Telecoms shift the war to money transfer business
Mar 04, 2009
When Bank of Uganda Governor, Emmanuel Tumusiime Mutebile approved MTN Mobile Money transfer services early last week, it signalled the commencement of a historic and unprecedented financial transaction innovation and a new competition era.
BY DAVID MUGABE
When Bank of Uganda Governor, Emmanuel Tumusiime Mutebile approved MTN Mobile Money transfer services early last week, it signalled the commencement of a historic and unprecedented financial transaction innovation and a new competition era.
The pioneering development described by Mutebile as “revolutionary†will be fully operational this week and is expected to transform the financial scene like no other telecom innovation in the recent past.
The regulator’s (Bank of Uganda) endorsement signifies one thing. That the competitive telecom industry in Uganda which is also one of the most vibrant in Africa, has taken its competition war to another battle front- mobile money service.
A few hours after the endorsement by Mutebile, Uganda telecom (utl) also announced a partnership with Redknee Solutions Inc to provide mobile money solutions, in a move that showed “no one wants to be left behind in this sector.†ZAP, a mobile money product of Zain is already operational in Kenya and Tanzania and it is expected to be launched in Uganda soon.
In many ways, indications are that the landscape in the telecom industry that has four active players (MTN, Zain, Warid and utl) now tilts towards those who remain relevant to their clients in product and service innovation and satisfaction.
Industry reports indicate that Warid in Uganda is in a hot race to launch a similar product. In the weeks ahead, experts believe the MTN Mobile Money transfer facility will literally sweep the market and push the existing internationally recognised money transfer brands off the scene.
What this may also mean is that even as the market leaders are in the kitchen trying out different menus to tap new markets and consolidate the existing subscriber base, it will be harder for the new entrants to take root. Analysts say that even before the new entrants stamp their feet, they are forced to go overboard and try to catch up with the fast changing scene of telecom technology.
What then will the new entrants do differently to woo new customers? “They have to sink money in creative new technology, which they have to pioneer. Otherwise they will just die off or be swallowed up,†said an industry source.
What is most significant about innovations like MTN mobile money is there power and potential to push up subscriber numbers. For instance, the MTN Zone pricing plan launched in July 2008 was initially a promotional offer.
On launching, it was quickly taken up as one of the most successful products in Uganda’s telecom history. In the first 10 days of its launch, the zone attracted some 1.3 million subscribers with about 45% of the customer base getting hooked onto the zone.
The MTN zone has today emerged as the pinnacle of the telecoms tariff wars, dealing an almost decisive blow to industry tariff competition. Now the new mobile money involves real cash, the reason why telecoms are in business.
Charles Mbire, the MTN chairman, and an astute businessman, said; “It will increase business velocity and in the simplest of ways, it is one way of checking the rampant poverty when money can quickly, easily and cheaply reach the most remote hands.â€
The far reaching geographical coverage of telecoms means that even the most rural people will access this service. But there is more. It is estimated that more than 80% of the entire Ugandan population of about 29 million is unbanked due to the tiring paper work, illiteracy, time consuming and identification processes associated with formal banking.
Broken down, it means that just about four million people are involved in some sort of formal banking system.
This is almost half the number of the about eight million mobile telecom subscribers in the country. In a nutshell, almost twice more people will be involved in financial transactions (if they take up the service) through the mobile phone compared to all the banks and financial institutions combined.
The mobile money service has some clear cut advantages. First, the pricing is unbeatable ranging from only hundreds of shillings to a few thousands depending on the amount of money being sent.
Secondly, the unmatched convenience of no paper work required. One only needs the money they are sending and identification, then they will be charged for the short messages and a very minimal transaction fee.
Once fully operational, it will also be used for paying bills, payment of goods and services and also sending and receiving money from banks.
So who needs a bank now?
Of course the formal banks have some distinct advantages and services not found with the mobile phone money transfer. Banks can store money and valuables.
They can also extend loans, store records and provide more security. But nothing beats the efficacy and timeliness of the mobile phone transaction. MTN has set up 600 points across the country and together with Stanbic Bank branches, these points will serve as transaction outlets.
“One of the ZAP services in Kenya is more sophisticated because you can even pay your water and electricity bills on phone as well as having inter-bank transfers,†said George Nguti, a Kenyan national working in Uganda.
Reports indicate that when the M-Pesa service offered by Safaricom was launched in Kenya, within days it was snapped up, a development that “collapsed†the formally more established money transfer avenues. Today, about five million people use the M-Pesa.
A recent report from Deloitte on “Taxation and the Growth of Mobile in East Africa,†indicates that mobile phones account for 95% of all telecoms connections in East Africa. The report further indicates that a 10% increase in mobile penetration leads to a 1.2% increase in GDP in the long run across countries.
Yet with all these robust advantages that call for further investment in the sector, the sector faces some challenges that hamper long term penetration.
For instance, the Deloitte report mentions high excise tax as a major deterrent that needs to be harmonised across the region. The others are high energy costs, high interconnectivity fees and poor infrastructure.
