Prepaid is the future of financial inclusion
Rupert Shaw is the chief commercial officer at Ding, a mobile top up and airtime transfer company based in Ireland
Among all the developments in the telecoms sector, the prepaid mobile phone is perhaps one of the most revolutionary. At a time when mobile phones were only to be found in the hands of businessmen, with the bank accounts and debit cards to pay off the monthly privilege of making calls and sending texts, the vast majority of the world’s population could only rely on their landline – that is if they indeed had access to one.
But some time during the 1990s, as the cost of mobile phones began to drop and prepaid contracts were introduced, mobile connectivity became an attainable reality for much of the world’s population. This was perhaps the biggest democratising force the telecoms industry enacted, and it brought new kinds of technology to the masses.
In some ways, the prepaid mobile was one of the earliest forms of financial inclusion, giving access to connectivity to those without bank accounts or credit cards. The simple act of topping up our mobile phones or sending credit to a loved one belies a sophisticated infrastructure that has become fertile ground for life changing innovation.
Because it is not just mobile phones we can top up today, it is debt cards and virtual prepaid cards. We also have the ability to prepay for other services including utility bills, all financial products that bypass the traditional banking system, providing access to anyone with a mobile phone.
The preference for prepaid is particularly visible in regions with low banking penetrations, and this includes the GCC where large numbers of expat labourers still sit outside of the financial system – for them, prepaid is the only way they can communicate with their families, or pay for other services and bills beyond cash.
We recently surveyed 7000 people from around the world for our Ding Global Prepaid Index and the results highlighted the growing importance of the prepaid market.
One surprising result was that Saudi Arabia has the world’s highest prepaid market size, with 95 per cent of those surveyed having engaged in at least one facet of the prepaid market, from sending airtime to paying off utility bills. Overall, the GCC has the world’s most avid users of prepaid mobile phones at 76 per cent, a figure that is especially poignant when compared to a market like the US where just 32 per cent of those surveyed say they prefer prepaid mobile.
Interest in prepaid products has grown across the world amid the uncertainty caused by the pandemic, becoming a preferred choice to budget and control expenses while also enabling wider forms of inclusivity. The democratising force that prepaid has brought to telecoms will permeate other sectors, all underpinned by the ability to pay upfront.
As regulations begin to evolve, we can expect more exciting innovations to emerge in this space, particularly now with the rise of super apps in the region. These platforms, which offer several services on the one app, have incorporated prepaid mobile wallets, allowing their users to not only transfer credit, but to pay for goods and services too. In a cash prevalent society, such tools can be revolutionary and enable digital inclusion among both consumers and businesses.
Saudi Arabia’s recent policy to introduce open banking regulations is a seminal moment in the development of financial innovations in the country. From new means of digital payments, to enabling neo banks that can absorb the large portions of the unbanked populations in the country, Saudi Arabia can lead as an example for other countries to follow in this step towards the fintech future.
We live in a world where there is a large financial gap and this past year has demonstrated the adversities this can inflict on societies. Those with the means - that is access to the internet and financial products and services - have been better placed to weather the uncertainties that came with the pandemic. Those who lost their jobs, or those who fall into the unbanked or underbanked category have struggled and continue to do so. For them, prepaid has become a tool to maintain access, both to communications and financial services, it has also become a way to take control of their budget and expenses.
The opportunities in the prepaid market are not driven merely by consumption, but rather a human need that enables us to communicate, share loving moments and support friends and family whether by sending mobile credit or paying off their bills.