Taking Mobile Money to the Next Level
For mobile money services to evolve, providers need to support all the activities that go on before, during, and after customers make payments.
The defining characteristic of mobile money is that it works in real time. With real time, customers can get immediate confirmation that transactions related to their account are complete, make immediate use of funds they receive, and check that their balance matches their expectation. Real-time transaction processing ensures that all transactions are properly funded; it also removes counterparty or credit risk, which enables the safe use of a large number of third-party retail stores as cash in/out outlets.
Mobile phones have carried real-time practically everywhere. How can bringing together immediacy, control, and trust not revolutionize money—especially in cases where people have not experienced that combination before?
But the fact that real time is mobile money’s basic ingredient doesn’t mean that all services running on mobile should be evanescent, limited to the here and now. I’ve argued elsewhere that the transition that mobile money needs to make—if it wants to get into everyday use—is from making payments to managing payments. Managing payments essentially means following the lifecycle of different payment types—in other words, adding a time dimension to the present real-time mobile payment service.
Consider the following four categories of examples:
- For individuals, managing payments means not only facilitating today´s payments, but also preparing for payments that they will want or need to make tomorrow by helping build up the necessary balances. This means seamlessly incorporating flexible notions of budgeting and savings into payments so that today’s payments don’t end up obliterating tomorrow’s. For instance, you might earmark an amount for school fees and use a mobile service to “send” money to yourself on the day it’s due.
- Community-based or self-help groups often form around a common financial objective (such as group saving through a rotating savings and credit association) or a joint financial objective (such as fundraising for a wedding or funeral). Beyond assisting payment into or from the common pot, mobile money platforms could play a role in managing the whole informal financial structure, including setting up the group, issuing invitations to join the group and reminders to contribute, and maintaining transparent records.
- For businesses, managing payments means following the end-to-end process of a typical payment, including an employee raising a payment request, appropriately notating it and linking it to an invoice, having the payment authorized by approved officers according to enterprise policies, and backing up the payment data for reconciliations. Without this information context, formal businesses will struggle to identify efficiency and business protection gains that result from shifting to electronic payments.
- Stores can use mobile money to track store credit, since store credit is a mutual agreement to defer a payment. Managing those payments involves tracking store credit—from the moment customers incur debts at the point of sale to the moment they settle payment—by structuring installments and issuing payment reminders to customers as appropriate.
Again, notice how managing the context of these various types of transactions is about seeing payments through their logical time. While the basic mobile money platform ought to remain real-time and credit free, higher-level mobile money services ought to open up possibilities for credit (through products such as M-Shwari, which offers small loans on demand) and bring back a time dimension so that users can incorporate mobile money more easily and meaningfully into their daily lives.
Based on a recent review of mobile money product innovations that I conducted with my former colleague Mireya Almazán, now at GSM Association, there is relatively little product development progress aimed at managing rather than making more-diverse kinds of payments. This is partly because we cannot implement the kind of manageability services described above on simple mobile phones alone; it will require an evolution to richer user interfaces based on web access and especially smartphone apps. ICICI Bank’s iWish service in India is one early attempt to reframe commitment savings products in much more intuitive terms. But we will soon be at the cusp of rapid smartphone adoption in developing countries, and mobile money will get a lot more exciting soon.