This post was written by Karina Baba, who just completed a summer fellowship with the CGAP Technology Program.

Is mobile money a viable business in its own right? Or will it only make a positive contribution to the bottom line through indirect benefits?

This past summer, we decided to ask mobile network operators (MNOs) directly what they expect from mobile money (defined here as remittances and other payment services via mobile) – Will it make money? When? And what does it mean for their core business? The results provide some of the first insights into how mobile money managers perceive the potential contribution of mobile money to their businesses and how they are selling the service internally.

We surveyed over 20 senior managers from some of the major mobile network operators in over 15 markets. 64 percent of the respondents launched mobile money in the past year. 70 percent claim to already reach over half-a-million customers each with transfers or bill payments or both.

Here are some of the highlights from the results:

Will it make money?

• Considering mobile money on its own as a source of revenue, about 70 percent of the managers who responded agree to a certain extent that this service will be a significant source of revenue for MNOs, making large profits over time. A majority of the respondents view mobile money more as a new source of revenue (63 percent) than as a strategy to acquire new customers (50 percent).

• Most mobile money managers expect mobile money to contribute to 30 percent of the overall revenue of the MNO in eight years with the mobile money business seeing positive cash flows within three years. All but one respondent expected that mobile money would make at least 10 percent of overall revenue and it would take five years to achieve that goal.

Will it make money on its own?

• Only 9 percent of MNOs believe mobile money doesn’t need to be self-sustainable. However, mobile money managers expect the business case for mobile money to rest as much on direct revenues as indirect revenues (indirect revenues largely referring to cost savings from selling airtime via mobile money and from the reduction in customer churn). When asked to distribute points among all benefits based on importance to the business case, direct revenues, reduction in cost of sales and reduction in churn received roughly the same amount of points each.

What can be done to improve profitability?

• Mobile network operators gave roughly equal importance to restructuring agent commissions as to renegotiating technology platform costs as ways to improve the profitability of the mobile money business. Getting agent commissions right is central to the mobile money business but the importance given to technology was a bit unexpected. It is possible that mobile operators, as technology intensive companies, may not be comfortable with outsourcing technology.

In summary, mobile money managers expect mobile money to be a major source of revenue and to make money on its own. But it will be a number of years before it can contribute in any notable way to the overall bottom line of the MNO, and the business will need help from indirect benefits. You can download the full results of the survey here.

- Karina Baba