A bubble similar to the dot-com mania of the late 1990s is inflating in the mobile payments industry in SA. And many of companies are going to be hurt when it bursts.
That’s the view of Standard Bank director Herman Singh who reckons far too much capacity is being created for the demand from consumers.
Singh, who heads up the innovation portfolio at Standard Bank, points to the recent high-profile launch of M-Pesa by Vodacom and Nedbank and says there are now at least 15 so-called “electronic wallet” providers in the country.
“A large number of players have sensed that there is a business opportunity and everyone has rushed in,” he says.
“The market has become hyper competitive and it’s turning into a mobile bubble. Everyone is chasing m-commerce with the view that it will be a huge market, but I’ve done the maths and it doesn’t stack up.”
Singh says there’s simply “not enough revenue in this industry to cover the number of players”.
“My hypothesis is there is a massive fall-out coming in the next three to five years. It will be very similar to the dot-com fall-out. The guys will run out of cash.”
The attraction of entering the industry is obvious, he says, with barriers to entry appearing to be low. But it’s deceptive. Development costs are “horrendous” – companies need to develop software for an almost endless number of mobile phones. And complying with financial regulations is “difficult” and a specialist skill.
Convincing retailers — physical and online — to accept dozens of different e-wallet solutions also isn’t going to happen easily, Singh contends. The proposition is too expensive and time-consuming for retailers.
To deal with the problem, Standard Bank is creating a back-end system based on its Mimoney electronic currency, which has been approved as legal tender by the SA Reserve Bank.
“Standard Bank is happy to power any wallet, and a number have already said they’ll work with us,” Singh says.
The aim, ultimately, is to make as many of the country’s e-wallet solutions interoperate with one another and to create a ubiquitous platform for m-commerce. This will make it easier for e-wallet providers to have their solutions accepted by a wide range of merchants.
“We have gone to all the e-wallet players and said it’s a big challenge to load a wallet, store the money safely and securely, do Reserve Bank reporting and settlement, and so on. That’s bank business.”
So far, Standard Bank has signed agreements with e-wallet providers Pocit, MXit, Wiwallet and Mowaly.
Standard Bank will make its money from the float it’ll manage, and from a “small fee” it charges for handling transactions.
Person-to-person transfers cost 35c, including those between different e-wallet providers. Other fees are valued based on a percentage of the value of a transaction, typically between 2% and 6%.
To help drive adoption of the Mimoney platform, Standard Bank has decided to provide the R40m or more in incentives it pays to its staff annually in e-currency.
“All the merchants who participate will enjoy benefits from Standard Bank staff spending money through the Mimoney payments system,” he says.
It’s not clear yet whether other banks will work with Standard Bank to provide the service, but Singh says Mimoney is open (not proprietary) and the company will gladly work with other financial services providers. — Duncan McLeod, TechCentral