Mobile Money: What African Banks need to Know (1)

Mobile phones can enable Banks and their existing and new customers to interact remotely in a trusted way through local retail outlets like the super markets, Gas stations, lottery points, post offices and even airtime dealers.

Banks lean towards confining themselves within clear industry boundaries, they tend to compete on matching and beating rivals and the result are strategies that converge along same basic dimension of competition but telcos compete across industries, communications, media and now finance. Telcos are breaking the acceptable boundaries of competition by tapping into mobile money landscape. For the Banks in the Mobile Money Landscape, the strategy is, ‘it is our beer, we deserve a sip but for the telcos, the beer barrel is ours’.

The entrenched ‘How we compete’ syndrome is taking the African Banks eye off the target, the Unbanked populations. Since telcos don’t seems to be very rigid on same principle, they are ready to explore what should ordinarily be the sweet pot for the Banks.

The MNO’s (Telcos) seem to understand clearly and at an early stage the Four Horsemen – Reach, cost, regulation and technology, that are critical to the success of deploying Mobile Money platforms in Africa to meet the needs of the Unbanked millions while the Banks were still groping in the dark. Why is this so? Both are customer-facing enterprises but with different value systems that pushed one ahead of the other, but for how long?

Banks are driven by specific customer and segment profitability measures within defined geographical boundaries with aversion to low margins ventures like mobile money, which are treated more as supporting key segments rather than as a way of reaching new ones. Telcos are low margin, high volume engines with extensive infrastructure in a more competitive industry than Banks in Africa. For a Bank, a few deep pocket customers can determine profitability but for a telcos, customer niches don’t work for them.

Horseman number one – Reach

Telcos usually operate extensive networks within National boundaries and external Boundaries. Few Banks in Africa are widely spread out like the MTN or Zain in Africa apart from few Banks like Standard Bank, Ecobank, UBA and a few others.
Telcos while not shouting about it operate some of the most elaborate retail systems and touch points in most countries.

In a country like Nigeria, the dominant Mobile Operator, MTN, retails the pre paid card through more than 500,000 airtime dealers, agents and stores that are not owned by them. Over the years, they had mastered the art of low value, high volume business environments and working through independent agents as potential Mobile Money agents will be a walk in the park.
The Banks on the other hand has little or no experiences in working through agents, though the newly released Mobile Money guidelines in Nigeria, now supports it.

In event of Banks trying to manage agent networks the way telcos do, is to attract failures. Telcos are masters at managing large retail networks of pre- paid airtime agents with strong internal control mechanism.

Elsewhere, Banks had successfully worked through agents. Lemon Bank in Brazil has more than 5,000 agents without a single Bank Branch; Banco Bradesco uses the post offices, Equity Bank in Kenya works with Nakumatt retail stores. In Peru, Banks operate more than 3,000 networks of banking agents.

Cross Border, Mobile Operators tend to ‘stick’ with a technology and modify it to existing regulations and run with it, across Geo Boundaries, MTN and Zain are doing this, all over Africa. Banks tend to look for, what is working in those countries and adopt it, accordingly.