Financial Sector Development in Africa: Opportunities ... - World Bank

44 Porteous
concentrated, successfully, on using the mobile as a specialist extension
channel. We will discuss one of these—the First National Bank of South
Africa—in the second section of this chapter.
While first-generation players generally launched in developed- country
environments with established financial infrastructure, the initial secondgeneration
players launched in 2001 through 2002 in developing-country
environments such as Zambia or the Philippines. They soon realized, if
they had not before, that they could not assume that there were nearly
enough locations at which customers could convert cash into electronic
value. Models that depended on bank branches alone simply could not
make headway. The second-generation models are therefore distinct in
their focus of building a new physical channel of merchants or agents at
which cash could be loaded or withdrawn. These models were designed
with the assumption that most clients had a basic handset capable only of
basic 2G data channels, which was the case for the overwhelming majority
of people adopting mobile phones for the first time. A final distinguishing
feature of the second generation is that the MNOs had been
dominant players to date. We will argue that, in order to develop and
protect their core voice business, MNOs had the strongest incentives and
abilities to play—but we will also see that these very same motivations
may limit the ultimate reach of this generation.
The third generation of mobile financial services started with the
spread of handsets capable of Internet browsing and running Java-type
applications. These capabilities do not require the expense of a “smartphone.”
(Smart handsets are spreading quickly but, because of a price tag
of US$200 upward, are limited to the top end of the market in developing
countries.) Third-generation services simply require an “enhanced”
phone or “feature” phone that is Internet-capable: these are now available
for as little as US$60 in some markets. For several years now, a greater
number of enhanced handsets than basic handsets have been shipped to
developing markets, as customers seek features such as e-mail and
Internet access. While mobile Internet is in its infancy worldwide, it is
already showing what investment analyst Morgan Stanley calls “unprecedented
early stage growth.”
Africa is no exception to the global trend. A major implication for
financial services is that specialist payment providers other than mobile
operators may now more easily offer payment services, both as e- commerce
transactions and person-to-person payments. A key difference from the
second generation is therefore that the arrival of the Internet on the handset
has in a sense thrown the door wide open to a new range of providers.