By Elena Malykhina
Payments as a platform promises a host of benefits for small and midsize enterprises (SMEs) to be more accessible to and better meet the needs of their customers, particularly those in emerging markets who may not be able to tap into traditional banking services. With 2 billion individuals and 200 million SMEs in those developing markets currently lacking access to savings and credit,1 payments as a platform would allow previously excluded groups to participate in the global economy.
Initial deployments of mobile money trace back to the early 2000s, when mobile operators viewed payments as a tool to boost customer loyalty and usage of mobile services.2 Since then, mobile money transfer has expanded over the years to include business-related transactions, including business-to-business (B2B) payments.3
These days, the mobile money industry is thriving. In 2018, there were more than 866 million registered accounts in 90 countries—a 20 percent increase from 2017, according to a report from global mobile network operator industry group GSMA.4 Asia experienced the most growth, with 90 million new mobile money accounts opened in 2018.
In 2019, worldwide mobile payment revenue is expected to surpass $1 trillion, more than double that of 2015, according to Statista.5 In this growing market, mobile money transfer has become more than just a “use case,” but rather an enabler of financial well-being for consumers and SMEs that lacked access to savings and credit in the past.6
SMEs play an important role in international economic development, especially in emerging markets where they account for up to 45 percent of total employment.7 Yet the needs of SMEs have been underserved, despite the fact they frequently rely on international payments and represent nearly 30 percent of global imports. SMEs are often treated as either “simple corporates” or “complex consumers,” according to McKinsey & Company.8
In order to meet the changing needs of SMEs, the mobile money industry is evolving.
The existing problem with mobile money transfer services is they were initially designed for individuals, not businesses. While some businesses hold mobile money accounts, the majority are still owned by individuals.9 In addition, a limited number of financial institutions provide a narrow list of services when it comes to the traditional mobile money model.10
In response to SMEs’ needs, many mobile money providers are now expressing the desire to strengthen their value proposition with payments as a platform, which involves a larger number of financial institutions providing a variety of third-party services to mobile money users. Examples of these services include enterprise solutions for SMEs, e-commerce, credit, savings, wealth management, and business insurance.11
So what do mobile money platforms look like? They come in many forms, but the key to their success is an ecosystem of partners that serve end users. Payments-as-a-platform providers enable plug-and-play access to mobile money services through application programming interfaces (APIs) and open, flexible IT solutions.12 They also rely on data and analytics to monitor security of mobile payments, such as fraudulent behavior.13
For example, Mercado Libre is a successful e-commerce company in Latin America that relies on data analytics and provides APIs to third parties offering a variety of customized services to businesses. By partnering with Mercado Libre, for example, lenders can determine the risk related to offering credit to a particular SME by analyzing transactions on the Mercado Libre platform.14
Shopify is another e-commerce company that has adopted a payments-as-a-platform approach and supplements its businesses with other value-added services.15 It offers everything from advertising and marketing to payments management.
In its report, GSMA recommends the transition to a platform-based approach in order to make mobile money transfer a more sustainable venture in today’s economy.16 Such platforms must be adaptable to work on all types of devices, particularly in countries where feature phones—not smartphones—are predominantly used to access mobile money.
As mobile money transfer matures further, providers adopting payments as a platform are emerging to deliver various personalized services to SMEs, especially in emerging and underserved markets.
Elena Malykhina is professional writer who has covered science, technology and business for more than 10 years. Her work has appeared in InformationWeek, Scientific American, Newsday, The Wall Street Journal and Adweek, as well as through the Associated Press.
1. Mobile Money in Emerging Markets: The business Case for Financial Inclusion, McKinsey & Company; https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20Insights/Mobile%20money%20in%20emerging%20markets%20The%20business%20case%20for%20financial%20inclusion/Mobile-money-in-emerging-markets.ashx
2. “Mobile Money Helps Drive Worldwide Growth of Payment Services,” American Express; https://www.americanexpress.com/us/foreign-exchange/articles/worldwide-growth-of-mobile-payment-services
4. 2018 State of the Industry Report on Mobile Money, GSMA; https://www.gsma.com/r/wp-https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20Insights/Mobile%20money%20in%20emerging%20markets%20The%20business%20case%20for%20financial%20inclusion/Mobile-money-in-emerging-markets.ashxcontent/uploads/2019/02/2018-State-of-the-Industry-Report-on-Mobile-Money-1.pdf
5. “Total revenue of global mobile payment market from 2015 to 2019,” Statista; https://www.statista.com/statistics/226530/mobile-payment-transaction-volume-forecast
6. Mobile Money in Emerging Markets: The business Case for Financial Inclusion, McKinsey & Company;
7. “Enterprise Solutions: The next frontier for mobile money,” GSMA; https://www.gsma.com/mobilefordevelopment/programme/mobile-money/enterprise-solutions-next-frontier-mobile-money
8. Global Payments 2018: A Dynamic Industry Continues to Break New Ground, McKinsey & Company; https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20Insights/Global%20payments%20Expansive%20growth%20targeted%20opportunities/Global-payments-map-2018.ashx
9. Payments as a platform: The future of mobile money, GSMA; https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2019/02/Embracing-payments-as-a-platform-for-the-future-of-mobile-money.pdf
11. 2018 State of the Industry Report on Mobile Money, GSMA; https://www.gsma.com/r/wp-content/uploads/2019/02/2018-State-of-the-Industry-Report-on-Mobile-Money-1.pdf
12. “The mobile money industry’s transition to a platform-based business model,” GSMA; https://www.gsma.com/mobilefordevelopment/uncategorized/opportunities-of-a-platform-based-business-model-for-the-mobile-money-industry
13. Payments as a platform: The future of mobile money, GSMA; https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2019/02/Embracing-payments-as-a-platform-for-the-future-of-mobile-money.pdf
15. Global Payments 2018: A Dynamic Industry Continues to Break New Ground, McKinsey & Company; https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20Insights/Global%20payments%20Expansive%20growth%20targeted%20opportunities/Global-payments-map-2018.ashx