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White Paper

is money
Consumers and
mobile agents
are cashing-in
on the new currency
Why arent
banks and MNOs?

Sparks Worldwide LLC

Airtime is Money
Sparks Worldwide

In Uganda,
Uganda sente means money.
Sente also means transferring mobile
airtime to someone else. Airtime, like
an ATM/debit card, is synonymous with
currencyfrequently cashed out or
used to pay for goods and services.
A study of Kampala mobile users by
Ndiwalanan found that while 22 percent
had sent or received mobile money, 53
percent had transferred airtime.
practice of Kenyans
The common p
trading airtime for cash was a catalyst
for the launch of M-PESA, through
which 70 percent of Kenyan mobile

accounts, NFC, m-wallets, or

smartphones required.
The U.S. also shows rapid growth in
mobile payments using airtime
accounts, as users download mobile
games, text donations, or, for those
with a pay-per-message plan, vote for
American Idol or Dancing with the
Stars favorites. For the Haiti relief
effort, U.S. mobile customers texted
donations of $30 million in $10
increments, which were charged to
mobile, yes, airtime, bills.
Mobile users win as Mobile Network
Operators (MNOs) discount airtime to
keep and attract new customers or
promote new services. And airtime
resellers profit from buying and selling
discounted minutes

Migrant workers and sole proprietors
from developing countries transfer
currency through legal channels such
as Western Union and post offices, or
through informal channels, including
hawala brokers and bus drivers.
Security, speed, cost, and Forex
interchangeability determine choice of
channel. Airtime transfer offers
advantages in all of these.
Before MNOs offered SMS airtime
transfer services, senders who
purchased prepaid airtime vouchers or
scratch cards simply texted the airtime
cards PIN code to the recipient. The
recipient could share his phone with
others and charge for airtime used

So where are the banks and MNOs?

Why isnt airtime convertible to
cash? Why havent MNOs and
banks done more to leverage mobile
accounts as a p
The market opportunity is remarkable
with Berg Insight estimating that crossborder airtime transfers alone will grow
at a CAGR of 67 percent to reach US$
1.67 billion in 2015, regardless of legal
cash out availability.
users now use a prepaid m-wallet on
their phones to pay taxi drivers, utility
bills, convenience stores, or to send
money home.
Sending and receiving airtime among
mobile users with the same carrier is
as simple as an SMS, with no new

This report seeks to uncover the

tremendous value to banks and MNOs
in overcoming the myths and hurdles
surrounding converting airtime to cash
and using airtime as payment
payment, and how
to best position that service to users
and agents in the U.S. and abroad.

sell the PIN code to one of the MNOs

airtime agents at a discount, or trade the
PIN for goods or services. The MNO
received no benefit from the transfer.
MNOs soon seized the opportunity to
capitalize on the mobile-to-mobile

Airtime is Money
Sparks Worldwide

airtime credit transfer market with MTN

launching Me2U in 2005. Competitors
f ll
d suit,
it e.g., O
Orange E
Share, Safaricom Sambaza, and in the
Philippines (where load means
airtime), Globe Share-a-Load and
SMART Pasaload. Celcom offered
Airtime Share via Facebook.

By 2012, airtime transfers in

Kenya, Tanzania and Uganda were
valued at US$10 million every month.
Aggregators popped up who would
move airtime from one carrier to

another to enable airtime transfer to

most prepaid mobile accounts. For
b d airtime
i ti
Transfer To partnered with 230 MNOs
in 80 countries.
At about the same time, MNOs
adopted an electronic voucher
distribution system
system, so that their agents
could transfer airtime directly to
customers mobiles without paper
vouchers and scratch cards.


For small amounts, airtime transfer is
often preferred over mobile money
transfer because it is easier, safer,

readily available, and sometimes, less

For example
example, in Ghana,
Ghana there are
70,000 airtime agents, but only 2,800
mobile money agents. In the
Philippines, there are 870,000 official
airtime sellers vs. 30,000 mobile
money agents. The following page
shows the disparity between mobile
money and airtime agents.

Quicker and safer than a credit or debit card

To send airtime in Afghanistan: Dial recipients phone

number # to # amount; send to 123.
123 A 2.50Afs
2 50Afs (5
U.S.) fee is charged. Adding a mobile or transfer PIN
makes it safer than a signature-based debit card.

Receiving airtime: Note that airtime value is

stated in currency
currency, not minutes

To request airtime (e.g., shopkeeper): Dial MREQ,

s phone number
number, amount; send to 7667.
Shopper responds Yes to initiate the transfer. Daily and
monthly limits apply to senders, not receivers.

