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Friday, 13 March 2009

Sending Money Home More Easily


Hardly a month of the 21st century has passed without some breathless announcement of soaring growth projections in the mobile space.

Two of the more compelling financial use-cases for mobile phones are remittance (domestic and cross-border) and retail purchase. Everything else is nice-to-have if your phone will do either of those things.

Some would add "mobile banking" as a primary use-case, but it only seems to involve accessing the same old banking services via a different device/network. That's about as compelling as filling your socks with custard before putting them on each morning. You may as well use telephone banking. At any rate, "banking" isn't really part of any other activity we engage in, unlike "sending money home" or "shopping". "Banking" is an admin task, like sorting your paper clips or arranging your pens in order of length. Investing is much more fun, but doesn't seem to be sufficiently frequent to design mobile apps around it.

Of course, the retail use-case is fascinating, but it has to be so tightly integrated with the overall product location and purchasing experience that it's almost impossible to talk about except on a retailer by retailer basis.

So that leaves remittance as the use-case with general significance. I've followed it since 1999, when I left the comfort of a City law firm to join the board of earthport plc. I left in June 2001, 5 months after it floated on AIM, by which time the dotcom bust had reduced the pace of e-commerce integration efforts to a crawl and it didn't need an inhouse legal team. But it's a tribute to human nature that subsequent management teams have been able to keep earthport alive to take advantage of the current wave of development.

To give you an idea of why persistence is worthwhile, the GSMA has concluded that the remittance market in 2006 comprised some 200 million migrant workers in EU, US, UAE etc, who each sent home US$2k-5k a year in $200 increments to about 800m recipients. Some 32 countries accounted for only $100bn of an estimated $270bn of traceable funds (add to that about $185bn non-traceable). And that market was served mainly by Banks, post offices, niche MSBs (55%), Western Union (25%), Eurogiro (11%), MoneyGram(6%) and Vigo (3%).

But migrant workers queue up, debit card or cash in hand, to pay giant fees to send money home.

I'll spare you a discussion of the hype and plight of the 30+ providers out there, and merely point to three news items that suggest real progress towards more useful remittance services:
Of course, several years back, the GSMA also allied itself with Western Union "to ensure faster development of Mobile Wallets suitable for implementation by Mobile Network Operators. ... initially targeting 30-40 Mobile Network Operators in markets where there is a high demand for remittances services to become early adopters of mobile wallets.” Indeed, I took the picture for this post from the announcement of Western Union's deal with Orascom, an emerging markets telco, in October 2008.

This news flow reveals that the incumbents in the remittance market have finally admitted they need new payment processing platforms to service the market effectively. And (alas, too late for my lapsed earthport options) m-wallets, or server-based solutions are the weapons of choice, rather than device-based solutions. The announcements also underline the importance of having a trusted local brand at each end of the remittance. In fact, it's easy to see that the trust level may be more important at the recipient end - where users may be less confident with technology. Finally, both ends of the remittance are highly fragmented and often based remotely, making the mobile phone the ideal touch point for payer and payee.

Hopefully we'll see M-PESA's "infuriating" success repeated by others across borders before too long.
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