I was always pretty gung-ho on mobile money especially after working with one of them as a client (I even interviewed with another one of their competitors as well). There was potential, the dreams. Talk about mobile money and you were the vision guy ! And you could not help but be awed by all sorts of top management guys waxing eloquent on this new concept.
But recently, after seeing the way mobile money has spread, I’ve been having my misgivings. Not on the concept as whole. The concept is still brilliant but somehow the execution and the strategy seems to be faltering.
Let me break my thoughts down a bit. Mobile money markets can be classified along two dimensions:
1. Replaceability: That is what does a mobile money service replace ? e.g. Cash, credit cards, etc.
2. Target customers: For simplicity, I’m going to make this just urban and rural.
So basically, current usage looks like this:
Not based on data...only representation based on well...common sense
Urban market:
So if you really wanted to conquer the Indian money bazaar…you would need to be a replaceable alternative to cash. OK, so first atleast the total amount of black money sitting pretty in the Indian economy is $500 billion – about 40% of the GDP. Permit me to be a little skeptical but there is no damn way that anyone is going to let that move into its digital avatar for a simple reason that till now bank accounts and non-cash transactions can be tracked. If we try to substitute cash, then suddenly everything is trackable. We would love it if no black money existed (or we would atleast claim to) but it does existed and no one in their right sense of mind is going accept trackability of such money.
For the non-black money, what really is the advantage? Security? OK, so how much money do you have in your wallet right now ? 500 bucks? 1K ? On an average, we would have maybe Rs. 1K (for the sake of exaggeration – the only time I’ve seen that much money in my wallet is between the ATM and giving it all to mom at home). That is the exposure to our wallets getting flicked. How much do we have in the bank account that is linked to the mobile money account? Let’s say Rs. 2 lakhs. And that’s our exposure if your mobile money account gets hacked. So if the probability of your account getting hacked is 0.5% more than your wallet getting flicked, you stand to lose a lot more. And frankly, this year, how often has your wallet been flicked? This is obviously assuming that everyone is dying for a mobile money account otherwise. Cash is easily the most acceptable form of a “barter” if I may. For m-payments to replace cash it has to be just as ubiquitous.
OK, so let’s say is another control around this..which does exist..1) Authentication and 2)Fixing a limit on the withdrawal amount. So how many cash transactions (white money transactions) have been so large that you prefer the security of the transaction to the convenience of cash? Not many right? It just seems that replacing cash just does not seem to be a viable enough market.
Now, we move on to credit cards: Here, I am going to split credit cards into physical location purchases and online purchases. So what are the real advantages of using mobile money at physical locations? Well, it’s no longer security. After all, the customer can block the card the moment it gets stolen and more importantly, it’s based on the merchant’s liability wherein if a chargeback is raised, then the merchant HAS to refund the money. Obviously, the merchants also have other controls both pre- and post-fraud but let’s not cover that here. So then what? Convenience? Well, OK, so the mobile does in a way replace carrying another plastic card. However, last time I checked they were not too heavy and carrying them on my person was not really a load. Disadvantages? Phones can be lost just as easily as wallets. Phones can run out of batteries and die out on you. But the clincher? Network congestion baby! Can you imagine waiting at the POS counter of a Big Bazaar with a million people in queue behind you while you wait for an SMS to come to you (or an app intimation depending on your product) that you can authenticate and send back and then wait for the merchant to get the confirmation? We already see plenty of instances where e-recharges are performed multiple times for the same transaction because of the massive delay in confirmation responses. How is this going to lessen? And I am not too sure of the security built around the SMSC (in case of SMS based transactions). Visa and Mastercard have their own VPNs for such transactions. Building a wireless one around a separate GSM / WCDMA standard to talk to a generic telecom infrastructure is going to be a bitch.
So we move on to online transactions: Well, this is one place where the m-money has a real chance to replace cards. Why ? Because of the time for a transaction to take place and having to jump through all the name, address, CVV and 3-D pin hoops to process the transaction. Except for one thing. The mobile money should not make us have to jump through the same hoops again. For example, going to the Big Bazaar site, with some mobile partners, we only have to enter our mobile numbers for the transaction to occur. However, post that, we once again have to re-authenticate the transaction through our mobile phones. The killer app is one wherein the transaction process is built into the payment process. Or on top of the mobile payment platform. For example, MChek’s mobile payment platform ensures that since the payments are processed from within the application itself, payments for utilities can be done without any requisite authentication since the request for the payment to be processed arises from the mobile application itself rather from a third-party website. In fact, given adequate partner tie-ups and push, it could automatically be the best form of remote payment. Else it will languish as just another credit card.
