Having been with MTN developing the Group’s strategy for Mobile Money outside of South Africa after the MTN Banking experimentation in that country, could you give us some insight into this experience, and why you think mobile financial services has been so successful in Africa?
I think that there are two measures of success that need to be paid attention to here. The first one is getting the mobile industry to buy into the case of mobile financial services. From that point of view, it is a definite success as more operators are weighing the variable cost of investment with the cost of not rolling out services along with the social benefits it can bring to Africa. More and more operators feel the scales have been tipped and cannot afford to be left behind. So we continue to see new deployments and services. Expectations have been exceeded here, as the mobile industry receives strong support from governments, development organisations, NGOs and in many instances financial regulators across the continent. In short, we have come a long way in a short time and there is clear momentum behind mobile financial services. The second measure of success – the one that really matters in the long run – is utilising mobile financial services to benefit millions in Africa. I think that is still a work in progress. Successes are still too far between and isolated. But this is not cause for despair. Most innovations follow an even slower adoption curve. The uneasiness that some industry practioners and analysts are feeling comes mostly as a result of the high expectations placed on mobile financial services. It reminds me of the 3G rush in the late 90s. It developed more slowly than we all anticipated but now it’s a reality in markets globally.
Why do you think the M-PESA Model has been so successful in Kenya? And do you think the recent launch in South Africa of M-PESA by Vodacom and Nedbank will be as successful as the Safaricom deployment? And why?
I think the M-PESA story has been much commented and documented. The general consensus on why it’s been such a runaway success is as follows: a) It was launched in a favorable market with a void around simple and affordable ways of transferring money and paying basic bills b) It is a very simple service with a great educational campaign c) The support of The Central Bank of Kenya was key d) The commitment of Safaricom at the highest level of the organization to the service. In my opinion the last two are probably the most important ones and also the hardest to replicate. South Africa is a very different market and Vodacom knows that. So I expect the team will keep what needs to be kept and change what needs to be changed. One word I don’t believe in is “impossible”. It could just be hard. And I think South Africa will be harder than Kenya because bank penetration is higher with multiple options to send money and pay bills. In South Africa, an obvious target market is illegal migrant workers who cannot access banking services for transfers, and therefore would current regulations allow for M-PESA to enroll them? Again, the M-PESA team in South Africa certainly knows all of this and has factored it in.
Africa has been an innovator in the mobile financial services space. How do you feel that this is changing Africa and where do you see the future of M-Banking taking Africa?
The changes are currently more apparent in the East than anywhere else. Besides M-PESA, we now have MTN Mobile Money in Uganda and Rwanda. MTN Ghana, Cote d’Ivoire, Benin and Cameroon have also launched their service and are at various level of uptake. We have Zain Zap and not to forget the banks’ own initiatives to provide mobile access to their existing clients. One good thing that the mobile financial services has already done for Africa is to attract attention to the need for better financial services. I think financial institutions, from large banks to smaller microfinance institutions (MFIs), insurance companies and investement houses, are now looking at ways to leverage mobile technology to expand reach and lower cost. So give it few more years and more tangible results will start appearing.
Coming back to yourself, Mobile Financial Services (MFS) Africa, is a new venture that you started, which seems to have the vision of bridging the gap between current mobile financial services products and a full set of financial services? Is this an accurate summation and please give us a brief description of how you see this being possible?
MFS Africa has been set up indeed to bridge what we call the “mobile financial services gap”. The gap is in the disconnect between the expectations of mobile financial services operators (on what service they will be able to provide) and the reality of what they are actually providing. Many players underestimate what a huge undertaking it is to rollout a mobile financial services scheme that can simply do domestic transfers and airtime top-up. To put these basics in place, you still have to deal with matters of regulation, agent network setup and management, platform implementation, marketing aspects, and the day to day operation of the business. MFS Africa bridges that gap by providing a range of value added services on a turn-key basis. Take international remittance for instance; all mobile financial services operators have it high on their roadmap, but most are discovering that it is quite challenging to implement. What MFS Africa brings in this context, is a “ready to use” connection to a number of money transfer companies that can cover the target markets (where senders are based). All the mobile operator needs to do is to include the product in its offering and market it locally. We take care of the sending markets and the management of the money transfer companies. In this way, the operators’ clients could receive money from anywhere directly on their mobile wallet.
MFS Africa aims to accelerate the growth of mobile financial services. How can this be achievable in such a complex business environment working with the telecommunications and financial regulators and operators?
We thrive best when faced with complex issues. It is exactly because the mobile financial services ecosystem is complex that MFS Africa was established to deliver offerings that take away the complexity for the key players in the market and lets them focus on what they do best. For all the services that we provide we spend lot of time and energy analysing the specific value chain and rearranging the different pieces so that we can provide a simple and cost effective service through the mobile phone. For all of them we, consistently ask four questions: What can we eliminate? What can we introduce? What can reduce? and what can we augment? So what we offer today, is a package that is the result of asking again and again these questions across markets. Operators benefit from this refinement and can therefore accelerate the monetization of their investment in mobile financial services.
You have Plug & Play Integration with your Clients Information Systems. This must involve some fairly complex programming considering the number of different systems that are run across Africa. How has this been achieved?
