Merchants and Agents - not the same at all

The industry of emerging markets are built on the back-bone of traders. It is the informal markets that distribute most goods and create most jobs. Anybody that have traveled in Africa, would be able to vouch for massive markets of informal traders selling everything conceivable. The nature of the commerce happening in emerging markets are also almost always based on cash transactions.

With the growth of mobile money initiatives throughout Africa, some of these traders have been signed up to perform a critical role; to provide cash-in and cash-out services to wallet holders. These traders are referred to as Agents in the new digital money world. They have to be formally registered, trained and must use a mobile phone to perform this function. It is also a requirement that they should have a certain level of literacy as they frequently have to keep book of transactions for audit purposes. Most of the schema's require these Agents to make a "substantial" pre-payment as a kind of float in order to manage cash flow risks.

With the growth of mobile money solutions in emerging markets, some traders are starting to accept electronic payments (in stead of cash). The incident of this is still very small and informal. It is likely that this practice will grow and will also become more formalised. Traders accepting mobile money (digital) payments can be classified as merchants (in a similar way as for Card Association merchants). It is pretty clear that these two roles (merchants and agents) are very different, and while they may be performed by the same trader in some instances, should be dealt with in totally different ways.

Where is Paypal going

Paypal recently announced that one could use a Paypal account to purchase at any Home Depot shop in the US. (Read here). The service require a Paypal App on a smarphone that generates a 2-D barcode that can be read by POS-equipment in the store. While this is a really innovative solution that takes an on-line product and turns it into a product that can be used in the physical world, it is an open question if this will lead to wide adoption for the mass market.

However, it is important to take cognisance of the following very important implications:

• It is now possible for non-traditional brands to enter the payment domain and go after the more profitable niche markets. Many other players have successfully done this in the past (consider Starbucks), using strategies that build on a wider eco-system than just providing a dependable payment experinece.
• The need for super-security mechanisms are not that critical. With niche solutions, relatively small balances and small take-up, it is just not worth the effort to break the security to steal money. It will be different when the service get to scale and really attracts large amounts.
• Consumers (as is the case with almost everything today), will be confronted with so many choices to pay that it will be difficult to decide what to select and how to manage these diverse options. It will be interesting to observe how the mass consumers react with a prolifiration of payment choices.

The underbanked market in the US may just go Boom!

I have now been writing this blog for the past six years and it is getting more difficult to write about things that I have never written about. I have previously written about the unbanked communities in the US(Read here and here), but I think is important to take another stab at it.

This was triggered by an article based on the Visa announcement of Visa Mobile Prepaid (VMP), aimed at banking the unbanked. (Read here). The author (Bryan Yurcan) makes the point that the US has an estimated 40 million un- (or under-) banked market. This makes it one of the bigger markets in the world for these types of products. While the new Visa product is relevant, it is currently not targeted at this market. This is why many other solutions are made available to this market to serve their needs, ranging from cheque-cashing services to new mobile payment solutions.

One such a service, referenced in this article is the new Boom services recently launched by m-Via. (Read here). The service is a mobile based payment solution focussed on the underbanked market with a lot of emphasis on remitting money offshore, especially to Mexico. If it was not for the ssss, m-Via could have been confused with the new Visa product.