Consumer habits, not tech, hobble mobile money growth

Mobile payment systems are considered the next big technology wave — not only in Africa, but globally.

The first point regarding mobile payment systems is that growth is far less a matter of technology than it is one of specific needs being met in a manner that encourages users to forego cash. In developed markets it makes sense for merchants to make the shift to mobile money acceptance. This is driven largely by the dominance of the smartphone as the consumer’s device of choice and availability, and affordability of point of sale devices.

In sub-Saharan Africa, smartphones have achieved little more than 15% market penetration, although the arrival of low-cost smart devices could change this picture in the near future.

“The growth in mobile broadband due to the advent of low-cost smartphones and reduction in data costs will see a huge shift from USSD-type solutions catering for all phones to smart applications for banking and payments,” says Yaron Assabi, founder of Digital Solutions Group. “We are seeing a shift in devices. The price point between a feature phone and smartphones have narrowed and more consumers are using the internet on their mobile.”

For mobile money players IT holds the promise of at least narrowing down the number of platforms they need to accommodate in developing applications and systems. This will be key in pursuit of promoting interoperability between technology platforms, the numerous payment systems, network operators and point-of-sale devices and mechanisms. It is a factor that has been identified as one of the key stumbling blocks to achieving wider adoption. Speaking at the Mobile Web Africa conference in Johannesburg in September, Mahindra Comviva’s global head of business development for mobile financial solutions Kamaljit Rastogi identified a number of trends likely to emerge in the near future.

“We believe that the capability to pay digitally for all sectors of society will trigger the mobile commerce revolution,” he said. “Mobile money is the perfect platform to make these payments, because it increases the convenience and the hit rate of a customer performing a purchase on a mobile app. Mobile money will become part of the core economic infrastructure. And mobile money operators will also add features like ATM access, cross-border remittance, and NFC [near field communication, where two smartphones are bought close together to communicate] payments to the functionality.”

He added that central banks are likely to start playing an increasingly pivotal role in promoting interoperability and integration between systems.

“Although it may appear they’re trying to strangle the industry, I think they prefer a cashless economy. For example, in the United Arab Emirates the central bank encouraged nine banks to get together to issue a joint mobile money/mobile wallet platform. They saw the convenience it can offer and that it can become a platform for providing e-government services,” he said.

Standard Bank’s head of its Beyond Payments division, John Campbell, predicts that payment will become merely part of the process of effecting lifestyle transactions — from paying a restaurant bill, to booking movie tickets or buying online.

“It mustn’t be an obvious part of the process and must happen in the background,” he says. “We need to embed ourselves in lifestyle activities and stop making banking and payments such a big issue.”

He pointed to data transmission as an example whereby the internet has become so pervasive that users are concerned primarily with doing things online and that the actual transmission and data usage are secondary to the online activity.

This viewpoint, of course, ignores the day-to-day concerns for users who are not cash flush, a pertinent issue in the African context.

Vodacom’s managing executive for m-commerce, Hemmanth Singh, believes mobile money operators are going to have to get more innovative in terms of the functionality and incentives to drive the shift to mobile payments. This will be driven largely by a loyalty component to transactions — whether when loading the wallet or making purchases. “This will give the users a reason to use M-Pesa,” he said. He said simple mechanisms could be the inclusion of free airtime if users activate an account, or offering additional airtime if it is purchased via M-Pesa.

Future innovations that are being eyed include partnerships with student loan and bursary providers for such funds to be loaded onto the mobile wallet, as well as enabling the payment of salaries into an M-Pesa account.

Digital Solutions Group’s Assabi said the entry of non-traditional players is expected to reshape the landscape for all involved: “The recent launch of Apple Pay, and the fact that Facebook is rumoured to have applied for a banking licence pose a threat to mobile operators and banks who want to retain their customers and maintain the natural growth they have enjoyed by a growing demand in Africa for mobile financial services. In Africa we will continue to leapfrog as we are a mobile first continent and often mobile is the only device which is multipurpose — serving as a torch, a wallet, insurance, banking, credit, media, and advertising to name some of the applications converging into a single device.”