Mobile

Visa acquires Fundamo to offer mobile money to the unbanked

Fundamo, one of the biggest vendors of mobile financial services technology for the unbanked and underbanked has just been acquired by Visa for a reported $110 million dollars. Fundamo operates in over 40 emerging markets, in particular Africa and the Middle East. The company’s main customers are mobile carriers and financial institutions who want to launch services like person-to-person payments including remittances, mobile airtime top-up and bill payment.

Visa is aggressively moving into mobile payments. The company recently announced a digital wallet and bought virtual goods transaction firm PlaySpan for $190 million in February. Visa is also said to be very impressed with mobile payments company Square from Twitter’s Jack Dorsey and today announced a partnership with Monitise, which customizes mobile applications for a broad range of phone models and will enable Visa to virtualize existing Visa accounts on mobile phones.

However, Fundamo is Visa’s first acquisition targeting the huge mobile money opportunity in the developing world. By 2012, the number of people with mobile phones but without bank accounts is estimated to grow from 1 to 1.7 billion. Mobile transfers are cheaper and more accessible to the unbanked than alternative methods like Western Union. The GSMA (the global trade group for the mobile industry) forecasts that the ‘formal’, i.e. tracked,  global remittance market could grow to over $1 trillion within five years with the help of mobile services.

I talked to Fundamo a year ago about a deployment in Pakistan with MCB bank. The services included mobile transfers between accounts, mobile top-up and paying utility bills. Initially mobile top-ups were the most popular service, but mobile transfers quickly overtook them.

One remarkable fact about this service was that the daily limit for mobile transfers is 100K rupees (soon to rise to 1 million) while the ATM daily limit is 25K rupees. MCB’s head of mobile banking Mazahir Ali Sayeed, told me that the mobile transfer behavior is also very different from normal banking. Customers made 3-4 times as many transfers via the phone as they make bank transfers and the amounts are often lower. There are spikes in transfer transactions before morning prayers and after 8pm. Customers start to use cash less often.

Normally a new banking channel is introduced by a bank to save money or retain existing customers. The mobile banking service at MCB actually pulled in new customers since all participants needed to open a bank account with MCB. Due to the success of the service, MCB planned to introduce a mobile wallet (an application in a SIM card that authenticates the user and may store some cash credit) that did not require a bank account.

I asked both Fundamo and MCB what they saw as the greatest obstacles to expanding the mobile money market in the developing world. Mazahir Ali Sayeed told me that customers need to be educated in how to use the service. Fundamo’s Chief Business Development Officer, Aletha Ling, saw the establishment of a distribution network of trusted local agents, as close to the community as possible, as the most important issue. They both noted a trend towards more interoperability so that, for example, a customer from one mobile carrier or bank could make payments to a customer at a different mobile carrier or bank.

Fundamo was privately held by a group of investors in South Africa and was founded in 2000 in Cape Town.


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