When mobile money first appeared on the market, mobile network operators (MNO’s) were seen as a serious disruptive threat to the banking industry. But as the market has matured there is evidence that there is space for both banks and MNO’s in the mobile ecosystem.
When comparing banks and MNO’s it is clear that their business models and business objectives are different and this has influenced the value proposition offered to customers. Banks want deposits. Mobile network operators want to keep growing their airtime sales revenues and prevent churn. MNO’s are accustomed to the high volume, low-value model – they have a customer base of millions who do many small transactions. Banks on the other hand, have always dwelt in the formal sector with strict governance structures, so generation of revenue through accepting small transactions does not work as banks don’t have the customer numbers.
As a bank it is difficult to compete with MNO’s in terms of reach and marketing budget when launching mobile money. MNO’s have relationship with millions of customers and own the SMS marketing channel to each of those customers – they are introducing a new product to an existing market. While mobile is a convenient delivery channel for a bank’s existing customers, many banks are aware of the amount of money in circulation in Africa’s informal economies. Part of their mobile strategy is to diversify; introducing a new product and targeting new markets. This is a more difficult task and the bank does not have the direct marketing channel i.e. mobile number, for the ‘informal or unbanked’ customer it is trying to attract.
Banks, therefore, need to build into their strategies that they cannot expect to scale at the same rate or indeed find the same products and services popular with customers as compared to MNO wallets, which dominate when it comes to P2P remittances.
So how can banks introduce a competitive mobile money solution that makes sense?
- Informal markets do not want restrictions – they want ease of access. But they also want safety and security – which is where banks with a solid reputation have an opportunity to gain market share provided they can make their customer on-boarding and KYC requirements simple enough.
- Banks should exploit what they do best and leverage savings, loans and insurance products, creating a relevant and compelling suite of products aimed at niche segments within their target market.
- Combine these products and services with compelling pricing.
- Ease of access is key to gaining market share in the informal sector. This means a simple to use mobile interface and a quality Agent network selected using carefully thought out criteria. The Agents need to be well trained, reliable, in a good location and have the necessary business resources to sustain operations. Agent commissions need to be high enough to keep the Agent motivated, and consistent fraud monitoring is vital in maintaining the trust of customers.
- Interoperability. Linking a broad spectrum of players within the mobile space e.g. MNO wallets, other banks, strategic payment partners and international remittance agents – to the bank’s mobile platform can produce the winning formula. This means that customers – and their deposits – remain in the bank’s mobile environment rather than moving to other platforms to use a particular service, such as remittances, offered by an MNO.
Written by Ashleigh Carter-Renaud, Multi-Pay Marketing Consultant