Financial

Mobile transactions market to exceed $500bn by 2018

Read time 3min 30sec
Mobile payment services have found greater success on the African continent than in SA.
Mobile payment services have found greater success on the African continent than in SA.

The value of domestic money transfers, including operator money and social media money services, will reach $520 billion in global mobile transactions by 2018, up nearly 200% from an estimated $178 billion last year.

This is according to a new study from Juniper Research, titled Digital Money Transfer & Remittances: Domestic & International Markets 2016-2021.

The study reveals person-to-person domestic transfers, such as M-Pesa, Airtel Money, Orange Money and MTN Mobile Money, will increase by 45%, showing higher usage in developing markets. This will be supplemented by users making social media transfers in developed markets via services such as Venmo and WeChat.

In 2015, Africa and Middle East had 235 million registered mobile money users, representing the largest share of the global market. International remittances via mobile will exceed $25 billion by 2018, driven by higher value mobile a transaction, says Juniper.

The study notes the bulk of activity is currently occurring via WeChat and Alipay within China, with growth fostered by 'red envelope' promotions at the Lunar New Year.

Non-sustainable in SA

However, mobile payment services run by telcos have found far greater success on other parts of the African continent than in SA.

Vodacom officially pulled the plug on M-Pesa in SA in June after saying there was little prospect of the service to achieving a critical mass of users in its current format in SA.

Vodacom CEO Shameel Joosub says one of the factors that hindered M-Pesa in the country was the high level of financial inclusion.

World Wide Worx MD Arthur Goldstuck agrees, saying there is not enough of a market for the unbanked in SA.

"Almost all people in full-time employment have bank accounts, and 75% of the total adult population has a financial instrument of some kind. Those that are unbanked have found many workarounds, such as retail money transfer and airtime as currency," says Goldstuck.

A few months later, in September, MTN SA announced it had decommissioned MTN Mobile Money due to lack of commercial viability.

"The operating costs of providing a mobile money platform have become prohibitive," says Larry Annetts, MTN SA's chief consumer officer.

Dobek Pater, Africa Analysis MD, believes MTN giving up on Mobile Money was inevitable, given Vodacom's experience in the market.

"Although MTN appeared to fare somewhat better, it looks as if traditional mobile money services are proving themselves non-sustainable in SA in their current format," says Pater.

While South African telcos have found the going tough with their mobile money offerings, local banks are singing a different tune.

Last month First National Bank said South Africans are showing significant appetite for mobile money solutions. This is according to the latest data from FNB eWallet Solutions, which shows 4.2 million new e-wallets were created over the past 12 months, a rate of about 350 000 new e-wallets per month.

Regulation

Juniper argues that over-regulation continues to be a key inhibitor in the licensing process for mobile money services.

"This can be complex, both in terms of the number and nature of licences that are required by service providers. Additionally, the services which the national government (often via its central bank) will permit a service provider to offer vary significantly", explains report author Nitin Bhas.

"In some markets, regulations for mobile money transfer may simply not have been defined, or may be in the process of being defined and then applied retrospectively. Furthermore, existing rules may stipulate that only financial institutions may possess money licences, thereby inhibiting the opportunity for players such as mobile network operators," says Juniper.

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