2 Billion people around the world are unbanked blared the Microsoft advertisement from my computer screen, and the Microsoft Cloud is helping to bring banking services to each and every one of them - or so we are lead to believe. Study this advertisement more closely, and the imagery shown is not that of a bank, it is of people holding mobile phones... implying that the future of banking is mobile, but is there any truth in this?
Last year, the Mobile Ecosystem Forum (‘MEF’), launched it’s third annual Global Mobile Money report which studied 15,000 mobile users across 15 countries. The headline findings, although unsurprising, stated that mobile banking and mobile commerce are set to continue to grow. The report found that 69% of mobile users used their phones to carry out a banking activity and 66% used their device to carry out some form of transaction.
The challenge facing the mobile payments industry used to be device penetration, but with the advent of cheap smart phones and simpler multi-device payment technologies (that work on non-smart phones), this is no longer a barrier. Indeed, UAE has the worlds highest smart phone penetration at 78%, Nigeria is at 28%, Kenya is at 26% and India is at 12%. Looking at these statistics, one may imagine that mobile payments and mobile money are not a threat to traditional banking. However, compare this to the percentage of the population that carry a mobile phone (not just a smart device), and one can begin to understand why the mobile money industry is growing at the rate it is (UAE 200%, Nigeria 94.5%, Kenya 71.3% and India 79%). In Kenya alone, MPesa (owned by SafariCom/Vodafone), is used by over 70% of the population and growing daily.
As readers well know, mobile money means different things in different geographies. In what some call developed markets, mobile wallets are gaining strength, the use of Apple Pay, Samsung Pay and other similar services (Beam for example in UAE) are seen as growth opportunities. Whereas in developing markets such as Kenya, India and Pakistan, the use of services such as MPesa (mobile money) and MShwari (mobile loans), are now ubiquitous. Where issues of security and trust are foremost in the mind of users and where a growing number of individuals no longer carry cash, making payments for everyday items using their mobile devices.
In mobile-first markets, that picture is very clear. Services such as Mpesa and Fundamo have unleashed a mobile money revolution across countries in Africa and Asia. With large sections of the population unbanked yet actively using feature phones to access mobile money services and pay for physical goods, bill payments, transferring money P2P, or accessing digital goods and services, these services present a real and present threat to the banks.
If we fast forward 10 years (as I mentioned in my recent article ‘The Future of Retail Banking’), we will see the majority of the population using their mobile devices for transactions that were previously handled by the banking system. Money, as we know it will become a thing of the past.
Naysayers will point to markets like India who have been slow to adopt mobile money, blaming trust, cultural and regulatory issues - I get that, but believe me when I say that a breakthrough is just around the corner. As soon as suppliers price the service correctly and it reaches a critical mass, the Indian market will tip... and banks will be in trouble if they have not prepared properly.
As usual, it has taken time for the banks to respond to the threat from the telecom operators and it is only now that I am seeing banks attacking telcos in some markets in the region. There are at least eight banks I know of who have, or are about to launch their own mobile money offer through an MVNO relationship with a telco. Acknowledgment if any was needed that the future (at least in growth markets), belongs in the palm of your hand.
Here are my top 5 tips to senior bankers wishing to survive to imminent telco tsnami?
Do not ignore the telcos. They are chasing you down with a user friendly, safe and convenient offer that is already in the hands of billions
Innovate in customer experience. Think of new ways to help your customers with friendly, easy to use, ‘anytime, anywhere’ products and services
Control the distribution channel. Right now, the telcos own the customer because they control the distribution of your service through their network. Find ways to get to your customer without relying on an expensive middle man.
Prepare for changes in regulation. Even though it may be difficult for the telcos to steal your business now. It will not be this way for ever.
Understand your customers better. Use data, use insight and most of all use gut instinct to offer relevant, convenient and useful services to your base. Do not try to be everything to everyone.