What is mobile money?
Good question, the answer depends upon which country you are in!
In Australia, we think of mobile money as your bank smartphone app operating using your mobile internet or WiFi connection. This is really internet banking tailored to suit the small screen size of a mobile device. It does not require a mobile number or SIM card. The back end uses the same regular banking systems as the general, internet and telephone banking systems.
It is a contrasting story in developing countries, for example in the Pacific Islands, where mobile money is very different. In Pacific countries, mobile money is directly linked to a mobile number and SIM card. It will only work on a mobile phone because it operates exclusively using mobile phone infrastructure (not regular internet or WiFi). It uses simple, low-tech SMS and text-based codes and menus (like *123#) which work on any mobile network and any mobile phone. It is highly secure and therefore does not require internet connection.
For the nerds, here is some technical info. Feel free to skip over if you are bored by this!
In emerging markets, mobile money works by using the mobile number as the account number to address a payment. Unlike banks, which need a complex combination of country, address, branch codes and account numbers to identify an individual account, mobile money only requires the mobile number to route a payment.
While some mobile money systems do provide a smartphone app option, most systems require only a feature phone.
Unlike banking systems which often rely on legacy architecture, mobile money systems are built on the latest state-of-the-art, modern, mobile telecommunications infrastructure, these are fast (money is transferred instantly) and very cheap to operate. Such systems are robust, simple to use and reliable.
Why is mobile money popular in developing countries like Pacific Islands nations?
As mobile money can work on any mobile phone and uses existing mobile network infrastructure, it is cheap to operate. Transaction fees are therefore smaller or can be eliminated altogether.
Many people in developing countries do not have a bank account. In fact, in many of these countries, less than 50% of adults have a bank account – the so-called ‘unbanked’. The World Bank estimates that there are between 2 and 2.5 billion unbanked in the world. The reasons for this are complex but are mainly related to lower levels of income and high unemployment.
The use of a mobile phone as a payment device is acknowledged as a logical payment solution for the unbanked, as people in emerging markets often lack the formal identity requirements that traditional banking services require, such as a birth certificate, formal ID, address, regular employment or proof of income.
Who operates mobile money?
Not banks! Mobile money systems are usually operated by the mobile phone networks directly. They are specially licenced by central banks and usually need to apply similar rules to banks when opening and managing customer accounts such as checking and verifying ID. Some examples of popular mobile money services are M-PESA in Kenya, EasyPaisa in Pakistan, EcoCash in Zimbabwe, Vodafone M-PAiSA in Fiji, Digicel Money in Fiji and Tonga and MTN Money in Ghana.
What is mobile money used for?
Pretty much everything! Just like regular electronic payments here in Australia, mobile money can be used for person to person or business payments. While most are person to person payments, in some countries mobile money can be used to pay for everything a bank account can including everyday bills, airline tickets or Internet shopping.
How do you get money in and out of mobile money?
Another excellent question! Mobile money uses a country-wide network of agents to as cash-in and cash-out points. These agents are specially licensed and are usually small shops or local businesses. In some countries, cash can be loaded or withdrawn from a mobile money account via ATM.
In some countries, mobile money is so popular that a large proportion of transactions in the economy are made electronically without the need to cash-in or cash-out. For example, in countries where mobile money is very popular, such as in Kenya, Ghana and Zimbabwe, there is a lower need to cash in or cash out. Wages and payments are made directly via mobile money and everyday payments are made electronically via mobile money.
Where is mobile money used in the Pacific?
Right now, mobile money is still new in the Pacific. Countries where mobile money is currently live include:
- PNG (Digicel Money)
- Fiji (Digicel Money, Vodafone M-PAiSA)
- Samoa (Digicel Money)
- Tonga (Digicel Money)
Services are currently being tested in Vanuatu, Kiribati, Cook Islands, and the Solomon Islands.
Harold Dimpel is an experienced entrepreneur with a focus on technology. In the last 15 years, Harold has specialised in mobile payment technology and services through his multi-award winning financial services technology business mHITs Limited. He is a mobile payment industry pioneer and has a track record of bringing multiple first-to-market, innovative and disruptive services to market in Australian and internationally.
About Rocket Remit
Rocket Remit specialises in fast, low cost money transfer from Australia to mobile money systems overseas in Africa and the Asia Pacific. Supported countries include Kenya, Ghana, Nigeria, Zimbabwe, Pakistan, Bangladesh, India, Nepal, the Philippines, Fiji, and Tonga plus many more. Visit www.rocketremit.com.