Money to go mobile before 2014 target

Mobile money will become a mass-market reality in the UAE well before 2014, the timescale set by analysts for the concept to become a success in emerging markets.

A study conducted by global consulting and advisory firm Ovum shows use of mobile payment services, especially mobile money services, is increasing in many emerging markets.

The report said the market was still in its infancy, but had the potential to become a mass-market service, reaching a third of all mobile phone users in emerging markets in five years' time.

However, much will hinge on how well the industry addresses market barriers and its ability to nurture user demand with clear, simple and attractive propositions.

Both etisalat and du said mobile money services will be a reality in the UAE much earlier than 2014 – the year highlighted by Ovum.

"We have already received permission from the Central Bank and the Telecommunications Regulatory Authority (TRA), which itself is a major step towards mobile money," Rashed Majed Al Abbar, Director of etisalat Mobile Commerce, told Emirates Business.

"It is necessary to get the TRA's approval but to enable mobile money services the Central Bank's permission is also essential.

"The analysts' prediction would be applicable for markets where banking penetration is extremely low.

"In the UAE, we already have mobile money services for car payments and purchasing ringtones. Higher value transactions would be the next step."

A du spokesman said: "The technology will soon provide mobile phones with the capability to act as a bank card, either debit or credit, using Near Field Communication (NFC) technology.

"The early adoption by the financial sector in the UAE of contactless payment – Paypass from MasterCard and Paywave from Visa – will accelerate the growth of mobile money by increasing the footprint of acceptance. As a result, more transactions could be carried out using a mobile phone to make an over-the-counter payment," he said.

"Mobile money is a reality today in the UAE, with the announcement of pilots plans and the critical mass of client base may be achieved well before 2014."

The report – called Mobile Money in Emerging Markets – said service penetration in such countries will reach between 30 and 40 per cent in 2014.

Angel Dobardziev, Practice Leader of Emerging Markets at Ovum, said: "In a range of alternative scenarios where the industry resolves the market barriers more quickly than envisaged, an optimistic scenario is possible where strong user demand propels mobile money services to penetrate between 60 and 70 per cent of mobile users in the emerging markets by 2014."

In a more pessimistic scenario, a mismanagement of proposition, pricing, distribution channels and ecosystem causes a vicious cycle which stifles user demand, leading to a niche market with a penetration of 10 to 15 per cent of mobile phone users by 2014.

To launch such services in the UAE regulatory barriers have to be sorted out, which according to operators, is changing.

Dobardziev said: "Traditionally, successful implementations of such services have not relied on government support; it was driven by market dynamics although wage protection programme in the UAE offers a great incentive to adopt mobile money."

"Government's role would be more in the context of removing regulatory barriers to expedite the services entry, while retaining capabilities to counter financial crime and fraud.

"The key constraint is the legal framework these services will offer as it requires the understanding and co-operation of two key authorities , the TRA as the regulator for telecom and Central Bank as the regulator of financial services sector."

The du spokesman said: "In many markets operators started offering the service based on temporary waivers until such regulatory framework is developed.

The financial sector in the UAE is strong and serves the needs of a considerable portion of the population apart from the massive workforce – estimated at close to two million across the UAE.

The du spokesman said: "Until recently the financial institutions saw mobile money more as a threat than an opportunity. This has changed and there is better understanding and evolution of collaboration models where a mobile operator and a bank could partner to offer innovative services, while each remains focused on its core business.

"One category – workers – is unbanked; it is cash-based and remits more than 70 per cent of its income on a monthly basis.

"The cost of serving such clients is higher than the potential profit and thus the conventional banks have no interest in banking this category. But the wage protection programme offers an opportunity to develop alternative means to offer banking services to this category using mobile platforms, which offer a cost-effective way to receive wages and remit to home countries and, when there is no alternative to cash, get it from ATM machines," he said.

"This category offers the mass to reach the economy of scale necessary to offer effective and successful mobile money services."

Etisalat said the challenge was to understand what customers wanted.

"With the banking channels strong and mobile money facilities offered by only a few banks, we will have to target specific segments," said Al Abbar.

"For the banked population we will have to use the utility payments mode while offering mobile remittance services to the unbanked population," he said.

The low-wage workers can become a big part of the customer base as most of them are not part of the current banking industry.

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