Follow the mobile money

[Commentary] Mobile money is just one element of the next wave of opportunity that confronts a telecoms market that is predicted by Analysys Mason to grow from its current level of $1.8 trillion to $2.4 trillion in just three years time. Smartphones already account for 65% of mobile traffic, according to Informa, which also predicts that usage will increase by 700% by 2015. The International Telecommunications Union (ITU) predicts that the number of smartphones will quadruple from 500 million today, to 2 billion by 2015. Adding up those three statistics brings tears to the eyes. Meanwhile in emerging markets alone, there will be 709 million mobile money users, with transactions worth $215 billion – again by 2015, this according the Berg Insight.

Yet mobile money itself is a complex topic. The most extraordinary variety is simply the use of a mobile phone to transfer credit. This is revolutionizing the lives and economies of emerging countries. Based on good old fashioned SMS, it provides a money transfer system to people who have no access to banks or credit. This simple concept is creating an opportunity and a step on the ladder to wealth that has never been seen before. It cuts out the need not only for banking infrastructure but also the need for a fixed telephone network. It allows richer people in towns and cities to transfer money to poorer relatives in the country – at the very least it cuts out the need for people from the country to walk two or three days to town. Internationally, it allows workers in one country to transfer money home, and to use the differences in currencies and wage rates to create relative but real wealth at home. It drives growth in the form of access to micro capital, for example, which together with access to the internet is enabling innovation and growth that is remarkable. In more mature markets, mobile money is really mobile commerce and this is equally exciting -- and more cut-throat. This is the arena where banks potentially meet telecom carriers face to face, and in which telecom, finance companies and handset manufacturers are all investing heavily and watching each other closely.