If telecommunications operators have their way slow-moving bank queues will soon be a thing of the past and we could all be checking balances and collecting salaries through our mobile phones.
Mobile remittances next on the agenda for UAE telcos
Nobody said setting up a mobile remittance service would be easy. But as a means of retaining customers and exploring new revenue opportunities, such services are considered a major opportunity for Middle East telecommunications operators.
Etisalat, Vodafone Qatar, Zain and Qatar Telecom (Qtel) have all developed mobile remittance programmes as a way for their customers to avoid lengthy queues at exchange bureaux by sending money back home through their phones.
The potential to move into the US$25 billion (Dh91.82bn) remittance market is easy to spot. In the UAE, about $6bn is transferred to India annually, according to the World Bank, providing a source of income to rural communities.
The organisation adds that the global remittance industry was expected to grow by up to 7.1 per cent in the next few years, following a 6 per cent decline last year.
Analysts believe sending remittances via mobile phones and collecting transaction fees will be the most successful financial service Middle Eastern telecoms operators will provide. Rashed al Abbar, the director of mobile commerce services for Etisalat, says he would be happy if the operator could obtain 10 per cent of the market.
"In mobile remittance you can't capture market share immediately. We're doing a new style of sending money so I don't think adoption rates would be very high at the beginning."
Along with the standard fee all UAE exchange houses have to charge customers when they send money abroad - for India the rate is Dh13 but it is different for each country - users of Etisalat's mobile remittance service will also be offered competitive currency rates as well.
"There's a significant value for telecoms operators to get involved with mobile remittance," says Aiaze Mitha, the founding partner of Amarante Consulting. "International remittance is one of the mobile financial services that has the highest margin level.
"If operators execute it right and ship the people from traditional channels, there is a direct benefit to the bottom line."
Etisalat plans to roll out its long-awaited mobile remittance service by about the end of the year, while Vodafone Qatar has successfully completed a pilot programme in which company workers sent funds back to the Philippines.
Qtel has also announced it will be launching an mobile remittance service in February but is yet to reveal detailed plans.
To illustrate the scope of expansion in the remittance sector, Western Union has partnered with Orascom Telecom and Zain to offer a mobile money transfer service across the Middle East and Africa in the near future.
But there are several challenges in setting up a mobile remittance system. The main one lies with financial regulators and the lack of rules associated with having a mobile device used as a "payment gateway".
"The regulators in the region do not allow for [operators] to launch financial services unless they are partnered with a bank," says Mr Mitha.
"Banks will have to be involved and they will have to be the dominant player in the relationship. If you look at Kenya, the banking penetration is very limited, so a [mobile remittance service] network like [Kenya's] M-Pesa has a wider distribution channel and agents that make it more successful."
There is also the challenge of addressing the needs of different country's central banks, which have their own sets of financial laws and regulations, says Greg Reeve, the head of mobile payments at Vodafone.
"Every market you go to, there's a slightly different landscape in terms of regulation, culture and expectation and you have to work inside that," says Mr Reeve.
The lack of regulations across the MENA region and the Asia subcontinent is causing operators problems already.
"That's why we cannot go mobile-to-mobile yet. But if that happens, we may think of a better service to our users in India," says Mr al Abbar.
New services will become increasingly important for the telecoms industry. As revenues associated with voice calls decline through the introduction of new technologies such as internet-based phone calling, or voice over internet protocol, operators know they have to start offering more than just the regular bag of tricks to keep their customers happy.
"We know that customers want products like [mobile remittance services] because experience shows that if people use their phones to move money around, they'll use their mobiles to make calls and be less likely to leave us," says Mr Reeve.
In the Middle East, banking has a wider footprint than in Africa, with more cash machines and branches, giving customers easier access to their money.
"The size of the markets are already defined," says Mr Mitha. "The segments that are already targeted will lead to 'mobile wallets'. [They will become] mini-bank accounts for workers to [have salaries] paid into and [workers will] be able to remit to their respective countries and families abroad."
Mobile banking is considered to be an integral part of the economy in several countries around the world such as Kenya. Michael Joseph, the outgoing chief executive of Safaricom, a joint venture between Vodafone and Telkom Kenya, says retail banking will be replaced entirely by mobile devices within 10 years. Mr Joseph is set to retire next month.
The fortunes of Safaricom are heavily tied to its M-Pesa service that allows Kenyans to use their mobiles to withdraw money from cash machines, pay for groceries and even sign up for life insurance. But its success is limited by the fact that fewer than 15 per cent of Kenyans have savings accounts.
In the Middle East, things are rather different.
"All the initiatives you see in the UAE, Qatar and Kuwait are trying to target both a mature market in terms of convenience with mobile payments and address the larger market with workers to enable them to send money home to their respective families," says Mr Mitha.
"Basically, anywhere you see a queue, we're looking to improve," says Mr Reeve. "You queue to get your salary and you queue to send your money home."