Mobile Wallet

Time to look beyond mobile money

Published on May 4th, 2016

Mobile money has been a darling of the fintech scene for some time, but it’s had its day. The industry needs to think bigger and look beyond the obvious short-term opportunities in mobile money to what an emergent market in Africa really needs. We sat down with managing director of World Wide Worx, Arthur Goldstuck, to explore the fintech landscape and find the opportunities that lie beyond mobilising payments.

According to Goldstuck African markets are teeming with possibility, but unlocking value requires a careful examination of what’s really happening on the ground. Mobile money is a fruitful area in terms of ideas, but many of the current solutions are struggling to find a market fit.

“Mobile money is a sector that is heavily populated with solutions in search of a problem, although still only skimming the surface in many regions. With Apple and Samsung solving some of the harder parts of the problem of access and seamlessness, it's almost game over,” he explains.

You may think that the next big thing beyond mobile money with its impending consolidation might lie in blockchain technology, but Goldstuck says this is uncertain.

“Most banks are exploring blockchain, but very few understand it. Outside banks and bitcoin businesses, no one understands it. There could be massive opportunity if it is explored with business applications in mind. However, a large part of the opportunity lies in communicating both the technology and its benefits with clarity. If you could explain blockchain the way you'd explain instant messaging, it could take root. And if you integrate blockchain into instant messaging, it could take off,” he says.

Whether it’s in the blockchain or elsewhere, Goldstuck believes that the industry could also benefit from some humility in truly understanding customer needs.

“Solving problems rather than foisting solutions,” he says.

“The same product sometimes does both. M-Pesa solved a massive problem in Kenya, but came to South Africa as a solution in search of a problem that didn't exist, namely exclusion from financial infrastructure. South Africa is probably the most financially inclusive country in the developing world.”

The reasons M-Pesa failed in South Africa - and elsewhere on the continent - are multitude, but it comes down to a misunderstanding of the market.

“We [World Wide Worx] identified 13 success factors that were present for M-Pesa in Kenya that were not part of the South African landscape,” says Goldstuck.

“The key is to understand both the dynamics and the needs of the market. It's the start-up cliche question: What problem are you trying to solve that will have a real impact on a large potential user or customer base?”

As such, Goldstuck is most excited by startups focused on real needs in African markets.

“There are many [big problems to be solved], especially in the area of transport. We may see the likes of Uber and Lyft as ride sharing apps, but they are in reality a new form of fintech service. Their transactional capabilities are as revolutionary as their disruptive impact, but that happens under the hood, so most people don't see this new engine of the digital economy ticking over,” he says.

Goldstuck adds that the proliferation of fintech startups globally makes it feel at times like entrepreneurs have “ideas dartboards” for new companies that aim to do just about anything you can imagine. While many of them are just offering minor improvements to existing systems, others are really shifting the needle and African startups could learn from where their international counterparts are finding traction.

“A startup like Cape Town's WhereIsMyTransport aims to solve the public transport problem for the low-income masses in the same way Uber solves it for the salaried elite. New Zealand's Xero aims to bring elegant online cloud-based accounting software to the smallest of small businesses. In particular, it addresses collaboration needs that are absent in most bigger systems,” says Goldstuck.

“From Israel, Warranteer saves and manages product warranties for individuals in the cloud, and links them to complementary services; that's a much bigger problem than people imagine, but is invisible in the consumer economy, and GetStocks is like a Facebook of share investing, giving access to global markets as well as individual traders' stock-picking activity, allowing others to learn from them and even copy their trades.”

In the immediate future, Goldstuck imagines the real disruption coming from areas that seem less exciting than, for example, the blockchain, but already demonstrating massive impact.

“The marriage of big data with big analytics - and the ability to make both big and small decisions quickly and with superior customer experience in mind - will make a far bigger difference,” he says.

“On a pure business level, the ability of a bank like Capitec to become a major challenger in a short time through effective targeting of a lower-income market with a lower-cost service and massively improved efficiencies is likely to become a case study in banking disruption. It is very possible it will be the biggest customer-carrying bank in South Africa by 2021.”

Another area of potential disruption is in identity management.

“Vinny Lingham's Civic [is] a great entrant into that market from South Africa. Because he's a local kid made good, most South Africans think it is the next big thing, but in fact it enters a crowded market, and is not well enough differentiated. Google ‘identity protection’ and you start to get a picture of an environment lacking in standards and scale. If Vinny can fix that problem, this could be bigger than any of his previous startups. However, it will probably take industry-wide initiatives to solve, and blockchain lies waiting for the industry to embrace it in this pursuit.”

The next-generation of disruption looks beyond money into the other value contracts for consumers and businesses, identity verification being just one. Property transfer, insurance and loans are other areas where technologies like blockchain offer a new way of recording and transferring. The future belongs to those solving the more difficult problems than how to make money mobile.