Smart, Globe need extensive domestic mobile money base

MANILA, Philippines - Domestic mobile network operators (MNOs), such as Smart Communications and Globe Telecoms Inc. (Globe), have realized that they must first establish an extensive and highly utilized mobile money ecosystem in the domestic market before they can take full advantage of the international remittance market.

Based on a study commissioned by the Consultative Group to Assist the Poor (CGAP) and undertaken by the Dalberg Global Development Advisors, one of the key lessons learned by early international remittance (IR) deployments using mobile channels, is establishing first a significant domestic mobile money ecosystem.

“The concept that mobile international remittances can precede broader mobile banking has failed thus far,” it revealed.

In the Philippines, for example, Globe’s GCash and others on domestic mobile banking services first indicates mobile international remittances will be lagging application, not a leader, in the movement to bring banking to the unbanked through mobile services.

It likewise points out that traditional remittance providers such as Western Union and the global banking system will continue to control a fair share of the international money transfer business as it established strong local partnerships.

Nonetheless, operators remain optimistic about deploying IR through mobile money, citing the opportunity to capture a portion of the large remittance market through revenue sharing agreements and the benefits of increasing mobile money transactions through downstream services.

It is estimated that remittances to developing countries would reach $351 billion for 2011. In the Philippines, international money transfers through the country’s banking system amount to $20.1 billion last year.

The two more basic means for IR through mobile transactions are the cash out via mWallet (mobile wallet), and the mobile cash-in.

Cash out via mWallet means a sender (for example a migrant worker) send funds, through either an MNO agent or through mobile transactions, are stored in an mWallet.

Mobile cash-in means a sender cash-in through mobile technology. But the recipients do not have corresponding mWallets and must visit a money transfer company, a bank or a vendor agent to withdraw funds.

The leading cash-out MNO to the Philippines are Celcom Aircash, Globe GCash, PLDT Smart, and Qtel Mobile Money.

For cash-in via mWallet for the Philippines are Belgacom PingPing, Lycamoney, Maxis M-money, and NTT Docomo Moneytransfer.

Other branchless cash-out center for the Philippines is Visa iRemit Card.

Meanwhile, Western Union serves as the foreign exchange and settlement partner, according to the CGAP study.

Deployments typically use Western Union as the sending agent but do not tap the Western Union agent network on the receiving end; instead, the MNO agent network is used.

A Western Union partnership eliminates the need to establish individual partnerships in each country of operation, providing for faster deployment time, as well as branch and reach benefits and acknowledged expertise in money transfer.

But Western Union controls fee pricing and prefers exclusivity in partnerships thus eliminating flexibility of a growing mWallet provider.

Globe’s GCash was launched in 2004, thus one of the longest track records among the global players.

CGAP describes it as an MNO “willing to innovate and learn quickly from mistakes; one of several major players in crowded Philippine market.”

It provides users in the Philippines with access to remitted funds through either a cash card or an mWallet that can be cashed out at a partner agent.

It can send funds through international money transfer partners numbering over a hundred in 35 countries. Globe has 29 million subscribers, GCash has a million, but GCash mWallets have used IR roughly 300,000.

The study said that GCash has refocused efforts on domestic mWallet services first, as they believe this is essential to building critical mass in the user base.

“GCash is increasingly moving away from unbanked, and targeting the banked and bankable population as they believe this population is essential to making the model work sustainable,” it added.

The study also said that Philippines players are still attempting to hone their models, and that they are not yet at the stage where they can prioritize financial inclusion of the very poor.