Airtime is Money
Sparks Worldwide

While airtime purchase, use, and

transfer is cheap and simple, an
h l i number
b off providers
mobile money services have made
offerings unreasonably complicated.
Nokia Money in India, with 1.2 million
subscribers, folded in March 2012 after
only two years
years. Nokia announced that
mobile money would no longer be
among its strategic initiatives. The
version of Nokia Money tied to YES
Bank and Union Bank (Easy Send with
83 percent of subscribers) offered
different services (like P2P money
transfer) than the Easy Pay stand-alone
m-wallet version. The m-wallet version
required a registration fee and loading

cash at rarely seen Nokia

agents, rather than airtime agents.
Mobile payment failure is often
attributable to product design being
led by IT, engineering, operations,
finance, sales, or legal rather than
consumer need and experience.
Go to market and marketing strategists
should own the P&L.
In most countries, for small P2P
transactions, airtime transfer has
remained popular while mobile money
floundered because providers failed to
follow obvious strategic principles,
which should be applied to offering
airtime as currency, including:

1. Negligible, if any, registration,

with no registration fees.
Fundamo, which Visa Inc. bought
in 2011, has successfully deployed
mobile financial services in 35
countries, basing its strategy upon
research that found that mobile
money services needed to be
incredibly easy to use and even
easier to register on.
Airtime transfer services rarely
require registration. Mobile users
dontt pay a registration fee for
purchasing prepaid airtime, and
should not be charged for m-wallet
or m-money registration. Its like
charging shoppers to enter retail
stores or restaurants.
2. Leveraging existing payment
Most U.S. consumers dont want
another payment account or
wallet. The Federal Reserve
Bank of Boston reports that the
average U.S. consumer has 7
payment accounts, not including
utility bills, which can include
non-utility charges. Thirty percent
of Americans already have a digital
wallet, such as Google Checkout
or PayPal.
Yet, most U.S. mobile payment
developers base their product
offerings on requiring an additional
prepaid account or wallet that must
be loaded. No wonder Americans

Figure 1

Airtime is Money
Sparks Worldwide

Figure 2

Raw data extracted from

Federal Reserve Bank of Boston

llag b
hi d many d
l i countries
in mobile payment.
Americans already have plenty of ways
to pay. Airtime is attractive because it
is an existing monetary account when
prepaid mobile airtime value is
displayed as currency, not minutes.
In Kenya and the Philippines, where
the majority of mobile accounts are
prepaid and consumers were not using
debit or credit cards to pay for goods
and services, m-wallets made some
sense. Mobile users were used to
frequently loading small amounts of
money on their mobiles to buy
airtime, which they often transferred.
t with
ith airtime
i ti
was a llogical
i l
progression, because it was existing
account in their mobile phones.

Starbucks is an example of success

with mobile payment by leveraging
i ti paymentt behavior.
b h i
A quarter
of transactions are made with
Starbucks Card accounts. The
coffeehouse empire initially targeted
their 3.7 million card rewards members
y app,
pp, which debits
with their mobile p
their existing prepaid card accounts.
Because there was no need have a
separate m-wallet or new account,
Starbucks mobile app rung up 26
million mobile payments in its first
year Unlike many prepaid cards
cards, they
pay, rather than charge, customers to
reload their accounts using the app.
The result: another $110 million more
loaded on prepaid accounts.

In Japan, South Korea, and Singapore,

where contactless mobile payment has
significant usage, a key driver was
replacing transit system card accounts.
that mass transit has the
Intuit reports
highest concentration of mobile
payment use. Facilitating acceptance
were smaller geographic areas, high
urban population densities, high public
transportation penetrations, and
cooperation among government
transit, financial institutions, and
MNOs. MasterCards Mobile
Payments Readiness Index (May
2012) lists all three countries in the top
six for collaboration.
With the apparent inability of all parties
to implement a broad scale mobile
payment solution, in the U.S., closed
loop systems, like those at large
department stores, are likely to be
the early winners with mobile or
airtime payment. Contrary to popular
belief, some private label store credit

Airtime is Money
Sparks Worldwide

cards represent over 30 percent

penetration of retail sales. PayPal is
h di iin thi
this di
ti with
ith it
its recentt
Home Depot mobile payment launch.
Japans popular RFID payment Mobile
FeliCa and subsequent wallet phone
Osaifu-Keitai started as a closed loop
public transportation card

Closed loop systems

are likely to be the
l winners
iin mobile
and airtime payments.
ExxonMobils Speedpass is an
example of a successful, closed
loop, additional payment conduit that
drove loyalty, which correlates to the
mobile environment. From 1997, its
tiny RFID (similar to NFC) transponder
on a keychain allowed petrol
customers to pay faster, leveraging
existing behaviors:

While more than 90 percent of mobile

users in most countries opt for prepaid
the U
i ti
iin th
S where
78 percentt
of mobile users subscribed to a
contract plan, consumers have shown
a willingness to accept mobile
payments on airtime accounts, usually
as direct carrier billing.
Charging additional services to ones
phone bill, like the Haiti donations or
TV voting, is nothing new. Yet U.S.
mobile carriers have largely failed to
take full advantage of airtime billing
opportunities even though third party
services have been charged to mobile
bills for more than a decade.
In the 1990s, GE Capitals Partnership
Marketing Group sold white label
health and legal services plans,
shopping clubs, and roadside
assistance plans to millions of billed
customers including AT&Ts, with

monthly subscription fees being

charged to utility bills. Since
customers are less likely to scour their
utility bills than credit card bills,
b hi were often
ft fforgotten,
resulting in low attrition and usage
rates. Unfortunately, this also made
this practice a target for crammers.
The U.S. is shifting toward prepaid,
which now makes up 22 percent of the
market and 60 percent of new mobile
subscriptions. Despite this growth in
prepaid, airtime transfer is almost
unheard of in the U.S.

1. Paying with something already in

hand (keychain) during purchase
2 Choosing between debiting
payment from an existing payment
account or the ExxonMobil private
label card account.
Efforts to expand, such as loading
ExxonMobil RFID chips in Timex
watches, and accepting Speedpass at
McDonalds were unsuccessful.


Airtime is Money
Sparks Worldwide

4. Unbundling m-payments from

other ms and NFC.
M-wallets, m-commerce,
m-shopping, and m-banking keep
creeping into m-payments.
Bundling m-stuff with m-payments
is the same type of flawed strategy
that led to the banks bonanza of
bundling their products, after
research indicated that customers
who had multiple products from the
same bank were more loyal. While
forcing customers who were
opening credit card accounts to
take checking accounts with debit
cards made lots of bank product
managers heroes as they checked
acquisition and KPI boxes, it has
little to
t drive
d i bank
b k profitability,
fit bilit
instead leading to a plethora of
dormant accounts and feesensitive, angry consumers. First
Data reports that 81 percent of
U.S. cardholders have credit card
from an issuer that was not their
primary bank. Alas, bundling didnt
build profit or loyalty.
M-banking is commonly confused
with m-payment. Currently, most
m-banking is a money
management tool, not a purchase
solution. Truaxis found that 93
percent of m-banking customers
used their phones to check
balances. Other popular services
were checking posted transactions,
paying bills, or transferring funds,

but not purchasing. The current

offering is most suited to those who
ha e an
iet abo
aboutt o
erspending or
being overdrawn, or are performing
online tasks on their phones, rather
than paying retailers.
Depending upon the study you find
first between 11 and 23 percent of
U.S. mobile users accessed an
m-banking site last month. Yankee
Group reports that 18 percent of
iPhone owners have recently used
m-banking while 16 percent made a
mobile payment, despite the enormous
divide in ease and availability of these
two services. Even in developing
nations, ABI Research found that

mobile remittance and transfers

are growing three times faster
than m-banking.
m banking
More m and ms. The grouping of
m-wallets, m-shopping, and
m-coupons to m-payment has been
a major contributor to the delay in

The reason why U.S.

consumers havent
embraced m-payment
m payment is
because they cant
there isnt a viable
infrastructure available...
offering a ubiquitous mobile payment
and airtime payment solution for
A lot of effort is centered around the
i t k belief
b li f th
thatt consumers havent
adopted m-payment because a good
loyalty program hasnt been attached,
discounts are a required incentive, or
that we all want an m-wallet to store all
g accounts,, dozens of new
payment options, loyalty programs,
coupons, and/or a myriad of other
functions or offerings.
The reason why consumers havent
is because
embraced mobile p
they cant there isnt a viable
infrastructure available. The mayhem

Airtime is Money
Sparks Worldwide

a mobile wallet. Nothing could be

farther from the truth. NFC is not
s non mo s with
ith mobile wallet.
allet The
end goal is not NFC technology. The
end goal is to enable people to transact
any time, any place, more quickly,
simply, and safely than ever before.

starts with complicating m-payment

with an m-wallet, which can mean
i t ll anything,
or nothing.
to the confusion are surveys, which
ask ambiguous, leading, rhetorical, or
erroneous questions. Data
Innovations Mobile Money Survey
announced that two-thirds of
smartphone owners were interested in
a mobile wallet, based upon a sample
size of 246 mobile users. Twenty-five
percent said they were not sure.

Another loaded,
loaded rhetorical consumer
survey by Retrevo asked: Are you
waiting for NFC (mobile wallet)
compatibility on the next cell phone
you buy? This survey also incorrectly
suggests that NFC and mobile wallet
are synonymous. Twenty-six percent
responded that they didnt know what
NFC (or a mobile wallet) is and 53
percent said they were not interested
in a phone with a mobile wallet.

