Think of Sub-Saharan Africa and one would understand that the logistics of cash could be so acute that cash simply does not exist. What exists is mobile money today in a range of services.
There mobile money is not competing with cash, it is the cash.
When a cash crisis looms in India, a fledgling business like Mobile Money finds a breather for life and the good news is that it is not temporary. There is enormous opportunity waiting to be “en-cashed”, if only there could be far greater collaboration between regulators, the banks themselves, mobile money platform providers and mobile industry as such together with the providers of internet infrastructure.
The success of mobile money lies with the building of an eco-system.
The biggest challenges in this world are not the ones where solutions are impossible to achieve, they are the ones where simple solutions get shrouded in the mysterious and invisible hands of narrow self-interests of specific constituencies. If collaboration happens between these constituencies, the chance of success improves dramatically.
Look at the fledgling Mobile Money industry and the progress has been quite dramatic in Africa, Asia and even in parts of Latin America. But it could have been far more had the regulators, government, banks and mobile operators all worked together.
For India, this is a one in a life time opportunity and all these stakeholders must collaborate to transform the current situation where cash has moved from “being a king” to being the “lifeline” for some people.
First of all mobile money is now available in 93 countries and in 271 services as per this report. Already 51 countries have designed a regulatory framework for mobile money to proliferate. The penetration of mobile money services is high in low income countries (81%), while the biggest range of services is to be found in Sub-Saharan Africa.
Mobile money is not a competitor to cash transactions or ATMs, in sub-Saharan Africa it is the only way money exists in remote parts.
In the East African model, the mobile service provider runs all the value added services on the mobile phone, which replaces a bulk of the transactions. In elsewhere the banks do it or use other service providers offering mobile financial service.
So we have two major contenders to this scheme of things. Banks are the major contenders on one side with increasing penetration levels while mobile telephone operators have a far deeper reach with customized services. Only in some markets do we see collaboration happening between the two where the best of both could be leveraged.
Financial and retail infrastructure combines to give better value but this integration is never complete in the absence of mobile operators playing a distinct role of inter-operability.
There are some very different models as well as the report notes, “in Peru, a group of more than 30 e-money issuers has launched an open and interoperable e-money platform.” This is a scheme of its only kind.
Inter-operability in mobile money space needs collaboration among a range of stakeholders and if the banks are part of this, we could potentially have a step jump in the proliferation.
The problem lies in the disparate business models of these entities; mobile telephony, banking transactions and inter-operability of financial services are not necessarily based on the same models that each of these entities would like to pursue.
Let me take the example of payments of various kinds that could be done through mobile money. Imagine a school needing payments of school fees in a remote village in India where you have one single institution receiving payments through different mobile operators, where inter-operability is a must. Take the case of a barber making a haircut from different customers, or a cobbler or a carpenter or electrician working from door to door. The problem will stem from inter-operability of the service providers.
India, by the way does not have interoperability. Neither has regulatory framework deepened. India on this account is behind Thailand, Bangladesh or Pakistan.
The banks have a plethora of products, like payments through debit cards and credit cards, which would come in direct conflict with this model. This is where the conflict needs to be avoided.
There is no alternative to mobile money agents through which the transactions would fructify, but as markets will deepen and with the availability of smartphones to majority of the population this problem will not get smaller but bigger. Perhaps master agents could help reduce the challenge.
But the good news is that the number of active agents in those markets where mobile money has prospered far outnumbered the number of bank branches.
The success of mobile money is simple, it has prospered where a large number of active agents were women; mobile money has done far better with women, who actually have found value in dispensing with their habits of working with cash.
Women have found far better innovative methods to replace cash with mobile money.
Could India take some lessons from these stories in Bangladesh or Thailand, which is in our backyard?
In current times in India, mobile money gets a fresh lease of life, provided the banks can proactively come forward to collaborate in a model that could be very unique for India.
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