November 17, 2011 |
Last year, in Javelin’s underbanked report, we wrote that the carrier’s mobile transfer infrastructure will eventually converge with the existing mobile banking and payments infrastructure. Visa’s announcement today with MTN, building on their acquisition of Fundamo, is a sign of that convergence. Visa has introduced a prepaid account that will be offered through the MTN Group to its customers in Nigeria and Uganda. MTN services are currently available in 21 countries, centered in Africa and the Middle East. While a carrier as the driver may be able to offer a lower cost structure to the un- and underbanked, financial institutions and payment firms are more likely to have the regulatory know‐how and security, and can offer a wider variety of product offerings. For example, Visa is an open loop payment structure meaning customers of one carrier could now send payments to customers of another carrier (as long as they are a Visa customer)—although if no other mobile network operator adopts the Visa prepaid offering, it will remain virtually closed anyway.
MTM Mobile Money was based on the carrier-driven model. The carrier-driven model is structured as a money transfer and payment service — a pay-as-you-go, pay- only-if-you-use-it model. Costs are very transparent. The individual cost for each service used may be higher, but there are no bundled costs, or costs for services not used. With an carrier as the driver, the prepaid deposits sit with a bank partner, but this financial partner is often totally invisible to the customer. Thus, the trust and brand relationship is being developed with the MNO vs. the financial company. It will be interesting to see how this changes now that a payments company, Visa, is involved. The carriers have demonstrated the power of mobile money among the unbanked and underbanked. Now it is time for the financial companies to demonstrate their value to the underbanked as well.