DIs definition of a mobile wallet:

store debit and credit card information
on their mobile phone, transforming
the handset into a payment device.
But DI added, wallet
technology would also allow for other

NFC is not
synonymous with
mobile wallet.
content, such as the storage of loyalty
and membership information on the
phone, mobile ticketing, smart poster
ead g, and
a d Bluetooth
uetoot pairing.
pa g
Is it the mobile wallet that 67 percent
were interested in, or simply the
contents, which could all be obtained
without a wallet? Well never know.
Bluetooth posters have been around
for years, without m-wallets. Juniper
Research finds that 4 billion m-tickets

were purchased last year. Thats

without an m-wallet, or NFC.
Companies like Paybox in Austria let
you purchase event tickets using
airtime, from either a pre- or post-paid
account, without NFC.
Bump mobile payment, which ING and
PayPal offer, uses GPS, not NFC,
technology, and could easily be used
to pay for goods and services in retail
ith t an m-wallet.
ll t It could
be also be adapted to allow payment
using airtime as currency.
In the same report, Data Innovation
claimed: the end goal for mobile
financial services is the widespread
availability and usage of a Near Field
Communication (NFC), also known as

Airtime is Money
Sparks Worldwide

including probablies and research

results still tout the Top Two Boxes
instead of onl
only the top one

Perhaps they were not interested in

NFC. Well never know. Worse was
th t the
th only
l other
th multiple
lti l guess
answer available was leading: Yes, I
want to be able to pay for things in the
store with my cell phone, which is not
dependent upon NFC or a wallet. The
no answer had no mention of
payment or NFC; just a mobile wallet.

One thing is clearconsumers in the

U.S. have seen little in mobile
payments thats viable and irresistible,
while Kenyans, Nigerians, and
Filipinos who all use airtime as money
prolifically, have.

Poor research is misleading decisionmakers. But its no worse than

decades of C-suite strategies based
upon on the Top Two Boxes of

What mobile players are missing is that

the mobile phone itself is an m-wallet,
which already has currency loaded on
it in the form of airtime

the mobile phone

itself is an m-wallet,
hi h already
l d h
currency loaded on it,
in the form of airtime.
multiple choice (aka only the answers
weve thought of or we want you to be
able to choose).
Companies who have done analysis
on the research please factor
typically find that fewer than 10 percent
of those who say they Probably Will
dont when the offer becomes
available. And fewer than 85 percent
of Definitely
e te y Will de
te y do
t So
its surprising that critical decisions,
forecasts, and pricing are based upon

Less is more. In economies where

card payment dominates, consumers
show limited interest in opening more
separate payment accounts for each
retailer or channel. The appetite for
another points or discount program is
equally dull.
Like payment vehicles, customers
already have more than enough
points, miles, and discount p
and arent hoping for additional ones.
Online loyalty consolidation programs
(often called e-wallets) like, and Personal Financial
Management (PFM) tools arent
mainstream and havent
haven t driven the
boom in e-commerce, so why would
consumers suddenly want them when
they are offered as a mobile wallet.
One m-wallet (unless its the phone
itself) is unlikely to dominate for the
same reasons that consumers havent
consolidated their financial products

Shoppers ranking of loyalty

relative to other
purchase drivers
Loyalty ranked last

PwC, Experience Radar 2011

Figure 3

with one bank. They like having

different providers for different
financial products. Plus, banks and
MNO have
j i d airlines
i li
d cable
companies on customers we-love-tohate lists after years of poor customer
service and worse customer
experiences, starting with the
phone voice mail
continued use of p
menus. Why would consumers
relinquish power by bundling.
As credit card giants like Citibank have
discovered, there are people who dont
like being programmed with programs,
and are simply not players. They
believe fees and charges are
increased to pay for me-too loyalty
programs and the minority of high
spenders who are able to reap most of
the benefits. Marrying m
payment to a
shopping program has the potential to
divorce almost half the market.

Airtime is Money
Sparks Worldwide

Many think that consumers who have

no interest in clipping coupons will be
i att th
the bit tto collect
ll t and
d sift
through their phones to locate the
relevant m-coupons from every
company who has an m-offer.
Although couponing in the U.S. has
g is driven
increased,, the massive surge
by a small groupthose who were
already heavy users and enthusiasts.
Only10 percent of Americans are
coupon enthusiasts. According to
Nielsen, Just 22 percent of shoppers
are responsible for 83 percent of all
coupons redeemed. Scarborough
Research found that only 11 percent
of households download coupons from
the Internet. Why would m-coupon
behavior be any different?
By drawing correlations to consumer
digital behavior, it seems unlikely that
a shopping program or loyalty program

is going to fuel m-payment for any

particular provider, particularly since
mostt programs are copycats
t off nonmobile promotions, and most
companies offer the same me-too
programs as their competitors.
Just as the desire for m-payment is
d t t d because
it llack
k off
off its
availability and/or awareness, so too is
the desire to use airtime as currency,
but for an additional reason. It can be
illegal to convert airtime to currency or
of most
to use airtime for the p
goods and services. So mobile
users, and certainly mobile agents and
merchants, are unlikely to report they
are breaking the law, even when the
practice is widespread. When Chinas
QQ social networkers became too
boisterous about trading virtual Q
Coins for real goods and services, the
Chinese government cracked down
quickly and harshly.


