A recent report by CGAP and Dalberg Global Development Advisers examines whether international remittance payments can be a means to help build domestic mobile money services. In particular, the study looked at services that enable a customer to receive funds from overseas directly onto a wallet on their handset from which the payment can be converted into cash at a local agent. The report was published in February.
The number of service deployments over the past 18 months with a cash-out option has increased from eight to 17 (cash-out refers to the process whereby funds are sent from overseas to a mobile wallet and then redeemed by a user via an agent). In addition, the report says, “several innovations driven by MTOs (money transfer organisations) and technology solutions have emerged. These can accelerate time-to-market and offer other benefits.”
The report cites a company called KlickEx, a currency exchange provider which matches individuals and companies who want to change currencies. The company has a partnership with mobile operator Digicel in the South Pacific. In addition, the report points to Belgacom unit BICS whose Homesend service offers a hub model to address interoperability issues in the international remittance market.
However while the number of so-called cash-out deployments has increased, some launches have fallen through, the report notes. Of a total of 17 potential deployments that were set for launch in 2010 only six actually delivered with a launch by early 2012.
Andria Thomas, a project manager at Dalberg, wrote in a blog earlier this month that through writing the report “we found a number of reasons to be sceptical of the short-term value of international remittances to mobile money deployments”.
Thomas says mobile operators who were first movers on international remittances thought they would drive wider mobile money take-up. Now there is a realisation she says that mobile operators actually need to deploy infrastructure such as an effective network of domestic agents in advance of launching international remittances. Even the famously successful M-Pesa has made little headway in the international remittance market.
Thomas also points out it’s a long haul to making cash-out services successful because of the number of operational, regulatory and marketing barriers to overcome. “Operators should not expect to see significant revenue or an increase in the number of m-wallet transactions in the first 1-2 years of operation,” she says.
However she also points out that there are companies making an impact in the market who can accelerate the adoption of cash-out services among mobile operators. She points to Western Union, which is establishing partnerships with mobile operators including MTN in the developing world, and BICS whose hub encourages interoperability between operators on the sending and receiving sides.