Over the course of human history, the way people have exchanged money has evolved dramatically, writes Meg Bear, the senior vice president of Product and Engineering of Juvo. From bartering to shillings, paper money, digital wallets, and cryptocurrencies, financial systems are again about to undergo a significant change.
The rapid pace of change in FinTech is predicted to give rise to a global shift towards cashless societies. This is due to innovations in mobile money, the adoption of contactless payments, and other digital financial services. For instance, the mobile money industry is now processing over a billion dollars a day, which is generating direct revenues of over $2.4 billion for service providers. As the growth of non-cash transactions continues to excel, mobile network operators (MNOs) need to consider some key areas of opportunity.
Financial inclusion puzzles
Financial inclusion in emerging markets will be an essential trend for MNOs. Right now, one of the barriers to financial inclusion is that many people around the world do not have access to basic financial services, such as credit. That is why, in India for example, cash ended up becoming more prevalent in the economy, as individuals were not equipped to transact over digital currency. But what if there had existed a form of technology to reach every person in the nation?
Enter mobile technology: MNOs have the potential to transform how money moves within and across societies. Just take a look at Malaysia, a country with one of the highest levels of financial inclusion in Southeast Asia. The World Bank points to “policies taking advantage of mobile phones and banking agents to expand access” as a major source of success.
As governments around the world embrace the promise of mobile access to aid the advance of financial inclusion, it’s unsurprising that that this growth has been the most pronounced across emerging markets.
New opportunities for revenue
Prepaid mobile subscribers – especially those in emerging markets – represent the single greatest source of new opportunity for MNOs. This group of customers is both large and has significant need. These populations are dependent on the minutes on their SIMs, and are not able to transact like monthly plan subscribers. The reason?
Prepaid subscribers in emerging markets typically lack formal financial identities, any documentation, and in some cases any money – and this has been a limitation to MNO growth.
The unbanked have to rely on cash or informal financial services which are typically unsafe, inconvenient and expensive. This is where the mobile operators can have a large-scale impact. They can responsibly help billions of excluded individuals become ‘good’ consumers of financial services – providing access, increasing loyalty, boosting financial literacy, and avoiding the threat of indebtedness.
This starts with something simple: a new approach to airtime lending.
Data that already exists
Mobile operators have vast swaths of data about their prepaid subscribers that can help create the foundation of a financial identity. But what’s simple isn’t always easy: the data is not typically organised to solve this problem. MNOs need a way to make sense of this data to unlock the significant value in emerging markets. This puzzle can only be solved by learning how to connect the payment behaviours of anonymous prepaid subscribers to distinct financial identities. The key to unlocking the power of this data lies in sophisticated data science that gives MNOs enough information to create meaningful financial pathways to credit.
By helping their prepaid subscribers establish an identity-based relationship, operators can provide their customers access to mobile financial services for the first time. This starts with services that meet an immediate need – such as airtime credit extensions – and can lead on to more advanced financial services that can be accessed on a mobile device, such as financing for a new phone or access to a cash loan. This is a progressive financing model that rewards subscribers – and carriers – for making small but meaningful payments in order to build both an established credit history, and a financial identity. Financially excluded individuals no longer have to rely on cash and can begin to take advantage of a personalised mobile financial services.
Enabling access for all
At a time when MNOs are struggling to retain customers, offering more personalised services where there is a real need will engage the transient prepaid subscriber. And it’s that engagement that is key to building a relationship that can add value to the customer and set the MNO apart from its competitors.
With that in mind, helping prepaid subscribers build financial identities is an idea whose time has come for everyone. These financial identities not only provide financial access and enable a cashless economy in emerging markets, they also create new revenue streams for MNOs. This is a path to profit that also lifts people up to join the global financial economy – and that’s a win/win strategy.
