The rate at which mobile technology has infiltrated the payments industry is nothing short of unprecedented. It is estimated that mobile money transfers will increase by 150% globally this year with more than $13 billion transactions in 2015 alone, according to a report by Juniper Research.
Currently the drive is consumer-led; with peer-to-peer (P2P) transfer of funds in emerging markets, and smart-phone enabled merchant payments in more established markets. However, the business sector can stand to benefit a lot from adopting mobile payments.
Today, consumer demand attracts businesses to the mobile money platform. The consumer, whose own mobile wallet may have been funded by a transfer (P2P), pays a merchant by mobile; the merchant pays his supplier by mobile; and the supplier in turn may pay his corporation by mobile. The mobile payments industry is still predominantly at the first stage where most transactions are P2P, but this can be accelerated by corporations playing an active role.
If corporate, instead of consumer, mobile payments were to drive the industry, we could speed up the rate of adoption, changing the way we think about ecosystem development. This could be easily achieved by corporations incentivizing mobile receivables with methods like invoice discounting, which drives adoption at the distributor and merchant level. This in turn encourages consumer adoption (especially if the discount is passed on).
Why would corporations take this approach?
For manufacturers, cash is the most expensive form of payments. In emerging markets, the cost of cash collection can be as much as 20% of sales, because the cash has to be collected, transported, secured, insured, and manually processed. For Fast Moving Consumer Goods companies where cash represents up to 75% of receivables, this can translate to $15M in costs for every $100M of goods sold. Simply put, the risk of fraud, theft and loss reduces significantly when payments are made or collected via mobile.
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For banks, embedding mobile payments as part of a treasury service could be a strategic offering in a payments industry that’s evolving fast, with stiff competition from non-bank players. Micro-loans can be made accessible on a regular phone, with users who pay back on time having their credit limit gradually increased. It would provide access to credit for Ugandans who are unable or unwilling to acquire traditional loans, while providing a means for banks to assess the creditworthiness of the 27 million unbanked Ugandans.
For telecoms struggling with users holding multiple sim cards and low customer loyalty, provision of micro-insurance is a strong incentive for the user to stay with one telco. A premium-free subscription could pay for itself by reducing customer attrition rate, and increasing airtime sales. The customers would then have the option of staying on the free plan, or doubling their cover by switching to the paid plan. Tigo has used this same technique to double the insurance rate in Ghana in just 3 years, insuring 1.4 million Ghanaians in the process.
The last 10 years have seen a mobile phone in the hands of 300M Africans: the next decade will be defined by our collective ability to harness this massive user base with innovative solutions.
The writer is a project manager at Smart Business Intelligence, a leader in mobile payments integration for SME and Enterprise business operations.
