01 Dec 2015

Research Brief: What Makes a Mobile Money Service Thrive in an Emerging Market?

by Erin Peterson


Professor Rajiv Lal
(Photo by Neal Hamberg)

Ishan Sachdev (MBA 2013)

Since 2009, more than 80 mobile money services have popped up in emerging markets to offer financial services to the millions of people who have a cell phone but no traditional bank account. Taking advantage of the increasing availability of mobile tech as well as the convenience and security offered by mobile banking, Kenya’s M-Pesa, for example, grew to serve 15 million customers in its first five years. But for every M-Pesa, there is a company like India’s Eko Financial Services, which has struggled to gain traction, leaving millions unbanked, and making it harder for individuals to save money safely, transfer funds inexpensively, and lift themselves out of poverty.

So what is it that can make a much-needed service flourish? After studying 10 mobile money services—half successful, half not—in emerging markets, Professor Rajiv Lal and research associate Ishan Sachdev (MBA 2013) found that the companies that thrived shared five common traits.

In a recent working paper, Lal and Sachdev lay out these best practices, which include an open and flexible regulatory structure, business models that focus on service as well as technology, and a deep respect for the agents—such as shop owners—who can help the service thrive. “Companies are always looking to create value for the end consumer, but they also need to appreciate the agent’s point of view,” says Lal. “Agents need to make money on their investment, and [these services] need to show them why it’s worth supporting.”

Lal hopes that mobile money services use this information as a road map as they plot future rollouts. “It’s not just that these services—which could connect up to 2 billion unbanked people into a national system—can make an immediate difference in individuals’ lives,” he says. “It will also help the world economy grow.”

“Mobile Money Services—Design and Development for Financial Inclusion,” by Rajiv Lal and Ishan Sachdev, HBS Working Paper.

Featured Alumni

Featured Alumni

Class of MBA 2013, Section G
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