Merchant payments add a significant use case for mobile money in developing countries by enabling customers to pay for goods and services from their mobile wallets. Across the developed world, cards and NFC enabled POSs are being used to pay for everyday purchases, but the question remains if mobile money can, or will, have the same levels of usage in the developing world.
In Uganda for example, there are a number of agents who are small retailers, and are paid a commission to facilitate the exchange of cash and electronic money. A merchant, on the other hand, will accept electronic payments in exchange for the goods or services he/she provide.
The 2015 State of the Industry Report on Mobile Money by GSMA states that; approximately twelve million transactions per month and more than US$ 325 million transacted, merchant payments represent 1.9% of total mobile money transaction volumes and 4.1% of total mobile money transaction values.
The report further states that Mobile money providers have reported only a handful of online payments, totaling 0.5% of total merchant payment volumes (which is less than 60,000 transactions).
Uganda providers have managed to get only a handful of merchants to date.
Benefits and Opportunities
For mobile money providers, merchant payments have a huge potential to increase mobile money transaction volumes. As a product, merchant payments have caught the attention of mobile money providers because of the sheer magnitude of retail payments in the market and the opportunity it represents to integrate the mobile wallet more deeply into everyday life.
The merchant can now sell to people across town, across the country and take payment around the clock.
Mobile money providers need to invest significant resources in merchant acquisition or partner with specialists to build an active merchant network.
Focused and dedicated teams with specific skills are needed to educate and convince merchants to use the service. A strong value proposition is essential to hold merchants’ interest and deliver sustainable transaction volumes. Using segmentation to attract the right merchants with an appropriate commission structure will help build a quality merchant network.
Providing merchants with a complete experience (fast settlement and access to their transaction data) will increase their confidence in the system.