Analysis: Follow the mobile money

Mobile money is just one element of the next wave of opportunity that confronts a telecoms market that is predicted by Analysys Mason to grow from its current level of $1.8 trillion to $2.4 trillion in just three years time.

Smartphones already account for 65% of mobile traffic, according to Informa, which also predicts that usage will increase by 700% by 2015.

The International Telecommunications Union (ITU) predicts that the number of smartphones will quadruple from 500 million today, to 2 billion by 2015.

Adding up those three statistics brings tears to the eyes.

Meanwhile in emerging markets alone, there will be 709 million mobile money users, with transactions worth $215 billion – again by 2015, this according the Berg Insight.

Yet mobile money itself is a complex topic. The most extraordinary variety is simply the use of a mobile phone to transfer credit. This is revolutionizing the lives and economies of emerging countries. Based on good old fashioned SMS, it provides a money transfer system to people who have no access to banks or credit. This simple concept is creating an opportunity and a step on the ladder to wealth that has never been seen before. It cuts out the need not only for banking infrastructure but also the need for a fixed telephone network. It allows richer people in towns and cities to transfer money to poorer relatives in the country – at the very least it cuts out the need for people from the country to walk two or three days to town. Internationally, it allows workers in one country to transfer money home, and to use the differences in currencies and wage rates to create relative but real wealth at home. It drives growth in the form of access to micro capital, for example, which together with access to the internet is enabling innovation and growth that is remarkable.

In more mature markets, mobile money is really mobile commerce and this is equally exciting -- and more cut-throat. This is the arena where banks potentially meet telecom carriers face to face, and in which telecom, finance companies and handset manufacturers are all investing heavily and watching each other closely.

Recent, much reported, announcements bring out the cynics and optimists in equal numbers. Barclaycard, the biggest credit card issuer in the UK is moving into North America, clearXchange has been launched by Bank of America, J P Morgan, Chase and Wells Fargo. Google launches the much trailed Google wallet and PayPal picks a fight (a sure sign of panic).

Near Field Communications (NFC) may well be here at last, having been nearly here for several years. It takes a while and a lot of money to build that kind of infrastructure but there are now advertisements showing how easy and how cool it will all be to pay for a new baseball cap by waving your mobile phone at the cash register. The cynics will be taking bets that it will not be quite that easy to begin with, the optimists believe that it is now happening for real.

The big question – the eternally big question for our industry – is where telecom fits in the web of partnerships. For an industry where revenue sharing, commissions and advertising are all fairly unknown territory, there is a tendency to stick to core business and be the entity that connects the customer to the device and to the financial institution and charge him a small amount of money for doing that.

If the role of telecom was taken by a financial institution you can bet they would find a way of charging commissions from whoever is making money in the chain and if the advertising industry was in their seat then the whole mobile money industry would be brought to you by a manufacturer of sparkling, sugary drinks.

Maybe, just maybe, there is enough of a business in just being the connection and doing that very well and there are several telcos out there that have taken that decision. The opportunity is far greater than just being the connector and should be ignored only after very careful thought. Apart from anything else, to stick to core business would be waste of millions of dollars investment in cool billing technology that can handle a vast array of different business models. That would be a pity.

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Alex Leslie a Connected Planet contributing editor, covering BSS/OSS. He is the award-winning publisher of BillingViews and founder of the Global Billing Association. He is widely recognized as a global thought leader on communications and media billing, payments, and emerging business models.