The revolution in mobile payments is here
In the 21st century, cash is obsolete, a hangover of an era where there was no alternative.
The mobile space is where the world is moving.But the mobile phone space is a cluttered universe.
Mobile service providers, banks, retailers and a host of secondary services are all vying for customer loyalty in a drive to gain market share and offer new services.
Banks, in particular, are targeting the lower end of the earnings market in a drive to get the unbanked on board and capitalise on a massive market.
Absa recently launched their “1234” branches, where customers can open accounts and do basic transactions.
Standard Bank has announced a drive to get retailers and spaza shops into their network and offer services.
You can now draw cash from an FNB ATM using your phone.
Nedbank is lagging the market. The competition is fierce and unforgiving and the primary driver is the mobile phone.
“It took over 20 years to connect the first billion subscribers, but only 40 months to connect the second billion,” said The Mobile World co-founder John Tysoe.“The six billion milestone will be passed in 2011,” he said.
Exponential market Online mobile analysis site mobiThinking says that, according to The International Telecommunications Union, 90% of the world now lives in a place with access to a mobile network.
For people living in rural communities, this is lower at 80%.
At the end of last year, there were an estimated 3.8 billion mobile subscriptions in the developing world – 73% of global subscriptions.
The GSMA Development Fund, the umbrella body for organisations working in the mobile-banking field, initiated the Mobile Money for the Unbanked (MMU) programme to accelerate the availability of mobile money services to the unbanked and those living on less than $2 per day.
MMU aims to bring together mobile operators in developing countries, banks, microfinance institutions, governments, development organisations and the private sector, and has the goal of reaching 20 million previously unbanked people with mobile financial services by 2012.
But there’s a stumbling block. No one is working together.
The GSMA noted that in the first year of launching there were 20 mobile banking operations. A year later there were 80 with another 20 in the pipeline.
Few have reached more than a million users, none offer an integrated service and all charge in one or other way for what they offer.
The cluttered universe needs a binding agent, an entity that can bring all of these competing, diverse offerings onto a single, accessible platform.A recent deal may have offered exactly that solution.
Propos Software Systems have developed a unique product that does just this – it brings together all these offerings under one umbrella – the Mahala Community Trading Platform (mahala means free in Zulu).
To roll out this umbrella platform, Propos, a South African-based firm, payments software company has teamed with a global mobile roaming company – US-based Roamware – in a multimillion-dollar deal and together are offering what can only be viewed as a revolution in the mobile payments ecosystem.
Roamware is a giant of a company, offering roaming services across 480 networks in 156 countries with a customer base of 3 billion mobile users.
The launch of the Mahala platform is scheduled for later this year, and will be staggered across several markets in both the developing and developed worlds, but will start in South Africa and the USA.
Sonny Fisher, the CEO of Propos, said Mahala will “nest above” national mobile operators, and will host both individuals and corporate customers, including retailers, banks and bill-issuers, who may enrol their own customers for an annual fee.
Fisher pointed to the social benefits of the platform: “Mahala is a revolution and scale is the key.
If we can get everyone onto the same platform, then we can get the developed world talking to the developing world.
“Established business needs new markets, while unbanked people need bank accounts and access to finance. Last year, $1.6 trillion (R10.8 trillion) was spent in the developing world. They just have no way to leverage what they have, and so much is wasted. We need each other.”
Fisher predicted a boom in low interest microloans, since microfinance lending institutions could control with whom funds could be spent, by creating “closed-loop” mobile communities.
“For micro-enterprises and informal traders, this means finally having access to capital for their businesses,” said Fisher.
The real value behind the Mahala platform, however, and in what can be considered a first for the financial services industry, is that all basic transactions are to be made free to the end user.
This includes a free banking service and free online payments.
Those without bank accounts will be provided with one, also without charge to the end-user.“By bringing scale to the platform, we were able to reduce the basic transaction costs to less than a single US cent,” said Fisher,
“So, we thought we’d go a step further and just make it free.”
Fisher called it “a historic day in the history of payments”, adding: “On the Mahala platform, advertising pays for the cost of the transaction. If you have a bank account and you link it to the Mahala Platform, we’ll pay your fees.”
Mahala appear to be taking their lead from Google and Facebook, who offer a free basic service but generate revenue from advertising and other value-added services.
Advertising spend on mobile advertising is on an exponential trajectory, rising from $1.4 billion in 2007 to $7.4 billion in 2009.Projections from Juniper Research reveal that this will rise to $38 billion by 2015.
Where fixed internet access is limited, mobile is the dominant means of accessing the internet.
In India, for example, mobile access accounted for nearly 90% of all internet users in 2008.A mobile economy offers a fundamental advantage to advertisers: brands can build up much more detailed profiles of their customers compared to online, and plan follow-up campaigns accordingly.
Studies have revealed that targeted adverts have a redemption rate 67% higher than unsoliticed adverts.Mahala advertising will mostly be delivered by sms and will consist of special offers or coupons delivered to the end-user, based on their record of mobile purchases.
According to Mahala COO, Steven Cholerton, Mahala mobile advertisements will be non-intrusive.
“On Mahala, you’ll choose to receive only the ads you want, from merchants you trust, or are interested in.“Depending on where you are, or what time of day it is, you can opt in or out.
So if you’re at the mall, you can switch the advertising platform on and receive offers from shops in your vicinity for products and services you might actually desire.
It puts control back into the hands of the consumer,” said Cholerton.“People hate unsolicited adverts on their handsets. We’re aiming to reverse the fatigue people feel by offering them real value,” he added.
He referred to a recent study claiming that coupons and SMS will become the most widely accepted form of mobile marketing and advertising by 2015.
The study, conducted by mobileSquared on behalf of Airwide Solutions, reveals 61% of wireless carriers think that coupons or vouchers would become the dominant form of mobile marketing by 2015.
“SMS is where the action is,” said Cholerton. “It’s ubiquitous, works on all devices and consumers know how to use it.”
“All the issues of interconnectivity have long been resolved and SMS already generates a lot of revenue for operators,” he said.
“There are no quality issues and consumers have a high degree of trust that the channel is secure.”
“In June 2010, Americans sent 173.2 billion text messages”, he said.
“When we went looking for a developed market to launch in, the US was an obvious choice.”
The revolution in mobile payments is here. And it is Mahala.