Enabling mobile money ecosystems in Africa

Pankaj_Gulati2Pankaj Gulati, CEO and Chairman of MoreMagic,

Pankaj Gulati, CEO and Chairman of MoreMagic, explains how to facilitate new ways to collaborate and drive revenue using current and future communications infrastructure

Libya erupted in a series of anti-government protests, which would soon mushroom into one of the largest political uprisings the country had ever seen.

A day earlier, MoreMagic Solutions, a leading global provider of mobile commerce and financial services solutions, announced its partnership with Nokia Siemens Networks, to deliver the Mobile Payment Solution. Libya was chosen as the trial ground. Perhaps it was a stroke of bad luck that just 24 hours later, the country would be marked by civil unrest, slowing down the deployment of the Mobile Payment Solution. Yet Pankaj Gulati, CEO and Chairman of MoreMagic, is undeterred.

“Despite the political issues, the basic needs of then people haven’t changed,” he says. “They’re still buying their groceries and other necessities from the supermarkets. They still need to make payments. And today, more than ever before, there is a need to make these transactions electronic.”

That’s precisely what the Mobile Payment solution does. Jointly developed by MoreMagic and Nokia Siemens Networks, the solution connects consumers, mobile operators, financial institutions and retailers, enabling seamless monetary transactions. Customers can transfer money, conduct mobile banking activities, pay bills and engage in a range of other financial and commerce related activities.

Why the Mobile Payment Solution will work

Mobile money has taken to the African population in a way that it hasn’t anywhere else. While India is also experiencing a similar mobile revolution, Indian nationalised banks have long been developing schemes to reach out to the bottom of the pyramid.

For instance, in 2010, the State Bank of India introduced a ‘one rupee bank account’ scheme which enables the poor to open a bank account with a mere one-rupee token deposit. In Africa, however, millions of people still do not have access to financial services. In 2010, McKinsey reported that in Sub-Saharan Africa alone, 80% of the adult population, or 326mn adults, do not use formal or semiformal financial services. 1

In Nigeria, a country of over 140mn people, only 22mn have bank accounts. The reasons for this are many. For one, large swathes of the unbanked earn less than $5 a day. Observes Pankaj, “The net worth of individuals in many African populations is so low that banks find it very hard to capture the demographic and serve them cost-effectively.” Other factors that limit banks from expanding their footprint include a lack of infrastructure, political instability, low incomes and high taxes. Yet as McKinsey says, “Unserved does not mean unservable.”

In other words, there is tremendous scope for unbanked populations to access financial services through channels other than traditional bank branches. One of these channels is mobile money. The Global System Mobile Association (GSMA) predicted that globally, 1.7bn unbanked customers will have mobile phones by 2012.2 In 2010, McKinsey reported that 316 new mobile subscribers have signed up in Africa since 2000.3 These figures represent enormous potential for mobile commerce and mobile money solutions.

Enter a new network

For over 10 years, MoreMagic has been connecting and enabling global ecosystems of mobile operators, financial services organisations, retail distributors, NGOs and other businesses – through a comprehensive suite of applications. They include mobile wallets, prepaid top-up applications, bill payment applications, mobile loyalty applications, airtime gifting schemes, and a mobile commerce hub.

Built on a flexible platform, these applications enable businesses and customers to collaborate across borders in new, convenient and affordable ways. Today, MoreMagic’s global network includes over 120 mobile operators in more than 60 countries, and over 150,000 retail distribution agents worldwide. The number of active users on its platform is almost 26mn.

This kind of success may not have been predicted ten years ago. After all, the mobile revolution was just beginning to take shape, and e-commerce was still king. So why did MoreMagic focus on the mobile space? “We believed that if we solved a certain financial services problem using the mobile channel, then we would have solved the same problem on the Internet, as well as other traditional channels,” says Pankaj.

It’s a logic that has served them well – right from their initial focus on Western markets to their current target - emerging countries.

The African horizon

“Around the year 2003, we turned our attention to emerging markets,” says Pankaj. “At that time ‘voice’ was the in-demand commodity, sold through scratch cards and such devices.

There was significant potential to make these transactions electronic – and therefore simpler.” MoreMagic built and deployed its electronic top-up solutions in about 35 emerging countries. In due course, the company introduced a mobile money solution that helped customers pay for salaries, utilities and other bills. “We decided to focus on two things - the technology and the end-consumer.

