Mobile Money Transfer

CHAPTER TWOLITERATURE REVIEW2.1 supple money hit prompt money absent, also referred to as peregrine money, spry earnings, and industrious wallet generally refer to earnings operate operated underfinancial regulations and performed from or via amobile device. Instead of paying with cash, cheque, or credit entry cards, a consumer free-spoken fire use a mobile phone to pay for a wide roll up of services and digital or hard goods.Although the concept of victimisation non-coin-based currency systems has a long history,it is yet recently that the technology to support much(prenominal) systems has become widely available.Similarly, Julia s. cheney defined mobile financial services from her paper examination of mobile banking and mobile salarys as follows Mobile financial services is a frontier applied to a range of financial activities conducted using mobile devices, such(prenominal) as cellular phones or personal digital assistants.These activities give ear into two broad categories mobile banking and mobile remunerations. Mobile banking allows bank customers to oblige balances, monitor transactions, obtain other account information, transfer funds, locate branches or ATMs, and, sometimes, pay bills. In the united States, depository institutions mobile banking platforms rely on one or a gang of the following troika strategies SMS text messaging, browser-based programs, or downloadable mobile-banking applications.The term mobile payments refers to payment transactions initiated or confirmed using a persons mobile cellular phone or personal digital assistant. These may be such things as making a purchase at the point of sale, sending money to a person or a business, or purchasing a crop or service remotely.Mobile payments generally fall into two categories. Those made at the point of sale argon called proximity payments and are typically initiated using NFC technology. Mobile remote payments, on the other hand, are non transmitted by NFC but quite an require payments to be initiated and settled through the mobile cellular phone engagement in combination with an associated payment network.These payments may involve person-to-person, person-to-business, or business-to-business payments and rely on SMS text messaging, wireless Internet technology, or a downloaded application in order to execute the payment.Mobile payment is being adopted all oer the world in different ways (wirelessintelligence.com) (erricson.com 2011).In 2008, the combined market for all types of mobile payments was project to reach more than $600B globally by 2013 (juniper research 2013),which would be double the figure as of February, 2011 (bonsoni.com 2011). The mobile payment market for goods and services, excluding contactlessnear field communicationor NFC transactions and money transfers, is expected to scale $300B globally by 2013 (juniper research 2013).Indeveloping countriesmobile payment solutions have been deployed as a means of extending f inancial services to the community known as the unbanked or under banked, which is estimated to be as much as 50% of the worlds adult population, according to Financial Access 2009 Report Half the World is Unbanked (financialAccess.org 2009).These payment networks are often utilise formicropayments.The use of mobile payments in developing countries has attracted public and private support by organizations such as theBill & Melinda Gates Foundation,United States Agency for International Developmentandmercy Corps.Mobile financial services cover a broad range of financial activities that Consumers engage in or devil using their mobile phones (Boyd and Jacob, 20076).They can be classified into three separate categories mobile banking (m?banking), Mobile money transfer (m?money transfer), and mobile payments (m?payments) (GSMA, 2008a). M?banking is subsumed under the larger category of electronic banking.Electronic banking (e?banking) refers to the readying of retail and small value b anking products and services through electronic channels.These include deposit taking, lending, account management, the prep of financial advice, electronic bill payment and the provision of other electronic payment products and services such as electronic money (Basel 19983). As a form of e?banking, m?banking is defined asfinancial services delivered via mobile networks and performed on a mobile phone.These services may or may not be defined as banking services by the regulator, depending on the legislation of the country in question, as well as on which services are offered. (Bngens and Sderberg 2008 7).Porteous (2006) further explains that mobile banking can either be additive or transformational.For the former type, m?banking is considered an additional channel for animated clients to access banking services in the transformational category, however, it targets clients who do not have bank accounts, aiming to include them into the formal banking system. (Bngens and Sderberg 20 08).Money, on the other hand, is a form of electronic money. Electronic money refers to stored value or prepaid payment mechanisms for executing payments via point of sale terminals, direct transfers between two devices, or over the computer networks, such as the Internet. Stored value products include hardware or card based mechanisms (electronic purses or wallets), and software or network based cash (also called digital cash) (Basel, 19983?4).M? money wherefore refers to services that refer consumers financially through mobile phones. Mobile money allows for any mobile phone subscriber whether banked or unbanked to deposit value into their mobile account, send value via a simple handset to another mobile subscriber, and allow the recipient to turn that value back into cash easily and cheaply (GSMA, 20097). In this way, m?money can be used for some(prenominal) transfers and payments.In fact, m?money is generally used in m?payments and m?money transfers rather than for m?bankin g. As such, m?money does not earn interest compared to bank deposits. This ensures that all e?cash (of which m?money is one) dispensed and circulate corresponds to actual funds in the system. This helps the central banks track movements in money supply1 (Mapa, 2009). With this, m?money cannot be used for savings and cannot be lent by m?money service providers (Sec 5.C and D of handbill 649) (BSP 2009).However, whether these funds should not earn interest has been questioned by some, especially when the funds that are pooled to back?up the issued e?money can be deposited in a prudentially regulated institution or invested in lower?risk securities (Tarazi, 2009).Thus far, the use of m?money has primarily been transactional, such as payment of bills (including payment conversion of m?money to electronic loads), transfer of funds.In microfinance, for instance, the system has largely been utilized to transfer and pay loans.Mobile