Author(s): Tony Worthington
If you're reading this in Europe or the US, you'll probably have a mobile services provider, a bank account and you'll make payments through systems such as PayPal and Apple Pay. Service providers in these three groups will largely be mutually exclusive.
If you're reading this in South Asia or Africa, the landscape is quite different.
It's now been a decade since Vodafone developed and introduced M-Pesa, one of the world's first and now iconic money transfer services through mobile phones. M-Pesa was initially introduced in Kenya through Vodafone's Safaricom business. Today, nearly 19 million people in Kenya transmit funds with M-Pesa, conducting over 10 million transactions a day.
Vodafone's rivals in Africa have also introduced mobile money offerings over the past decade. MTN, Airtel, Orange, Tigo and Econet have all successfully established services and now have tens of millions of users across the continent. Mobile money has also been rolled out extensively in Latin America and Asia.
Mobile money has been a success in Africa owing to the region's highly diversified population and the lack of large, national banking networks compared with developed economies. Research from AFDB shows that in 2016 there were 277 million mobile money accounts in Africa, compared with just 178 million conventional bank accounts.
More recently, M-Pesa and other mobile money services have evolved to offer users much more than a basic money transfer service. An ever-expanding range of services is now available, including mobile savings, microcredit, prepaid debit cards, customer-to-business and business-to-customer payments, microinsurance, integration with ATMs, and health insurance.
As mobile operators become more sophisticated financial services providers, are they now effectively becoming banks and payment providers?
Some operators already own banks. In 2016, Telenor's business in Pakistan acquired full control of Tameer Bank to provide a comprehensive range of mobile financial services to its subscribers. In Africa, Econet has developed its phenomenally successful EcoCash business into a new mobile financial services platform, Cassava. The group also owns Steward Bank in Zimbabwe.
In 2016, Orange acquired a controlling stake in Groupama Banque in France and announced it would rename it Orange Bank. The move forms an intriguing case of a former state-operated European telecom provider now offering financial services — a development that certainly wasn't envisaged in the prospectus for the initial public offering of shares in France Telecom 20 years ago.
But as operators provide more "banking" services, they will need to ensure that they conform to appropriate policies and procedures. Adoption of know-your-customer and anti-money laundering standards will be a prerequisite to be licensed to provide many financial services. This can be an expensive back office to build.
The ability of operators to provide more and more financial and lifestyle services to their subscribers will depend on two main factors. Firstly, they will need to offer a range of services that are at least as attractive as those currently provided by banks and payment providers. Secondly, they will have to persuade subscribers of the value of being a "one stop shop" for everything from call time and data top-ups to savings accounts and insurance policies.
We've seen the likes of Amazon, Alibaba and Tencent diversify superbly across a range of e-commerce marketplaces. There's a good chance that a highly entrepreneurial or visionary mobile operator will do the same for financial services. Then your mobile service operator will not just be providing you with connectivity, but also your current and savings accounts and insurance policies.