The overall mobile payments ecosystem has expanded exponentially due to sheer uptake of initial mobile money deployments in several African countries, most notably M-Pesa in Kenya, followed by innovations across the payments value chain.
The revolution which began with M-Pesa was soon visible across the value chain and resulted in gradual adoption & innovation across the payments spectrum such as Mobile remittance, Mobile Banking; moving towards the evolution of a more holistic ecosystem of m-commerce.
However, as far as banking industry is concerned, it could not sense the onset of a new revolution driven by this new technology and was left behind. Success of several deployments across Africa (Kenya and Tanzania) and in other countries (Philippines, Pakistan) forced the banking industry to reconsider their position and join the bandwagon, albeit late.
Indeed, the ground rules by now are already set by the early movers and the question, whether to participate or not is no longer relevant. Banking industry, both retail and commercial, are at a crossroads where they must assess their strategy as to how quickly this alternative channel can be explored to deliver better customer services and protect revenues.
Considering the late entry, the banking industry may also have to face the question of “compete or collaborate” with telecom industry enjoying the first mover advantage. However, Collaboration is perceived to be a better value proposition and is already being embraced by some industry players.
Opportunities and challenges have to be carefully evaluated by the industry. On one hand the industry has to build a strategic proposition to compete with telcos, independent service providers and OTT players and on the other hand it needs to look at the possibility of collaboration, both internal and external, to gain a competitive advantage.
The good news for the banking industry is that a conducive environment has already been created by the market and having basic fundamentals in place such as high level of awareness, availability of enabling technologies and gradual maturity of the value chain, industry can look to play a big role in this space.
At a strategic level, a holistic and forward looking approach needs to be taken to unlock the full potential of this nascent technology by finding niche not just in payments space but across the m-commerce spectrum.
A compelling business case (ease of use and wide acceptance) must be developed to create an optimal mix of product & service offerings such as provisioning virtual credit card on the mobile phone, account widening the range of Mobile Financial Services (MFS) and facilitating a mobile pro-merchant network with wide acceptance. Possibilities should also be explored for creation of new revenue streams within the limits of prudential regulation.
Leveraging established payment platforms and existing customer-merchant relationships will be the key for any strategic initiative in this space. Readily available data of payment transactions, account transactions and credit history all kept together with the help of CRM and data analytics could be a gold mine for banks to gain crucial customer insights.
On a broader note, the possibility of banks joining hands for non-core product offerings such as participating together in a common customer loyalty and reward program which can be redeemable through merchants already participating in the m-commerce value chain led by credit card industry, can’t be denied.
The sense of being left out in the burgeoning payments market has to be answered by adopting a robust framework but at the same time being agile in piloting new ideas and investing in the most promising areas will be the key.
Author: Abhishek Tiwari