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Failure of Mobile Money – Theory of Distrust or Easy entry or none

As an Analyst we let data & numbers do the talking, however as one analyzes more companies, industry and people one understands it’s often small thing that make & break numbers. However for today’s post I don’t have any number to back up my conclusion specifically pertaining to India I have discussed in my post.

So here is the basic point of mine, mobile operators launch money transfer service in India (mobile penetration of 90-100%) & in developing nation of Kenya (mobile penetration of 60%-75%). Any guess where it is more successful?…..its Kenya.

Just imagine a Kenya’s 25% of GDP flowing through mobile transfer with help of 2/3rd adult population of country (Link-1 , Link – 2). Airtel launched Airtel Money with help of Infosys, while Vodafone original inventor of mobile money transfer bought its M-Pesa brand to India. In case of India I doubt that even 1% was managed by Airtel & Vodafone’s of the world.

Some more stats to give insight one Goldman Sachs –

  • There are 20mn credit cards outstanding vs 50 mn registered Paytm users.
  • 89% or 36mn people in India pay income tax vs 45% in USA & 20% in China.
  • 400mn people have bank accounts in India, of which probably 125mn were opened in last 1 year itself.

Having said that I would agree industry scenario that existed in Kenya was different compared to India, like single company Safaricom (Vodafone subsidiary) held 75% of market share. In case of India it would be in range of ~27% – Airtel, 24% – Vodafone, Idea – 12%, RComm – 12% etc. however just because you are dominant player doesn’t mean you can force people to use your product.  In case you are wondering they didn’t promote it properly, please feel free to check out YouTube and search for “Airtel Money ad”, there were tonnes of Ad and some were pretty nice. However you can’t force people to use your product, you can entice them.

Look at it this way, Nestle Maggi has ~80% market share in noodles segment, can it force you to use Maggi ketchup? I know it’s not exact analogue given mobile commerce and mobile service are on same device, but there is limit to which one can control free will of human being.

Other reason can be it was money; central bank/Finance Ministry of Kenya/Govt didn’t really bother or create too much barrier for company to operate this service. That way India’s RBI never had problem with internal money transfer, however when money is coming in & out of country, it would surely need some monitoring (hence PayPal & Uber faced RBI’s regulatory wall), which to me seems fine (however this may sooner disappear in near future). Anyway hence we had PayTM & Freecharger come scoop the market.

One search on Google about success of mobile money transfer in India and you get few positive articles. And do it for Kenya or Africa and you would get tonnes of article along with facts & figure that would make you wonder “WTH”.

So that makes me wonder what happened, where did Indian mobile company go wrong? That led me think more philosophically and I came up with two possible theories 1) “Theory of Distrust” and 2) “Easy entry”.

Theory of Distrust

In its early days of VAS (Value Added Service) all mobile companies started offering this to all its customer for free or at nominal cost, followed by subscribe option at pay (deducted from prepaid balance or added in bill). As time went by Mobile operator saw very few people subscribing to these VAS service, I think most of the people opted for Ring Back Tone/ Caller tune but very few opted for jokes, cricket scores or news, or astrology or music etc. Telecom operators could see internal revenue targets not getting met or not getting their dream revenue, so what did they do? This is probably were greed overtook and they simply activated VAS service without subscriber permission. Whenever subscriber noticed and complained, discontinue it, but milk it till the time he didn’t notice. If you know anybody who has been using mobile for over past 10 year, chances are s/he would have either experienced this or seen it happened to somebody close or at least seen customer fight with retail store from where he recharged his prepaid.

This unfortunately incident “taking money without permission” was done by many telecom operators and over span of time, this created very negative impact and distrust among its customer base. This probably hindered the growth of their respective money transfer services.

Easy entry

Try opening a bank account and you would be surprised at number of documents you need to open. For general masses who work on daily wages who don’t get their food from PDS without bribing or nothing at all, procuring identification proof, address proof and what not is dream come true (hence they ran for aadhar card registration). They are anyway scared to speak to people in formal attire, they never dare entered a bank.

So poor were afraid to use mobile operator’s mobile money transfer scheme and scared to enter bank. In absence of any data I am not sure whether my theories are right and there probably exist another explanation on why country doesn’t have huge banking penetration and parallel economy running that in turn increase black money economy.

However PayTM & freecharger can definitely lead the way of increasing penetration, which slowly govt can bring them in system. I believe hence RBI opened door for setting up small payment banks. Most Telecom operators are retrying their luck by tying up with various banks. Will they succeed in their second/third coming? While going by success of PayTM and Freecharger, it looks difficult to me, but let’s wait & watch.