows limited potential under current market conditions. As a market built on OTC, 5% of Pakistani households have used mobile money, yet only 0.3% have a registered account. The data suggest, however, that if the market can successfully shift users to wallet-based services, using mobile money for business payments should grow as well. Of households that had used mobile money wallets to send or receive remittances recently (for one of the last three payments sent or received), 39% sent money for business purposes and 22% received money for business purposes. With such a small base this represents a very small absolute number, but it shows that mobile money users are interested in business uses. Perhaps targeting businesses could help catalyze the OTC to wallet transition?
Mobile money has the ability to streamline business payments to suppliers, wage payments to employees, and customer transactions. It can save the business owner time and money, and provide a safer, more secure option than cash. In Tanzania and Uganda, the market is promising and beginning to grow. In DRC, the market for business payments is in beginning stages, but seems to hold potential. Pakistan will take longer, but as mobile money grows and operators can shift users from OTC to wallet, it could hold similar potential. Commercial opportunities in small businesses exist in all four markets, and efforts should be made to better meet the needs and expectations of this segment in order to enable the transition from cash to mobile money.