Western Union Joins Mobile Remittance Market

Western Union has been so slow to respond to the market impact of mobile-phone based remittances, the company risks losing decades of market leadership in the money transfer business. The recent announcement of a partnership with the GSM Association (GSMA) may be an attempt to catch MasterCard, which announced a similar initiative at the 3GSM conference in February. According to Reuters, Western Union and GSMA will help operators let customers transfer funds from a mobile phone to a Western Union location and vice versa, and enable mobile-to-mobile transfers. A pilot program of the service will be available by mid-2008 and Western Union expects to see a material contribution to revenues in 3-5 years.

Western Union’s slow rollout of a mobile remittance program opened the door for companies like Visa, MasterCard, banks, and local service providers. Mobile-to-mobile money transfer programs are already generating revenue for more nimble players like Smart in the Philippines and Safaricom in Kenya, among others. By 2012, the number of recipients of international remittances could reach 1.5 billion and the size of the remittances market could total US$1 trillion, according to GSMA.

Non-technology companies like Western Union are being drawn into the telecommunications market by the increasing utility of mobile phones. The GSMA, its members and other mobile technology companies will benefit from new partnerships with global non-technology companies like Western Union. They provide valuable assets such as global brand and new services that can now be delivered via mobile technology. Association with a strong brand like Western Union can allay customer fears associated with accessing services and executing transactions via mobile phones. And, the added services present opportunities for additional revenue sources for all involved partners.

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Mobile Banking Lacks a Global High-Tech Leader

Using mobile phones for financial transactions, or m-banking, has seen rapid adoption in countries like the Philippines and Japan. Though the service remains fragmented and country-specific, this week’s CIO magazine points out the growing opportunity for m-banking in Africa.

CIO bases their assertion on survey results from South Africa, where local bank subsidiaries are already processing thousands of mobile transactions each month, and the biggest barrier to wider adoption seems to be a lack of consumer awareness.

Finding signs of m-banking success in South Africa is not surprising. Vital Wave Consulting research reveals that the mobile phone saturation rate among South Africans living at or above subsistence is comparable to the level in European markets. Saturation in South Africa (and Nigeria), together with rapidly increasing mobile penetration rates in other African countries, create a fertile user base. And mobile phone-based financial services are particularly attractive when poor roads and public transportation systems make a trip to the bank an expensive, all-day journey.

There are ample, quantifiable business opportunities in the m-banking value chain for multiple players, including banks, international credit companies, carriers, and software designers. While financial service providers are moving quickly to realize these opportunities, no global technology leader has stepped forward. A multinational high-technology company capable of providing such mobile solutions has much to gain by enabling comprehensive m-banking across emerging markets.

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