Nokia Money – An Uphill Battle
Posted Thu, 27 Aug 2009 13:46:42 EDT by Mark Beccue
Nokia announced yesterday they will launch Nokia Money, “a new mobile financial service offering consumers with mobile device access to basic financial services”, which will be powered by Nokia-backed mobile money specialist Obopay. The service will look to “enable consumers to send money to another person just by using the person's mobile phone number, as well as to pay merchants for goods and services, pay their utility bills, or recharge their prepaid SIM cards (SIM top-up)… available across different operator networks and on virtually any mobile phone.” First markets will be in selected developing countries where the unbanked population is high. The company also said it is building a network of Nokia Money agents. Very little other detail was given, though Nokia will feature the service at next week’s Nokia World event in Germany.
What we are left with is a vaguely described service that on the surface doesn’t appear to leverage any of the device maker’s formidable strengths.
There are several reasons mobile money services are feasible in developing markets. All of those reasons revolve around MNO capabilities/ecosystem and not around anything Nokia controls.
1. Mobile phones and network coverage have become ubiquitous, even in the most remote regions.
2. To support consumers, MNOs have put in place a widespread agent network to sell mobile phones and provide prepaid top up services. In many countries, these agents are village merchants. While not every village features an agent, there are enough to provide at least adequately accessible service in remote rural areas.
3. Mobile money services are a logical evolution of top-up. MNOs found that many consumers in developing countries wished to fund other phone accounts, typically a relatives’. MNOs obliged and then found consumers desired to fund other accounts, typically a relative’s, that could then be cashed out. Given insufficient banking reach or even transportation infrastructure in most developing markets, this method is a far easier way to deliver money. MNOs are in the primary position to offer both top up and mobile money services, like person to person payments, bill pay and others through one single account.
So the question in terms of Nokia’s offering becomes, does Nokia intend to compete with the MNOs in this space? What is their competitive advantage?
Is Nokia looking to compete in established mobile money markets against MNOs? Nokia has strong relationships with the retail network which sell their devices in developing countries. One might speculate that Nokia could pre-load Nokia Money on new devices and seek to make these device merchants their Nokia Money agents. In developing countries, these device agents are usually MNO agents as well. Is Nokia looking to put potential agents in the position of offering a competing mobile money service to MNOs? Logic would say that most agents would favor the MNOs, as agents make more money on a reoccurring basis with MNOs providing top up services than they do with Nokia selling mobiles.
And why would consumers choose to do business with Nokia when they can get the same services from their mobile network provider? Price could be a driver.
Nokia might choose to enter countries where MNO interest in mobile money services is low. But in this far into the game, there is usually a reason MNOs aren’t moving forward with mobile money services in a country, usually due to unfavorable regulatory conditions.
Perhaps a better strategy would be to partner with selected MNOs to provide out of the box Nokia Money, preloading the service on new devices and leveraging the MNO’s agent network. But what value does Nokia provide to an MNO in this scenario? Not much.
Finally, the real barrier for Nokia, as it is with any mobile money service provider, is the regulatory hurdle. Each country has its own set of rules and regulations regarding personal financial services. Nokia will have to work with regulators in its chosen markets to meet specific requirements, which may include forced cooperation with the country’s banks and or MNOs. Obopay knows all of this of course.
So, until Nokia reveals more details and proves it wrong, Nokia Money will face some pretty tough challenges.