Arabian Gulf phone companies are racing to deliver better mobile money services.
The UAE-based operator Etisalat plans to offer its own mobile money service, Flous (money in Arabic) in all 15 of its markets. Flous enables customers to pay credit card bills, pay for parking or tickets and buy other services from the operator. It works across a range of connected devices and not just telephones.
Most recently the company launched Flous in the west African nation of Togo, working alongside local banks and MasterCard. It is already available in Egypt.
"We are currently in the process of rolling Flous out throughout our global footprint. It is a service that enables customers to use their mobile phones for a wide range of financial transactions … and it is bringing banking to the unbanked," an Etisalat spokesman said.
Before the end of the year the worldwide mobile payment transaction value will surpass US$235 billion, according to Gartner.
Currently the Middle East's share of this market is minimal, but it is expected to grow at a compounded annual growth rate of 80 per cent until 2017, when it will be worth $27.6bn.
Almost 90 per cent of these transactions will be remittances from expats.
While bank account and credit card penetration exceeds 70 per cent in the UAE and stands at similar rates across the GCC, large immigrant populations are spurring mobile payment transactions.
"In the GCC there would seem to be quite good prospects for mobile money transfer services that allow expatriates living and working in the GCC to remit money to their home countries," said Matthew Reed, the principal analyst at Inform Telecoms and Media. "Those remittance services might be of particular use to people who do not have good access to conventional financial services. More broadly in [the Middle East and North Africa], the combination of rising mobile phone penetration and underdeveloped financial services also creates potential opportunities for domestic-focused mobile money transfer services."
Mobile penetration has reached saturation point in most markets, making them a viable platform for mobile payment services not just because of their reach, but because they incur lower costs when compared to traditional banking services. For many they have become a vital way to transfer and manage money.
"In the GCC, Qatar seems to have gone furthest to making these services available, with both Vodafone Qatar and then Ooredoo having introduced mobile money transfer services with a focus on remittances," said Mr Reed.
Ooredoo, the Qatari operator, has MoneyGram. Using SAP's mobile platform, MoneyGram enables customers to transfer funds via their phones and tablet devices.
"With the global economy increasingly becoming a mobile economy, consumers require convenient access to transaction channels, anytime, anywhere," said Matthew Talbot, a senior vice president of mobile commerce at SAP. "The [service] expands the mobile money ecosystem, creating more reach for operators to better serve their customers and help drive the adoption of mobile payment services, particularly in regions with large numbers of underbanked subscribers."
Despite the expected growth, Mena mobile payment transaction will account for only 4 per cent of global mobile transactions in 2017.
"Conceivably there are opportunities in more developed markets in the region for more complex mobile money services such as m-commerce and mobile advertising, though progress has been quite limited so far," said Mr Reed.
The region accounted for 6 per cent of global smartphone shipments last year. But less than 0.1 per cent of mobile advertising is coming to the Middle East, according to Deloitte's most recent telecoms, media and technology predictions report.
A lack of regulations and dedicated services is holding back development. In a bid to overcome this, the Central Bank of the UAE has agreed to a road map with banks and telecoms companies to develop a common payment system in the country and improve mobile banking services. The Telecommunications Regulatory Authority has also set out clear policies for certification to encourage electronic and mobile commerce in the country.
With near-field communication technology in smartphone and a more robust regulatory system in place, it may not be long before phones replace credit cards and even cash one day.