By Hariprasad Pichai, consultant at Arthur D Little

Mobile money is a growing market with significant revenue potential, yet the ecosystem is nascent, with no complete solution and no dominant player.

This provides significant opportunities for telecom operators, but financial intermediaries, banks, mobile platform owners, retailers, online giants and niche players are also all trying to grab a piece of the mobile money pie.

Understanding where to partner, where to acquire and when to innovate must therefore be a key strategic concern throughout 2013. 

There are five key challenges to be tackled by any organisation looking to go to market with a comprehensive mobile money solution.

Furthermore, the mobile money solution that best addresses these within the time, cost and quality constraints will ultimately succeed.

1. User experience

An improved user experience that is compelling, convenient and cost-effective will be a key lever in switching customers and merchants from traditional payment methods such as cash and card.

The partnership between Square and Starbucks is a recent solution that has disrupted an entrenched payment method (card). This was achieved by delivering a superior user experience where a customer is able to conclude a purchase through a mobile phone without even presenting it at the point of sale.

2. Context awareness

In a world where data is the “new oil”, device platforms facilitate granular information about the customer that was hitherto unavailable.

Players like Amazon, Google and Apple have acquired a large number of customers and have successfully used granular information in predicting purchase behaviour.

When the value is stored with non-traditional players, traditional guardians of customer data - primarily banks, financial intermediaries and telecom operators - lose the granularity of transactional information generated by customers.

They thus face the risk of lowered ability to understand their customers. A solution that makes “context awareness” integral to the value proposition stands to gain against competing platforms.

3. Universality/interoperability

A mobile solution giving access to digital money through the device has to match the universality and interoperability of money itself.

Merchant-specific, platform-specific or location-specific solutions are therefore unlikely succeed in the long run.

M-Pesa is an example of a universal mobile money solution enabling any two parties having a handset to transact, thus facilitating B2C, B2B, local and even international remittances.

Similarly, PayPal is bringing universality into its mobile money offering by expanding into in-store payments through the same online account.

4. Security

One of the main challenges to tackle is not so much securing “digital money” but securing the device upon which transactions occur.

How do we make sure that money is safe even when the customer loses a mobile phone? More importantly, will the customer feel that it is as safe as carrying a credit card in a regular wallet?

An ideal solution balancing the trade-offs between security and convenience is yet to emerge.

5. Regulation

Regulations make or break mobile money offerings in the market as much as technology and innovation. Mobile platforms can inherently provide complete traceability of all transactions, thereby ensuring security, authentication and compliance.

However, this will not suffice for some regulatory environments.

Therefore, once the solution is in place its proliferation and adoption in different markets will be driven or impeded by each territory’s regulations.

Telecom operators and banks find themselves in a position of strength on universality, security and regulations – all of which they have previously leveraged successfully in underdeveloped markets to bring “banking to the unbanked”.

To succeed they must innovate, acquire or partner to create a compelling user experience.

Significant opportunities exist in a market expected to see transactions reach $1 trillion by 2015.

However, telecom operators must execute on plans now as to how they can best capitalise on the opportunities and remain relevant.

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