Prepaid Mobile Payments Unlock Poor’s Buying Power - Spire Research and Consulting

+ Official Coverage at ZDNet website
+ Official Coverage at Majalah Marketing, Indonesia website

ZDNet (28 February 2012)
Majalah Marketing, Indonesia (3 August 2012)

As mobile penetration rates rise in emerging countries, prepaid mobile commerce products will see more demand from over four billion of the world’s unbanked people. Spire Research and Consulting’s thought leadership in defining this emerging market worth USD5 trillion in its quarterly SpirE_Journal prompted an article by global ICT magazine ZDNet in February 2012 discussing this phenomenon.

Spire’s Q4 2011 SpirE-Journal contained an article discussing a nascent, high-growth phenomenon – mobile pre-paid credits. This product – being rolled out aggressively by credit card processors and telco carriers – has the potential to unlock e-commerce demand from billions of consumers in emerging markets who are deterred by credit card requirements from shopping online. It may also eat into the business of wire transfer service providers.

An estimated four billion consumers at the base of the global economic pyramid have no bank accounts and credit cards. Yet, these consumers are increasingly involved in e-commerce as they gain access to common-use computers in villages, schools, and community centers or Web-enabled low-cost mobile devices. There is therefore a pent-up demand for prepaid mobile commerce products for these consumers to purchase online. Mobile commerce providers, especially those in regions like the Asia-Pacific, Africa and Latin America, could tap on this huge market opportunity.

Countries with the largest market potential for this sort of product would be those with big informal economic sectors like India, Indonesia and China. Other emerging markets which have room for development on this front include Pakistan, Bangladesh, Vietnam, Thailand, The Philippines, Sri Lanka and Cambodia, not to mention African “lion economies” like Kenya, Tanzania, Angola and Mozambique.

Prepaid mobile credits would allow these consumers to purchase bargain items on e-auction sites. Money could also be transferred using this product, from workers in cities to their families in rural areas.

Renowned credit card companies like Visa, MasterCard and American Express are all hopping on the bandwagon. Visa was among the first to offer a mobile prepaid product targeting consumers in emerging countries. Prepaid mobile accounts allow consumers to withdraw from ATMs, transfer money, pay bills and make purchases. Credit card companies are collaborating with local mobile operators, mobile commerce companies and financial institutions to bring this product to emerging countries.

However, in his comments to ZDNet, CEO of Spire, Leon Perera, warned of risks amidst the bullish outlook. There will be challenges unlocking this potential China due the dominance of government-linked firms in the mobile carrier space. In remote villages where there is poor connectivity to urban hubs, product delivery and post-sales support are uphill tasks. There might also be political backlash from consumers should people get cheated online.