Thursday, May 5, 2011

Mobile Money - Do we have a case for Sri Lanka?

Mobile money today has become a very broad term encompassing any monetary type of transaction being done using a mobile device. The GSMA tries to categorize this into 6 [1], Pay buy Mobile, Mobile Ticketing, Mobile Money Advisory Services, Mobile Money Transfer, Mobile Signatures and Mobile Money for Unbanked.

What interest me most is the concept of Mobile Money for Unbanked or to make it sound better the mobile wallet concept. Mobile wallet concept will allow the mobile operators to offer mobile wallets to its subscribers, which will be separate from the air time account. When this service is offered, just like the way we do reload/recharge/top up we can goto the agents(small shops offering top up) and ask them to deposit money to the mobile wallet. But the crucial difference is that we can also goto these agents and make withdrawals or transfers to friends, family, utility payment or purchases using the money in the mobile wallet.

I have seen few countries where this is implemented, but two countries stand out. One is the safaricom's (Kenyan) implementation of M-PESA and the other is Globes (Philiphines) G-Cash. M-Pesa's  success is mind boggling and clearly visible, you get into a taxi and the taxi driver will  be more than willing to accept the payment using a mobile wallet transfer. Cashless transaction taking place at the grass root level. It has become part of peoples lives, just like cash is part of our lives. In the same way G-Cash's implementation has been successful and now it has become an acceptable and affordable international remittance mechanism.

Although its a huge success in Kenya, mobile money hasn't still reached the commercial success of the same magnitude when implemented in its neighboring Tanzania. Lot of debate had been done on this and people are trying to find the reasons for it being successful in some countries and not being so successful in others. I have heard people tell me that its a cultural thing, it depends on the size of the country, depends on the operator who deploys it.

Mobile money has now started to spread fast and the uptake in the developing countries had been very rapid. The GSM world boasts about 100 deployments and 87 on its way [2]. In almost all the deployments, there had been two clear beneficiaries from these implementations, one of them of course are the mobile operators, this is an extra revenue stream for them and it brings in stickiness to the network. Secondly it has benefited the unbanked population, the rural masses who didn't have branches nearby and whose income levels were below a few dollars per day and banking transactions were deemed to be too expensive for them, the masses who considered having cash in hand to be insecure, the people wanted to do to remittances or transfers of small scale. With mobile money being introduced it infused a new kind of economy into the system.

Now the question here is why not in Sri Lanka?

If I am not mistaken currently operators are not allowed to implement the mobile money solution due to a Central bank regulation which doesn't allow non financial institutions to take deposits. I am sure banks will be happy with this regulation being in place, as they could view this as a way of pre-empting a possible competition.  But when the overall context is looked upon I think Sri Lanka is a country which is with a large unbanked population and due to the cost of setting up banking infrastructure reaching them will continue to be a challenge, there is a large community who are in need of having a simple way of making remittances to their loved ones in quick time, still there are places where people consider its insecure to have too much money in hand, hence would prefer to put it into a mobile wallet. this leads to think that the mobile money solution should be allowed into the system. But the challenge will be to regulate and impose a regulation on the organizations offering it. It can be considered as an additional license to the operators I guess, and a regulation where they need to show liquidity to up to a certain percentage of the total deposit they have at hand at any given time. I think as a country we need to work out a viable solution to enable this solution which could help the people at the grass root level.


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