Sources of Remittances

When thinking about about money remittance solutions, it is important to consider the different sources of remittances money. The mechanism utilised by the payer to trigger the transaction could have major implications on a number of factors of a remittance transaction. Some of the implications can be:

• The degree of conformance to banking regulation
• The involvement of third parties and their role
• Risk and fraud considerations
• The liability profile of the operator and/or the payer
• And of course as always the cost associated with performing the transactions

The different mechanisms that can be employed in triggering a remittance payment are the following:

• Cash (typically via an Agent)
  
• Bank account (usually via the Internet)
  
• Credit card (or other cards) (via the Internet)
• A mobile wallet via a mobile phone

One should consider the registration process, the confirmation, the dispute mechanisms and reversals or refunds for each of these different mechanisms when designing money remittance solutions.

Thoughts on Mobile Banking business cases

I was close to some of the early projects that launched the first Internet banking services in South Africa during the middle of the nineties. None of them had any business cases. Banks deployed these services because it was unthinkable to have a bank without allowing clients to access their bank accounts via the Internet. Today all Internet banking divisions have solid revenue targets and (in most cases) good ROI business cases.

However, things have changed. It is now impossible to deploy products without a solid business case and strategic motivation of why it must be done. Mobile banking initiatives are often subjected to such requirements and this frequently delay decisions, but seldom stop them. It is thus important to think about the business cases for mobile banking. While each initiative differs in terms of investment, potential penetration and impact on financial metrics, it is possible to categorise the business benefits in three categories:

• Direct revenue benefits exist and is usually one or a combination of the following (transaction fees, monthly subscription fees, commission on goods sold, differential on interest and others - like interchange fees). It is my experience that these should generate revenue of at least $1 per month in order to build a revenue-based business model.
• Cost savings should also be considered. The different benefits that can be achieved by the deployment of mobile banking are savings on less complex business processes, cutting banking staff out of the process and savings on capital expenses.
• Many indirect benefits exist. Some can be quantified, while it is difficult to do it with others. I have seen some of the following actually happen during mobile banking deployments and I believe it is important to include them in business cases too.Mobile banking increase stickiness, brand loyalty and impulse buying without a doubt. Enough measurements exist to back this up. I have seen large increases in voice ARPU for instance if mobile banking is depl0yed by mobile operators. One should also not ignore defensive imperatives in markets where other players have launched mobile banking.