MoneyOnMobile is a mobile operator agnostic alternative to M-Pesa for the Unbanked and Underbanked

single shampoo

MoneyOnMobile is very low profile given how much traction they have. With a retail outlet distribution channel in India of 335,000 shops, 200 million unique phone numbers and more than 1 million domestic money transfer transactions processed in August 2017 alone, MoneyOnMobil should be top of mind for anybody tracking mobile money innovation.

Yet, although I keep a close eye on this space, I only heard about them a couple of weeks ago. Maybe we all instinctively gravitate towards something that resonates with our Western lifestyle. We can personally relate to the emerging middle class of India and so we can relate to ventures such as Paytm or the recently launched Tez from Google that serve that market.

It is harder to relate to the needs of the Unbanked and Underbanked and that is the market served by MoneyOnMobile and M-Pesa

As soon as I came across MoneyOnMobile,  I wrote about them here.

MoneyOnMobile has got the tag “Square of India”, partly because Jim McKelvey, a cofounder at Square is on the board of MoneyOnMobile. That positioning works well because of the connection through Jim and because Jim tells the story so well in this short video:

However this is a Western centric view and the analogy makes one think of credit card processing for small retailers. The analogy for MoneyOnMobile is closer to M-Pesa than Square and that is the analogy described in this post.

Disclosure: MoneyOnMobile is a client of Daily Fintech Advisers. I am not a financial adviser, please do your own diligence before investing.

The journey of discovery about MoneyOnMobile

When I tell people who know about mobile money in India about MoneyOnMobile, the journey of discovery goes like this:

“That sounds like Paytm.”

“Not really, Paytm and Mobikwik and Tez and many other ventures go after the emerging middle class of India. It is a great market of about 300 million people and Western models and bank/credit card rails translate reasonably well to that market. MoneyOnMobile in contrast is serving the Unbanked and Underbanked of India, a market closer to 850 million people. What is remarkable is that MoneyOnMobile have found a way to profitably serve that population which you could never do with Western bank/credit card payment rails”.

“OK, so it is more like M-Pesa”.

“Exactly. With one crucial difference. MoneyOnMobile is an open platform that is mobile operator agnostic”.

In this post I will elaborate on that thesis for those who need some more background explanation.

Although I did not know about MoneyOnMobile, I did write a post nearly 3 years ago in November 2014 basically saying that the world needs something like an open alternative to M-Pesa. When I wrote that I did not know about MoneyOnMobile, I just thought that something like that should exist. So when I came across MoneyOnMobile a few weeks ago I immediately saw how game-changing it was.

Why M-Pesa is so game-changing 

M-Pesa started in Kenya because people were trading their mobile phone minutes; in a world without bank accounts or landlines, these mobile minutes were vital to life and were a form of currency. The roadside stands (a kind of decentralized Walmart) became the bank where you could convert mobile minutes into Kenyan fiat currency and/or pay bills. Bankers lobbied the Kenyan government to kill it, but a study found it to be secure. Anecdotally, the Kenyan President wanted to pay his gardener and when he saw how easy it was to do this with M-Pesa he was sold.

The traction data from M-Pesa in Kenya is stunning. Read this article from SC College of Business at Cornell with this data:

“Today, Kenya is a leading actor in the mobile money sector: approximately more than 26 million subscribe to the network with over 127.000 agents. Between 31% and 50% of Kenya’s GDP is estimated to flow through this network, as over 50% of the population continue to be without a bank account and to rely on platforms such as M-Pesa.”

But there is one big problem with M-Pesa

M-Pesa is controlled by Vodafone. There is nothing wrong with Vodafone. They are a good mobile phone operator. However an open, mobile phone operator agnostic version of M-Pesa would be better. This is particularly true in India where there is tough competition from many mobile phone operators driving down prices (which is critical to the Digital India agenda of the Indian Government).

The other analogy that people reach for when they first come across MoneyOnMobile is Bitcoin. This is where it is useful to compare M-Pesa and Bitcoin. They are like mirror images of each other:

M-pesa bitcoin

If you replace M-Pesa with MoneyOnMobile in that comparison, the power of their model emerges because it is like M-Pesa, except that it is mobile phone operator agnostic.

Why fight over the Overbanked when the Underbanked are so hungry for service?

Disruption happens through outsiders who are not being served by the current financial system. Bankers, fighting over the overbanked in the West, are eying the 70% of the world that is unbanked. One of the simplest trends to ride in the 21st century is the rise of billions from subsistence farming into the consumer society. Each of those billions spends very little but in aggregate the market is big and when a country reaches the tipping point when a real middle class emerges, it becomes a very big market – witness China and more recently India and many countries in Africa today.

The reason why – price

Going after the blue ocean Underbanked market is so obvious. Why is not everybody laser focussed on this? The reason is simple. It is hard to serve the Underbanked profitably.

It is hard, but not impossible.

CK Prahalad popularised the idea of this demographic as a profitable consumer base in his 2004 book The Fortune at the Bottom of the Pyramid.

The iconic Bottom Of Pyramid success story was the single serving of shampoo sold by Hindustan Unilever Limited (HUL) in India, described well in this HBR article:

“Years ago, HUL pioneered the use of low-cost, single-use packets to make its products affordable for lower-income consumers who often shop daily for necessities (think of a ketchup packet, but filled with soap). Now these packets are ubiquitous in developing countries around the world. HUL itself sells 27 billion sachets a year.”

It should be easy to do this digitally where the marginal cost is zero; but it is impossible using bank/credit card payment rails. MoneyOnMobile has figured out how to make payments profitable even if the transaction is 1 Rupee (about US$0.015) – just like M-Pesa. Unlike M-Pesa, they are mobile phone operator agnostic.

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Bernard Lunn is a Fintech deal-maker, author, investor and thought-leader.

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