M-Banking: can Zain's new business model for ZAP rival M-PESA?
One of the major successes of the mobile industry in recent years has been the growth of m-banking in the developing world. (Safaricom is adding 10,000 M-PESA accounts a day) although a considerable number of well-funded, vendor- and operator-backed efforts to deploy m-payments systems in Europe have failed, m-banking succeeded in Africa and Asia - largely because it catered to needs that the rest of the financial system simply didn't supply. Now, a major emerging market operator, Zain, has entered the game with a radically different business model. Will it work?
Another driver of success was that the developers of M-PESA and other systems observed that the airtime credit transfer features built into their prepaid OSS solutions were being used by their subscribers as a crude money transfer system; rather than prescribing a solution, they built on user creativity. Telco 2.0 is interested in this not only because this form of development is profoundly Telco 2.0, but also because m-banking is the ultimate example of the opportunities that appear where there is a large and positive difference between the quantity of data transferred, and its social value.
By far the best-known systems are M-PESA, developed in-house by Safaricom in Kenya and now deployed in several other countries, and Smart Telecom in the Philippines. However, as you'd expect, the success of these has attracted imitators and competitors as well as emulators. If you'd asked most people in the industry which operator was likely to reach the market first with such a product, they would probably have said Celtel, the hugely respected emerging market GSM specialists founded by Mo Ibrahim. After all, by 2006 they'd already integrated their East African HLRs, ending roaming charges in the area and permitting cross-border credit transfer, a single currency of sorts.
Well, Celtel was sold to Kuwait's MTC not long after that, changing its name to Zain. Mo Ibrahim took his money and began offering African presidents a bonus for retiring peacefully. Now, however, Zain has moved into the mobile money business. It is certain that this will be an important moment in its development; Zain's sheer scale makes that certain. The initial deployment covers some 100 million subscribers. This also means that some markets now have competing mobile payments services - Tanzania, for example, has Zain's ZAP and two competing M-PESA deployments. This is probably going to teach us a lot about this business in the next few months.
The rest of this 'Analyst Note' is available to subscribers of the Telco 2.0 Executive Briefing Service here. It covers the end-user value of m-banking, Zain's new approach to rewarding its agents, and lessons from GSM deployment in Kerala.