Did you know that 42% of the global adult population is still absent from the formal financial system?1 That shocking statistic suggests that the financial services and FinTech industries are in a rare position to drive not only economic and innovation change, but also social change. And within this massive opportunity set, the potential for mobile payments may be the most robust of all.
Mobile money services (money transfers and payments) have proven to be an effective gateway for financial inclusion among the un(der)banked and could evolve into a US$3 trillion payments volume opportunity, per PwC. In fact, many believe that capturing any und(er)banked opportunity begins with mobile; it’s the essential enabling technology for financial inclusion. And now mobile is moving beyond being a new delivery channel and to provide basic banking services to a number of un(der)banked populations.
There are several examples where mobile-delivered services have improved financial inclusion. One of the most notable is in Kenya, where regulatory exemptions permitted mobile network operators (MNOs) such as Safaricom to enter the payment market with an agent-based banking model. There are now more than 26.2 million mobile money accounts in Kenya,2 roughly equal to the adult population of 26.1 million.3 However, transitioning to the next step, a formal account, remains elusive in many developing nations.
Mobile money services have begun to establish financial inclusion and could be expanded over a multiyear or decade time frame to include lending, savings, and insurance. Factors including digital distribution (mobile), nontraditional competition (MNOs), and regulatory changes (exemption of select financial products) have combined to influence the industry to serve the unbanked. As a result, companies such as bKash, Easypaisa, and Page are now viable competitors.
All this increased competition should help commoditize aspects of the market. Two-thirds of countries with mobile money services now have two or more services competing for the same audience. Further, many of these services are unable to expand outside their respective home markets for regulatory, operational, or cultural reasons. Market saturation is beginning to materialize, as demonstrated by the declining number of new mobile money services in each of the last three years. This will help commoditize basic financial features, which is a needed component in the goal of economic inclusion.
This healthy competition in the market will force money services providers to pursue one of two central strategies: 1) either build massive scale at low-to-free price points, or 2) increase the value proposition via more sophisticated financial services.
Ultimately, however, the pathway for economic inclusion is paved by emerging FinTechs. Those who successfully capture the mobile opportunity will move beyond the money services opportunity to begin to address lending, insurance, and savings. Thus, the mobile payments opportunity is not only immense, but a critical first step to tap into the next massive wave of financial services consumers. Are you ready?
Financial Services Leader, PwC US