Mobile Money: Alternative or Integral to Cash Management Strategy?
by Karin Flinspach, Managing Director, Head – Global Cash Products, Standard Chartered Bank
‘Mobile money’ i.e., payments and collections through wallets held on mobile devices, has grown exponentially in recent years, but there continues to be an unspoken assumption that mobile payments are somehow an alternative channel for payments than more ‘traditional’ electronic transfers or card payments. With mobile money now the dominant form of payment in countries such as Kenya, with rapid growth in countries across both Africa and Asia, treasurers should no longer consider mobile money to be a niche or optional payment solution, but a core element of their cash management infrastructure.
Catalysts for mobile money
Africa has been the crucible for the birth and subsequent growth of mobile money. The combination of a large unbanked population, and a rapid increase in smartphone and feature phone usage (i.e., cheaper handsets with more limited functionality than smartphones) provide the ideal conditions in which mobile money can flourish, such as
M-PESA in Kenya. In addition, as banks may be less accessible, more expensive and have less ‘privileged’ a relationship with customers than telecom providers, particularly in rural areas, consumers and small businesses often find it more convenient to work with telecom providers, an issue that has been exacerbated further following the recent collapse of some local banks.
Together, these factors have led to M-PESA, and other mobile money schemes, revolutionising the way that consumers and businesses pay and receive funds. In March 2016 alone, 36.7 million customers and 151,000 agents used M-PESA to process 121.7 million transactions, an increase of a third since March 2015 (source: Central Bank of Kenya). Indeed, there is now around seven times the value of transactions exchanged through M-PESA as via the national ACH. Similarly, mobile money has expanded rapidly in other countries in Africa, including Tanzania, Uganda, Ghana, Zambia, Democratic Republic of Congo, Mozambique, Lesotho, Nigeria, Rwanda and Zimbabwe.
No longer an alternative payment method
Consequently, treasurers should consider mobile money as a mainstream form of payment and collection, and given its inherent advantages of being real-time and addressing last-mile delivery, be proactive in supporting, and leveraging established and emerging mobile money schemes. The opportunities for corporations across a wide range of industries are considerable. Those that have a supply chain that comprises small suppliers or distributors (such as farmers), or that need to make payments to individuals, such as bills, loan or microfinance payments/installments, insurance premia, or even wages, can benefit significantly by replacing insecure, and in most cases physical cash payments with payments direct to mobile wallets. Similarly, those that collect from individuals or small businesses can virtually eliminate the need to process and transport cash, whilst making it easier to reconcile collections.
Key to the value proposition for these corporations is not simply the more secure, timely, convenient and cost-effective transfer of funds, but the data that accompanies each payment. By capturing information on customer behaviour, supplier spend, regional nuances, and the impact of sales and distributor incentives, companies can refine and control their supply chains, communicate more directly with customers, and be more precise in their sales approaches.
As a result, mobile money has real potential to help treasurers to achieve key quantitative and qualitative performance indicators, whilst also managing counterparty and supply chain more effectively.