MFS leads to greater cross-sec­tor col­lab­o­ra­tion and growth op­por­tu­ni­ties

Financial Mirror (Cyprus) - - FRONT PAGE -

Mo­bile fi­nan­cial ser­vices has im­mense po­ten­tial to grow the reach of fi­nan­cial ser­vices and in­crease the con­ve­nience and ease of use for cus­tomers around the world, par­tic­u­larly in emerg­ing mar­kets. This is ac­cord­ing to the EY re­port: De­cod­ing mo­bile fi­nan­cial ser­vices – In­no­va­tion and col­lab­o­ra­tion to drive growth.

For fi­nan­cial in­sti­tu­tions, mo­bile fi­nan­cial ser­vices can help serve a vast mass mar­ket, which oth­er­wise may be out of reach due to high phys­i­cal in­fra­struc­ture costs, the re­port finds. For telecom­mu­ni­ca­tions providers (tel­cos), it acts as an ad­di­tional rev­enue stream and can help the in­dus­try cross-sell ser­vices.

“The area of mo­bile fi­nan­cial ser­vices is at the tip of a dig­i­tal ice­berg,” SAID Prashant Sing­hal, EY Global Telecom­mu­ni­ca­tions Leader.

“We ex­pect to see the world change the way bank­ing is done in the next two to five years, as both tel­cos and fi­nan­cial in­sti­tu­tions lever­age mo­bile as a plat­form for growth. Given com­ple­men­tary com­pe­ten­cies and in­fra­struc­ture, they are well-po­si­tioned to col­lab­o­rate, bring syn­er­gies and in­no­va­tion to mo­bile fi­nan­cial ser­vices and meet chang­ing cus­tomer de­mands.”

With the num­ber of fi­nan­cial ser­vices de­vel­op­ing mo­bile ap­pli­ca­tions on the rise, the im­pact is be­ing seen right across the var­i­ous cat­e­gories of mo­bile fi­nan­cial ser­vices. Ac­cord­ing to the re­port, the cat­e­gory of mo­bile pay­ments has seen the high­est rate of adop­tion so far; how­ever, other ser­vice ar­eas have also be­gun to gather steam.

Mo­bile credit ser­vices, wit­nessed a big in­crease in the num­ber of ser­vices in 2014 and, ac­cord­ing to the re­port, many of these new ser­vice launches are driven by strate­gic part­ner­ships between fi­nan­cial in­sti­tu­tions and tel­cos.

Mo­bile mi­cro­fi­nance is also gain­ing trac­tion, as both fi­nan­cial in­sti­tu­tions and non-banks en­ter the fray to of­fer small-scale credit ser­vices.

Mo­bile mi­cro­fi­nanc­ing al­lows fi­nan­cial in­sti­tu­tions to reach the bot­tom of the in­come pyra­mid, in­creas­ing their client base. For new en­trants, it’s open­ing up av­enues such as crowd­fund­ing, the re­port finds.

While growth in new mo­bile in­sur­ance ser­vices is cre­at­ing sig­nif­i­cant op­por­tu­nity for cross-sec­tor col­lab­o­ra­tion in this do­main — ac­cord­ing to the re­port a ma­jor­ity of these ser­vices are be­ing mar­keted by tel­cos in part­ner­ship with in­sur­ance com­pa­nies.

Glob­ally, among the peo­ple who

still lack ac­cess to the fi­nan­cial sys­tem, ap­prox­i­mately 620 mln live in coun­tries that have in­tro­duced reg­u­la­tory frame­works or en­cour­age non­bank en­ti­ties to par­tic­i­pate in the fi­nan­cial ser­vices do­main. Most of these coun­tries have a con­sid­er­able gap in their lev­els of mo­bile pen­e­tra­tion and in­clu­sion in the fi­nan­cial sys­tem. EY anal­y­sis of the po­ten­tial mar­ket in­di­cates that ap­prox­i­mately 434 mln of this “un­banked” pop­u­la­tion can be served by mo­bile fi­nan­cial ser­vices in the near term.

In­dia, the Philip­pines, Demo­cratic Repub­lic of Congo, Colom­bia and Tan­za­nia top the list of coun­tries with the high­est num­ber of un­banked peo­ple that have the po­ten­tial to be served by mo­bile fi­nan­cial ser­vices, ac­cord­ing to the re­port.

While in­no­va­tion in MFS has led to bet­ter user con­ve­nience and in­creas­ing up­take of new dig­i­tal ser­vices, it has also brought new pri­vacy and se­cu­rity chal­lenges to the sur­face. Re­cent ex­am­ples of cy­ber at­tacks re­flect the ex­tent of dam­age that can be caused to or­gan­i­sa­tions, from sub­stan­tial fi­nan­cial dam­age to a dent in rep­u­ta­tion and a share price drop, high­lights the re­port. Com­pa­nies may not only lose their cus­tomer base, but also be af­fected by reg­u­la­tory levies for non­com­pli­ance to pro­tect cus­tomer data.

“In view of chang­ing con­sumer pref­er­ences and needs, or­ga­ni­za­tions need to be able to cre­ate a bal­ance between the user con­ve­nience and se­cu­rity as­pects of mo­bile fi­nan­cial ser­vices. To this end, se­cu­rity mea­sures such as to­keni­sa­tion and bio­met­ric au­then­ti­ca­tion are likely to have a strong im­pact on the dig­i­tal pay­ment in­dus­try. Ro­bust know-your­cus­tomer, anti-money laun­der­ing and trans­ac­tion au­then­ti­ca­tion pro­ce­dures will re­main a key fo­cus to com­bat cy­ber threats,” said Sing­hal.

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