Lucas Skoczkowski is the CEO of Redknee, a communications software company specialised in services delivery for wireless network operators. Mr Skoczkowski received the Ernst & Young Entrepreneur of the Year Award and the Top 40 Under 40 Award for Canada. Prior to Redknee, Mr Skoczkowski worked at Nortel Networks and Clearnet in various aspects of Product Management. Mr Skoczkowski serves on Redknee’s Board of Directors. Lucas Skoczkowski has a Bachelor of Science in Electrical Engineering from the University of Waterloo.
Mobile service is changing the lives of millions on the African continent where communications and other services common in more affluent and urban regions barely reach. Among the most important of the new services is mobile money. This lets the continent’s vast unbanked population avail themselves of vital but otherwise inaccessible services such as affordable monetary remittances, interest bearing savings. Such services have a measurable impact upon economic growth and should grow rapidly once regulatory and competitive issues are sorted out.
The wireless revolution occurring in much of Africa today is changing the lives of millions - and is growing every day as new mobile services are introduced and adopted, and subscriber penetration continues to climb. Today, half of the world’s population is living in regions where traditional wireline service is limited or even non-existent. It is in these regions where citizens are finally gaining access to their first means of telecommunications, and it is mobile communications, not wireline services, that is making this possible. These mobile services are not limited to voice and text, they also include newly emerging applications such as mobile money services. The impact of mobile services in these high-growth regions is measureable in quantifiable. In fact, a study by Deloitte and the GSMA empirically demonstrated that every ten per cent increase in wireless penetration yields, on average, a 1.2 per cent gain in Gross Domestic Product (GDP). Why is there such a direct link to GDP growth? The ability to communicate and share information and content rapidly and efficiently accelerates change. For instance, with mobile services farmers can now verify crop prices in the next village without spending a day traveling by foot. Using mobile money transfer and micro loan services, women’s groups can quickly and securely receive micro-loans to start a business co-op to support their families. With mobile money, workers in Africa’s cities can send money home to support their families in distant rural villages. These are just a few examples of how, every day, mobile communications and mobile money services are shaping and affecting the lives of many people. Mobile banking The mobile handset - with its low-cost communications, mobile savings initiatives, and mobile payment and remittance capabilities - is helping transform poor populations. In high growth markets, mobile banking for the ‘unbanked’ is quickly becoming a transformative technology that gives millions of rural poor access to financial services that were never before available to them. In fact, according to GSMA’s recent Mobile Money Quarterly Update, there are approximately one billion people worldwide who own a mobile phone, but do not have bank accounts. By 2012, that number should grow to 1.7 billion. The cost of handsets and services has dropped over the years, but the real driver for mobile service adoption in these regions is the sheer need for easy and instantaneous communications. Because of the benefits mobile communications bring, people are willing to give up a much greater percentage of their income for these services than those of us in developed markets pay. Mobile savings and remittances In areas without safe places to store funds, what is earned in one day is spent the next, and traditional savings accounts with compound interest are unknown. Without an incentive to save, how can these communities move beyond the limitations of a cash-based society? This is an area that is being looked at closely by aid organizations, Micro-finance institutions (MFI), and NGOs (non-governmental organisations) worldwide, as mobile banking services are being enabled by operators and technology leaders in the wireless sector. Fund-matching programmes are an example of the initiatives used to foster good saving habits. With the support of aid organizations, dollar-for-dollar or airtime minutes for dollars saved, are some of the plans under consideration. Even those earning less than US$2 per day can now be motivated to save through such micro-finance initiatives. Additionally, mobile money services, such as mobile money transfers, provide an inexpensive alternative to traditional money transfer services such as Western Union, which have minimums and fees that are often out of reach for poorer populations. With a mobile wallet on a handset, financial transfers and payments - for any amount - can be made cheaply and quickly. Mobile technology brings the ability to transfer extremely small (micro) amounts of credit or funds to an employee in the next village, to a family member living far away, or to a mobile savings account that will begin earning interest. As exciting and promising as these services are, two of the largest hurdles we are now facing are how to turn these services into business models that any network operator can roll out and support. Additionally, there are regulatory issues and requirements that need to be ironed out amongst the banks, governments, network operators and MFIs. These issues are currently being explored and there are other services that are being rolled out to help make mobile services more accessible and affordable. Accessibility and cost Despite all the hope and early success, the physical and political environments in some of these regions make supporting these nascent mobile services extremely difficult. Yet necessity is the mother of invention, and some recently introduced creative services and support mechanisms are combating these challenging environments. With the prevalence of prepaid (as opposed to post-paid) mobile services reaching upwards of 90 per cent throughout much of Africa, the ability to top-up account balances has become a constant challenge. When there are few, or no, retail stores to support the sale of vouchers or prepaid phone cards, and when voucher card minimums are too high to be practical for poorer populations, there is a need for other options. In cases such as these, some vendors now offer ‘airtime reseller’, or e-top-up services. Historically, the purchase of pre-paid top-up minutes has largely occurred through a physical voucher-based distribution system, but now there is growing use of a secure mobile network to provide seamless, affordable transfers of airtime minutes; this is boosting the productivity and efficiency of all the entities involved in these services. This airtime reseller service allows designated community resellers to top-up another person’s mobile phone by transferring minutes from handset to handset over a wireless connection. Resellers sell minutes at a slight mark-up to their customer and earn a small commission on each transaction. The airtime reseller can be practically anyone in the community who purchases wholesale minutes from an operator-approved airtime dealer. ‘Reseller minutes’ are securely held in a separate account and accessed through a secure PIN code. The only thing resellers need to begin selling minutes is a standard mobile handset and a dealer arrangement. These electronic transactions remove or reduce the need for operators to support costly retail vouchers, eliminate the danger of voucher-card theft, and expand subscriber penetration into remote rural areas. Airtime reseller services also enable micro-top-ups, often for as little as US ten cents, and serve the many that can only pay for one call at a time. As subscriber penetration levels increase amongst the more financially secure populations, operators look to the lower income subscriber segments to expand their subscriber base and boost revenue, while benefitting the residents of rural communities and villages. Transformational banking has greater appeal in high growth markets because it satisfies a need. There is a latent demand for these services given vast number of unbanked mobile subscribers. Mobile penetration has increased dramatically over recent years, but traditional bank account penetration has remained very low. In these markets people are often more willing to trust their mobile operator with their cash than a traditional bank. These services make a huge difference in people’s lives thanks to the convenience and security they offer. In developed markets, the situation is very different. Banks are still not entirely comfortable with mobile operators entering their domain to provide mobile banking services. This, despite the fact that the consumers targeted for mobile banking services are not bank customers, but the unbanked low-income population in remote areas that banks have not managed to address. A lot of this unease among banks stems from the realisation that mobile penetration is significantly higher than banking penetration in most markets. Therefore, banks fear that the greater reach and penetration of operators may enable them to become strong competitors. Also, in markets where operators are working in partnership with banks to introduce mobile banking services, they are finding it hard to achieve their time-to-market ambitions. This is because, in contrast to operators, banks take longer to evaluate and introduce new services. Time-to-market is a much more sensitive and critical consideration for operators than for the banks. In addition, there are commercial issues to resolve, including service branding and agreements, as to who owns the customers. As the demand for mobile services continues to grow in low income regions, we will see network operators build even more creative business models around services in these markets, supporting the local populations and sharing in their newfound economic growth. As the saying goes, all boats rise with the tide, and the fast approaching economic and technological tide that is sweeping across Africa will be good for everyone, including business, government, and society in general.