We want to make transactions as simple and secure as possible.” Security is becoming a key concern in the African mobile industry, even as incidents of fraud and theft increase. Customers may be buying into the mobile boom, but they’re still hesitant about entrusting their hard-earned money to the mobile network. African Regulators have also expressed their concerns over the security of mobile technology, and haven’t always welcomed the mobile banking phenomenon with open arms.

But things are changing. MoreMagic, for instance, strives to bring all the players in the ecosystem together to create a level of trust. In Sierra Leone, the company has enabled a successful mobile money transfer system through a vast ecosystem that includes multiple network operators, an independent financial services organisation, and a leading mobile payment system provider – all, with regulatory approval. MoreMagic and Splash Mobile Money launched its pilot operation in Sierra Leone in September 2009.

Less than four months later, over 12,000 clients had enrolled to the service. In December 2010, MoreMagic announced that it would provide the technology behind the first mobile money service in Haiti. The launch of the service by Voilà and Unibank followed on the heels of a successful nine-month pilot which provided Mercy Corps, with a secure and cost effective way of distributing money across Haiti to support reconstruction efforts.

As for MoreMagic’s venture in Libya, it remains to be seen what will happen. But if the critical role of mobile technology in the uprising is any indication, then it won’t be too far in the future before the Mobile Payment Solution becomes a reality.

 

Notes:

1. McKinsey on Africa: A Continent on the move, June 2010 - http://www.mckinsey.com/clientservice/Social_Sector/our_practice s/Economic_Development/Knowledge_Highlights/~/media/Reports/SSO/Africa_FULL_VF.ashx

2. http://www.gsmworld.com/newsroom/press-releases/2009/3432.htm

3. Lions on the move: The progress and potential of African economies, McKinsey Global Institute, June 2010 -

http://www.mckinsey.com/mgi/publications/progress_and_potential of_african_economies/pdfs/MGI_african_economies_full_report.pdf

 

Investments accelerate delivery of mobile financial services

Visa Inc. is acquiring Fundamo, a provider of mobile financial services for mobile networks operators and financial institutions in developing economies. It also announced a new, long-term commercial agreement with Monitise PLC, a provider of mobile money solutions for financial institutions in more developed geographies.

The investments accelerate the execution of Visa’s global strategy announced last month to provide the next generation of payments solutions, enabling consumer to transact whenever and wherever they choose, using a card, a computer or a mobile device with Visa`s reliability, security and global acceptance. The combination of acquiring Fundamo and expanding the relationship with Monitise will enable Visa to deliver best-in-class mobile financial services and payments capabilities to consumers across the full spectrum of uses, geographies and mobile environments from basic services on simple handsets to more advanced services for smart phone owners.

While mobile financial services in developing markets are growing and have become a core service offered by many mobile operators and financial institutions, these services are often limited in scalability and reach and are not interoperable with other regional payment services or global payments networks. Fundamo`s platform enables the delivery of mobile financial services to unbanked and underbanked consumers around the world, including person-to-person payment, airtime top-up, bill payment and branchless banking services.

The combined Visa Fundamo platform will add enhanced functionality and new services to existing mobile financial services across Asia, Africa and Latin America for safe, reliable and globally accepted payments solutions. It will expand the utility of closed-loop systems, enable them to be interoperable, make financial services available to more consumers and offer merchants access to new customers. This has the potential to connect billions of unbanked and under-banked consumers to each other and to the global economy.

“Combining Visa`s unparalleled network scale, global reach, extensive product suite and established financial institution relationships with Fundamo`s expertise in delivering mobile financial services in developing economies presents us with an important long-term opportunity to grow our business and drive financial inclusion in key geographic markets,” said Joseph W. Saunders, chairman and chief executive officer of Visa Inc. “We are pleased to add Fundamo`s industry leading technology solutions to our portfolio.”

“Mobile network operators and financial institutions will now be able to take advantage of Fundamo`s trusted mobile financial services platform backed by Visa`s high standard for security, reliability and scale,” said Hannes van Rensburg, CEO of Fundamo. Hannes van Rensburg and the Fundamo management team will continue to manage current and future Fundamo implementations as valuable members of Visa`s mobile product organization.

Privately held, Cape Town, South Africa-based Fundamo has more than 50 active mobile financial services deployments across more than 40 countries, including 27 countries in Africa, Asia and the Middle East. Fundamo`s deployments currently have a base of more than five million registered subscribers and the potential to reach more than 180mn consumers with mobile financial services.

Mobile prepaid payments provide affordable, convenient and secure transaction capabilities that are transformational to the lives of merchants and consumers in those regions.

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