m-payment

when the cell phone becomes a wallet

Credit transfer, m-payment: what’s that ?

Credit transfer grants an operator’s customer additional communication time thanks to the credit transferred by another customer of the same operator. These transfers are the first step of payment services on mobile phone.
M-payment (mobile payment) gathers all payment solutions via mobile phone. When equipped with a chip, the cell phone enables to pay directly (e.g. contactless electronic system - RFID). Credit transfer solutions, similar to post-office transfers, also exist. User A sends « virtual » money to user B with his cell phone. User B can then receive in a participating shop or in a partner bank the amount sent.

Alternative solutions to bank accounts are developing in emerging countries

Developing countries (Africa, Eastern Europe…) generally have low bank account penetration rates. As a matter of fact, rural populations do not often have access to bank agencies. Banks make no or little investments in rural areas because of the lack of infrastructure (roads, post office, low density rates, geographical isolation…).

Yet, the weakness of the bank account penetration rate is not only due to rural life. It is a structural issue concerning all populations in developing countries. For instance, there are only 1.4 million bank accounts in Morocco, including companies’ accounts, for 33.5 million inhabitants. Therefore, the mobile penetration rate is generally speaking quite higher than the bank account one. Cell phone can rapidly become a financial transaction tool. In Africa, once credit transfer was launched, populations have quickly favoured minutes exchange versus money in an informal way.
Exchanged amounts remain low (less than 10 euros). Confronted to this apparent “misuse”, mobile operators have identified an opportunity to stimulate mobile development in these countries.

Numerous African stakeholders offer solutions related to m-payment

Orange offers credit transfer in Senegal. M-Pesa (Safaricom), in Kenya enables its registered customers to transfer money like in Post Offices. Wizzit (a virtual Bank) in South Africa goes for an even more innovating model: it offers its subscribers various possibilities with their cell phone like money transfer from person to person, bill payment, credit card.

M-payment development is a real opportunity for mobile operators

This solution strengthens the importance of the cell phone, improves customer loyalty, and generates additional traffic. Operators can also take advantage of emigration to generate international traffic revenues (partnership between emerging and developed countries operators). Thus, M-payment boosts the emerging countries economy by making up for the low bank account penetration rate and facilitates local and international financial transfers.

The choice of the appropriate business model is a key issue

A real expertise is required to develop suitable solutions: risk management, end to end secured identification, integrity of flows, clearing...
Many issues emerge. Do operators have to be backed by a partner bank? How can transfers be secured? What regulation for international transfers? Will money withdrawal be located only in agencies or at franchisees?


download the pdf version