Mobile money, a technological innovation that has brought access to financial services to many who previously lacked them in emerging economies, reached a significant global milestone in 2019: one billion registered mobile money accounts.
Each day, more than $1.9 billion is processed by the mobile money industry, the Global System for Mobile Communications Association (GSMA) reports. There are now 290 mobile money services live in 95 countries.
As the latest GSMA State of the Industry Report on Mobile Money puts it: “More women are using financial services, low-income households are accessing essential utility services and smallholder farmers are getting paid more quickly and conveniently. Meanwhile, millions of migrants and their families are experiencing the life-changing benefits of faster, safer and cheaper international remittances and humanitarian cash assistance is being delivered more thoughtfully to those in crisis situations.”
As the mobile money industry has grown tremendously in just over a decade, so have the number of value-added services offered by mobile network operators to attract consumers—from basic person-to-person (P2P) payments to a variety of options that include paying bills, such as utilities; making person-to-business (P2B) payments; receiving government-to-person (G2P) payments; or using insurance and credit services, among others.
At the same time, mobile technology has evolved from 1G to 2G to 3G to 4G, with exponential growth in capacity and functionality. And to complicate matters further, those different generations of technology co-exist in the market.
The question for mobile network operators that provide mobile money services is whether that growth is sustainable if businesses don’t understand how consumers make their choices.
Along with my colleagues Yan Dong of the University of South Carolina, Sining Song of the University of Tennessee, and Sriram Venkataraman of the University of South Carolina, I set out to discover how consumers choose mobile technologies and mobile money services given different generations of mobile technologies. We also studied how the bundling of different mobile money services and different generations of mobile technologies affect each other in consumer demand.
We examined patterns using a dataset on mobile money services and mobile network operations in the emerging markets compiled from multiple data sources. What we found is that bundling mobile money services with mobile wireless communication services increased the odds that customers would remain with a company even if the company raised the price of its wireless service. That was especially true with 3G technology, which was the current technology during most of the period included in our dataset.
If a company does not bundle mobile money services with its wireless network, customers will jump to another company as soon as the price goes up. It’s hardly surprising that customers are sensitive to price. But our research suggests that price is less of a factor in consumer demand when value-added mobile money services are included.
As we wrote in our study, “Mobile Technology and Financial Service Bundling: A Structural Estimation of Mobile Money,” which is forthcoming in the special issue on FinTech at Information Systems Research: “The findings suggest that [mobile network operators] may avoid depending solely on price competition, and consumers can choose service providers based on service as well as price.”
Our study offers three important managerial implications for the mobile money industry. They are:
Further research is needed in this area, but this much seems clear: By bundling mobile money services with mobile technology, wireless carriers can help raise their bottom line by helping to level the playing field for people living in low-income countries.