mobile payment in the mena region

Paritosh Kashyap

Mobile Payment in the MENA Region


All around the globe, mobile phones are becoming an integral part of daily lives.

There are presently 5 Billion mobile phone users across the globe. The role of a

handset is not just restricted to talk. It is being used for diverse purposes- text

messages, photographs, surf, social network, multi media consumption etc.

One of the areas where mobiles have made headway in the recent past is payment.

Usage of mobile devices to transfer money or make purchases is mounting up

across the globe. The emergence of sophisticated smart phones has given it a

further boost. Presently there are 1.08 Billion Smart Phones users around the

world. M-commerce- as it’s commonly known- can be done either by linking the

handset to the bank account or by simply topping up. The later part is more

popular in many of the emerging economies in Asia, Africa & Middle East- regions

marked by high mobile penetration but low penetration of bank accounts.

2001 2009 2011

0

50

100

150

200

250

2.4

69

240

Fig 1: Shows the growth of Mobile-payment or M-Payment over the last ten years

in us $ billions. Source: Inter Bank Financial service infographics.

Types of mobile payment

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Mobile as a point of sale: with the help of a dongle, merchant’s mobile

phones can be used for processing credit card payments.

Contactless payment: works on the NFC technology. NFC, or near field

communication is set of protocols which allow smart phones to communicate

with each other or other devices, with in a very small distance. Credit card

info or some other loyalty program info could be loaded into the mobile

phone – which could be eventually used for making the payment at the point

of sales.

Direct Carrier billing: phone number is shared with the merchant & the

charge appears on the mobile bill. Is costliest among all the existing

solution, but ensures a very high degree of security. It’s used more in selling

digital goods & applications.

Types of M-payment Companies involved

Mobile as a point of

sale

Square, intuit, PayPal,

VeriFone

NFC Isis, Visa pay wave,

Google wallet, Master

Card pay pass

Direct Carrier billing Zong, Boku, Bill to

Mobile, mopay, payfone

Table 1: Shows the list of various companies active across various types of Mobile

payment. Source: Venturebeat.com

Major Players involved in M-Payment

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Payment processing network companies- Companies like Visa, MasterCard

& American Express are digitizing their wallets. They are also collaborating

with device manufacturers to develop NFC enabled mobile payment.

Banks: Banking operations such as balance inquiry, payment & transfer of

money can be done over the mobile phone. The initial form of Mobile

Banking initiated via SMS was known as SMS banking. Advent of better

technologies eventually lead to advance version such as WAP & web based

banking. This further graduated to installation of advanced banking

application on the mobile phone. These applications ensure better user

interface & experience, enhanced security & pre stored user data.

Technology startups- Lot of application developers & technology startups

such as- Square, Zong are emerging with high end technological solution,

designed for the mobile payment landscape. Some of the leading players are

as follows –

a) Card.io: Have developed an application to process credit card payments

through phone. One needs to hold the credit card up to the phone. The

camera in the phone will read the details in the card & authenticate the

payment without involving any typing.

b) Zong: A carrier billing solutions, where the phone number is shared with

the merchant & the charge appears on the mobile bill.

c) Square: Are dongles attached to the merchant’s smart phone our tablet &

can process credit cards.

Network Operators- Operator led money transfer can be an additional

source of income for operators. It can be implemented either by linking the

network with a bank account of credit card or with the help of top ups. The

top ups do not require existing bank accounts.

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Web Companies- Web giants like Google are also entering into the rapidly

evolving market of mobile payments.

Present industry scenario

As discussed, due to the increase in popularity of M-commerce, many big financial

institutions, web companies, payment companies, application developers are

jumping on the bandwagon. Visa has made strategic investment in Square

(mentioned above)- a mobile payment platform. Google has launched “Google

Wallet”- a mobile payment system. The 3 giants in USA- AT&T, Verizon & T-Mobile

have joined hand to incubate ISIS- a mobile payment space, expected to be piloted

in mid 2012. PayPal has acquired mobile payment provider Zong (mentioned

above) for US $ 240 Millions.

