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Mobile & Wireless
GSMA And Vodafone Lured By US$230 Billion Remittances Market
Transfer Next Coud Be A Major Market Driver After SMS
by Iain Morris
For all the talk of mobile TV and convergence, a far less glamorous service grabbed much of the headline
space at the start of 3GSM last month. On the opening day the GSM Association (GSMA) unveiled details of a pilot money-transfer scheme allowing migrant workers to use cellphones for international remittances.
A day later Vodafone trumped that announcement with news that it was ready to launch M-PESA, a money-transfer service set to rival that of Western Union. Sunil Mittal, the chairman of Indian operator Bharti,
which is spearheading the GSMA initiative, reckons that money transfer ‘is going to be the next big one after SMS’.
The opportunity already looks compelling -- Vodafone estimates that around US$206 bn is sent by migrant workers in remittances every year, while the World Bank put the figure at US$230 bn in 2005 -- but Mittal says it could be a lot bigger if operators got involved.
Bharti claims to serve millions of ‘underbanked’ Indian customers from mainly rural communities, where the surge in mobile subscriptions (more than six million phones are sold each month in India, according to the country’s communications ministry) has not been matched by the take-up of basic financial services like savings accounts.
A money-transfer offer would allow those customers to cash credit on their phones at any of the operator’s 1.5 million retail outlets across India.“The idea is that you can use your mobile phone to send £20 [US$39] to another person’s mobile phone,” says Carrie Pawsey, a senior analyst with Ovum, in explaining the workings of Vodafone’s M-PESA service.
“That person then receives an authenticated text message, which he or she can take to an authorised dealer in the country. The dealer will then give the person £20 [US$39] in cash.”Indeed, both M-PESA and the industry pilot are particularly targeting the market for such ‘micropayments’, which Vodafone and the GSMA claim are currently hit by the exorbitant rates for commission charged by the likes of Western Union.
“If you want to send £50 [US$98] from London to India today it will cost you £12 [US$24],” says Rob
Conway, CEO of the GSMA. “That’s 24 per cent of the transfer sum.”
Conway would not speculate on what operators might charge instead, but Pawsey reckons Vodafone is looking at roughly £3 [US$5.85] for a £50 [US$98] transfer -- a massive reduction in the commission fee. But it’s not just low pricing and ‘underbanking’ that could spur adoption. Because money transfer works via SMS, users will not have to purchase expensive new handsets to take advantage of the service.
And senders will be able to use it whenever they like and wherever they are (customers of Western Union, conversely, will need to visit a branch).There are big incentives for operators, too. “The infrastructure
is already in place to enable the service,” says Pawsey. Unlike mobile TV and 3G services, money transfer will not require a costly network upgrade, although operators will have to collaborate with their foreign peers to make it work
successfully at an international level.
Vodafone has already teamed up with Kenyan operator Safaricom on M-PESA, and the GSMA says its pilot has attracted the interest of 19 major operators representing subscribers in 100 countries.Of course, the issue of security
is a major concern. “There will have to be quite stringent financial checking so that payments can be traced back,” says Pawsey.
“I guess that’s why Vodafone has done a deal with Citigroup, which has a huge financial back office and is very experienced at processing these types of transaction.” The GSMA believes it has been equally proactive in this regard, launching its money-transfer pilot in conjunction with MasterCard.
So what are the prospects? Filipino operator Smart Communications has been running exactly such a service in
Bahrain in partnership with domestic operator MTC Vodafone. CEO Napoleon Nazzareno did not discuss revenue from the service at 3GSM, but he says that customers have been generating approximately 11 million transactions a day.
The GSMA, meanwhile, thinks its initiative could help to increase the size of the international remittances market to more than US$1,000 bn by 2012 – an increase of more than 400 per cent over the next five years.
Money transfer may sound a lot less exciting than mobile TV, but it could be a lot more lucrative.
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