Telecoms expand presence in mobile financial services market

There are about 90 percent Indian villages without a commercial bank branch, and over 350 million rural mobile subscribers in India — indicating the scope for mobile financial services, convey EY reports.

In emerging markets, mobile financial services or MFS will span $500 billion in 2021, from $198 billion in 2015, as per Juniper Research.

Insurance offerings will enable telecom network operators to cut down churn levels.

Mobile money in India

Vodafone India has over 120,000 authorized agents which are equivalent of all bank branches in India. 60 percent of Vodafone India agents are in rural areas till March 2016. Vodafone India has a base of over 5.4 million registered accounts / customers. 1.3 million are active mobile money customers.

Globally, Vodafone M-Pesa money transfer service has more than 25 million (+27 percent) active customers — supported by a network of more than 261,000 agents in 11 countries.

Airtel Africa said its customer base using the Airtel Money platform increased 23.4 percent to 8.6 million in Q1 fiscal 2017.

Airtel Africa said the number of mobile money transactions during the quarter increased 70 percent to 337 million. Value of mobile money transactions on the Airtel money platform rose 62 percent to $5,069 million.

Idea Money launched Domestic Money Remittance (DMR) with IMPS / NEFT facility on PPI platform in April 2016. The service is now available across 17 circles. During Q1 FY 2017, IMCSL has achieved transaction worth Rs 450 million throughput on DMR platform.

Idea Money has tie ups with online and offline merchants like Book My show, KFC, Dominos, Yep Me, Make My Trip, IRCTC, Bajaj Allianz, LIC, Cafe Coffee Day etc. Idea as on June 30, 2016 has acquired more than 3.4 million PPI mobile wallet customers & efforts are on to exponentially increase the number of active PPI digital wallet users.

Telenor Suraksha life insurance scheme in India witnessed 50 percent users among 45 million user base signing up since its December 2015 launch.

Growth drivers

Mobile financial services will boost the GDP of all emerging economies by as much as $3.7 trillion by 2025, with a 6 percent increase, suggest McKinsey report.

India could see a boost of $700 billion, an 11.8 per cent increase by 2025, owing to mobile financial services.

Additional GDP will also create around 95 million new jobs across all sectors, 21 million of them in India.

Online financial services in India will become a Rs 15,000 crore market by 2020, multiplied by 15 times from Rs 1,063 crore in 2014, owing to a hike in usage of mobile wallets and insurance services.

The main challenge is to customise financial service products as per individual markets.

This creates a potential for mobile financial services for a large population.

Government is attempting to promote financial inclusion in India, with initiatives like Pradhan Mantri Jan Dhan Yojana.

The above resulted in the opening of 125 million new bank accounts just a year after the launch in 2014.

MFS has scope for a vast mass market, mainly in places lacking physical infrastructure due to high costs.

For telecoms this will become an additional revenue stream and will aid industry cross-sell services.

Moves towards promoting inclusions and access to financial services are underway by the Government of India.

Indian telecom operators will work on the financial inclusion agenda enabled by the reach and prior experience in mobile money services.

The m-commerce boom in India is another driver for MFS growth.

Also the m-commerce market in India will escalate by 55 percent from $2 billion in 2015 to $19 billion by 2019.

Cashless transactions are also gaining popularity against cash based payments especially in B2B and B2C transactions

The growth of mobile phones mainly smartphones are leading to the boost in mobile payments, microfinance, and banking services.

India, Philippines and Colombia have the maximum unbanked people using mobile financial services at 47 percent, 68.7 percent, and 61 percent respectively.

The mobile penetration in these regions also ranges from 75 percent, 111 percent, and 113 percent, respectively.

The main concern with this service is the risk of financial damage and cyber-attacks.

Hence, security measures such as tokenization and biometric authentication are crucial for the digital payment industry.

Also regular know-your-customer, anti-money laundering and transaction authentication procedures have to be practised to remedy the same.

This can effectively slash the issues in regions like India, the Philippines and Nigeria facing limited adoption owing to products not appealing to their target audience.

Asia-Pacific witnesses issues of national regulations with strong potential for future product launches.

Lifting of restrictions in under-served regions will further boost MFS.

Also, products are now set to meet religious requirements to cater to a wider user base.

Vina Krishnan
[email protected]