The Economics of Mobile Banking

The truth of the matter is that mobile banking can only be successful if it makes business sense in the long run, and that means business sense for most (or all) stakeholders. Obviously this is only going to be possible if mobile banking can lead to more efficiencies that can be translated into direct benefits. Fortunately (for people like me working on mobile banking solutions) improvements in efficiencies are easy to demonstrate: replacement of expensive cash systems, improvements in back office processes, removal of the constraints of time and place (meaning people don't have to travel and stand in queues) etc. All of these things lead to direct benefits to participants in the mobile banking eco-system.

The challenge is is two-fold: To demonstrate this to potential investors in mobile banking solutions and to ensure that the ultimate solution does not have an economic barrier to one of the stakeholders:

Demonstrate the benefits
It is important to be able to build suitable business models to demonstrate that a positive business case exists. We at Fundamo have refined our approach to this having worked in many markets and different realities. We have build powerful business modeling tools and have learned that models should take cognisance of the different realities from one country to another. They key is to start with the different sources of revenue to prospective investors. These are typically the following: subscription, transaction fees, treasury benefits, interchange fees, commissions and cost savings. The contribution of each differs significantly from one scenario to another.

Ensure all participants benefit
I have seen other solution providers in this industry making fatal mistakes by deploying solutions with impossible cost barriers. These barriers implies that it is impossible for one of the participants (say for instance the mobile operator) to support the initiative in the long run. In some instances it is assumed that the subscriber would be prepared to pay more for almost the same service. It is therefor important to evaluate the proposed mobile banking solution from the perspective of all participants in the solutions eco-system. Every-one should get a slice of the revenue or benefits, enough so as to entice them to make behaviour changes.