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Scaling mobile money

Author

Listed:
  • Mas, Ignacio
  • Radcliffe, Dan

Abstract

Retail payment systems require scale to get off the ground and struggle to grow incrementally. This is due to three factors: (i) Network effects: when it comes to payment systems, the value of joining a network is directly proportional to the number of people already on it; (ii) Chicken-and-egg trap: in order to grow, these systems must aggressively attract both customers and cash-in/cash-out merchants in tandem, otherwise, merchants will stop offering the service due to low transaction revenue and customers will not join the system because they cannot access a convenient outlet; (iii) Trust: customers have to become comfortable going to non-bank retail outlets to meet their cash-in/out needs and initiating transactions through their mobile phones. Until a deployment serves a large number of customers, people will lack trust in the new system, because they know few who can vouch for it. To overcome these barriers, mobile money deployments need to reach a critical mass of customers as quickly as possible, lest they get stuck in the ‘sub-scale trap’. To do this, they need to get three things right. First, they must create enough urgency in customers’ minds to learn about, try and use the service. Second, they must invest heavily in above and below the line marketing to establish top of mind awareness of (and trust in) the service among a large segment of the population. And, third, they must incur considerable customer acquisition costs (beyond marketing and promotion) to ensure that their cash-in/out merchants are adequately incent­ivised to promote the service. Many deployments around the world have potential to scale, but are stuck in the ‘sub-scale trap’, because their promoters either underestimate the investments needed to achieve scale or are reluctant to make these investments because they can point to only one major success — M-PESA in Kenya.

Suggested Citation

  • Mas, Ignacio & Radcliffe, Dan, 2011. "Scaling mobile money," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 5(3), pages 298-315, September.
  • Handle: RePEc:aza:jpss00:y:2011:v:5:i:3:p:298-315
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    Citations

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    Cited by:

    1. Olayinka David-West & Oluwasola Oni & Folajimi Ashiru, 2022. "Diffusion of Innovations: Mobile Money Utility and Financial Inclusion in Nigeria. Insights from Agents and Unbanked Poor End Users," Information Systems Frontiers, Springer, vol. 24(6), pages 1753-1773, December.
    2. Charlton, Diane & Hill, Alexandra E. & Taylor, J. Edward, 2022. "Automation and social impacts: winners and losers," ESA Working Papers 330793, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    3. Melia, Elvis, 2019. "The impact of information and communication technologies on jobs in Africa: a literature review," IDOS Discussion Papers 3/2019, German Institute of Development and Sustainability (IDOS).
    4. Farai Jena, 2015. "Do Migrant Remittances Affect Household Purchases of Physical Investments and Durable Goods? Evidence for Kenya," Working Paper Series 7915, Department of Economics, University of Sussex Business School.
    5. Blumenstock, Joshua & Callen, Mike & Ghani, Tarek & González, Roberto, 2024. "Violence and financial decisions: evidence from mobile money in Afghanistan," LSE Research Online Documents on Economics 117303, London School of Economics and Political Science, LSE Library.
    6. Ivan Rivadeneyra & Daniel D. Suthers & Ruben Juarez, 2022. "Mobile money networks with tax-incentives," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-14, December.
    7. Lepoutre, Jan & Oguntoye, Augustina, 2018. "The (non-)emergence of mobile money systems in Sub-Saharan Africa: A comparative multilevel perspective of Kenya and Nigeria," Technological Forecasting and Social Change, Elsevier, vol. 131(C), pages 262-275.

    More about this item

    Keywords

    mobile money; access to finance; mobile banking; branchless banking; financial inclusion;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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