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"MOBILE PAYMENTS – TEN YEARS ON, WHAT HAS CHANGED?" Mobile Payments – Ten Years on, What Has Changed? Introduction When in 2004 Globe Telecoms of the Philippines launched its G-CASH product as a competitor to the successful money transfer launched in 2000 by Smart, the other mobile operator in the Philippines, it seemed clear that it was only a matter of time before mobile payments and mobile banking became a major part of the way in which poor people received financial services. The MicroSave-Microenterprise Access to Banking Services (MABS) M-Banking Dialogue 2009 held in Manila, prompted some reflection on what has changed in ten years in the m-banking environment.
This Briefing Note considers some of the key developments. Platform / Protocol In the early days of mobile payments, two main issues concerned potential providers. Would there be coverage in the areas where the unbanked and potential users will be located?
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And what applications / communications could the handsets support? It turns out that they should have been more worried about business models, and customer value propositions. The coverage issue has largely disappeared, at least for global system for mobile communication (GSM) services. Few would-be mobile payment service providers now seem concerned over coverage.
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In most low income markets general packet radio services (GPRS) services are now available and 3G has been launched or is anticipated. Network reliability may still cause concern, but is probably no greater an obstacle to operations, than other infrastructure constraints routinely faced in remote areas (power cuts, bad roads etc). In fact in many countries the mobile communication networks have proved the most resilient in times of crisis. The evolution of the handset is more difficult to track, but is certainly changing rapidly. Three trends seem relevant.
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Figure 1 highlights the extent to which more and more phones are “enhanced” – by which we mean able to handle over the air application downloads using GPRS. One of the main concerns ten years ago was the hassle factor experienced when customers needed to download an application using subscriber identity module (SIM) toolkit. In fact most early solutions requiring menu downloads or for customers to remember long “strings of numeric codes” were not commercially successful, and created an asymmetry between the segments targeted and reached.
Although targeting the unbanked, it was largely the banked and literate who were able to manage the download process and the unbanked need dedicated assistance and support to manage this process which dramatically increased the costs of launching a service. With more modern handsets, a dramatic fall in the costs of handsets, java applications, GPRS services (and an increasingly technologically-aware market) these issues seem largely to have been resolved for many users. Of equal concern was the capacity of the SIM cards issued by mobile operators to handle the additional applications. Although little data is available it seems that most networks have successfully migrated most users to 64k SIM cards in the normal course of business, thus removing the constraint and also eliminating the need for customers to complete a potentially confusing SIM swap to avail of a mobile payment service.
The third issue concerns security, with operators needing to make trade-offs between ease of deployment and use and security. These issues remain and continue to be a key feature of debates on the appropriate business model and partnerships required to succeed. There are now probably three groups of “core solutions” and related business models that are competing in the market, which reflect these trends: i) SIM dependent and integrated solutions – The best know example of such a solution is M-PESA from Safaricom, which is now pre-loaded on all Safaricom SIM cards.
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