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Mobile money will shake up banks

Cape Town - Mobile money has fast-tracked socio-economic development in emerging markets and promoted freedom of choice and enterprise development, said Desere Orrill, MD of MobiMedia and CMO of the Ole! Media Group.

Fin24: How has mobile payment methods championed socio-economic advancement across Africa?

Desere Orrill: Mobile money first became popular as a way for young, male urban migrants to send money back to their families in the countryside. It is now used to pay for everything from school fees (no need to queue up at the bank every month to hand over a wad of bills) to taxis (drivers like it because they are carrying around less cash). More and more retail stores are collaborating with mobile money providers to allow for the purchase of goods in store.

In Sub- Saharan Africa, close to 500 million people are unbanked while there are 502 million active SIM connections representing around 253 unique million mobile subscribers. This gap between unbanked individuals with access to a mobile phone is the foundation of the opportunity of mobile money. As well as enabling payments, mobile technology is capable of extending the reach of financial services through products like insurance, credit and savings.

Through effective relationships with banks and other financial institutions, mobile operators can meet a broader range of customers’ financial needs and thereby deepen financial inclusion.

Fin24: What have been the consequences of “airtime” being used as a highly tradeable commodity across the continent?

Orrill: In 2012, there was $6bn contribution to the sub-saharan GDP from the mobile ecosystem. This is expected to grow to 8% of the GDP in 2020, reaching a value $19bn. Airtime in its traditional form was used to connect people through communication. It has expanded to allow users to pay for entertainment services such as music and transact using Mobile Money.

47% of the world’s entire unbanked population will have some form of mobile banking by 2017.

In other news:
"We first launched M-pesa in SA in 2010. We have totally revamped the service which addresses key areas: Distribution, registration, functionality and loyalty."

- Herman Singh, Vodacom's managing executive for M-Commerce.
Read the full story.

Fin24: What are the countries where this will have the most impact and how will it change the banking industry in general?

Orrill: Mobile-money services are especially useful in developing countries: Kenya and Tanzania have shown the greatest adoption and growth so far. However Kenya’s success has yet to be replicated much elsewhere. Kenya had a specific mix of circumstances that help the growth. With the launch of MTN Mobile Money and Airtel Money, Mobile Operators backing will definitely speed up growth. Both Telesom in Somaliland and Econet Zimbabwe have cited developing merchant payments as a critical success factor in their strategy. Meanwhile, Orange is leveraging their significant footprint in West Africa through launching an inter-regional wallet-to-wallet transfer service between Ivory Coast, Senegal and Mali.

The impact this may have on the banking industry in general is probably similar to that which any innovation has within an established industry – it causes disruption and loosens the stronghold which the traditional “owners” of a sector have on the particular industry. In the banking sphere it is likely to make banks review their policies and fee structures and to become more “approachable”. It is likely to make banking more accessible to more people at more levels of society.

Fin24: Can there continue to be such a thing as an open and free market with a consumer’s right to choose how and what method they select to pay for services?

Orrill: At the end of the day, the old adage “willing buyer, willing seller” makes for the most successful transactional ecosystem. And in this case it would apply to the method of payment selected, too. Consumers will continue to seek the easiest and most convenient and cost-effective way to transact, and sellers will endorse and support this in the interests of commercial success. This means that banking will have to adapt. Whether traditional banks and network operators team up or face each other in the ring, still remains to be seen. At any rate, the developments will make for interesting observation over the coming decade.

In other news:
"We're excited to be working with a new partner, Bidvest Bank whose skills and expertise allowed us to add entirely new functionality to M-Pesa that addresses the specific needs of the South African market."
- Vodacom Group CEO Shameel Joosub.
Read the full story.

Fin24: What examples of this are there in South Africa?

Orrill:

- MTN Mobile Money
- M-Pesa launched with Vodacom
- Wizzit
- FNB eWallet
- CashSend by ABSA

Fin24: Can you borrow like banks? Can you invest?

Orrill: Traditionally mobile money was created to allow users to deposit, send and withdraw money, no interest was earned on any money saved in the account. Regulation has been the greatest obstacle to launching effective mobile money services. In the savings and credit space, Safaricom is leading the way through the launch of their banking and loan product, M-Shwari. M-Shwari was launched in November 2012 in partnership with Commercial Bank of Africa and one year on has more than two million active customers with deposits amounting to 20 billion shillings and outstanding loans of 60 million shillings.

- Fin24.

Google Glass available in SA at a price

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