There are huge opportunities in the mobile payment and money transfer space, especially in emerging markets where large sections of the population are unbanked, say industry watchers.
According to Konstantinos Tzingakis, director of innovations at Ericsson sub-Saharan Africa, the opportunities for mobile payment applications are numerous, and range across a broad spectrum.
”They include everything from linked mobile and traditional bank accounts, ease of payment for basic goods and services, to more advanced micro-financing and micro-lending solutions,” he explains.
While only around 10% of South Africans have home Internet access, around 90% have access to the Internet using their phones, notes BMI-TechKnowledge research analyst, Ryan Smit. “Of that 90%, a large percentage will have smartphones in the future, and banks will see that as a massive opportunity.”
JBB Research CEO, Julien Blin, argues that mobile payment solutions, such as mobile money transfer (MMT), have a brighter future than mobile banking applications in Africa because they can work on any phones - especially feature phones. “You don't need to have access to the mobile Web to use mobile payment solutions. You can use these payment solutions via SMS, the most popular type of mobile data service in Africa today.”
In a Gartner report released last year, money transfer was rated the top consumer application for 2012. According to the firm, the reduced costs and increased speed and convenience of MMT compared with traditional services have strong appeal for users in developing markets. Most offerings signed up several million users within their first year.
Nick Jones, Gartner vice-president and distinguished analyst, says MMT for migrant workers is gaining a lot of attention in areas where many people are still unbanked. “They may not have access to ATMs or credit cards, but a mobile phone is the one device they do have.”
He says there are massive opportunities in this space, with lots of creativity being applied by developers and telcos alike.
Private affair
However, Gartner adds that challenges exist in minimising both regulatory and operational risks associated with mobile-based payment services. “Regulators in many markets are piling in to investigate the impact on consumer costs, security, fraud and money laundering,” states the firm.
He notes there are both practical issues, including security and identity (phone theft, ownership of the phone or SIM), and soft issues, such as building trust and knowledge of how to use such systems.
“You need to create more awareness about mobile banking services applications,” says Blin. “A lot of people still believe mobile banking apps are not secure, and don't feel comfortable checking their balance online via their cellphone. That remains a major issue to drive higher adoption of mobile banking apps.”
According to Jones, a major user demographic for many newer applications is young people, who are less concerned about privacy issues than older users. “The challenges are likely to be more around privacy than regulation,” notes Jones, as regulators usually lag behind developments happening in the market at consumer level.
“As more services become contextual and sensitive to our habits, location and behaviour, there will be a lot more challenges around privacy, and who knows your whereabouts,” he adds.
Onwards and upwards
In future, as smartphone uptake allows more widespread access to applications, Tzingakis believes the diversity and capability of mobile apps in financial and other areas will skyrocket.
“Up until now, many mobile applications have been fringe applications or isolated mostly to pilot studies and experiments,” he states.
“This year and in years to come, we will start to see a consolidation of applications and the adoption of many new apps into mainstream services. This will come as more and more institutes and industries explore this area, and adopt the various solutions into their everyday working and business.”
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