The revolution in mobile payments is finally here

2011-05-07 21:38

In the 21st century, cash is obsolete – a hangover of an era where cash was king. The mobile space is currently where it’s at.

But the mobile phone space is a cluttered universe.

Mobile service providers, banks, retailers and a host of secondary services are all vying for customers.

Banks, in particular, are targeting the lower end of the earnings market in a drive to get the ­unbanked on board and capitalise on a massive market.

Absa recently launched their “1234” branches, where customers can open accounts and do basic transactions. Standard Bank has announced a drive to get retailers and spaza shops into its network, and you can now draw cash from an FNB ATM using your phone. Nedbank is lagging the market.

The competition is fierce and ­unforgiving, and the primary ­driver is the mobile phone.

“It took 20 years to connect the first billion subscribers, but only 40 months to connect the second billion,” says The Mobile World co-founder John Tysoe.

“The six billion milestone will be passed in 2011.”

Exponential market online ­mobile analysis site mobiThinking says that, according to the ­International Telecommunications Union, 90% of the world now lives in a place with access to a ­mobile network. For rural communities, this is lower – at 80%.

At the end of last year, there were about 3.8 billion mobile subscriptions in the developing world – 73% of global subscriptions.

The GSMA Development Fund, the umbrella body for organisations working in the mobile ­banking field, initiated the Mobile Money for the Unbanked (MMU) programme to accelerate the availability of mobile money services to the unbanked and those living on less than $2 a day.

MMU aims to bring together ­mobile operators in developing countries, banks, microfinance ­institutions, governments, development organisations and the ­private sector, and has the goal of reaching 20 million previously ­unbanked people with mobile ­financial services by next year.

But there’s a stumbling block. No one is working together.

The GSMA noted that in the first year of launching, there were 20 mobile banking operations. A year later, there were 80 – with another 20 in the pipeline.
Few have reached more than a million users, none offers an integrated service and all charge in one way or other for what they offer.

The cluttered universe needs a binding agent, an entity that can bring all of these competing, ­diverse offerings on to a single, ­accessible platform. A recent deal may have offered that solution.

Propos Software Systems has developed a unique product that does just this – the Mahala ­Community Trading Platform (

Mahala means free in Zulu.

To roll out this umbrella platform, Propos, a South African-based payments software firm, has teamed up with a global mobile roaming firm – US-based Roamware – in a multimillion-dollar deal. They are offering what can only be viewed as a revolution in the mobile payments ecosystem.

Roamware is a giant of a company, offering roaming services across 480 networks in 156 ­countries with a customer base of three billion mobile users.

The launch of the Mahala platform is scheduled for later this year, and will be staggered across several markets in the developing and developed worlds, but will start in South Africa and the USA.

Sonny Fisher, the CEO of Propos, says Mahala will “nest above” national mobile operators, and will host both individuals and corporate customers, including retailers, banks and bill issuers, who may enrol their own customers for an annual fee. Fisher points to the social benefits of the platform:
“Mahala is a revolution, and scale is the key. If we can get everyone on to the same platform, then we can get the ­developed world talking to the ­developing world.

“Established business needs new markets, while unbanked people need bank accounts and access to finance. Last year, $1.6 trillion (R11 trillion) was spent in the ­developing world. They just have no way to leverage what they have, and so much is wasted. We need each other.”

Fisher predicts a boom in low­interest microloans since microfinance lending institutions can control with whom funds can be spent by creating “closed-loop” mobile communities.

“For micro enterprises and ­informal traders, this means finally having access to capital for their businesses,” says Fisher.

The real value behind the Mahala platform, however, and in what can be considered a first for the financial services industry, is that all ­basic transactions will be made free to the end user.

This includes a free banking service and free online payments.

Those without bank accounts will be provided with one, also without charge to the end user.

“By bringing scale to the platform, we were able to reduce the basic transaction costs to less than a single US cent,” says Fisher.

“So, we thought we’d go a step further and just make it free.”

Fisher calls it “a historic day in the history of payments”, adding: “On the Mahala platform, advertising pays for the cost of the transaction. If you have a bank account and you link it to the Mahala platform, we’ll pay your fees.”

Mahala appears to be taking its lead from Google and Facebook, which offer a free basic service but generate revenue from advertising and other value-added services.

Ad spend on mobile advertising is on an exponential trajectory, ­rising from $1.4 billion in 2007 to $7.4 billion in 2009. Projections from Juniper Research reveal that this will rise to $38 billion by 2015.

Where fixed internet access is limited, mobile is the dominant means of accessing the internet.

In India, for example, mobile ­access accounted for nearly 90% of all internet users in 2008. A ­mobile economy offers a ­fundamental advantage to ­advertisers – brands can build up much more ­detailed profiles of their customers compared with online and plan follow-up campaigns accordingly.

Studies have revealed that targeted adverts have a 67% higher redemption rate than unsoliticed adverts. Mahala advertising will mostly be delivered by SMS and will consist of special offers or ­coupons delivered to the end user, based on his or her record of ­mobile purchases.

According to Mahala’s chief ­operating officer, Steven Cholerton, Mahala mobile advertisements will be non-intrusive.

“On Mahala, you’ll choose to ­receive only the ads you want, from merchants you trust or are interested in. Depending on where you are, or what time of day it is, you can opt in or out. It puts control back into the hands of the consumer.”

Cholerton refers to a recent study claiming that coupons and SMSes will become the most widely accepted form of mobile marketing and advertising by 2015.

The study, conducted by ­mobileSquared on behalf of ­Airwide Solutions, reveals that 61% of wireless carriers think that coupons or vouchers will become the dominant form of mobile ­marketing by 2015.

“SMS is where the action is,” says Cholerton. “It’s ubiquitous, works on all devices and consumers know how to use it.”

The revolution in mobile ­payments is here. And it is Mahala.

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