JVL Ventures, LLC (Isis)

M again. As the chart on page 4

indicates, statistics are also clouded by
ambiguity between m-commerce and
m payment since U
S consumers are
using the same online services to
purchase on their smartphones. Every
two seconds, merchandise is bought
using the eBay mobile app. PayPal
alone scored $4 billion in mobile
payments in 2011 without NFC.
The excitement over MNOs AT&T
Mobility, T-Mobile USA, and Verizon
Wireless forming Isis dampened when
it announced a predictable 3-prong
t t
ll t NFC,
NFC and,
d you
guessed it, a shopping discount
program. Isis recently added
ExxonMobil (Speedpass) and
American Express as methods of
, indicating
g that many
y of the
players agree to layer another loyalty
program on their existing programs.


Airtime is Money
Sparks Worldwide

Does this mean their own programs

arent delivering incremental revenue?
ill IIsis
i diff
ti t th
Trader Joes and Target, who have
extraordinary customer frequency and
net promoter scores, have hardly
suffered by minimizing customer
loyalty programs.
programs Instead,
Instead they
focused on offering exclusive products
and overall superior service.
Almost every study on mobile payment
indicates that simplicity is sought by
consumers while providers spend
most of their time bungling payment
opportunities with bundles of m-wallets
and shopping programs. Simplicity is
the reason consumers use airtime. Its
faster. And time is money.
Unfortunately, most large U.S. mobile
payment initiatives corral around NFC,
missing the short term opportunity.
Informa reported that more than 90
percent of 2011 total global mobile
NFC payments valued at US$2

Simplicity is the reason

consumers use airtime.
Itss faster.
And time is money..
billion are predominantly from Japan
and South Korea.
SMS, USSD, WAP, and combinations
using QR codes, cloud, apps, etc. can


leverage existing hardware and

software. All of the above have
advantages and shortcomings for
value transfer, both as airtime or
y With NFC, one critical
disadvantage is time-to-market.
Since MasterCard invested heavily in
NFC-based PayPass from 2004 with a
contactless card and merchant
hardware, they hoped to absorb that
investment with their mobile solution
PayPass Wallet. In 2009, they also
launched MasterCard MoneySend for
mobile payments, declaring Person to
Person Payments a Promising
Future. The future was short and not
very promising with announcements
that the program would end in 2012.

Although MoneySend (through

Obopay) offered a choice of SMS,
Web, or app interface, cash out at
ATMs, and purchase power at any
MasterCard retail establishment,, it
required the sender and receiver to
both obtain new prepaid cards (another
account) . If only existing MasterCard
cards had been enabled...
NFC and an m-wallet might prevail in
the mobile payments landscape. The
point is, that the preoccupation with
ms and NFC have greatly delayed the
proliferation of m-payment and the use
of money as airtime. As usual, the
customer will win, and Truaxis says
that 71 percent of them want to use
their phones to pay in-store.


Airtime is Money
Sparks Worldwide


Security is not the reason m-payment
and airtime as currency is growing
snails pace. Consumers arent on
board because they havent been
t d with
ith an option
ti th
thatt is
i far

Apparently PayPal, Obopay, MTN,

Orange, Vodafone, Globe, and others
didnt get the memo
memo, because
beca se the
been offering SMS-based money
and/or airtime transfer solutions for
years. In fact, more countries use
text/SMS-based money transfer than
any other method.

cards is illegal. Safety didnt seem

to be a concern when primary banks
t d tto compete
t with
ith other
th credit
card issuers, and stood to make
more than a few extra bucks on the
merchant discount rate...until the
Durbin Amendment put the kibosh
on it.

What is ludicrous is that the same

banks who are screaming that textbased m-payment and airtime-tomoney conversion is a fraud and
risk issue, replaced customers PINbased ATM cards with signaturebased debit cards en masse, using
negative option, even where the
practice of sending unsolicited credit

Consumers were happy to replace

their PIN-based ATM cards and shift
their credit card purchases to debit
cards, despite the fact that a thief who
had their PIN-less debit card numbers
could easily empty their entire bank
accounts in minutes. Consumers
hardly gave a thought to the aftershock
of debit fraud on a bank account,

NFC-based mobile payments

dominate in fewer countries, which
tend to be compact.

easier, faster, simpler, and cheaper

than the way they pay for goods and
Pundits, banks and MNOs argue that
the delay in delivering an NFC solution
is worth it because it is the more
secure than PIN-protected SMS
second generation GSM platforms with
SIM STK identification, ATK
encryption, and air interface
encryption. They claim NFCs risks of
tracking, eavesdropping, skimming...
the list goes on...are supposedly
more manageable or less costly than
other methods.