banking modelsLyman et.al. (2006) makes two tones of br anchless banking bank led Non?bank commercial actors. This was further expanded by Goswami & Raghavendran (2009) by breaking down mobile banking variants into 5 models based on how they partner up with telecom providers (1) carriers going solo, (2) banks going solo, (3) exclusive bank and telecom partnership, (4) bank telecom open partnership, and (5) open federation model.These variations indicate that there is much innovation occurring with respect to delivering m?banking/m?money services. Although innovation is important, at some point, standardization would be needed to support interoperability that would enhance services among customers (GSMA, 2008a).In fact, of the five models mentioned, the open federation model is considered by Goswami & Raghavendran (2009) as the almost flexible and dynamic since it allows for a partnership between all banks and telecom companies while sharing a common platform for m? banking. The platform then expands the coverage of mobile banking and gives the unbanked a freedom to choose with whom to maintain an account.The other implication of the variety of existing models is that it creates different regulatory arrangements depending on the nature of partnerships between telecommunication carriers and financial institutions. In the case of novel Money in the Philippines, for instance, the banking regulations have complied with by its banking partner, whereas the telecommunications aspect is addressed by the telecommunications provider.A regulatory distinction however occurs once there is e?money issuance by a telecommunication beau monde or non?bank entity through the telecommunications operator (Lyman, et al. 2006), as was the case with Globe Telecoms G?Cash. In both cases, they had to work with financial regulators on banking regulations it was not previously concerned with.Mobile phone payments is a habitual and most preferable way of sending and receiving money in Africa since the vast majority of the continents popul ation are ruler dwellers or uneducated (Ayo, Ukpere, Oni, Ometo, & Akinsiko, 2012 Mangudla, 2012). The concept of mobile money transfer dates back to the history of telecommunication and banking industries.There are collaborations between the two industries for the facilitation of MMT service (Ayo et.al, 2012). M-PESA was the first MMT service in Africa, which was introduced by Safaricom of Kenya (A Vodafone partner) in 2007. M-PESA (M refers to mobile, and PESA refers money in Swahili language) can be accessed from the different outlets such as the headquarter, main branches of the company, or an real business outlet.Safaricom registered over 20, 000 consumers for M-PESA within the first month of introducing the service (Hughes & Lonie, 2007), and the number reached more than 15 million users of MMT in Kenya after five years of launching (Michaels, 2011). He contends that there are several factors so-and-so the wide adoption and arrogateance of this service by the users includ ing rapid migration to cities for work, a significant unbanked number of the populace, the credibleness of the service provider, and finally their commitment towards families in home villages.Therefore, as asserted by Hughes & Lonie, (2007), the M-PESA is primarily intentional for the unbanked populace in Kenya. The MMT also was later introduced in several African countries such as Nigeria, sec Africa, Tanzania, Ghana, Somalia among others. The success of these services in South Africa and Ghana were less than the Kenyas M-PESA success (Tobbin, 2010).MMT IN SOMALIAMMT service in Somalia was first introduced by GOLIS , HORMUD and TELESOM telecommunication companies working with puntland, south central Somalia and Somaliland respectively. SAHAL and ZAAD money transfer was the first product however, EVC, the hormud version of MMT, was banned by al-Shabab Group. The hormud company later introduced a more advanced service named EVC Plus. opposite telecommunication service providers la ter offered similar products with different brands. For example, Nation link offer E-MAAL and somtel offers E-DAHAB services respectively. The neediness of effective government in Somalia modify the necessities of the life and the telecommunication industry filled the governmental bedspread by introducing revolutionary technologies (Osman, 2012).The industry provides several services such landline, mobile phones, internet and mobile banking. The mobile banking or what we can refer to mobile money transfer is very popular in the most sophisticated and active people in Africa with regard to mobile phone payment (Osman, 2012).Many diverse factors can to the adoption and acceptance of these MMT services in Somalia.One major reason is that the banking systems in the country are very special(a). In addition, there is much risk for caring cash since the country is still politically unstable and recovering from more than two decades of chaos and civil war (Mohamed, 2013). There are Bro bdingnagian remittances sent by the Somali Diaspora back home to their families, friends, relatives, or business associates.There is also commodious migration to the major cities because of economic crisis, famine, droughts, and job seeking. All these factors can contribute to the acceptance and usage of MMT service by the Somalis as they were behind its usage in other countries especially in Africa. There are limited empirical studies on the state of art of MMT adoption in the country.Sayid, Echchabi, and Abd. Aziz (2012) examined the mobile money acceptance in Somalia by drawing on the TAM model. Sayid et.als (2012) study suggested that perceived utility program and security positively affected the attitude towards mobile banking, whereas social influence and perceived usefulness significantly and positively influenced the intention to accept mobile money.Furthermore, their study suggested that perceived ease of use had positive effect on perceived usefulness of mobile money. Sa yid et.als (2012) sample size was very small (N=100) which is difficult to draw a statistical closing from it. In addition, this study looked at the MMT in a broader scope.However, their study provided useful insights about the factors influencing the acceptance and adoption of MMT in the country.The current study will examine the trends, challenge and future of mobile money transfer and banking in puntland. The study will focus sahal service as particular as there is no such in depth analysis in this service before.This service has 597,000 sahal service active subscribers which do mobile money services across puntland, similarly it has 86,000 active mobile payment subscribers which use sahal payment as their first choice paybills.The study will focus on these customers, the regulation and the mobile network operators to study the trends, challenges and future of this service.