UK Mobile Money Transfer Platform - Essay Example

Introduction

The mobile phone and smartphone space has evolved in the recent past immensely with the world experiencing great cutting edge technology in agriculture, production, transport and other fields. Many more technological innovations have been invented in the financial sector, although a majority of these technologies have always revolved around the traditional functions of banking and credit issuance. The financial sector has been a rather hands-off industry because of the high level of security clearance needed and the risks involved with the ultimate risk being total financial losses as a result of Dos attacks and cybercrime (Saunders, Cornett & McGraw 2006). However, despite this looming financial risk, various organizations have come up with financial solutions that seem to be gaining significant popularity within the market as witnessed with a mobile money transfer program formulated by Vodafone and applied in Kenya dubbed the M-Pesa service. It is against this backdrop that I propose a mobile money transfer program aimed at exploiting the financial market space in the UK and beyond.

Many individuals probably do not think that a country located on the East African coast could become a digital business innovation centre. However, as fate would have it, in 2007, Kenya transformed into a launching pad for M-Pesa, a life-changing mobile phone-based system used for among other things financial and money transfer services. After its launch, the M-Pesa money transfer platform has developed exponentially. For instance, in 2012, a staggering 40% of Kenya's Gross Domestic Product (GDP) was being channelled through the M-Pesa platform (Jack & Suri 2011), with the pioneering organization recording about 2 million transactions per day. M-Pesa has now become a universal digital technology not only in Kenya but in the surrounding East African countries as well, as it has expanded to include a host of other monetary services such as funds withdrawal and deposit, microcredit extension, payment of bills and delivery of remittances.

The business idea that would lead to the formation and development of M-Pesa was initiated after researchers financed by the United Kingdom's Department of Internal Development (DFID). DFID in the UK is the organization mandated to handle matters relating to foreign aid. The researchers thus took note of the fact that many Kenyans were making transfers of mobile handset airtime as a substitute for cash. With the help of the DFID, the researchers identified the potential in this proposition and helped form a relationship with Vodafone – a mobile service provider. The telecommunication giant Vodafone had long considered methods of providing support to microfinance institutions through its mobile systems, as the space for getting access to credit and banking services in Kenya was restricted and the other manual method of physical money transfer was way too risky. Vodafone's head of Global Payments Mr Nick Hughes developed this noble M-Pesa idea and made an application for financing through the DFID challenge fund (Mbiti & Weil 2011).

Almost ten years after the M-Pesa idea was hatched, the platform has changed Kenya's economic interaction. M-Pesa's success has reshaped the East African powerhouse telecom and banking sectors, helped in financing small and medium micro-organizations and extended monetary inclusive for almost 25 million Kenyans. The M-Pesa platform has been particularly recorded great success in reaching Kenyan's earning a small income. Research studies indicate that the number of individuals who were using M-Pesa as of 2008 has almost quadrupled in just three years.

Nonetheless, this model cannot work for the UK market for various reasons. The M-Pesa platform was launched with the aim of providing money transfer services for the majority unbanked individuals in the East African country. The UK has nearly everybody banked from an early age, with ease of access to financial services through online access and internet banking. Another aspect that would prevent a 100% replication of the technology would be the nature of the UK financial market, which has many competitors who offer differentiated services as opposed to only a handful of big banks in the Kenya. In this regard, the M-Pesa service would need to be improved and incorporate many aspects that would fit the UK financial market and its needs as pertains to the financial services.

The New UK Mobile Money Transfer Service Features

The New UK Mobile Money Transfer Service would be required to adapt to the UK financial market aspects. Instead of having the money transfer services integrated with the voice communication service providers unlike in Kenya, the New UK Mobile Money Transfer Service would be based on an application developed solely with the purpose of incorporating agency banking services with the new app. The app would be exclusive to the services provided, and would be patented to prevent replication. This new application would allow people to deposit and withdraw cash in electronic form by using the application available for free on the market as opposed to the traditional SIM cards in M-Pesa linked to the application usable in a normal cellular phone.

The new application, which would be installed in the mobile phone menu, would have the users have access to the New UK Mobile Money Transfer Service after successful registration with the prompts of the app linked to the organization supporting the service. In the New UK Mobile Money Transfer Service menu, the application would have various extra options available to users, which are currently unavailable in the current technology. Such would include synchronization with statutory payments organizations, insurance companies, emergency services companies and financial institutions key to maximizing their revenues through commissions that they would charge to receive funds through the new service.