Global credit card payment (2010)

Mobile payment (2011)

Mobile Payment (2015, est)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000 6200

240670

Fig 2: shows figures for credit card & mobile payments. Source: Visa 2011 annual

report. Values are in US $ billions.

Mobile Payment in the Mena region

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Middle East & North Africa Region (MENA) is one of the most fertile grounds for

Mobile Payment. It basically has two types of market base-

High end customers residing in Gulf countries & other parts of the

region with sophisticated smart phones & high disposable income.

Unbanked individuals which includes vast population in North Africa &

Levant as well as expat workers living in GCC. They can use mobile

phones for money transfer, remittances & payment. Mobile technology

in convergence with financial institutions & network operators can be a

very effective tool for financial inclusion. Such model has been extremely

successful in Kenya in the form of M-Pesa & requires neither a

sophisticated handset nor a bank account.

Advantage Middle East & North Africa

High mobile penetration: MENA has an overall mobile penetration of around

90%. By the end of 2012, it’s expected to see 250 Million mobile phone

subscriptions. By 2016, additional 100 Million phone subscriptions are

expected to be added. In terms of volume Iran is the biggest market,

followed by Saudi Arabia.

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Jordan

Oman

Morocco

Egypt

Iran

Saudi Arabia

Uae

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

75%

77%

90%

90%

91%

95%

99%

Fig 3: Shows mobile penetration for some of the selected mena countries. (Multiple

handsets have not been considered). Source: Insights Mena

Expat Work Force: In Gulf countries, a large percentage of population

comprises of expat population- large no. of which are part of industrial work

force. Large volume of remittances is send through them. Saudi Arabia itself

witnesses an annual outflow of US$ 100 Billion as remittances. Mobile

payment can be a suitable option for money transfer as well as salary

payment for such workforce- given the fact that many of them do not have

bank accounts.

Comfortable with mobile payment: In MENA region people are credit card

shy. Cash & carry culture predominates over credit cards. Fortunately the

same does not hold true, in case of mobile payment. A research conducted

by Plus 7 on 4000 smart phone users in the region, shows that individuals

intend paying by their mobile phones.

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Oman

Egypt

Saudi Arabia

Uae

Kuwait

Qatar

Bahrain

0% 5% 10% 15% 20% 25% 30% 35% 40%

25%

33%

33%

33%

33%

33%

40%

Fig 4: shows the percentage of respondents for various countries who are

comfortable purchasing products on their phone. Source: Plus 7.

Other than the above mentioned points, there is lot of other factors- conducive for

the growth of Mobile Payments in the MENA region. One of them is the young

demography in the MENA region. A vibrant younger population ensures quick

adoption of newer technologies.

Given the fact that MENA is a fertile ground for Mobile Payment, many companies,

across the globe are entering or planning to enter in to the market. Some of them

are Brick2Click.com, Mi-Pay, Mobibucks, and Gemalto etc. The given list table

shows, some of the companies –

Name Country Type/ services

Mi-pay UAE M-payment

services for -Fin,

utility, network

operator & media

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comp.

M-pay Kuwait Top ups, bill

Mobibucks Uae M-payment

solution provider

to bank &

merchants

Jiring Iran Salary, purchase

Gemalto

(planning

phase)

Pan Middle east Service provider

for bank, network

operator

Table 2: shows some of the M-payment providers in the region. Source: Zawya,

Wamda

The unique socio-economic factors, coupled with the young demographics in the

region makes the MENA region optimum for M-commerce & M-payment to

flourish. Many consumers have jumped directly from cash payments to mobile

payments, by passing the credit card mode. For many merchants, inclusion of a M-

payment system is not just optional but indispensable. But there are some

bottlenecks as well. Not all local banks are well equipped to provide M-Payment

gateway. There is also a very serious dearth of local Arabic applications. A lot more

needs to be done to consolidate MENA as a strong base of M-Payment. In order to

realize this- network operators, technological solution provider, financial

institutions & regulators- all need to work in convergence.

Source: Read Write Web, Infosys.com, Mashable, Digby, IBFS, Zawya,

Wamda, DailyMenadeals, Thenextweb, Zawya, Wamda, Insights MENA,

Venture beat.

Paritosh Kashyap


Paritosh Kashyap

mobile payment in the mena region

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