An estimated 70 percent of people in developing countries do not have access to a basic bank account—the challenge of financial inclusion is daunting. Banks hesitate to deploy dedicated retail infrastructures in slums and rural areas, and generally do not see a business case for low-value accounts.

Over the last decade, mobile network operators have stepped in to try to fill the vacuum by offering mobile money services, with varying degrees of success. Unlike most banks, they have a true mass market vocation, well-known brands that are relevant for the poor, experience running extensive third-party retail channels, a deployed base of smartcards (SIM cards) with secure identity elements, and an increasingly ubiquitous mobile network that can be used for remote real-time transaction authorizations and confirmations. Smart Communications in the Philippines was the path-breaker, but Safaricom in Kenya has become the poster child. MTN, Vodacom, Tigo, Orange, and Airtel are all trying to make it work in various other countries.

So will mobile operators sweep up the field? Regulators, for one, may not make it easy. In India and Nigeria, mobile network operators need to operate under the license of a partner bank. Where mobile operators have a freer hand, two issues are dogging existing systems: excessive system downtime and lack of interconnection—that is, the ability to send money to the accounts of customers of other network operators or even other banks. The lack of resolution on both issues makes one wonder whether network operators are taking the mobile money business seriously enough.

Wherever I travel, I hear about unstable mobile money platforms that experience regular capacity issues. (It’s a testament to the strength of the mobile money proposition in developing countries that even a popular perception of unreliability doesn’t seem to derail it.) Of all the hard stuff that a mobile network operator needs to do to pull off a successful mobile money platform, provisioning appropriate telecoms and IT capacity seems like one of the more routine tasks.

The problem is that most network operators underinvested in their first-generation mobile money platforms (which keep a running tab on clients’ monetary account balance). That’s certainly the case if you compare that investment with the amount they have spent on their core prepaid airtime platform (which keeps a running tab on clients’ airtime balance). The mobile platforms that many of them bought were not scalable enough, making them cheap to buy but expensive to grow. And many network operators squeezed suppliers of mobile money platforms at procurement time, and are now finding that suppliers are reluctant to sink more resources in maintaining and upgrading these systems. The situation has gotten so desperate that many network operators are now considering platform switch-overs.

The argument for interconnection of mobile money platforms is based on standard network effects: the value of a payment system grows with the number of people that you can pay to or receive money from through the system. Unless an operator has an extremely dominant position in the mobile telephony market (Safaricom is a case in point), all operators will be better off interconnecting and offering a more compelling service to each of their customers. Job #1 ought to be to create a new market category, not to fight for a slice of something that barely exists. Otherwise, creating the customer awareness and the agent network they need will feel like pushing rocks uphill.

But mobile money managers know that proposing to interconnect with the mobile money platforms of their fellow operators would be a non-starter with their CEO, and that’s because most CEOs are looking at a broader competitive picture where mobile money is just a pawn. For most network operators, the business case for mobile money is based primarily on reducing customer churn by positioning a new sticky service for their customers, and secondarily on brand differentiation. Network operators thus see mobile money as a mere battleground in the larger voice business war, not as a new business line standing on its own merits.

Without a fully reliable service and without the benefit of country-wide network effects, the growth of mobile money will continue to be slow, and the journey will feel painful for most network operators who try it.

So will mobile operators be the white knights of financial inclusion in developing countries? For the time being, it seems that we have to choose between banks that are committed to financial services but don’t believe that serving poor people can be profitable, and mobile operators that serve the mass market but don’t believe enough in financial services to treat it as a core business line. At the very least, I credit mobile operators for provoking banks—and policy-makers—to take a hard look at the 50, 70, or even 90 percent of the population they are currently ignoring.

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