Developing mobile wallets in underdeveloped countries

With the emergence of technological advancement in banking, mobile money has been the prime focus for every financial institution. After automation in traditional banking through the internet and SMS, the newest development in banking is the ability to carry your bank with you.

The question is about mobile money’s applicability in underdeveloped markets. Several assumptions make me predict the success of mobile money in Nepal:

* Remittance as a major source of income — Comparing all nations in regards to remittance as a portion of their GDP, Nepal is third with $3.5 million inward remittances in 2010 and a growth rate of 10.5 percent. Mobile money in developed countries will provide us with an understanding of the initial development necessary for receiving remittances by mobile phone. Remittance will grow and encompass merchants and the transfer of money within the country. Mobile money is a more convenient way to remit money compared to traditional remittance and will eventually be a success in Nepal.

* Unbanked population — It is apparent that a large portion of the Nepalese population is unbanked, a population that is also major recipient of remittance. Mobile money will provide a safe and secure way to store money for this population. Furthermore, studies show that in underdeveloped countries, the population feels more comfortable using mobile phones than ATM cards.

There are good reasons to believe that mobile wallets will be successful in countries like Nepal, but we have seen mobile money products fail in similar countries with similar cultural backgrounds. Thus, to ensure the success of mobile money, certain precautions must be taken.

* Strong agent and merchant base — It is of the utmost importance to have a strong merchant and agent base for the success of mobile money in any market. Users will get hooked to mobile money if it is easy for them to upload money and if they have an opportunity to use it like physical money. Thus, before launching a mobile money/wallet program in a country like Nepal, organizations launching a program need to be ensure it has that strong agent and merchant base.

* Unified Mobile Wallet — If we observe the cases where mobile money has been implemented, we can see mobile money has been a success only where one or two providers have introduced a wallet. When the market is segmented it is hard to have a big merchant and agent base. There is also limited transferability of the money stored in the wallet. Thus, there is limited chance of the product being a success. There should be a unified mobile wallet with full transferability for the wallet to succeed.

I have been continuously searching for more practical ways and strategies for mobile money to work in underdeveloped countries. It is my hope that we will come up with realistic plans to attract users to mobile wallets in underdeveloped countries.

Source: Mobile Payments Today

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