Mobile money services have gained momentum over the past year and a half, thanks to a number of successful deployments in Africa and the mobile money transfer initiative by the GSM Association. Service providers, including banks and mobile operators, have to invest substantial efforts in building an "ecosystem" to make the service work within the local regulatory and business environment.
There are seven major steps that service providers should take to make mobile money services successful in emerging markets.
The first is to engage regulators from early on to gain their support. There are situations that service providers don't want to see, such as the withdrawal of popular services due to non-compliance or worse, banks being fined or facing sanctions.
Service providers must have a clear understanding of certain requirements commonly seen across markets. These include consumer protection measures such as data security, privacy, "know your customer" and anti-money laundering policies as well as combating financing of terrorism.
Which model?
The second is to define with the help of banks the business model and the operator's roles and responsibilities. Generally, there are four business models, one of which is the bank-led model - in which case banks take most of the responsibility and treat mobile operators as a "bit pipe."
Another model is the operator-led one, where the service provider assumes all responsibility, including float accountability. Of all business models, this gives the operator the highest returns, but it also assumes the highest risks.
Still another model is the bank-operator joint effort, in which they take a fair share of the responsibilities. This is most effective as each party performs tasks within their expertise. And then there is the model in which a third party leads, usually a solution provider that offers the service to operators.
The third step is to select a vendor, preferably those with an end-to-end robust solution that is market -proven, and those with successful deployments of reasonable scale. A vendor should have a solid understanding of local regulatory and business environment, proven track record, and a robust, scalable and flexible solution.
The fourth step is to set up the agent network, a key element in the ecosystem of mobile money services as agents work on providers' behalf to take deposits and pay out cash, as well as work as the primary interface with the customer.
Step five is to recruit service partners or third parties that accept mobile money payment such as retail shops, utilities, internet/broadband providers, government and schools.
Sixth is to manage risks both for consumer protection and regulatory compliance.
Finally, operators should market the service especially to rural and remote regions where the majority of the targeted market resides and where there is a lack of marketing channels. Word-of-mouth is the best way to advertise in this case. The service should be designed so that users don't have to sign up to use functions such as money transfer.
Sandy Shen is a research director in Gartner's mobile devices and consumer services group