Over the past few weeks several banks have announced their plans and some have already started charging for ATM transactions (both cash and non-cash) beyond a certain number of times. Naturally this has led to discontent amongst customers but there are lesser ways of escaping these charges unless one carefully plans ATM transactions. In this situation we explore a lesser used alternative, the Mobile Money offerings from mobile operators.
Mobile money offerings like Airtel Money, Vodafone's M-Pesa though have been around for sometime now were never viewed as an alternative to bank accounts. Mobile money has been majorly showcased a solution to serve the unbanked populace, as a tool for financial inclusion and not as an alternative to banks and plastic money like credit / debit cards. For instance, Vodafone India's 2014-15 H1 results cites that they have 80000 agents and over two million registered M-Pesa customers. M-Pesa was launched in India in April 2013. Vodafone's numbers look very small when compared to over 72 million bank accounts that have been opened under Jan Dhan Yojana in a very short period of time.
On one side Vodafone is very vocal about unfriendly market in India and on the other side there lies under utilized potential. Of course raking in numbers like Jan Dhan Scheme would not be possible for mobile operators as they demand a different level of trust, but the present numbers are simply low and unimpressive. Airtel is also in similar situation with regard to Airtel Money.
How Telcos can set things right?
We believe telcos must look beyond just the financial inclusion part and start targeting the urban masses to grow the mobile money market. Cost conscious users (like me :) ) are already exploring alternatives to reduce dependency on banks for daily expenses. This search would however be futile as stocking cash at home is not the answer to reduce dependency on banks.
This is exactly where telcos must be pushing mobile money.
- Target small merchants aka kirana store: Just offering mobile money to mobile users won't suffice as there must be an ecosystem where one can pay for things with mobile wallet. This is where mobile operators must connect with merchants and follow a bank like approach. Even in bigger cities very few small scale merchants have POS machines from banks. Bringing the kirana store merchant under the mobile money ambit would certainly make things easier for both sellers and buyers. Sellers would see instant cash in their accounts and buyers need to not carry wallets and coins around - all one would need is just a mobile phone. Like banks' POS terminals, telcos need not influence or gift mobile phones to merchants, many of them already have phones to carry out their business.
- Lower the cost barrier: While mobile operators need not spend a fortune like banks setting up ATM Kiosks and pay interest to customers for deposits, the charges are still on the higher side. A steep charge of Rs. 70 to transfer Rs. 5000 to a bank account is largely unjustified. NEFT / IMPS is much cheaper. Airtel Money charges - only Super account earns 4% interest
- Provide incentives: Similar to reward points, cashbacks and discounts offered by banks, customers may be rewarded for mobile money usage. Instead of reward points, operators can go for simple thing like prepaid balance credit. This would play a significant role in promoting mobile money usage amongst students and non-earners like homemakers.
- Increase partner network: Operators need to ink more MoUs with e-commerce portals, government agencies etc.
Operators can easily do all of the above as they have everything at their disposal - robust sales network all over the country, marketing budget for TV and web etc.
How operators stand to Benefit?
Once mobile money becomes the de-facto standard for transaction values of at least below Rs. 5000 operators stand to reap benefits:
- Improved bottom line: Like voice and data, good amount of revenues would start coming from Mobile Money. This could mean 5-10% of revenue targets on conservative estimates.
- Improved Customer Loyalty as subscribers opting for MNP would have to transfer mobile money accounts as well. Hence MNP numbers would go down!
- VAS Revenues: A host of value added services can be designed and offered which can be paid for with mobile money
What do you feel about our observations on mobile money? Do you use mobile money for payments and how was your experience? Let us know through comments.