Barring cash, mobile money transfers are now slowly becoming the de facto method of paying in both urban and rural areas of many developing countries. Large swatch of mobile penetration has made this possible. With over 500 Million people using it and its availability to over two-thirds of low and middle-income countries, mobile money transfer is poised to become one of the largest disruptors in financial services.
Mobile money is now truly a global phenomenon, with remittances highlighted as the lowest hanging fruit.
Remittances are Still Fragmented
Despite the advancement in payments, remittances are still quite fragmented, in many cases non-interoperable, and expensive. The need to transfer money between long distances was the catalyst for mobile money transfer and today, still remains as its core.
A large number of international money transfers are still conducted via the old age method of walking into a physical location of a money transfer agent and placing cash for transfers. The same is true on the payout side, where only designated agent locations can cash out the money transfer.
This is limiting in many aspects. Number of agent locations, cash at hand, income made by agent on these transactions versus domestic money transfers (which are usually much smaller in size and hence, more transactions equals more income), geographical outreach, etc. A nearest point of presence may be only 1 kilometer away, but it is still an inconvenience for many who have to journey this small distance, to pick up the cash, only to load it back into some kind of a wallet.
The entire process of sending money has speed-bumps and in many instances, fractures. The experience is anything but smooth. Fluency in the transfer of money from sender to beneficiary is not present in a majority of cases.
Mobile Money Can be the Game Changer
Mobile money predominantly resides on the mobile wallet itself rather than being cashed out after the transfer is made. This is primarily due to the fact that a vast majority of the merchants and billers are ready to accept mobile money (which cuts down on cash management, pilferage, leaks, theft, reduces corruption, etc.)
Once these mobile money networks and money transfer operators are seamlessly connected, end to end money transfer can be a reality. For instance, a remittance from UAE to Dhaka, Bangladesh, Philippines or Sub-Saharan Africa could be a single end-to-end transaction using the mobile phone. No need to queue up at a physical location (which costs time and money to get to). Simply transfer your balance from your account to the other, from one country to another, in near real-time.
By connecting mobile money operators to the remittance channels, the size of the ecosystem increases; no more reliance on the capital injected by the agent alone. Now mobile money can be truly mobile and be within anyone’s reach.
Stitching together the money mobile network operators, money transfer operators and the disparate payments and banking systems is no easy feat but we are trying to do just that. Interoperable mobile money is the need of the hour and TerraPay intends to make it possible.