Banking on “Mobile Money”: The Implications of Mobile Money Services on the Value Chain

Abstract

Problem definition: This study examines the effects of mobile money on the value chain, that is, mobile network operators (MNOs), banks, and end users. Mobile money is an innovative technology that is bundled with related services and is designed to provide cost-efficient financial inclusion for underserved populations in the developing world. Academic/practical relevance: By studying the interaction between mobile money value chain structures and service bundle compositions, we expand our understanding on value chain revenue allocation mechanisms in developing economies. This study provides a valuable foundation for practitioners to better coordinate the value chain and facilitate sustainable growth of mobile money services. Methodology: By combining proprietary and public data, we assess the impact of launching mobile money and the potential asymmetric effects of credit payments on the performance of the value chain. We identify control groups by using propensity score matching and estimate a quasi-experimental difference-in-difference regression. Results: We find that the launch of mobile money has had a positive effect on the performance of the value chain, consisting of old, poor, and undereducated populations. However, although some bundled, complementary services, such as credit payments, benefit participating banks, they may be associated with lower MNO profits. Moreover, the effects of mobile money on the value chain remain positive and stable over time, whereas the effects of credit payments are stronger over time. Managerial Implications: Findings suggest that MNOs and banks should be encouraged to launch mobile money and expand the customer base to old, poor, and less-educated members of the population. Certain services such as credit payment may yield asymmetric benefits such that banks could consider compensation mechanisms for the MNOs. Policy makers in developing countries should encourage coordination and promote a fair distribution of benefits between the two partners to sustain the growth of mobile money services. The online appendices are available at https://doi.org/10.1287/msom.2018.0717 . This paper has been accepted for the Manufacturing & Service Operations Management Special Issue on Value Chain Innovations in Developing Economies.