Mobile Money Taking Off, says Frost

Both mobile operators and banks are turning to mobile transactions to foster loyalty and drive revenues. Ranging from vouchers and bank balance checks to remitttance and top-up payments, mobile money is finally coming to fruition in both the banked and unbanked sector, while near field communication (NFC) promises to be the pot of gold at the end of the rainbow.
So says the analyst Frost & Sullivan, whose new study, Money in Mobile – European Transactions, estimates that the mobile money market in Western Europe will grow to 4 – 5 billion by 2013. The research examines both the banked and unbanked sectors, and segments mobile money into four areas: non-NFC-based m-payments mobile banking; remittance; and NFC-based m-payments.
Solutions targeting the developed world require a long-term strategy, even as providers will need to find a viable solution for retail payments (B2C), notes Frost & Sullivan Principal Analyst, Sharifah Amirah. NFC is potentially a solution, but hardware costs and mass market availability still remain key challenges for its widespread adoption. In the mean time, SMS-based services will drive growth.
Frost notes that much of the success to date has been primarily on servicing the unbanked mobile subscriber. The global ratio of mobile phone users to bank accounts is about 4:1.5. Remittances between specific markets, for example, Philippines-Hong Kong and India-UAE, have also been very popular.
Currently, in the developed world, it is about getting users comfortable with performing certain money-related functions on their phone, such as checking balances and portfolio performances. Operators and banks alike are still building consumer trust in terms of transferring money and paying bills over the phone, says Frost.
Transaction costs and ease-of-use will drive money transfers and P2P transactions, adds Amirah. The gap between financial institutions and mobile operators is beginning to narrow, but there is still need for greater education both on the supply and demand side.
Several trials and small-scale deployments can be seen in key Eastern European markets. The high number of banks in the region foresees interoperability as a key challenge.
Growth will be driven by high frequency and low-value transactions, supported by widespread, cashless transaction systems that are cost-effective and secure, says Amirah. Increased cross-border cooperation will drive the high growing remittance transactions.
However, five primary concerns remain. These include security issues; the lack of regulation on mobile transactions; quality of service; limited collaboration between different participants; and the high cost of solutions. There is great risk in the industry in the context of point solutions, in particular, not being scalable or suitable for wide scale deployments, says Frost.
Success stories to date reveal that no one solution fits all. For instance, M-PESA will not necessarily work in India. Services have to be customised to suit the culture, regulation and competitive landscape of a particular region even as skill sets and distribution requirements will vary.
Once there is trust, security and greater interoperability, only then will there be growth in proximity transactions and m-commerce, concludes Amirah.
For more information about the study, which is part of the Mobile & Wireless Growth Partnership Service programme, send an email to: joanna.lewandowska@frost.com with your name, company name, title, telephone number, company e-mail address, full postal address, and company website.