Mobile Money in Emerging Markets - Why Governments Matter
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When aiming to bridge the gap between the banked and unbanked, mobile plays an important role. In emerging markets such as the Philippines and Kenya, where mobile penetration is high but the accessibility of financial services is limited, there are great opportunities for mobile wallets and mobile money services to gain user popularity – enabling users to access and handle their financials in a safe and convenient way.
However, uptake of mobile money solutions requires that users understand and benefit from the services. And since there are great benefits connected to wide financial inclusion– both on societal and individual levels – initiatives coming from a governmental level can play an important role when working towards a cashless society. Because while mobile phones may be widely used in many emerging markets – the uptake of mobile money services require that people trust, understand, and benefit from them. But how can this be made?
The collaboration strategy
In emerging markets such as in the Philippines, Peru, and Kenya, aliases between governments, banks, and major telecom companies have proven to be a successful strategy in propelling mobile wallet uptake. In these markets, banks and telecommunication providers, who traditionally acted as key drivers, are backed up by governmental initiatives to stimulate the user uptake process and aiming to make financial inclusion for everyone possible.
As an example from the Philippines, a program called Government Conditional Cash Transfer Program has been established to reach the unbanked through a comprehensible microfinance system, called Globe Cash. The many functions of the service aims to benefit user needs, offering not only a traditional wallet service, but also cross-border remittances where family members located in other countries can have money sent to the recipient via a mobile phone, and exchange it for cash at ATMs, rural banks, and several other pick-up locations.
The Better Than Cash Alliance is yet another initiative aimed to bring together country governments and organizations to help ease the transition from a cash bound to a cashless society. Kenya, Peru and the Philippines are examples of the most prominent members of the alliance, working together with organizations such as the World Food Program, banks, credit card providers, and a range of foundations and agencies.
For example, the UN utilized the Globe GCash system to pay for workers’ wages through the World Food Programme, backed up by local governmental forces as the Typhoon Ondoy forced inhabitants to resettle into new areas. By enabling people in areas struck by natural disasters to attend a Cash-For-Work program to reestablish their infrastructure, they are paid for their work using the operator’s mobile technology.
Addressing Further Challenges
Thanks to the governmentally introduced initiatives mentioned above, the expansion of mobile money services in emerging markets services has been increased. However, far from all unbanked individuals are reached. For instance:
• Though a high readiness for m-commerce, the amount of mobile subscriptions more than double the amount of bank accounts in the Phillipines (Microenterprise Access to Banking Services)
• Only 1 in 15 globally launched “branchless banking” services has more than 250,000 active customers (The World Bank's Consultative Group to Assist the Poor)
• Many schemes in Kenya, except from the popular M-PESA service, shows a large number of subscribers with a low transaction frequency (The Africa Report).
So how can governments further assist in enabling mobile wallets to bloom in emerging markets?
First, users must have access to resources that enables them to fully understand how solutions work. Providing educational programs and by working together with phone providers, a higher level of user knowledge can be raised at the point of a mobile phone purchase.
Second, efforts can be made to help operators and network providers get together and establish platforms that are truly relevant and useful, containing many functions rather than establishing several services and platforms that may not be as user-friendly.
Lastly, by making changes in the financial rules and regulations to include mobile technology, banks and solution providers are enabled to comply with a set of relevant rules and develop feasible solutions that have a short time-to-market and a high user uptake.
Even though utilizing mobile wallets requires recipients to be signed up, verified, and educated about a service, mobile solutions are oftentimes more secure than cash, as they offer a detailed overview and monitoring function which can ensure that the money is received by the right addressee. Mobile services also enable people in remote areas to get an overview of their financial situation, and to receive money from their family members.
When governments commit to improve the availability of financial services for the unbanked, working closely together with both banks and telecommunication providers is a good strategy for reaching their goals. To reach the full potential that the mobile readiness serves in countries like Peru, the Philippines, and Kenya, Governmental actions matter. By improving the legal and practical systems even further, operators and telecommunication providers can come together and help make total financial inclusion possible.
Written by: Lars Arvidsson
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