Mobile Money in Emerging Markets: The business case for financial inclusion

Scale, partnerships, and innovation are key to mobile money business

Mobile money in emerging markets

• 20 pages • McKinsey & Company

Meeting the mobile money needs of the unbanked in emerging markets is a vast opportunity. However, firms seeking to tap the mobile money opportunity are faced with a landscape of unknowns. How will the mobile money value chain work in practice? What do we know about consumer behavior? To answer some of these questions, and understand how digital payments providers can capture the opportunities while benefiting those without access to financial services, this report looks at the actual financial data of a sample of mobile money providers, all on a blinded basis. 


Mobile money has dramatically changed the way people do financial transactions for various purposes. The success of mobile money providers across the globe attest to not only its viability and profitability as a business but also to its value to customers, particularly to the largely unbanked populations in emerging countries. This study shows that in order to succeed, existing and aspiring providers need to keep in mind the following:

  • Mobile money providers must achieve scale to be profitable, and be ready for significant long-term investment. Data from existing providers show that the break-even point occurs at USD 2 billion to 3 billion in annual transaction value, corresponding to roughly USD 20 million to 30 million total system revenue. Setting up and maintaining the IT backbone and network personnel, and real estate costs require significant fixed investments, and will only decrease once scale is achieved. Providers must be prepared to invest heavily and with long time horizons; reaching down-market customers may incur higher infra and marketing costs. This presents a greater challenge to small providers, who may need to spend over two times what they earn to be competitive.
  • Sustaining a mobile money system requires diverse and hard-to-develop capabilities. Success in the mobile money industry requires broad marketing and distribution, managing an agent sales force, maintaining systems and performing analytics, rapid product development, and financial intermediation, and no single provider possesses all of these capabilities. Forging innovative partnerships between mobile network operators, banks, IT and internet providers are key to build a profitable and dynamic mobile money system.
  • Successful providers are forward-looking, and keep abreast with current drivers of mobile money. Providers keep ahead by continuously looking out for new and innovative ways to offer financial products and services, and adjacent revenue streams. Mobile money opens opportunities for providers to enhance existing business models and to develop new ones beyond standard digital payments (i.e., data-based financial services, micropayments, and new sharing-economy models like ridesharing, distributor-seller matching).

An increasing number of firms are seeking to tap into the mobile money market, which is a vast business opportunity and also a gateway to greater financial inclusion for many small businesses and households. This study notes the huge number of potential clients in emerging economies—two billion individuals and 200 million small businesses—that lack access to formal savings and credit, and digital finance providers are expected to gain as much as USD 4.2 trillion in aggregate revenues from this market.

This McKinsey study highlights three success factors for mobile money systems: scale, partnerships, and innovation. Scale is key to unlocking profitability in mobile money. Payment systems realize significant benefits only after the network has been established and grown enough to lower marginal costs, particularly in sales and marketing, agent acquisition and management, and cash distribution. Aspiring providers must have a high risk appetite, and be ready for significant up-front spending for long-term growth and market capture. Successful providers draw on their own reserves, find long-term investors, or look to partner. Mobile money providers can seek to develop internally the diverse skillsets needed to sustain and grow mobile money systems (e.g., systems development, product/service prototyping, marketing, distribution, financial intermediation) but, in the long run, will be better off partnering with existing players—banks, agent network operators, internet providers. The study includes cases of bank-MNO partnership, and of an established Internet player acquiring an agent distribution network to illustrate successful partnerships and strategies.

Apart from cash in, cash out (CICO) services, which delivers the highest profit for mobile money providers, adjacent revenue streams from new financial services remain largely untapped. Existing and aspiring providers should look into a variety of business models beyond standard digital payments—i.e., using datasets generated by digital transactions to inform customer needs and credit risk assessments, using mobile technologies to monitor and facilitate loan payments, micropayment services for small and medium enterprises and individual customers, and new e-commerce models like online marketplaces and ridesharing.

As the world becomes increasingly interconnected, mobile money is expected to continuously evolve and flourish, and serve an increasing number of people. Ultimately, the ability of providers to roll out better mobile money services and new adjacent products will depend on how far they are willing to expand their core business, their ability to partner with other industry players, and work around regulatory constraints to affordability and accessibility.