West misses a trick as mobile money takes off

By Georgina Prodhan

LONDON (Reuters) - Mobile operators seeking the "killer application" that customers can''t live without should look again at emerging markets, where mobile money is proving a valuable tool for connecting the unbanked.

Carriers in Africa, Asia and Latin America are finding that offering customers the chance to use their phones to transfer money to family and friends, pay bills or make purchases brings the kind of loyalty that Western counterparts can only dream of.

Although the sums of money involved are mostly tiny, many of these customers have no bank account, meaning their handset is their first and only connection to the financial system, and changing telecoms provider is extremely disruptive.

"Once you get to a critical mass, if you''ve got customers, you''ve got customers for life," Brian Richardson, chief executive of South African mobile banking company Wizzit told an industry conference in Barcelona last week.

Western carriers have largely pulled back from adventurous acquisitions in emerging markets, which became unpopular with shareholders and were then stymied by the global credit crunch.

Instead, seeing the success of Apple''s (AAPL.O) iPhone and fearing the prospect of becoming mere "dumb pipes" for valuable media content, they have become preoccupied with trying to boost profits by driving up data usage in developed markets.

The industry''s hottest M&A news is the $23 billion attempt by India''s Bharti Airtel (BRTI.BO) to merge with South Africa''s MTN (MTNJ.J), while Kuwait''s Zain (ZAIN.KW) blazes an acquisition trail through 24 Middle Eastern and African markets.

Zain has created a multi-national network by scrapping roaming charges across its markets, and is rolling out its mobile-money service Zap across the network, which it reckons will help it double customer numbers to 110 million by 2011.

PAIN LEVEL

In Western economies, using mobile phones for banking seems an obvious next step, but in fact the obstacles are greater as both banks and telcos both want to own the consumer, while the need for new ways of delivering services is not urgent.

"The pain level to move money in developed countries is low. The pain level to move money in emerging countries is high," Eric Duprat, general manager of PayPal''s mobile business, told the conference organized by industry group the GSM Association.

With Internet banking, ATM machines and ample bank branches available in most developed markets, the focus of mobile banking in the West is on near-field communications technology that makes contactless payments possible with the swipe of a phone.

To make this possible, banks and telcos would have to collaborate in an unprecedented way, with each wary of giving up any control over their prized customer base. "I don''t who''s greedier, the banks or the network operators," Richardson said.

Banks such as HSBC''s (HSBA.L) First Direct are adapting existing Internet-banking platforms to make them more suitable for mobile use, for example on Apple''s (AAPL.O) iPhone -- but would ideally do much more.

"We certainly believe that phones could eventually replace credit cards," Jenny Southwell, First Direct''s head of digital marketing, told Reuters.  Continued...