For the past two decades, the relationship between financial institutions and their customers has transformed at a steady pace. Gone are the days that forced customers to visit their local branch to request services. Now, there is more dependence on electronic channels, such as internet banking and mobile applications.
According to a recent study by MasterCard, digital payments in the Middle East will increase rapidly, with over 70% of respondents in the survey confirming that they are willing to use mobile phones for payments.
However, some countries, such as Egypt, are playing catch-up, as most people still visit local branches regularly due to Central Bank regulations, illiteracy, or lack of trust in electronic means. To make matters even worse, the high percentage of unbanked and underbanked banked among the population means that cash is still the main way of transacting and doing business.
After COVID-19, Central Banks across MENA realized the severity of the situation, especially where a curfew could result in a financial services lockdown. They tried to think of solutions that would allow more freedom for customers to transact without visiting bank branches, while at the same time, getting to the unbanked and including them into the financial ecosystem through an easy-to-use and relatively simple way to enroll.
The main solution that they figured would achieve the most success is the Mobile Wallet.
Why are Mobile Wallets the new way of banking in MENA?
KYC regulations are quite simple in MENA and any person with a mobile phone will be able to sign for a mobile wallet (mobile phone penetration rates in MENA are over 90%).
Even customers without smartphones will be able to use the system through a USSD interface.
The mobile wallet can relatively quickly provide a way for customers to perform most of his/her banking needs without visiting the branch.
It can be a launch pad for adding new services, which generate revenue for the bank, and at the same time provide convenience for the customer, such as paying bills, engaging in ecommerce, or even buying insurance.
Launching digital wallets – the main drivers for MENA banks
COVID-19 has been deemed a lifestyle changer. One of the most important aspects that will transform itself is the relationship between the bank and its customers. Even beyond COVID-19, there are a couple of other drivers that will force banks across MENA to get into this business without any delay.
- Several relatively small Fintechs are stepping into the market and can pose a long-term threat if banks do not act quickly.
- Telecom operators have already launched easy-to-use and comprehensive e-wallets. With their huge reach they currently dominate the market, and moving forward might end up posing a similar threat to what M-Pesa’s business is to banks in Kenya.
- Countries around the MENA region have a relatively high percentage of unbanked or underbanked, and an e-wallet will be a great way to reduce this percentage and reach out to this market with relatively low costs.
- Mobile wallets will provide a revenue-generation stream, and will attract more customers to sign up with the bank.
- It is a beneficial way to spread to hard-to-reach areas without opening new branches, and getting ahold of customers with low portfolios, that might not be interesting enough for banks as regular customers.
How does a great Mobile Wallet Platform look like?
How do you choose and recognize a suitable mobile wallet platform with all the offerings out there on the market?
Stay away from Custom or Internal Development
Some banks will resort to their internal development team for an m-wallet implementation, or even outsource development to an external consultant. This will create a rigid implementation, taking a lot of time, and will not provide the flexibility needed for a fast-paced market.
Is one-size-fits-all the right solution for me?
Many banks could go for a one-size-fits-all kind of solution, but this will be a major problem going down the road, since there will be no differentiation between different bank offerings. Moreover, every bank has a specific set of services and customers, and it should consider whether it will be a waste of time to offer the same e-wallet solution that other banks are offering.
So, what should a bank be looking for?
The holy grail of m-wallet solutions would be the best of both worlds - a platform that is ready with all the common components and has a fast time to market, and at the same time, provides the flexibility to customize and add features according to the bank’s specific requirements. The system should also be future-proof and provide a launch pad for adding more services, features, and functionality according to the changing market conditions, changing demands, and more importantly changing regulations.
What are the most important features of an M-Wallet offering?
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A well-thought-out, easy-to-use interface is one of the most important aspects of your mobile wallet offering, since it will increase your adoption rate, and will not drive your customers away. As much as possible, you should decrease the number of steps for the customer to perform any of the services, and utilize whatever features are available in their device, such as fingerprint scanner, or facial recognition.
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It should provide a One-Stop-Shop for all services a customer may need, this way it might end up being the only, or the main application the customer uses for his daily banking and payment needs.
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It should constantly provide something new, be this a new feature, service or even a promotion to attract customers, not only to use the wallet, but also to invite their friends and family to do so.
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Rewarding your Customers for using the service or inviting your friends to use it is key for increasing adoption rates. The more your customers, or even external users utilize the platform, the more revenue you will generate, and the more costs you will be saving.
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Providing features that separate you from other banks - every bank is different and has specific services and offerings for specific target customer segments. The e-wallet needs to follow the same approach.
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The Agility and Flexibility of the platform are very important, as you always need to stay ahead of the competition, and adjust to the ever-changing regulations quickly and with minimum interruptions to your service.
Endless Opportunities ahead
With all that has been said so far, the Mobile Wallet is a promising new way of promoting financial inclusion, which is currently supported and encouraged heavily by all Central Banks throughout the MENA region. Digital wallets provide a promise for the banks to:
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Generate more revenue
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Attract more customers
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Reduce costs
Therefore, choosing the right platform is key to the success of any bank in the future, not just when competing with other banks, but also when positioning the bank against Telecom operators, Fintechs and Digital Banks.
From my experience, which spans over more than two decades dealing with end customers and financial institutions, I realize that bank-driven mobile wallets still have a very slow adoption rate in MENA. Choosing the right platform is key to the success of a mobile wallet initiative in order to generate greater value for both financial institutions and their customers.
Once realized though, the potential of mobile wallets will spread beyond traditional financial services to unlock opportunities, such as marketplaces for cross-selling and upselling, creating better and more personalized offerings using AI, and many more. Client retention initiatives through loyalty apps and points will also be reshaped through the power of technology stemming from the right platform.
The journey to providing quality digital financial services is a long one, and only the banks that are able to see the “big picture”, focusing on the lifetime value of their customers will be triumphant in the years to come.
