While using a mobile phone makes it more convenient to conduct payments and make transfers, mobile money users still need to be able to easily cash-in and cash-out from their mobile wallet, and these cash-in and cash-out (CICO) activities have to be supported by a physical network of distribution points. In an article published last week, we estimated that every month, around 54m unbanked and underbanked people make mobile money transactions. Today, I want to discuss mobile money distribution: how does the mobile money industry manage to make financial services accessible to millions of unbanked and underbanked people?
How far are mobile money agents reaching?
To facilitate deposits and withdrawals from accounts, the mobile money industry has been relying on large networks of agents. First, let’s consider the reach of these agents. In 2013, the number of mobile money agent outlets grew quickly at an annualized growth rate of 71.5%, reaching 886,000 in June 2013. In comparison, the established global money transfer service Western Union has a network of just over 500,000 agent outlets around the world [1].
On average, there are 28.4 agent outlets per 100,000 adults in markets where mobile money is available. This is six times more than the average density of bank branches in these markets, which stands at 4.6 per 100,000 adults. This signals that mobile money is able to significantly expand access to financial services for the unbanked and underbanked. In countries where there are more mobile money agents than bank branches, agents rather than banks are becoming the face of the financial services industry.
What percentage of mobile money agents are active?
While the reach of mobile money agents is impressive, it is important to consider the level of activity of these agents. In 2013, mobile money providers registered large numbers of new agents. Unfortunately, a significant portion of them are inactive. 464,000 mobile money agent outlets were active in June 2013, performing at least one transaction in that month. Globally, 47.6% of registered agent outlets were inactive in June.
Viewed at a more granular level, the average number of transactions per active agent outlet per day increased slightly between September 2012 and June 2013, from 5.6 to 6.7. Based on MMU benchmark data, any ratio above 10 is usually quite healthy. When that ratio is too low, agents may not generate enough revenue from transaction commissions to justify participation in the service. However, when the ratio is too high, the quality of the service declines because agents do not have enough time to serve customers properly or educate new ones about the service.
What are the trends in mobile money distribution?
As the industry matures, new distribution trends are emerging which contribute to improving accessibility of mobile money services. One of these trends is agent sharing. Traditionally, every mobile money provider builds and manages its own network of mobile money agents, although in some cases agents can service multiple deployments in one market. In 2013, we began to see agent-sharing models becoming formalized, with service providers recruiting and managing agents that other companies use to deliver their own mobile money services. Examples of this model already exist in Nepal, Nigeria, and Zambia. This emerging trend highlights an interesting alternative for operators seeking to manage their cost structure.
Another interesting trend is the extension of mobile money distribution beyond agents using ATMs; as of June 2013 a global network of over 260,000 ATMs could be used to access mobile money accounts. Indeed, ATMs can be an attractive complement to a traditional network of agents: they are available 24 hours a day / 7 days a week, and usually have enough liquidity to support cash-outs. Some ATMs also enable cash-ins, but in most cases, they are used as alternative cash-out points. Our 2013 survey of mobile money providers revealed that 23% of the respondents were using ATMs as cash-in and/or cash-out points in June 2013. This percentage is growing fast as it was already twice as many as in September 2012. Some mobile money providers are particularly keen to leverage ATMs; check out our interview with Yolande van Wyk to find out more about the example of FNB in South Africa.
This approach seems to be especially popular in the East Asia and Pacific region and in Latin America and the Caribbean. In three markets—Brazil, Indonesia, and Thailand—more than 40,000 ATMs can be used to perform mobile money cash-ins and cash-outs. In June 2013, ATMs processed 1.5% of the total number of cash-ins to and cash-outs from mobile money accounts.
These insights come from MMU 2013 Report on the State of the Mobile Financial Services Industry.
Notes
[1] “Western Union Reports Fourth Quarter and Full Year Results”, Western Union (February, 2014).