Innopay Mobile Payments 2010


Airtime is Money
Sparks Worldwide

which could involve opening a new

account, bounced bill payments and
di t debits,
d bit plus
l piles
il and
d weeks
of paperwork before pilfered funds
are reinstated.


Because mobile users are often told
that receiving cash for airtime, or using
airtime to pay for goods and services is
illegal, determining market size is
difficult through surveys. We know
there are far more airtime recipients
than mobile money transfer recipients.
We also know that, in most prepaid
countries airtime sales represent the
largest chunk of MNO profits. Even
among m-remittance customers, the
purchase of airtime from m-wallets
represents a large profit opportunity for
MNOs, cutting out the middleman.

The same whining payment vehicle

issuers in the U.S. didnt convert to
safer EMV chip and PIN cards with the
rest of the world.
Potential providers are spending too
much time focusing on the back end,
and not enough on the customer. It
shouldntt be difficult to communicate to
consumers that a PIN-based mobile or
airtime transaction (which, for most of
the world, would only put the prepaid
balance at risk) is safer than a PINless debit card. Plus, PIN screens, like
th ones on Droid
D id phones
draw a pattern on tic-tac-toe dots
instead of entering numbers, mean you
can enter a PIN in less time than it
takes to put your wallet or phone in
your p
pocket or p
Providers can still put in place the
same type of transaction limits and
parameters that MasterCard has on its
contactless cards, Orange puts on
SMS money transfers, and MTN puts
on airtime transfers. Those who are
succeeding dont see airtime as
currency as an all or nothing solution.
The biggest risks are not longer at the
point of sale, but breaches among
those who legitimately store
manipulate, and utilize customer and
account data.

Figure 4

This whitepaper doesnt aim to

propose the best technological and
security solutions. What it submits is
that the snails pace on mobile
payment and airtime as currency and
consumer concerns about safety as
reported in research have little to do
with security. There are countless
g any
y interface more
solutions to making
secure. If the consumer is never
offered a great reason to change, and
never told how airtime payment
presents an optimal option, the
excuses of convenience and safety
or security
security are what youll
you ll find in top
two boxes of your multiple-guess
customer surveys.

The most frequently stated reason

given for MNOs and their agents
inability to convert airtime to cash is
that this practice would equate to
accepting deposits, requiring a banking
license But prepaid airtime
airtime, if
convertible to cash, might be more

Source: Zain Bahrain


Airtime is Money
Sparks Worldwide

akin to a prepaid debit gift card than a

bank account, since purchased airtime
i often
ft stated
t t d as currency, nott
minutes, on the mobile phone until use.
Laws about cashing out airtime differ
by country, but even if there arent
banking regulations involved, you can
expect a dose of anti
money laundering
laws including those know-yourcustomer statutes, and money
transmission rules particularly for
cross-border transactions. Other
rules involve the frequency and/or
value of transactions.
The trading of airtime for goods and
services would involve another set of
rules. Yet, there are countless
examples of how successful innovators
d tto ttransfer
f value
l around
the myriad of legal mines.

PayPal is licensed as a bank in some

countries, but in the U.S., it is a money
itt The
Th deposits
it it transmits
are held in FDIC-insured banks. While
this solution would not work for MNOs
who sell airtime for profit, independent
agents could be simply transmitting
value. Like airtime,, PayPals
early on believed it would fail because
of its lack of an easy cash-out method.
Like PayPal, airtime could become a
popular online and mobile payment
option. Like PayPal, prepaid cards
and bank transfers could be options for
cash-out. PayPal could add airtime as
one of its currencies by partnering
with an MNO, or offer cash out at
Western Union.
OneBip offers a service to cash-out
cash out
unused airtime. The catch is that, in
addition to the
conversion fee OneBip
charges on volume,
there is also a carrier fee
(OneBip claims the MNO
receives) that can range
from 37 percent in
Singapore to 53 percent
in the U.S. OneBip
makes it clear,
clear like
PayPal, they are not a
bank, merely a funds
payment gateway.
OneBip also allows you
to send cash via e-mail
i airtime
i ti
dit or a
contract phone bill.

GetPoundsBack's PAYG Cashback

service, who didnt t believe that short,
h names were a marketing
k ti plus,
is another UK service that pays about
60p on the pound for airtime, less a

Airtime agents have

been the greatest
6 percent commission, but you may
have to wait 2 to 3 month to see your
discounted balance.
These arent examples of airtime as
currency, because currency needs to
b available
il bl anytime,
better opportunity is for MNOs to work
with banks or obtain banking licenses.
In 2010, Indias Airtel was granted a
license allowing subscribers to load
m-wallets at retailers and make
payments. The next leap would be for
Airtel to be allow subscribers to convert
airtime (which already is an m-wallet)
to cash or to make payments.
In developing economies, cash-out of
nominal airtime value is as easy as
buying airtime through airtime resellers
or agents. Airtime agents have been
the greatest beneficiaries of mobile
users desire to trade airtime. Vouchers
and scratch top up/recharge prepaid
cards are being slowly replaced by


