Emerging markets: Mobile money and financial inclusion
By Christophe Yanclo, Head of Payment Innovation & Market Insight for SGGTB & Jeremy Saltiel, Head of Multichannel Digital Strategy, International Retail Banking for Societe Generale - 2016
“At present it is the mobile network operators that are leading the transformation of banking services in Africa. Banks are stepping up to play their part and have financial services based on a banking rather than a MNO model.” Christophe Yanclo, Head of Payment Monitoring and Innovation for SG GTB
New technologies are being trialed in emerging regions – what can be learned from these and applied in other regions of the world? Understanding the real impact of technological and business model innovations on levels of financial inclusion and poverty reduction is critical. New research from the Harvard Kennedy School – supported by the SWIFT Institute – analyses the impact of mobile banking because this technology holds perhaps the greatest promise in overcoming geographic, demographic and institutional constraints to financial inclusion
- Mobile network operators (MNOs) in sub-Saharan Africa have evolved from offering simple top-up services to their mobile phone customers to integrating an increasing number of transactional services. These companies have become providers of financial inclusion services to a large number of people in Africa. Starting with M-Pesa in Kenya, such services have now spread throughout the region of East Africa and the MNO’s offerings are very strong.
- The inroads made by mobile network operators in Africa have galvanised banks to act in order to ensure they can retain a competitive edge in financial services in the region. For example, Societe Generale is providing services in several sub-Saharan African countries in which we have a historical presence. Our goal is not to repeat the MNO model, but to provide easy access to financial services through a distribution network based on a variety of partners, or agents, including petrol stations, food retailers and convenience stores. We are organising our distribution channels along the same lines as retailers so that we can bring financial services to a broader range of the population. To be successful in the region, banks need to be able to offer their services to people where they are during the day.
- Banks need to consider partnering with other organisations on the transactional side of payments but also in order to provide a range of the expected financial services through a different network. There is a big advantage for banks in that we can offer savings and loans accounts whereas MNOs cannot. Banks are also considered safer than MNOs and have a good reputation.
- The penetration of some banks in their home countries has reached only 5-20%. This is very low, but nearly everyone in sub-Saharan Africa has a mobile phone and this is why it would be a good idea for banks to consider partnering with MNOs. These operators can help banks to reach a much wider customer base via their their widespread and large distribution networks. Already, some MNOs have partnered with banks in order to provide savings accounts, loans and micro finance to their customers.
- The activities of MNOs are not restricted to retail banking – services are also being offered to corporate clients. These companies want to dematerialise their payments and get rid of cash and MNOs are offering services to government authorities and corporates for the electronic payment of salaries. Services are also being offered in B2B use cases where at present the only option in many cases is cash.
- Banks have a decision to make – do they merely partner with MNOs to provide the underlying financial services that are required for mobile money systems or do they step up and provide their own set of services to encourage further financial inclusion across developing regions? Many pan-African banks are beginning to step up, moving into the heart of this transformation of services in Africa.
- The ultimate goal with offering mobile payments services is to bring payment recipients into the financial system by offering further related services. By educating people about financial services we can further the efforts of financial inclusion in this part of the world.
- The mobile payments model in sub-Saharan Africa is based on real time payments, which are now being adopted throughout Europe and the US. There are similar use cases for such payments in Europe as there are in Africa such as peer to peer or business to business real time payments. This is an example of a transfer of innovation from an emerging market to developed markets. Many of the well-established mobile money operators in Africa are now branching out into developed countries with the same models.
- Financial inclusion is developing in Africa and will have many positive benefits. For example, if people are encouraged to put their savings in the banking system it will increase the liquidity of the system and enable more capacity to lend in order to develop the economy. From a security point of view removing cash from the system will provide a safer and more reliable way for people to receive their salaries and other payments.
- The agency banking model that began in Africa and is now a success is emerging in other parts of the world. Customers can access financial services through a variety of outlets including bakeries, food retailers etc that are providing a more convenient location in which to bank. Banking services are being provided to customers where they are during hours that are more convenient to them.
“Our goal is not to repeat the MNO model, but to provide easy access to financial services through a distribution network based on a variety of partners, or agents, including petrol stations, food retailers and convenience stores. We are organising our distribution channels along the same lines as retailers so that we can bring financial services to a broader range of the population.” Jeremy Saltiel, Head of Multichannel Digital Strategy, International Retail Banking for Societe Generale