15_G15_InSight_Money

Global Issue 15

Global Insight Making Money Move Mobile money: a quick guide Jamillah Knowles Mobile wallet A method of payment performed over a mobile device, such as a smartphone or tablet, is known as a mobile wallet. It could be checking your bank balance, buying goods or transferring money. Mobile banking is more convenient in countries that do not have banking systems readily available to a lot of the population. Mobile payments are set to reach US$600 billion globally by the end of this year, according to Juniper Research. Transactions can be made in a number of ways, including mobile web payments, direct operator billing, contactless near field communication and SMS transactional payments. Mobile web payments These are made when a consumer pays for something over a mobile web page or application. This can be via services such as Amazon payments, PayPal or Google Wallet, where a credit or debit card is connected to the account and a separate password, or PIN, is used to make payments. These easy ‘one-click’ methods are often more suitable for mobile devices, where inputting lengthy card or identification details may be difficult and insecure. Direct operator billing Carrier or director operator billing (DOB) involves agreements with a mobile provider. Billing is established through an existing account and purchases are added to the phone bill. This system requires no further registration, provides a more secure payment method and reduces costs for merchants and customers. Contactless or near field communications The mobile device itself becomes a payment instrument with contactless or near field communications. A chip in the phone is identified by a reader, which picks up payment and identification details. Not all mobile devices carry NFC technologies, but banks are working around this. The spread of NFC payment technology has been slow, however. Short messaging service (SMS) SMS transactional payments work by sending a text message to make a purchase. Charges are applied to the operator bill or an online wallet with a prepaid balance or credit card attached. Example: Starbucks customers can download an app with a store card attached, choose their beverage and generate a bar code read at the till to make payment. Square and other new applications New applications and surrounding services are evolving. Square – an application with a card-swiping device that fits into the audio jack of a cell phone or tablet – automatically generates accounts for each transaction. Receipts are emailed to consumers. Advanced Western technology gave us the worldwide web and the mobile phone. But it took a developing African country to link the two. An innovative leap in Kenya coupled the attractions of the mobile phone to the acute needs of a society in which the majority have no access to banking services. So mobile money was born, spawning a global movement. Welcome to the worldwide wallet. Millions of people without access to formal banking now transfer money and pay bills by mobile phone. Few people predicted the impact mobile technology would have on access to money, and it is equally difficult to forecast the long-term impact of the virtual currencies now being launched. But the effects are likely to be momentous. The evolution of mobile money and the digital wallet is an example of what is sometimes described by historians as the advantages of underdevelopment. Although mobile technology developed elsewhere in the world, the sheer lack of communications technology in Sub-Saharan Africa, in particular, was the impetus for products that have subsequently taken off elsewhere. These range from the pay-as-you-go model of financing, to mobile banking and current proposals for a cashless society in Nigeria. It is difficult to overestimate the effect of the mobile revolution on communications in the poorest parts of the world. The number of mobile phone subscribers in Africa increased from 11 million in 2000 to 475 million by 2012. South Africa recently became the first African country to achieve a penetration rate in excess of 100 per cent. There is still scope for further expansion, however, as many people have two or more mobile handsets in order to delineate different areas of their lives, such as work and private life. Contrast the 475 million active mobile African handsets with the Mobile banking and the use of airtime as currency has revolutionised money movement in countries with limited banking infrastructure and poor security 12.3 million landline connections that exist in Sub-Saharan Africa outside South Africa. Mobile innovation that enabled many countries to leapfrog communications technologies is now doing the same for banking, particularly in rural areas where facilities are scarce. Kenya’s M-Pesa, launched in 2007, is the global leader in mobile banking. Money can be transferred from one person in the Indian Ocean city of Mombasa, for instance, to another in Kisumu, in the far west, via a text message. It is then collected in a physical form from one of a network of 28,000 agents. The system is utilised by 15 million Kenyans and Kenyan mobile phone cash transfers totalled a massive US$16.2 billion last year. Over any given period, M-Pesa processes more transactions within Kenya than Western Union – a giant international brand – handles worldwide. The benefits of mobile banking and money transfers are so great that this meteoric success has been widely repeated. In Uganda, for instance, the number of people using mobile money technology jumped from 2.9 million in 2011 to 8.9 million last year. Following M-Pesa’s success, another 150 mobile money services have launched across Africa in the last six years. But it is a different story in Nigeria, Africa’s most populous nation. Mobile money systems are generally promoted by the private sector, but the Central Bank of Nigeria launched its Cashless Project last year. The bank is encouraging the use of payment cards © Jemimah Knight  global thi rd quar ter 2013 www.global -br ief ing.org l 15


Global Issue 15
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