All what you need to know about Arabic m-money

e-Commerce initiatives are growing in popularity. While mobile banking is a good way to service the expatriate community in the UAE and the Middle East, it also gives the vital access to money services for the unbanked population in developing countries.

Etisalat announced its mobile money remittance service at the end of March, giving its subscribers the means to transfer money home at the touch of a button. It forms part of the UAE operator's e-commerce ecosystem, which started back in 1999 when it first launched its lauded e-payment platform.

The operator has certainly made a case for offering such services in the UAE. The country's high mobile penetration - often cited as anywhere between 100-150% - along with the relative number of ATM machines and bank branches leads logically to mobile banking.

The UAE boasts roughly 500,000 bank branches and 1.4 million ATMs. This is nothing compared to the number of people armed with a mobile device.

"This is like one-to-one banking," says Abdulla Hashim, vice president, marketing, Etisalat. "The mobile penetration in the UAE is among the highest in the world, exceeding 6.4 million users. There is a huge gap in terms of ratio between the number of mobile users to banks and ATMs.

Another factor is that the UAE has a huge expatriate community, primarily from the subcontinent. This makes the country one of the top money-sending nations in the world.

From studies back in 2005 from the International Chamber of Commerce, more than US$7 billion was transferred out of the UAE. The World Bank estimates that 50% of the money is transferred through unofficial channels. We've seen the market is fragmented and there are a number of aggregate channels," Hashim adds.

The service is made possible through a number of key partnerships, in the telco, government and banking spaces. Etisalat is working in association with Mashreq Bank (in the UAE), HSBC India and Indian operator Idea Cellular to facilitate the service.

Tata Communications will act as an intermediary between Etisalat and Idea Cellular.

The current phase allows transfers to over 40,000 Indian branches, but with talks ongoing, this is likely to be expanded to more countries and more banks.

"The first thing is enabling money transfers by using a mobile handset," Hashim explains. "It is with you everywhere, and this is an important value proposition by giving convenience to the customer.

Anytime you want to transfer the money, you have access. It offers the customer a peace of mind because it's convenient and it's also secure.

Users in the UAE are tech-savvy and demand innovative services. This is also true for much of the Middle East, where young, growing populations are increasingly demanding more and more high-tech services and innovations.

However, to successfully reach out to the mass market, the service needs to be convenient to use. Etisalat is making use of USSD technology, available on all mobile phones, as the primary access method. Mobile users need only to dial #123# before being brought to a menu screen.

It's a very simplistic, menu-driven approach. It's not technically-savvy, you don't need any major downloads on your mobile phones. All mobiles on the market support USSD," says Amol Natu, manager, product marketing eBusiness, Etisalat.

In addition, mobile banking is a cost effective alternative to money transfers. Currently, microtransactions aren't an option via traditional banking, given the costs involved. While Etisalat has yet to confirm a pricing structure, the cost of the transfer will depend on the amount of money being sent.

"Our remittance service is intended for both micro transactions and macro transactions. In the current landscape, sending small transactions is not economically viable between of the cost associated with that. One of the major value additions we're bringing in is channeling macro transactions as well as micro transactions," Natu explains.

There are, however, concerns. According to the McAfee Mobile Security Report 2008, almost three in four mobile users are concerned about the security of their mobile devices.

While they feel safe in using traditional voice services, this confidence deteriorates when using new applications, particularly when money is involved.

This means operators need to work harder to earn customers' trust, by implementing stringent security protocols. In addition, subscribers need to be educated in how to use such services. Etisalat has also staggered its m-commerce services over a lengthy time, allowing customers to feel comfortable with performing a variety of mobile phone based payments.

Banking the unbanked

The indications are that countries are already finding joy in mobile banking services. Since it was launched in March 2007, Vodafone's M-PESA service has proven to be a winner in Kenya, where it is offered by Safaricom.

Amid the ongoing furore surrounding Safaricom's impending IPO, M-PESA is a bright point for the operator, with over 1.6 million subscribers.

Such is the success that Vodacom is the most recent operator to announce plans to launch M-PESA in Tanzania. But rather than servicing expatriates, the real driver is the lack of banking facilities.

"M-PESA, meaning ‘M' for mobile and ‘Pesa' for money in Swahili, is one of the world's first cellphone-to-cellphone PESA transfer services for people who do not have access to conventional banks," says Dietlof Mare, managing director, Vodacom Tanzania.

"Of the 21 million Tanzanians over the age of 16, only 1.6 million currently have a bank account, but more than 7.5 million Tanzanians have a cellphone or have access to a cellphone," he adds.

The service was also rolled out to Afghanistan by local operator Roshan in February. M-Paisa acts as a vehicle for microfinance institutions' loan payments, and it also boasts a number of additional business-to-business applications.

Consumer transactions are also available, and Roshan's retail outlets serve as transaction points for the withdrawal and deposit of money.

"The benefits of mobile money transfer are particularly relevant in a developing market such as Afghanistan, where the large majority of the population does not have access to traditional banking services," says Karim Khoja, CEO, Roshan.

"The challenge of providing timely and reliable payments in a country requiring major infrastructure development is significant. M-Paisa, with Roshan's mobile network, will provide the backbone to enable such funds to be transferred reliably which will provide an important vehicle for economic regeneration," he adds.

Roshan is taking things a little further too; the operator and Vodafone are trialling interactive voice recognition services, which will be launched later this year. This goes some way to addressing the high illiteracy rates in Afghanistan.

Egypt's Orascom Telecom Holdings was next to jump on the bandwagon. It announced plans to create a new subsidiary to offer mobile banking services to its 70 million customers across seven countries.

As in the case of Etisalat, Orascom is leveraging its strong customer base to offer a number of value-added services in the hope of propping up revenues.

The social and economic impact of such a service is enormous. Not only does it reduce dependence on financial institutions, it gives rural and illiterate communities the means to manage their money.

As m-commerce evolves, several more mobile applications could come to fruition. One example is Near Field Communications (NFC), where handsets act as a credit card when in proximity to a cashier or payment counter. But there are many more possibilities earmarked for this coming year, including mobile parking and ticketing.