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A primer: The business case for mobile money

  • By Timothy Roberts
  • Tuesday, March 16, 2010

Here’s the deal: average revenue per subscriber (ARPU) has been on a steady decline as mobile carriers penetrate low volume users and fierce competition has driven voice minutes to near commodity level pricing. Operators have tried to combat the decline through investments in mobile data services, applications, and other mobile value added service offerings.

As the number of mobile subscribers moves from three to four billion, the profile of that next billion represents a unique demographic where serving the subscriber value-added-services means augmenting an already capable 2G+ network. The profile of that next billion are from the developing markets where economies are primarily driven by cash; banking systems exist however do not serve the individuals in the remote areas where communications networks are capable of reaching. The next billion are remote and migrant workers, which generate an income to send back to their homes to support their loved ones.

A majority of that next billion will dominate the prepaid subscriber community. According to Informa, prepaid subscribers will continue to dominate the landscape for many years to come. Overlaying this analysis onto the regional subscriber acquisition uncovers several interesting dynamics.

In the developed markets we have also seen the shift in favour of a prepaid over postpaid account, a no-commitment mobile account which is a byproduct of the destabilization of financial markets in the developed markets. The challenge for mobile operators in developed markets is how to capitalize on the shift and growth of mobile prepaid subscribers.

Some people see mobile money as the next big thing. They say it promises a bright new future where mobile payments will make fortunes for operators and transform the lives of unbanked consumers who use these mobile payments to pay utility bills rather than spend the day queuing. The unbanked community alone is a huge constituency: in 75% of countries, the majority of citizens have no access to banking facilities.

I’ll offer a response to this challenge in my next post.