Opportunity Calling: Uneven Growth in Mobile Money Markets

Mobile money continues to drive economic growth with more than half a billion registered mobile money accounts across 92 markets at the end of 2016, according to the mobile operator association GSMA. In several emerging markets, however, mobile money is used by less than one percent of the population. We caught up with OnFrontiers expert Megan O’Donnell to find out what’s driving these disparities. An adviser on technology solutions for frontier markets, Megan has more than 15 years of experience working with telecom operators, tech and finance companies, governments, and multilateral organizations. Here’s Megan’s take:

Many people are surprised to hear that in Ethiopia, Nigeria, and Indonesia mobile money is barely used (one percent or less adoption), especially when compared to Kenya and Tanzania where it has arguably transformed the way people transact their business and personal lives. Why? Is this a big market opportunity of untapped consumers? Shouldn’t global mobile finance providers be diving in to fill the gap?

Percentage of Population Actively Using Mobile Money – 2015
Kenya 79%
Tanzania 63%
Uganda 47%
Bangladesh 33%
Ghana 29%
Pakistan 9%
Nigeria 1%
India 1%
Indonesia 0%
Ethiopia 0%
Gates Foundation data except Ethiopia (World Bank Findex)

Reason #1: Bank exclusivity – the telecom sector is restricted

In Kenya and Tanzania, the government allowed telecom operators to lead the way in launching mobile money. Through their basic voice services, telecoms had already been interacting with rural villages previously untouched by the outside world and building trust among these people by letting them communicate with their friends and families. Since this brand relationship was already established, people were willing to trust the telecoms with their money – a big barrier to overcome in each new market.[1] In Ethiopia, Nigeria, and Indonesia, the telecoms also reach deep into the populations, but the governments have restricted them from offering mobile money by requiring a bank partner to lead the initiative. So why have these governments applied these restrictions?

Reason #2: Control – governments fear losing control of money flows

Many governments, particularly those observing Kenya, see mobile money as a sort of wild out-of-control beast. In 2016, mobile money transactions in Kenya were valued at an estimated 50 percent of GDP.[2] Most governments, through their central banks, seek to control the money flows in their economy for various important reasons – tax collection, foreign currency management, anti-money laundering, counter-terrorist financing, etc. Governments generally have tight controls on registered banks (such as reserve and reporting requirements) so letting telecoms, or even riskier third-party technology companies, handle the money flows in the country is perceived as highly risky. This is one reason why mobile money has actually thrived in countries like Somalia that have little governmental authority and therefore fewer regulations.

Reason #3: Legacy business – traditional banks are protecting their profit base

If traditional banks are allowed to offer mobile money, why aren’t they jumping at the opportunity to develop this new revenue line? A few reasons: i) formal banks are generally not risk-taking institutions – they prioritize protecting their legacy businesses; ii) un-banked, lower-income populations, often the segments who benefit most from mobile money, are not current clients of banks, and banks do not really understand their needs or see them as a profit opportunity; and iii) most banks don’t have the corporate will to explore new, untested, and highly risky technologies. So even when telecoms try hard to partner with banks in order to comply with government requirements, these mobile money partnerships often sour.

The next leapfrogs?

But to be optimistic, there are upsides to being a late adopter. First off, there are powerful lessons to learn from other markets’ troubles. Last year, hackers allegedly infiltrated Bangladesh’s mobile money leader BKash to steal $101 million, revealing systemic weaknesses in the platform’s security related to customers’ identification and SIM registration. Also, as we saw in Myanmar, markets can leapfrog hardware to go straight to delivering mobile money through smartphones. First generation mobile money driven by USSD[3] transactions can be expensive and has a restricted interface, while smartphones can deliver user-friendly experiences even to low-literacy consumers. And new technologies like block-chain (enabling decentralized systems promising faster and more secure transactions) and near-field communication (which enables offline networks in areas with spotty connection to the energy and telecommunication grid) also open a world of new possibilities for innovation to overcome risks and better serve customers.

So when will Ethiopia, Nigeria, and Indonesia catch up with other mobile money markets? Very soon, I believe, but each country will set its own path. Global investors and service providers looking to enter these markets must start by understanding the complex economic, political, and cultural dynamics at play in each country. Then they will need to adapt their models and build trust with potential local partners. As smartphones and other innovations gain traction, governments are sure to recognize the opportunity, allowing mobile money to thrive, with even more sophisticated suites of digitally-enabled financial services soon to follow.

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For more about mobile technology, check out these OnFrontiers blogs on Kenya, Ghana, and the African region.

Featured image was taken by Megan O’Donnell in Myanmar.


[1] Each country market has its own unique factors that further drive mobile money adoption but this trust element is one of the primary common factors.

[2] US$32.7 billion in mobile money transactions (Central Bank of Kenya); US$65.9 billion GDP (World Bank 2015 estimate plus four percent estimated 2016 growth rate).

[3] Unstructured supplementary service data (USSD) is a communication technology used to communicate between a mobile phone and an application program in the network, such as balance inquiries and top-up.