Mobile payments driving commerce

 

Bank of Uganda was recently quoted saying the number of users of the mobile money transfer system grew from 2.9 million in 2011 to 8.9 million at the close of 2012. This is nearly twice the 4.9 million bank accounts as of December 2012.

 

The size of mobile money transactions has grown phenomenally from 87.5 million in 2011 to 242 million at the end of 2012. The value of the transactions grew from sh3.8 trillion to sh11.7 trillion. This is more than the total amount of money (11.2 trillion) in the 2012/13 national budget.

 

In Uganda, MTN was the maiden telecom company to launch a mobile money platform with the MTN Mobile Money in 2009. Other telecoms soon followed suite with similar service and to date, about nine million Ugandans use mobile money for financial transactions. MTN registered 890,000 users in the first year of mobile money. 

 

Initially, the platforms were for sending and receiving money. However, the telecoms have also added more features on the services such as the payment of utility bills for electricity and water, and subscription for services such as Pay TV.

 

Mobile money payment solutions have been lauded for providing convenience, saving time and money as customers have the option of not incurring transport costs to pay points.

 

"The reason for partnering with telecom companies is that we want to make it easier for our customers to pay their bills. With customers accessing more payment platforms. Our efficiency is also improving," Umeme managing director Charles Chapman said recently at the launch of a partnership between the utility provider and Orient Bank.

 

The partnership enables Umeme clients to pay their bills at Orient Bank branches and receive instant reconciliation of their accounts via SMS to their phones.

 

Zerubabel Kwebiiha, the chief executive officer of Ezeey Money, says the addition of payment solutions on mobile money services is becoming critical for growth of mobile money trade.

 

"As the explosion of mobile money financial services continues, the uptake is going to boil down on the customer experience, the security features and how much a service can offer," he said, after NWSC launched a payment service with Ezeey Money last week.

 

Utility providers such as Umeme and National Water and Sewerage Corporation (NWSC) have partnered with mobile money service providers to ease payment systems and concentrate on their core businesses of power and water distribution respectively.

 

"We have had so many challenges with cash offices, such as transporting money to the banks and robbers breaking into our offices. When we started e-payments in 2011, we solved some of these issues," said Eng. Alex Gisagara, the acting managing director of NWSC. 

 

The head of Warid Pesa, Brian Kimathi, says the service has seen an upsurge of customers paying their bills and different services since their launch of the pay bill services.

 

"Our subscriber activity has surged up at about 5%, month on month since we launched our pay bill service. We are seeing a serious uptake (on bill payments on Warid Pesa) because of effectiveness and efficiency," he said.

 

Nuhu Kanyike, the Airtel Money director said: "We are seeing the graph (of mobile based payment solutions) shooting up. We are seeing more customers turn to the mobile phones to pay their bills." 

 

Kimathi and Kanyike made the remarks shortly after Warid and Airtel, as a result of their recent merger, jointly announced a mobile-linked bank account service with Equity bank last week. 

 

"Since we introduced electronic payment solutions four years ago the number of subscribers using the various options has grown steadily. An average 45% of our customers now use these solutions to reconnect their subscriptions.

 

We plan to roll out more online solutions in the next few years," said Charles Hamya, the general manager of MultiChoice Uganda.

Skepticism getting the better of consumers is responsible for some people still lining up in banks to pay their bills, Kimathi reasons.

 

"Technology is very interesting. We have the first movers who embrace technology right away, while others sit back and wait to see whether that piece of technology makes sense to them. Of course there are questions about fraud and security, but I am confident of growth in the next one year or so," he said.

 

The cases of fraud on the mobile money platform have increased in recently, with some employees of telecoms allegedly conniving to defraud their employers. Last year, MTN lost billions to fraud on its mobile money platform.

 

Hamya says: "A number of people still prefer to queue up but it is only a matter of time before this changes, part of the reason for this disparity is cultural/historical. Many Ugandans still feel they need to interface with someone when they are making such a payment."

 

"We are trying to create a cashless economy. We are also trying to enable customers without bank accounts to access financial services. The mobile phone is increasingly becoming an enabler for financial services. Very soon, we might go into savings," says Kanyike.

 

"The revolution of the mobile phone beyond just voice calls is fast facilitating financial inclusion."

"We expect this figure to grow substantially going forward especially as more people become comfortable using the platforms, technology improves and we increase the number of solutions available along with our partners.

 

We see the mobile phone being a key driver of this process going forward because it converges many of the payment solutions in one device. It is going to become the new currency for transacting business," Hamya reasons.

 

He further calls for a number of interventions to further up the numbers of mobile money financial services.

"Mobile money operators have to increase the levels of awareness for their services, they will need to integrate with commercial banks and also need to enhance on the performance and stability of their platforms.

 

On our part, we are interfacing these pay platforms with our subscriber management system meaning that the moment a subscriber uses the system their payment is automatically updated on their account as well as get their service restored immediately. So we are pushing the concept of convenience to our subscribers."

 

As the uptake of mobile money financial services grows to include payment options, banks have seen part of their business eaten into as more people pay up through the mobile phones. As a result, some banks have forged partnerships with telecoms to tap into the blossoming mobile money business.

 

Orient bank executive director, Ben Lewis says it is important that the banks stay abreast with the evolution of the capabilities of the mobile phone.

 

"As banks, we have to keep in line with technology. If you don't move with the times, you miss out," he said.

Equity bank executive director Apollo Njoroge says banks still have a critical role, even as mobile commerce is on the rise.

"Moving forward, the banks have to integrate with telecom companies.

 

The issue is working together, because at the end of the day, when people deposit money to the telecoms, it ends up in a bank," he said.

 

Kwebiiha says the disparity between transactions on mobile money financial services are simply an extension of the core banking industry.

 

"A lot of the transactions on mobile financial services are still of low value, while the transactions in the banks are still going to be of high value. Mobile money financial services cannot get rid of the banks and the reverse is true.

 

There is no competition between the two, if there is, it is minimal," he said.

Over 70% of mobile money transactions are below sh70,000.