Mobile Money: OTTs vs. MNOs

Mobile money is the latest battlefield in the ongoing war between the MNOs and the OTTs. The latest new entrant, WhatsApp may change the game with its 1.5 billion users.

Mobile money has been growing steadily since its inception in the early 2000s. Originally created by Safaricom in Kenya and allowing only money transfers between their subscribers, mobile money has seen its scope expand and now allows not only peer to peer payments but also to pay merchants, utilities and all kinds of goods and services.

Over the years, research has established that the right set of factors to foster the development of mobile money is the combination between a high mobile phone penetration and a low bancarization rate. Many mobile network operators have rushed to develop mobile money services, not only for the sake of providing the service itself but also as it allows them to manage the funds float associated with their users’ accounts and as mobile money is a very efficient retention tool for their subscribers.

Besides MNOs, financial institutions and some other companies have been trying to enter this market. But to their lower market penetration, they generally have not been successful.

Conversely, OTT, over-the-top players, already have hundreds of millions of users, so many of them have launched some money transfer functions. One can think of WeChat in China, Facebook Messenger, Snapchat, Line in Japan, Kakao Talk in Korea,

Now WhatsApp is entering the mobile money game! At first WhatsApp will only provide a limited money transfer service in India has it has received an agreement of National Payments Corporation of India (NPCI) restricted to a test for one million users allowed to transfer only small amounts.

On a global level, the arrival of WhatsApp in the field of mobile money transfer is a major step towards a global solution given the service claims to have over 1.5 billion monthly active users and is recognized for its security. Mobile network operators are limited to their customer base while solutions proposed by handset vendors, namely Apple and Samsung, are limited to these handsets.

The mobile network operators have already a long history of looking for added value services in order to compensate for falling margins on their core business. With mobile money transfer, many of them had found a way to be more than simple voice and data pipes. The arrival of WhatsApp in the mobile money transfer business is another sign of the market advantages of OTT players over the MNOs.