Clash between Telcos, Banks Hobbles Mobile Money Growth
Unbanked is an umbrella term used to describe diverse groups of individuals who do not use banks or credit card for their financial transactions.
They have neither a checking nor savings account while underbanked refers to individuals or businesses that heavily rely on cheques and cash as means of funding rather than bank related methods such as credit cards or loans.
The needed partnerships to enable financial inclusion of these important segment is being frustrated by the egos of banks and telcos.
First of all, telcos and banks operate different business model and processes, making it difficult to find a middle ground.
And on the basis of product ownership; both entities want to own their products rather than going into partnerships for products they can deploy on their own.
Sometimes too, telcos and banks are limited by regulation and government policies.
Emmanuel Okoegwale, Principal Associate, Mobilemoney Africa, explained that, telcos understand low value and high volume products hence a single customer or a small segment can’t make them profitable but banks do not operate that way.
Telcos products may not necessarily be tied to generating direct income; it can be linked to reducing cost by locking-in customers and reducing cost of signing up new customers.
“Banks products are designed to be profitable in short term so both entities will always go at logger heads in partnerships due to fundamental differences in business models. This can be deduced from the falling apart of the Safaricom’s and Equity bank on the m-kesho product but same telco succeeded with m-shwari with Commercial Bank of Africa. Telco and Bank relationship is more of willingness to stay in the marriage rather than the ability.”
Okoegwale identified different business model operated by both Banks and telcos as responsible for the distrust.
“Banks are driven by short term profit taking while telcos have long term plans. They also have fundamentally different approaches to product designs and product management. Despite all these, the willingness is more important than the ability. Where a certain management is willing to make things work, they will overcome distrust issues,” he noted.