The fast success of South Africa's Standard Bank provides a clue as to why mobile money is attracting so much attention from global payments providers as a way to expand services to underserved areas.
In less than a year, Standard Bank has drawn more than 500,000 new payment customers via the use of relatively simple texting technology.
"People can not only make payments, but they can also access the account to manage their own money, so they can know what they have to spend and what they need," says Audrey Mothupi, director of inclusive banking, which is part of the Personal and Business Banking unit at Standard Bank.
Called AccessAccount, Standard Bank's mobile money technology is powered by SAP's mobile platform, an application development tool that's used to enable person to person transfers, purchases of electricity and mobile air time and other payments. Consumers initially use mobile money and direct deposit to top up their phones or pay for utilities or food, while at the same time gaining control over their spending—which is the key behind turning mobile money customers into credit card customers.
The bank is also entering into partnerships with retailers to allow small merchants to remotely purchase and pay for supplies. "The owners of the shops don't have to travel two or three hours to restock their stores," Mothupi says.
Lots of companies are introducing mobile money systems around the globe. BlackBerry is testing a money-transfer service based on its messenger technology with Monitise and PT Bank Permata of Indonesia. MasterCard, working in collaboration with Equity Bank and mobile point of sale tech company Ezetap, announced new mobile payment technology Kenya. MasterCard this week also entered into a mobile money partnership with VimpelCom, a provider of globally integrated telecom services, to extend mobile money into more than a dozen countries in Southeast Asia.
As mobile money matures beyond the early closed loop systems mostly run by local telecoms, partnerships with card issuers will become vital to the success of the programs. Having a relationship with an issuing bank makes it easier to expand the prepaid mobile money relationship to a credit card or other credit-based relationships.
Visa, for example, has attracted banks in Rwanda for its new mobile money play; while in the U.S., startups like Moven—which uses prepaid accounts as an entry level relationship—partners with banks to manage the deposits.
"The mobile solutions that we have seen thus far are not full bank accounts…if you have a full bank account tied to the relationship, it's more than just moving money back and forth. You can achieve financial inclusion," says Diarmiud Mallon, global lead for mobile marketing programs for SAP, whose mobile-money clients also include Dutch Bangla-Bank Limited in Bangladesh.
The Standard Bank program is still relatively new, but the bank envisions using SAP's technology as a way to gauge performance and manage credit risk as consumers deepen their relationships. "If the consumer uses the [service] to make payments, we can track the creditworthiness of that person and then they can access credit for credit cards or other purposes," Mothupi says.
Some U.S. payment companies are taking an incremental approach to credit risk. American Express' "Make Your Move" program tracks prepaid card users and gives them tips on how to use cards for recurring bills to build a track record that increases the likelihood of approval for a credit card.
"It makes sense for institutions to allow consumers to deepen their relationships through regular habits of payment, outside of established credit reporting protocols, especially among the underbanked," says Mary Monahan, a research director for Javelin Strategy& Research.
The incremental building of a track record can guide unbanked consumers into deeper relationships that, through mobile and prepaid, offer a viable alternative to traditional banking and payment products, Monahan says.
"The key is to keep functionality simple, transparent, convenient and low cost," she says. "Secured credit cards have often been used for this purpose, and prepaid/mobile account holders should be given the option of building credit as well."