The 2015 Ericsson Mobility Report tells us that by 2020, 70% of the world will be using a smartphone. It even says that mobile data networks will cover 90% of the population with subscription reaching 6.1 billion people and almost 80% of these new subscriptions will come from Asia Pacific, Middle East and Africa. Now, this tells me one doesn’t need to be a fortune teller to see what is going on and as a person who’s been in the mobile industry for years, I can say without a doubt, mobile money is the future of the world.
The ability to conduct financial transactions like payments, withdrawals, money transfers, online payments and more using a mobile phone. No cash and no card. As a matter of fact, influential tech blog Techcrunch is predicting in its article, 5 Things That Will Disappear In 5 Years, that cash, cheque books, credit cards and ATMs will be replaced by digital wallets in just five years from now.
As I always mention in my talks, writings and meetings with finance industry executives, mobile money is an efficient and reliable answer to financial exclusion. It has the potential to transform lives by bringing into the system those who have been left behind due to the high costs of banking and a general lack of access to banks due to distance. Even the government’s National Development Plan would like to see South Africa to reach a target of 90% financial inclusion by 2030. Mobile money has an ability to fulfil all this.
South Africa is lagging behind in its adoption of mobile money. There are various reasons for this including our strong banking system and concerns around mobile money security and profitability. For the mobile money industry to succeed in South Africa there are few things that need to be fixed.
I have compiled a short list of some of my observations so far.
1. There is a huge difference between mobile money and mobile payments
People are confusing the two technologies and although they are very similar, the difference is huge. Mobile Money is the ability to store money in a value store not linked to a bank account. This is giving people access to money or financial services without them having access to a physical bank account.
Mobile Payments is when you give users the ability to pay for goods or services using your mobile device. Most of the available Mobile Payment services like Apple Pay or Zapper require that the user has an active credit or debit card linked to the application.
2. Mobile Payments will only work if merchants adopt it
The biggest problem currently with Mobile Payments is the lack of merchants accepting it as payment method. By making Mobile Payments more attractive to merchants they will convince their customers to switch. Take SnapScan for example. When it was launched in 2013 people were new to the idea of using their mobile to make payments. Snapscan targeted the local merchants and made it more affordable to them to rather use Snapscan and not the traditional card terminals and merchant accounts. Merchants then advertised it to their customers and convinced them to rather pay using Snapscan.
3. Mobile Payments industry is lacks unity
If we look at the Mobile Payment market today you will notice that almost all the big brands are releasing their own version of Mobile Payments. Apple, Samsung, Google, Microsoft not to mention all the local banks and telecom companies. It can be confusing to consumers on what products to use and merchants are struggling to keep up. It’s almost impossible for merchants to accept all the available payment methods even if they want to. By developing a unified product, adoption will be quicker and users will build trust in the product. The credit card market is a good example. Although there are 1000s of different credit cards in the market all of them are backed by either VISA or Mastercard. This allows people to build trust in technology and merchants can easily accept them as payment method and adoption grows faster.
Another advantage of a unified Mobile Payments product is international acceptance. Most products only work in certain countries. Snapscan only works in South Africa. Apple Pay works in the US and Europe. By developing a unified product, international acceptance will be much faster meaning you will be able to pay using your same device anywhere in the world.
4. People don’t trust or understand it
The credit card is about 40 years old and still there are a lot of people who still don’t trust it. People want to see physical money in their hands or pockets. Convincing people that they can pay using only their mobile device will take time and a lot of effort. The mobile device is only 20 years old in South Africa and only recently people got use to the idea of being able to do almost anything on their phone and now we want to convince them that the same device will replace their wallet and cash.
5. Mobile Payments are not convenient enough
Walking into a store, taking out your wallet and making a payment is something people have been used to for centuries. For any Mobile Payment experience to work it has to be more convenient, safer and faster than paying with cash. It’s been an industry standard that any payment on the internet should be done within 3 clicks or less. It’s my belief that people expect Mobile Payments to be a lot faster. Until a product has been developed that can deliver a safer and more convenient payment experience faster than what people are used to people will not adopt it.