Mistrust slowing down uptake of mobile money on other African countries

By Macharia Kamau

NAIROBI, KENYA: Mobile money may have achieved wild success in Kenya among both banked and unbanked users of mobile phone users but has not been taken up with a similar enthusiasm in other parts of Africa.

Operators that have introduced mobile money products are having difficulties in converting their voice and data customers into mobile money customers. Telecommunications companies that have been able to convince their subscribers to take up mobile money are also at pains to get them to use the service, with many of the converts going months without using the service.

While operators across developing and emerging markets have deployed the platforms, Kenya accounts for more a substantial fraction of the global mobile money transactions.

Analysts say distrust, failure for mobile money platforms to inter-operate and perceived difficulty in use of the platforms has been among the major factors that have slowed down growth. Interoperability – which would essentially enable users to send money to an account regardless of the operator just as is the case among banks – is seen by the operators in Africa as a factor to unlock mobile money growth.

Nil Flatau vice president marketing and business development at Mer Group’s telecom division noted that a mix of factors have contributed to sluggish uptake of the services in other African markets. These include a fairly developed financial services sector in markets like South Africa and Egypt and failure by operators to tailor products to suit their particular markets.

The failure to pick in other markets is however seen as a teething problem rather than an absolute failure.

“Lack of interoperability has been among the factors that have hindered the uptake of mobile money in many countries,” said Flatau in an interview with the Standard on the side-lines of the AfricaCom conference in Capetown South Africa last week.

“Users do not want to be on a system that is closed and the flipside is that, by opening up their platforms there will be more transactions and as such increased revenues from mobile money for operators, which is a better scenario as opposed to current situation where none of them is making any money

Other factors include distrust of services stemming from limited awareness among users and perceived difficulty in operating mobile money accounts.

“Subscribers are yet to gain the level of trust in mobile money platforms as they have with handling cash or conventional banking services. There is also the ease of use where mobile money is perceived to be difficult to use and in many instances customers give up easily,” said Flatau.

Telecommunications infrastructure firm Ericsson notes that operators have to innovate and offer more solutions on mobile money services to get more customers on their platforms as well as increase usage of the services.

“More forward looking and convenient payment options should be endorsed and communicated to mobile users. This may increase awareness as well as usage of these services,” said Fredrik Jejdling Ericsson Head of Region sub-Saharan Africa.

Vodacom, the Vodafone subsidiary in South Africa, launched M-Pesa in the country and while it was greeted with enthusiasm, it has failed to pick. It however plans to relaunch the service in the first quarter of 2014, with a larger footprint in the country and added services. The UK based telco has deployed M-Pesa in a number of its subsidiaries in Africa. Besides Kenya, its Tanzanian operations has also achieved success, accounting for upwards of 14 per cent of its revenues in the year to March 2013.

Others include the French operator Orange that launched Orange Money in about 12 of its operations in Africa and Middle East and a total of four million users. Airtel Etisalat, MTN and Millicom have also launched mobile money in a number of African markets.

Different operators in the markets that the services have failed to pick largely blame lack of interoperability as among the key challenges that slowed down uptake of mobile money in other countries in Africa.

Valentine Amadi a senior at Etisalat Nigeria said at a panel discussion during the conference that interoperability would be essential for growth of mobile money, which he noted meant deepening financial access to financial services in Africa.

South African operator MTN with subsidiaries in Africa and Middle East has a total of 12 million across all its operations.

In South Africa for instance, while the firm has been able to grow its subscriber base by a million in about an year since launch, it is unable to get them to use the service. Though it says more than half of the 1.3 million users are active, just about 30 per cent of them use the service every month and many of them just do one transaction.

Cheslyn Jacobs manager in charge of distribution MTN Mobile Money in South Africa said making the platforms inter-operate would be beneficial to both the customer and service providers.

“The idea should be to get as many people as possible to access financial services and that creates value for both the user and the operator. Some time back, sending SMSes across networks was not possible but after it opened up, there has been an explosion in the volumes of text messages and I think that is how operators should approach the mobile money issue... closed system is a thing of the past,” he said.

He added that while the South Africa market is well covered by financial services institutions, there are over 10 million people that remained unbanked, which is the core target market for MTN Mobile Money. There are also plans to add other services to the mobile money service by MTN away from the basic money transfer.

“Mainstream financial services have been in South Africa for more than a hundred years but there are 12 million unbanked people in South Africa. We have not run after their customers… we are after the unbanked millions, which we see as a huge market. Of course there are many banked people that see value in our services and taken them up,” he said.

“We are big prophets of financial inclusion and have intentions of doing savings and offering insurance products especially for funerals as well as advancing what we refer to as capital to enable our customers make investments and advance their lives.”

Some regulators have contemplated forcing mobile operators to open up their platforms by putting in place laws.

There has been a similar push in Kenya, one that has however achieved a limited degree of success, if any. With other mobile operators and to some extent the Central Bank of Kenya pushing for the interoperability while Safaricom has pushed back, preferring the current closed system. The operator has in the past argued that interoperability is not something that subscribers have been clamouring for. In a recent briefing, Bob Collymore chief executive Safaricom said the greater call and subscriber need has been to enhance cross border transfers, such that Kenyans abroad can easily send money back home.

Research firm Informa Telecoms and Media in a report last week noted that the challenges faced by many operators in Africa are hiccups that can be handled, adding that the need for financial inclusion made the region fertile for mobile money. It notes that operators should increase add-on services on mobile money services to make unbanked users get a wholesome financial services experience.