Clear regulation a must for mobile money

Clear regulation is needed at a local level to drive mobile banking services in emerging markets, while in developed regions such services mean children aged five and under may never own a physical wallet, industry experts told Mobile World Congress delegates this week.
Speaking at the mobile money keynote, Kristin Skogen Lund, executive vice president and head of digital services and Nordic at Telenor, explained that telcos are best placed to offer mobile banking services in developing regions, but that the success of such services requires stable local regulations.
Lund referred to Easy Paisa, Telenor’s mobile banking service in Pakistan, which handled 30 million transactions in 2011 and already has 18,000 participating outlets – double the number of branches offered by traditional banks in the country. The low overheads delivered by the virtual set-up means the operator’s charges are a fraction of those from regular banks – just 5% of the cost incurred by banks.
“Few banks can match [that],” Lund states, adding. “Telcos are in a great place to bank the unbanked.”
Easy Paisa customers can set up an account in ten minutes or less, and cash is transferred instantly, compared to a typical two to three days for transactions conducted through banks, she said. The approach is clearly paying off – last year the service handled $700 million-worth (€528 million) of transactions.
However, Lund pointed out Telenor’s Pakistan service has only been achieved thanks to clear regulations from the country’s central bank. Regulation is also important in developed markets, Lund said, noting that Telenor backs the GSM Association’s assertion that SIM cards are the best place for NFC to be embedded.
Telenor is also offering mobile wallet services in Sweden and Denmark, in conjunction with Tele2, Telia, Three and TDG.
Of course, operators aren’t offering these services out of the goodness of their hearts. Lund notes mobile financial services are a great way of cutting churn and driving ARPU. “It’s one of the biggest opportunities we have,” she concluded.
Established finance firms are also pursuing the mobile opportunity. John Partridge, president of Visa, predicts that wireless financial services will spell the end of regular wallets, noting that children aged five and under might never even enter a store by the time they’re earning their own money.
Visa processed 80 billion transactions in 2011, and like many similar credit card firms is pushing its security and reliability credentials as a key selling point. Partridge says just $5 cents in every $100 of transactions is lost to fraud today.
The credit card firm views developing regions as the prime opportunity for mobile financial services. Partridge cited Nigeria as an example, noting the country has as many as 35 million mobile subscribers who don’t have a bank account. The firm announced a tie-up with Orange Money during the conference, which covers Africa and Middle East, a collaboration Partridge says is set to revolutionize life for the citizens in the regions.
However, many mobile wallet players must hope that Partridge’s predictions regarding the under fives never visiting a physical retailer are wrong. Michael Abbott, chief executive of US operator joint venture Isis, noted that mobile wallets should be a driver for stores, giving them some visibility into customers when they first walk in that can then be used to offer improved services.
Today, he noted, stores only gain information about their customers when they’re at the check-out, by which point it is too late to tailor the shopping experience and encourage consumers to come back regularly.
Abbott also touched on mobile coupons as a key opportunity for wireless finance, painting a torrid picture of clipping printed coupons and then matching those to the right products in supermarkets and presenting the right coupons at the cash register.