M-Commerce - more than just content


February 2006

Emerging markets are where it's at...

A report commissioned by the Information for Development Program (infoDev) in partnership with the International Finance Corporation (IFC) and the GSM Association, released at the 3GSM Conference held in Barcelona in February, revealed that, as far as mobile commerce (m-commerce) is concerned, emerging markets are where the action is.

While m-commerce transactions are largely related to content purchases in the developed world, in developing economies, m-commerce technology is being used to provide financial services, for which “there is significant and growing demand”, according to the report. “In fact,” it notes, “m-commerce may address a major service gap in developing countries that is critical to their social and economic development.”

The proliferation of mobile communications in developing countries has the potential to bring a wide range of financial services to an entirely new customer base says the report, which notes that: “In many developing countries, particularly in rural areas, access to financial services is limited. A large proportion of the population are excluded from formal banking systems and make payments entirely using cash, which is far less secure and flexible than electronic payment mechanisms.”

The report focused on the use of mobile devices for micropayments in the Phillipines, where there are over 3.5 million m-Commerce users on the two major networks. “In discussion with the two networks, it was identified that the key success factors for that market included the ability to load prepaid airtime credits as well as the ability to transfer both cash and airtime credits between customers. Coupled with these were the low values set by the operator for such prepaid top-ups or credit transfers. Typical top-ups of US$ 47 to 57 cents were allowed by the networks (equivalent to around four to five minutes of calls) while transfers between customers of both cash and airtime credits were permitted as low as US$ 4 cents.”

Information for the report was provided by GLOBE Telecom, Philippines, SMART Communications, Philippines, Fundamo, a system supplier headquartered in South Africa, MTN Bank, an m-Commerce service provider in South Africa and Safaricom, the joint Vodafone-Kenya Telecom mobile operator.

The range of features available in each market showed significant uniformity, as to be expected if the target markets were similar, the report notes. “With minor variations, the features of all systems included:

  • Provision for cash deposits and withdrawals
  • The ability for third parties to make deposits into a user account (employer, family member or a micro-finance organisation)
  • The ability to make retail purchases at selected outlets
  • Over-the-air prepaid top-ups using the cash already in the account
  • The ability to transfer cash between users’ accounts
  • The ability to transfer airtime credits between users
  • Provision for bill payments


“Apart from the advantages to the wider economy, the service providers noted that if implemented properly, the service would bring advantages to all stakeholders. While the networks would experience higher SMS usage and hence higher Average Revenue Per User (ARPU), the banking industry gained access to an otherwise difficult if not inaccessible market segment. Added to that were the transaction revenue and interest on the generated cash float. The identifiable customer advantages included the availability of useful features including cash deposits and withdrawals and ease of prepaid reloads and credit transfers between users,” it states.

Fundamo COO Craig Saks, whose company participated in the report, notes that: “Fully fledged m-banking and payments solutions are not a priority in developed markets, where access to alternative payment mechanisms and internet infrastructure is widespread. That said, many of the vendors, suppliers, and analysts we spoke to at the conference say that banks worldwide are investigating and slowly getting into m-commerce initiatives, from Czechoslovakia to India, due to the benefits. We believe that m-banking will be as relevant to banks as Internet banking has been - this report shows that m-banking is happening, the demand is there, and banks and operators are moving to meet that need.”

The report is available online at http://www.infodev.org and http://www.worldbank.org/ict


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