GSMA Mobile Money for the unbanked.
Around the world, mobile money deployments are racking up large numbers of new customers. But as certain commentators have noted, these numbers are sometimes misleading. In some deployments, a gap is opening up between the number of registered users and the number of active users. Does this make the number of registered users irrelevant? Quite the contrarya large gap between the number of registered and unregistered customers represents a big problem. Operators have to spend money for every customer that they acquire; if those customers dont start using the service, then the operator who signed them up has started to dig a financial hole for themselves. And those holes can be pretty deep.
Lets imagine that it costs US$2 to register a new customer. That cost is typically made up of a commission paid to the registering agent, the kit (sometimes including a new SIM) that is provided to the user, and any costs in the back office associated with creating the account and fulfilling KYC requirements. If an operator has 500,000 users on the books that arent using the service, that equals US$1 million in costs with no associated revenues. And if the operator pays a per-user fee to its technology provider, either on a one-off or ongoing basis, the situation becomes even more dire.
You may be asking yourself why a customer would register for a service he has no intention of using. Well, if its free to register, and when commissions to the registering agent are significant, the more relevant question may be, Why not? When agents can earn a quick buck (or some fraction thereof) signing up new users, they may decide that thats more lucrative than facilitating transactions, and focus on the former rather than the latter. (Agents whose only responsibility is signing up new customers dont even have this trade-off to make; so long as their compensation is tied to registration itself, theyll register anyone for the service, regardless of whether than person has any demonstrated need for mobile money.)
There are two bits of good news. The first is that its relatively simple for operators to start filling in this hole, and it doesnt need to be expensive. The first step is to put the brakes on acquisition by fixing registration commissions: agents need to be paid for registering customers, but they should see more value in signing up a user from whom they will earn a stream of cash in and cash out commissions than in the single act of registration. The second step is to take the money thats being saved on customer registration and pour it into marketing activities that are designed to drive usage, particularly among users whove already registered. As long as unregistered customers can still go to an agent and register themselves if they are inspired by these marketing efforts to try the service, operators should see no reduction in transaction volumes when scaling back their customer acquisition efforts.
The second bit of good news is that we see a number of operators moving in this direction. For example, a number of operators have moved to registration commissions that are contingent on users making one or more transactions. This might mean that the numbers of registered usersi.e., the ones that capture the headlinesstart to grow more slowly. But it will also mean bringing the industry closer to long-term financial sustainability, which, although it might not make headlines, will be something to celebrate.
For more about agent commissions, check out our recent report on incentivising mobile money agents. And stay tuned to this blog for our forthcoming look at the profitability of mobile money.