February 2012

Mobile money: Getting to scale in emerging markets

By Beth Cobert, Brigit Helms, and Doug Parker

More than a billion people in emerging and developing markets have cell phones but no bank accounts. It’s generally too expensive for banks to place retail branches and ATMs in poorer areas, particularly those that are rural and sparsely populated, and the services such outlets offer usually don’t meet the needs of lower-income customers anyway. The informal networks through which low-income people do store and transfer money have high transaction costs and are prone to theft.

Mobile money is beginning to fill this gap by offering financial services over mobile phones, from simple person-to-person transfers to more complex banking services. To date, there have been more than 100 mobile-money deployments in emerging markets; at least 84 of them originated in the past three years.

Only a handful of these deployments have reached a sustainable scale; some notable examples include M-Pesa in Kenya, MTN Uganda, Vodacom Tanzania, FNB in South Africa, and GCASH and Smart Money in the Philippines. Even these players have not gained much traction for financial services beyond simple transfers and payments. We sought to find out what drives on-the-ground success and to develop a preliminary set of prioritized, actionable recommendations. We interviewed and conducted workshops with more than 40 leading mobile-money providers (primarily mobile-network operators and banks) and industry experts, which we supplemented with a survey of about a dozen providers.

Among the experts we consulted was Michael Joseph, the former CEO of Safaricom in Kenya and “father” of the M-Pesa money transfer service, which has inspired many recent deployments around the world (see interview with Michael Joseph on page 7 of the attached report). We have also begun compiling a benchmarking database that includes performance data for about 20 percent of existing deployments (see page 11 of the attached report). Our research revealed the three most critical success factors to implement after a provider has launched its deployment and starts to face execution problems:

(1) pay close attention to managing the agent network;

(2) create a compelling product offering;

(3) maintain corporate commitment.

Download the 13-page report, including four charts and an in-depth interview with Michael Joseph, the former CEO of Safaricom in Kenya and one of the key figures in the M-Pesa money-transfer service.

Beth Cobert is a director in McKinsey’s San Francisco office and Brigit Helms is a consultant in the Seattle office, where Doug Parker is a consultant. The authors wish to thank Megan Brumagim, Laura Goins, and Katie Young for their contributions to this article.