But these challenges aside, sector players are watching the industry keenly and how the individual telecom firms will continue to maneuver the market and stay on top.
When Bank of Uganda Governor, Emmanuel Tumusiime Mutebile approved MTN Mobile Money transfer services early last week, it signalled the commencement of a historic and unprecedented financial transaction innovation and a new competition era.
The pioneering development described by Mutebile as “revolutionary†will be fully operational this week and is expected to transform the financial scene like no other telecom innovation in the recent past.
The regulator’s (Bank of Uganda) endorsement signifies one thing. That the competitive telecom industry in Uganda which is also one of the most vibrant in Africa, has taken its competition war to another battle front- mobile money service.
A few hours after the endorsement by Mutebile, Uganda telecom (utl) also announced a partnership with Redknee Solutions Inc to provide mobile money solutions, in a move that showed “no one wants to be left behind in this sector.†ZAP, a mobile money product of Zain is already operational in Kenya and Tanzania and it is expected to be launched in Uganda soon.
In many ways, indications are that the landscape in the telecom industry that has four active players (MTN, Zain, Warid and utl) now tilts towards those who remain relevant to their clients in product and service innovation and satisfaction.
Industry reports indicate that Warid in Uganda is in a hot race to launch a similar product. In the weeks ahead, experts believe the MTN Mobile Money transfer facility will literally sweep the market and push the existing internationally recognised money transfer brands off the scene.
What this may also mean is that even as the market leaders are in the kitchen trying out different menus to tap new markets and consolidate the existing subscriber base, it will be harder for the new entrants to take root. Analysts say that even before the new entrants stamp their feet, they are forced to go overboard and try to catch up with the fast changing scene of telecom technology.
What then will the new entrants do differently to woo new customers? “They have to sink money in creative new technology, which they have to pioneer. Otherwise they will just die off or be swallowed up,†said an industry source.
What is most significant about innovations like MTN mobile money is there power and potential to push up subscriber numbers. For instance, the MTN Zone pricing plan launched in July 2008 was initially a promotional offer.
On launching, it was quickly taken up as one of the most successful products in Uganda’s telecom history. In the first 10 days of its launch, the zone attracted some 1.3 million subscribers with about 45% of the customer base getting hooked onto the zone.
The MTN zone has today emerged as the pinnacle of the telecoms tariff wars, dealing an almost decisive blow to industry tariff competition. Now the new mobile money involves real cash, the reason why telecoms are in business.
Charles Mbire, the MTN chairman, and an astute businessman, said; “It will increase business velocity and in the simplest of ways, it is one way of checking the rampant poverty when money can quickly, easily and cheaply reach the most remote hands.â€
The far reaching geographical coverage of telecoms means that even the most rural people will access this service. But there is more. It is estimated that more than 80% of the entire Ugandan population of about 29 million is unbanked due to the tiring paper work, illiteracy, time consuming and identification processes associated with formal banking.
Broken down, it means that just about four million people are involved in some sort of formal banking system.
This is almost half the number of the about eight million mobile telecom subscribers in the country. In a nutshell, almost twice more people will be involved in financial transactions (if they take up the service) through the mobile phone compared to all the banks and financial institutions combined.
The mobile money service has some clear cut advantages. First, the pricing is unbeatable ranging from only hundreds of shillings to a few thousands depending on the amount of money being sent.
Secondly, the unmatched convenience of no paper work required. One only needs the money they are sending and identification, then they will be charged for the short messages and a very minimal transaction fee.
Once fully operational, it will also be used for paying bills, payment of goods and services and also sending and receiving money from banks.
So who needs a bank now?
Of course the formal banks have some distinct advantages and services not found with the mobile phone money transfer. Banks can store money and valuables.
They can also extend loans, store records and provide more security. But nothing beats the efficacy and timeliness of the mobile phone transaction. MTN has set up 600 points across the country and together with Stanbic Bank branches, these points will serve as transaction outlets.
“One of the ZAP services in Kenya is more sophisticated because you can even pay your water and electricity bills on phone as well as having inter-bank transfers,†said George Nguti, a Kenyan national working in Uganda.
Reports indicate that when the M-Pesa service offered by Safaricom was launched in Kenya, within days it was snapped up, a development that “collapsed†the formally more established money transfer avenues. Today, about five million people use the M-Pesa.
A recent report from Deloitte on “Taxation and the Growth of Mobile in East Africa,†indicates that mobile phones account for 95% of all telecoms connections in East Africa. The report further indicates that a 10% increase in mobile penetration leads to a 1.2% increase in GDP in the long run across countries.
Yet with all these robust advantages that call for further investment in the sector, the sector faces some challenges that hamper long term penetration.
For instance, the Deloitte report mentions high excise tax as a major deterrent that needs to be harmonised across the region. The others are high energy costs, high interconnectivity fees and poor infrastructure.
But these challenges aside, sector players are watching the industry keenly and how the individual telecom firms will continue to maneuver the market and stay on top.