Airtime is Money
Sparks Worldwide

resalable airtime credit loaded directly

on agents mobile phones, aka e-refill.
T tier,
ti master,
t distributor,
di t ib t wholesale,
h l
or head office agents, who e-refill from
MNOs at discounts that range from 6 to
20 percent, transfer airtime via SMS to
dealers, resellers, or other agents, also
called Electronic Voucher Distribution

vendors, who get the lions share of the

discount. Resellers make profit as
soon as they sell via SMS this airtime
to customers.
Vodafone calls this Balance Transfer
Service (a term normally used for
currency), and reports that some end
users have made a livelihood
livelihood from
marking up and transferring airtime to
others although the data are
unreliable, especially since many were
reluctant to reveal figures for an
informal grey market activity.
The grey gets spottier where agents
and resellers buy airtime via SMS from

customers (cashing out) at a highly

discounted rate, and then resell this
time to other customers
lucrative for
resellers in high traffic areas.
The MNO makes a minimal SMS P2P
transfer fee, but no discount or
commission on these sales. While
agents are reducing MNOs
MNOs airtime
commissions, the reverse is also true.
Now that most of the largest MNOs
offer mobile money services with
m-wallets, they aggressively
encouraged mobile users to use those
ll t tto purchase
ttop up airtime
i ti
directly, avoiding voucher distribution
costs and agent discounts. MNOs
offer customers a discount on airtime
that is purchased directly. GSMA

that 19 p
percent of Vodafone/
Safaricom airtime is purchased directly
using cash in the mobile wallet and
estimated that this generated savings
of almost US$13 million. In Uganda,
they estimate that MobileMoney direct
airtime purchases have produced 12
percent of MTNs gross profit.
When airtime agents threatened a
backlash by suppressing mobile
money activities, Vodafone and MTN
relented by offering a 5 percent and 2
percent commission respectively on
mobile money airtime purchases to
agents who registered customers.
Agents dont receive a benefit, while
profit through
g a small
MNOs make p
fee, on P2P airtime transfers.
While the discounts, commissions, and
fees on airtime sales and transfers
have created jobs for hundreds of
thousands of airtime agents and
resellers, and have generated
significant profits for MNOs, this


Airtime is Money
Sparks Worldwide

structure has stunted the development

of airtime as currency. A study of 17
Af i
t i by
b Research
Africa which asked What factors would
make you prefer sending or receiving
airtime rather than cash or transferring
money via banks? found that,
g y, zero transaction costs
were more influential than wide
acceptance of airtime as a form of
payment or safety.
For airtime to be used like currency,
and not simply money, mobile users
might seek a structure similar to credit
and debit cards, whereby:
For the purchase of goods and
services or bill pay, the merchant
absorbs the discount fee, typically
b t
1 and
d 4 percent.
t Th
The user
is not charged a P2P airtime transfer
fee for purchases.
For cash-out or P2P transfers, a
small fee could be charged, as with
ATM withdrawals on cards
cards. On
larger amounts, a percentage
could be added similar to money
transfer services.

or used to purchase goods and

services, cash-in volumes would
increase dramatically
dramatically, dampening
liquidity expenses.
Existing top up discount structures
remain, which are similar to those of
prepaid gift cards, which are often
sold at retail.
Or, like PayPal and bank accounts,
the customer could sweep as
needed between accounts: airtime
wallets and m-wallets, prepaid
cards, or other accounts.
Customers, agents, resellers, and
MNOs can all win under a structure
like this. The more the fee structure
emulates users existing payment
structures, the more likely users will
i i
as currency en masse.
As with the transmission method
(e.g., SMS vs. NFC), leveraging
existing practices is key.

Agents can understand the

commission structure needs to be
different for airtime as cash rather than
for minutes. Most MNOs use their
. agents for mobile money
transactions with lower commissions
(e.g., Globe GCASH offers 1 to 3
percent compared to airtime load at 10
to 15 percent). MNOs need to
emphasize the long tail benefits such
as increased frequency, and later
on, larger transaction sizes, in the
same way that banks encouraged debit
over credit card use.
True Group in Thailand did just that to
switch 80 percent of their airtime
dealers from True Move airtime cards
to lower-commission True Money Cash
Cards that also enabled their bill
pay, money transfer, cable and online
services, Wi-Fi, and gaming. They
convinced agents that theyd receive

While todays cash-out fees include a

substantial fraction to cover agents
costs of maintaining a float (which
can represent up to 30 percent of
intermediary costs), greater
customer volume with higher
turnover would reduce those costs
i ifi
tl F
if airtime
i ti
can be readily converted to currency


Airtime is Money
Sparks Worldwide

more revenue in the future with greater

penetration and frequency by designing
d superior
i product
d t offerings
ff i
for end users.
Customers who used prepaid bill pay
got free access to True Visions cable
TV and, through partnerships, access
to the top online games
games, a huge market
in Thailand. With 25,000 merchants
accepting True Money, TrueGroup
has found a way around regulations
that prohibit e-wallet and m-wallet
money withdrawals.