It does. And again that’s our strength. The team has a very deep understanding of how mobile financial services are designed and deployed, and all of us have been part of deployment teams across Africa and beyond. The MM VAS-Box (Mobile Money Value Added Services Box) that we deploy has been designed to take away the complexity of mobile financial service platforms and connect them to the simple world of web services. But our proposition does not stop at the technical level. We see that as a hygiene factor really. We pride ourselves in also simplifying operational complexity (which is the main complexity in deploying these services) and design services that work with the networks. So when we work with an insurance company, for instance, to design and deploy m-insurance services, we do not only simplify the technical complexity of such service through our MM VAS-Box, but we ensure that the product we are designing can be consumed through the mobile device. As you can imagine payment is only one aspect of this. We have to re-engineer the entire client life cycle, from acquisition to the processing of claims. And we do this with two main things in mind: simplicity and cost effectiveness.
In which countries are you currently operating and how can a startup manage to operate across the continent?
We are currently operating in several countries: Ghana, Cote d’Ivoire Uganda and Congo (DRC). In each of the countries, we are in discussions with a number of mobile financial service operators to provide our services. In Ghana, Cote d’Ivoire and Congo, we are already at the pilot stage and will commence commercial operation soon. Nigeria, Cameroon, Benin, Malawi, Rwanda and Morocco are our next target markets. Nigeria (which is the biggest market of the four) is still waiting for the Central Bank of Nigeria to issue the required licenses. I learned quite a few things from my MTN experience about operating across Africa these included:
a) You need good people who are comfortable with traveling and operating across languages and cultures; so we are very picky and apply strict rules in our recruitment (for instance we all speak fluent French and English in addition to our native languages)
b) Mobile financial service models need to be standardized to enable economies of scale and part of it has to be localized to meet local demand; for this, we partner with local entrepreneurs that can support us in localizing the proposition.
c) You have to be driven by a purpose that is beyond immediate financial gain to cope with the adverse business environment that you encounter. Our purpose is to make life a bit better for millions across the continent by providing, simple, relevant and affordable financial services.
Currently, you have 4 service offerings, namely Bill Payments, International Money Transfer, Online Payments and Microfinance Transactions. Could you tell us more about these offerings also with specific reference to the differences between the Bill and Online Payments offering?
Our International Money Transfer service allows existing money transfer companies to send money to mobile wallets across Africa. Mobile money transfer companies already offer different payout options such as cash (the main one) but also directly into a bank account, or as a check. We simply allow them to add onother option, the one that is likely to be the most relevant in Africa in the near future: the mobile wallet payout. Our Bill Payment Service complements the traditional bill payments that mobile money operators offer directly. It goes beyond simple payments to offer a complete shopping experience over the mobile phone. Many of our clients want their customers to change their options, and add new services, before they pay. Most mobile money operators do not have the ability to handle such complex demands. Online payment refers specifically to e-commerce where we enable websites to accept payment from mobile wallets. Our MFI transactions include services such as credit (apply for and receive loan through the phone), savings and insurance (buy and pay for basic coverage through the phone).
In the future, do you see the possibility for all current banking offerings such as investments through unit trusts and other such complex saving structures to be offered to mobile financial services clients?
Definitely. Although this may sound like a niche product, there is no reason why mobile technology cannot open up new opportunities like these offerings. The mistake will be to only see the payment component that makes mobile financial services possible. We take a holistic view. From how I acquire the clients to how I retain him, with the mobile as the key technology throughout. It is our ability to take a broader view and transform a service such as a unit trust investment and make it available to millions though the mobile phone. If you focus on just the payments you will miss out on the broader and bigger opportunities.
Having been a founding member of the GSMA Working Group for Mobile Money Transfer and Mobile Money for the Unbanked, how do you feel the African perspective is different from other parts of the world where Mobile financial services are taking off such as Latin America and the Asian Pacific regions?
In many ways the market conditions and challenges are similar. But the differences are probably around the much lower financial services penetration in Africa when compared to places like Asia where MFIs have been able to pull quite a large number of people in the financial system, or Latin America where banking penetration is relatively high. One of the root causes of this is obviously the smaller infrastructure base that we have in Africa which constrains the growth of many industries not just financial services. And it is precisely because of this lack of infrastructure that development has been held up. Mobile represents a fantastic opportunity to change this as it takes away time and distance. That is why we are also seeing more mobile financial services activity in Africa than anywhere else.
What do you think some of the major risks are in the mobile financial services in Africa? Do you offer solutions that overcome these risks which would be of benefit to operators and financial institutions wanting to role out M-Banking services in Africa?
The biggest risk I see might well be impatience. Impatience of players, analysts and investors to monetise this opportunity. What we offer (at MFS Africa) are ways to shorten the “time to money”. We are able to offer the appealing services that operators need to drive uptake and usage.
Is MFS Africa focusing its energies solely on Africa? And do you think that your expertise will be exported to other markets where similar challenges and opportunities lie? Where do you think this will be in the future?
Our roots are solidly in Africa, but our perspectives are global, as our clients and investors. Our plan is to perfect our model in Africa first and take it to other emerging markets as the next step. We have not identified a specific region yet, but we are watching closely the developments in key markets like Pakistan, Brazil, Indonesia and Mexico.