- Revenues to increase by 3373%
- Transaction volumes to grow 3376%
- Asia Pacific countries to account for 57% of all transactions in 2017
Mobile financial services (MFS) in emerging markets are set to skyrocket in the next four years, as large connected but ‘unbanked’ populations turn to technology, media and telecommunication companies for basic mobile banking services.
Revenues for MFS are forecast to grow by 3373% to $29.8bn and transaction volumes will expand to $628bn by 2017, according to Generation Next, a study identifying the five biggest TMT growth trends in emerging markets, commissioned by global law firm Linklaters.
This rapid growth will occur as TMT companies gain 807 million new mobile money customers across emerging economies, with over 50% of all new customers in the five biggest growth markets of China, India, Indonesia, Brazil and Kenya.
The increase in transaction volumes will see revenue per customer climb by 177% by 2017. Margins for MFS services are also set to grow as TMT companies add new payment, savings, loans and insurance products on top of their basic services.
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Julian Cunningham-Day, Telecoms co-leader at Linklaters, comments: “There are huge swathes of the population in emerging markets that have never had access to traditional banking services. TMT companies have a huge opportunity to help these consumers leapfrog developed markets by providing hugely transformational mobile money services.”
The five big bets for mobile money
Emerging markets, where large proportions of the population lack access to bank services, will dominate the global growth of MFS. These markets are expected to account for 86% of all global users, with Asia-Pacific countries hosting 57% of all mobile money users by 2017.
China, India and Indonesia alone will see mobile money revenues grow to $13.5bn, or 44% of all emerging market revenues for these services. After China and India, Brazil is forecast to experience the largest proportional growth, with its revenues expanding from just $2m to $981m in 2017.
Making it happen
While the potential revenue in mobile money is significant, banking and telecoms are both highly regulated and complying with two sets of exacting regulations will be a challenge for many companies. The report notes that strategic collaboration in the shape of contractual partnerships, joint ventures, or in some cases M&As, will be vital to creating the services required.
The study also identifies three major growth considerations for those offering these services:
- Partner to bridge expertise gaps: few existing TMT players can offer comprehensive MFS on their own. Telcos must learn about financial services, banks about mobile devices and services, and both need a deeper understanding of retail services. Partnering will be vital to addressing these expertise gaps.
- Get localisation right: local knowledge in partnerships is invaluable in understanding regulatory issues, retail market dynamics, key demographics and the services that are likely to work well in each area.
- Balance competitive fees and agent commissions: networks of effective agents to process cash in and out of mobile money services have proven key to mobile money success to date. Setting their commission and the fees charged to end customers correctly is a careful but vital balancing act for emerging market MFS providers.
Roger Barron, Telecoms co-leader at Linklaters, comments: “While the growth opportunities in mobile money are huge, TMT companies won’t just be able to ride an easy wave to growth. Regulatory restrictions mean that partnerships are absolutely vital to providing comprehensive and compliant mobile money services, and TMT businesses won’t succeed without them.”