In a handful of countries where mobile

money transfer already blossomed,
t now earn more revenue from
m-money transactions than airtime
sales. Kenyas mobile money

Because most MNOs

market a parity
service, marketing
strategies continue to
swirl around p
transactions top 2 million per day,
blasting airtime top ups. In the
Philippines, McKinsey reports that,
while the number of airtime top
p ups
p is
almost double money transfers, the
value of money transfers is about
seven times greater. There is no
reason why airtime as currency cant
tell a similar story in improving the
dynamics of agent commissions at the
same time as providing additional
customer benefit.
Because most MNOs market a parity
service, marketing strategies will
continue to swirl around pricing, with
more free airtime promotions and
pressure on intermediaries to cut
commissions. If a 2 to 5 percent
reduction in remittance commissions
would increase formal remittances by
5o to 70 percent (World Bank)
imagine the impact of commission
reduction and tax relief on airtime.


Value added tax is killing the chance
that airtime will be used to buy goods
and .services. Why? Because, in most
countries, the end user pays VAT upon
the purchase of airtime, and may have
to pay VAT again that is included in the
cost of goods sold.
Some governments also throw in
airtime-specific excise taxes. Ghana
has a National Health Insurance levy
on airtime purchase. In Kenya,
governmentt taxes
dd up to
t about
b t 26
percent lumped into the cost of
minutes; in Uganda, a whopping 30
percent. Three Nordic countries
charge 25 percent. Turkey tops the
percent,, according
g to a
table with 48 p
study by GSMA and Deloitte, which
also reported depressed mobile usage
levels correlated to airtime taxes. Post
pay users get whacked as well.
Research ICT Africa proposes several
solutions including tax refunds for
unused airtime upon cashing-out, or
only assessing VAT upon airtime
usage rather than purchase. Where
airtime is represented as currency, the
latter solution seems reasonable.
Despite lost value from taxes, P2P
airtime transfers for small amounts still
exceed mobile money transfers in most
countries because of speed and
simplicity Resolving the tax dilemma
will be a major factor in promoting
airtime as currency.


Airtime is Money
Sparks Worldwide

With 5.9
5 9 billion
billi subscribers
b ib
ld id
mobile phone ownership far exceeds
bank accounts and credit cards. More
than 90 percent of those mobile
accounts are prepaid.
In many of those countries where
prepaid dominates, MNOs offer airtime
transfer services. Some offer mobile
money transfer services. Most
countries prohibit cashing-out of
airtime, although MNOs airtime agents
often provide this service for a fee.
For small amounts, airtime transfer has
been growing in popularity as an option
for payment of goods and services and
P2P payment. Why? Because, with a
mobile PIN,
PIN its fast,
fast safe,
safe and easy,
and it leverages existing behavior and
existing accountsthe prepaid airtime
value (usually stated in currency) or the
postpaid account. In the U.S., which is
largely postpaid/ contract although
shifting toward prepaid, mobile users
texted $30 million in $10 increments to
the Haiti relief effort, which was
charged to airtime bills.

key Group
drivers for airtime to be used
as currency include:
Eliminating additional registration
and long fee menus.
Leveraging existing payment
vehicles, whether the airtime account
or a current store, credit or debit
consumers d
t because
need another financial account.
Eliminating m-wallets, instead
treating the mobile phone itself as
the wallet, because consumers dont
a a
o e e
e- o
or m-wallet.
a e
Not assuming that NFC is better than
SMS, cloud, USSD, or other options.
Unbundling mobile/airtime payment
from loyalty programs, shopping
tools, discounts, and m-banking,
because consumers dont want more
loyalty programs or discounts levels.
Addressing security issues (which
are no greater than PIN-less debit
cards) and consumers concerns.
Collaborating with other parties to
quash legal and tax hurdles.
Creating unique go-to-market
strategies, not focused on pricing.

Sparks Worldwide LLC
ld id
Global Management Consulting
Patentable Product Development
Go to Market Strategy

Babs Ryan
Sparks Worldwide LLC
PO Box 5090
Andover, MA 01810-0823 USA

MNOs with banks should take

off this
hi opportunity
i b
Allowing postpaid users to use their
existing mobile accounts to pay for
more goods and services, like a
credit or charge card account.
Allowing prepaid users pay for goods
and services and cash out
transferred prepaid airtime value.

Beck Diefenbach/Reuters

Paying with PayPal at Home Depot with just

a mobile number and PIN, without NFC.

2012 Sparks Worldwide LLC

All rights protected and reserved


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