Mobile Money: The Effect of Service Quality and Competition on Demand

Determining factors that drive or dampen the demand for mobile money transactions
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This paper introduces mobile money and explores the effects of competition and service quality on its steady-state demand. It enquires into three dimensions of service quality: service reliability, pricing transparency, and agent expertise. The research is based on a combination of agent networks and demographic data sources from Kenya and Uganda and an in-person survey of over 4,400 mobile money agents operating in the two countries. It finds that an agent’s reduction in steady-state demand for stocking out of cash or e-float is economically and statistically significant. Moreover, agents who are more transparent with transaction pricing and agents who are more knowledgeable experience relatively greater demand. The paper covers the following sections in detail:

  • Discussion on the scope of the study and review of relevant literature;
  • Mobile money’s history, impact, and implications;
  • Mechanics of a mobile money transaction and challenges and opportunities;
  • Hypotheses development related to service quality and competitive intensity;
  • Data and empirical specification with a focus on agent network survey, spatial census of financial access points, high-resolution spatial demographics, and econometric specifications;
  • Results with a focus on the effects of service reliability, pricing transparency and agent expertise, and competition on mobile money steady-state demand.

About this Publication

By Balasubramanian, K. & Drake, D.F.