All users of the New UK Mobile Money Transfer Service would need to be registered with the company. Theoretically, users would need to have their details taken physically by registering with an authorized service agent with identification documents, with foreigners interested in using the service required to produce their passports. The application would be enhanced with biometric identification system to avoid any third party use without the rightful owner's consent. To avoid user identity theft, any individual without proper documentation would not be registered.

The New UK Mobile Money Transfer Service would be innovative enough to serve all registered users efficiently. Users would be able to use their New UK Mobile Money Transfer Service account as a mobile banking platform with a fully-fledged account, even though they would not be necessarily required to open a bank account to use the New UK Mobile Money Transfer Service. In rural UK areas, one of the issues that affect the people living in these areas is restricted access to proper financial services. In this regard, the New UK Mobile Money Transfer Service may be applied as a financial service provider substitute to traditional banks for the provision of financial services. The new service users may be allowed to transact up to £ 150,000 at any one given time.

The Workability of the New UK Mobile Money Transfer Service

Unlike the M-Pesa service which incorporates voice and part money transfer service provision, the New UK Mobile Money Transfer Service using the specially designed application would be developed on the basis that the commissions are only incurred after clients "use" the service with their cash, and therefore, one advantage it would have over other similar services is that there would be no charges for any deposits made through the application. Therefore, normal charges would be incurred for sending money. For instance, after a successful registration in one of the New UK Mobile Money Transfer Service provider agency outlets, and successfully downloading the app into a smartphone, a user may go to any agent across the country and make deposits of not more than £150,000 to his/her account through the application.

The new app would be linked to all ATM providers such that a user would be able to withdraw the deposited cash through an automated teller machine (ATM) without any delay. The arrangement between the New UK Mobile Money Transfer Service provider and the ATM operators would be for the ATM to earn a slight commission for all transactions carried out from the money service through the ATM. The fees would be subject to contractual agreements between the two entities, with the highest price capped slightly below the normal bank charges for a similar service.

For one to send cash through the app, users would be required to download the free app from the app market. All downloaded applications would be monitored by a team of IT experts to establish any criminal trends that would jeopardize the new process. Therefore, it would not be possible to send money to an individual operating without the app. The app would be designed to be compatible with most mobile phones and smartphones. All transactions would be verified through the main server, which would automatically send a confirmation code for every transaction effected at whatever time of the day.

Structure and Innovation of the New UK Mobile Money Transfer Service

The organization would not own agent shops. All agents would be external business owners keen on making some money off the withdrawal and deposits transactions. The charges would then need to be split between the organization and the agents on a percentage basis set by the organization. All agents would be required to register with the company for the electronic money would be bought from the organization without any extra payments. It is this money that would be used to deposit the funds though the app into an individual's mobile phone.

The New UK Mobile Money Transfer Service would be targeting mostly the individuals living in the rural UK and mostly in places located too far from banks. The New UK Mobile Money Transfer Service would need to operate where banks do not have a presence yet, or with customers who prefer not to work with banks with regards to the financial engagement. In addition, the service would also be targeting groups that do not have access to formal financial banking services. Future engagement would, however, expand the scope of the app to include certain business aspects that would be beneficial to the organization.

Digital Media Content: Please visit https://www.youtube.com/watch?v=i0dBWaen3aQ for further details on the innovation model of the New UK Mobile Money Transfer Service based on a tried and tested M-Pesa framework as highlighted in the attached video.

Rationale

Banks have become an integral component in our lives, the power of money being exhibited in our day-to-day activities. For instance, all employers require that members of staff open bank account for their monthly payments. Banks are also important for advancing credit to individuals as well as corporates (Demirgüç-Kunt, Feyen & Levine 2012). Without money, normal day-to-day transactions would be hampered. However, there are areas where banks are not able to reach; rural areas where they are not as developed for infrastructural development and service delivery in the form of banks (Herington & Weaven 2009). In this regard, there exists a vacuum that needs to be exploited for individuals living in rural areas as well as individuals considered "unbankable" such as ex-convicts and people without a steady source of income.

By exploiting this space, the New UK Mobile Money Transfer Service will be able to earn small commissions from daily transactions between people in the rural areas and those without bank accounts or stable financial muscle. People will be able to send and receive money from as little as £25 to a maximum of £125,000. These commissions between users of the New UK Mobile Money Transfer Service, when put together, will form a considerable non-funded income for the company, but most importantly will solve a problem faced by the two groups aforementioned.