Different Business Models Stiffle Growth Of Mobile Money | Independent Newspapers Limited
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Different Business Models Stiffle Growth Of Mobile Money

Posted: Oct 1, 2015 at 12:00 am   /   by   /   comments (0)

Stories by Emmanuel Okwuke,


Experts have said that different business model that banks and telecommunications service providers operate are making it very difficult for them to come together to reach millions of the unbanked and under-banked Nigerians under the financial inclusion scheme.

Unbanked is a term used to describe diverse groups of individuals who do not use banks or credit card for their financial transactions. They have neither a savings nor current account.

The under-banked refers to individuals or businesses that heavily rely on cheques and cash as means of funding rather than bank related methods such as debit cards or loans.

The needed partnerships to enable financial inclusion of these important segment is being frustrated by little differences between banks and telecommunications companies (Telcos).

According to them, telcos and banks operate different business model and processes, making it difficult to find a middle ground.

On the basis of product ownership; both entities want to own their products rather than going into partnerships for products they can deploy on their own.

Also, they opine that sometimes too, telcos and banks are limited by regulation and government policies.

Principal Associate, Mobilemoney Africa, Emmanuel Okoegwale, explained that, telcos understand low value and high volume products hence a single customer or a small segment can’t make them profitable but banks do not operate that way.

He noted that products of Telcos might not necessarily be tied to generating direct income; it can be linked to reducing cost by locking-in customers and reducing cost of signing up new customers.

“Banks products are designed to be profitable in short term so both entities will always go at logger heads when it comes to partnerships due to fundamental differences in business models.

This is what caused the partnership between Safaricom and Equity bank on the m-kesho product to collapse. However, same telco succeeded with m-shwari with Commercial Bank of Africa. Telco and Bank relationship is more of willingness to stay in the marriage rather than the ability to witstand the union”.

Okoegwale identified different business model operated by both Banks and telcos as responsible for the distrust.

“Banks are driven by short term profit taking while telcos have long term plans. They also have fundamentally different approaches to product designs and product management.

Despite all these, the willingness is more important than the ability. Where a certain management is willing to make things work, they will overcome distrust issues,” he noted.

“How can the end-user gain access to use the services on their own devices, where can they have the access in the communities, what is the cost of accessing the services and many others. These are questions that regulators must consider while making policy and regulatory decisions concerning financial inclusion.

Chairman of the Focus Group and Senior Programme Officer for the Bill and Melinda Gates Foundation, Sacha Polverini, said that, by leveraging the rapid growth of existing mobile networks and the use of cell phones, the majority of cash transactions can be shifted into digital form.

“Innovative digital payment systems can reduce transaction costs up to 90 per cent, giving financial institutions, mobile network operators and a new set of service providers the ability to create innovative new financial products tailored to the needs of the poor”.