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Banks Will Soon Be Competing With Mobile Operators in the GCC – Who Will Dominate Mobile Payments?

With several emerging countries rapidly adopting mobile phone banking, experts in the Gulf region are speculating whether traditional banking is on the verge of a major transformation. During a meeting of industry leaders in Dubai this week, there was agreement that mobile payments would continue to be provided by banks in developed countries while mobile operators would begin to dominate in emerging markets. However, with their unique combination of wealthy, over serviced elites and poor, unbanked laborers, there is far less consensus on what will become the norm in the Gulf States.

Banks Will Soon Be Competing With Mobile Operators in the GCC - Who Will Dominate Mobile Payments? 1

For banks and mobile operators, the stakes are high – and both are rapidly signing deals with solution providers and trying to gain footholds in the market. Banks are excited by the prospect of serving large numbers of customers through a very low-cost channel. At the same time, mobile operators are eager to leverage their strong brands and control of the SIM card in every phone to provide a new service.

The dynamics are very different depending on whether you look at the domestic person-to-person transfers or cross-border payments. Most workers don’t need to go to the potential cost and hassle of loading their salary into an e-wallet for domestic payments purposes. Most of their spending is on consumer goods and is consumed close to where they live. Cross-border payments are another issue altogether. I doubt whether the worker who goes to the exchange bureau once or twice a month to send money home is desperate to be able to send money directly from his phone…especially if he needs to load the cash by going to visit an agent first.

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The Gulf presents a very different situation to Kenya, which is the leading market for mobile payments. Over 8 million of the leading mobile operator’s customers have signed up for a service called Mpesa in less than three years (1 in 3 adults by some estimates) and make regular payments to relatives up-country. There are difficulties of achieving the same results in the cross-border market: For international remittances.

Few mobile network operators have a commanding market share at both ends of a remittance corridor. Once operators need to work across different networks and systems, the costs, risks, and complexity of offering the solution and convincing customers to use it increase dramatically. Many countries in the region are in a similar situation.

Where the real challenge may be to provide low-cost payroll cards to workers, then linking the card to a remittance platform that operates on the phone, this is a game that everyone can play – including the exchange houses, which offer an increasingly sophisticated range of products. However, once every phone comes with a money transfer application pre-loaded (which may soon be the case given the recent deal between Nokia and Obopay), then things could begin to change in the GCC.

Copyright 2009 Genesis Analytics, PTY Ltd.

No portion of this article can be reproduced without express written permission from the copyright holder. Richard Ketley is a director of Genesis Analytics and has been head of the banking and access to financial services practices since 2001. Richard is widely recognized and consulted as a leading expert on banking in Africa.

He has worked extensively with banking and financial sector clients throughout Africa and the Middle East. Genesis Analytics is a specialist banking and payment strategy firm with operations in the UAE and South Africa. Richard was a speaker at the Mobile Money Transfer Conference held in Dubai from 26-28 October 2009. For more information, visit

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