If only 1 in 10,000 merchants accepted your debit card, would you still carry it, or would you ditch it for cash? The answer probably feels a little obvious: I’d ditch it for cash! That’s because the payments industry represents a “two-sided market”. Someone needs to issue payment instruments to individual consumers and someone needs to acquire businesses through mobile merchant accounts to accept those payments. The value of one side of the market is directly related to the value of the other.
The above statement holds true across geographies and income brackets, whether we’re talking about Apple Pay in the United States or EVC Plus in Somalia. That being said, how might the average Tanzanian pay for goods and services if only 1 in 10,000 merchants accepted Airtel Money, Vodacom M-Pesa, Tigo Pesa, and Zantel Ezy Pesa (the local mobile money services)? You guessed it… cash!
Why Mobile Merchant Accounts Need to Grow
And that’s exactly the issue: There are hundreds of millions of individual mobile money accounts worldwide, but only a few hundred thousand mobile merchant accounts. As a result, many mobile money services struggle to provide daily relevance to their customers and, in turn, see them immediately withdraw 100% of whatever funds they receive.
How do we diminish the use of cash? Mobile money providers – and electronic payment providers generally – should begin thinking of merchants, not as a second act to be rolled out years after launch, but as part and parcel of their core offering from day one. Mobile merchant accounts increase the utility of an individual’s mobile money account by giving them more places to use it.
This increases the likelihood that consumers will store value on their accounts. Further, if providers make it easier to pay with mobile money than to withdraw value (e.g. charging a commission to withdraw funds as opposed to paying merchants for free), then people might begin using their accounts multiple times per day. The opportunity to enable electronic payments at the base of the pyramid (BOP) is massive. Merchants stand at the center of that opportunity if provided mobile merchant accounts.
Mobile Money and Merchant Solutions
The development of inclusive financial services is not a solo act. With the success of services like M-Pesa, there is a need for a larger community of actors to realize the broad potential of financial services. Merchants require services that will specifically address their needs, and KopoKopo is helping to make this a reality.
Like an orchestra, where many instruments together make great music, coordinating electronic payments and banking is similar for mobile merchant accounts. Our developed market solutions do that, but the instruments are different, and the number of sections are all from one industry. This orchestra, assembling around the world, has modern instruments and greater contributor diversity.
Looking at the analogy this way, we’ll serve more peoples’ financial needs. Complicated? Yes. But accomplishing these goals will happen, as different companies, technologies, and solutions emerge in the marketplace.