Dates in the desert
While sceptics would caution that the corner may in fact be a little farther than thought, the advent of 3G, and now HSDPA, has provided users with connectivity to faster networks with increased bandwidth – making the idea of mobile banking and surfing on the Internet much more feasible. And statistics from IT research group Telecoms Trends International on uptake of m-commerce are at least encouraging.
The number of m-commerce users is expected to grow to 1,67bn next year from 95m users in 2004. Globally, revenue is anticipated to grow to US$554bn in 2008 from $6,7bn in 2004. Though Asia – particularly Japan – North America and Europe are leading its adoption, the largely untapped Middle East is fast becoming the preferred destination of vendors keen to cash in on the boom, with the countries leading in that region being Saudi Arabia, Kuwait, Qatar, Oman and the United Arab Emirates (importantly, Dubai).
South African technology group Fundamo – part-owned by VenFin and Sanlam, and most recently in the news after it received a R36m cash boost from HBD, the venture capital group owned by billionaire Afronaut Mark Shuttleworth – has set up base in that region to tap in on the m-commerce uptake.
Among Fundamo's high profile clients is MTN Mobile Banking – the joint venture between cellular group MTN and Standard bank – to which it provided the technology used in facilitating mobile banking transactions.
Reg Swart, Fundamo's regional executive for Africa and the Middle East, says it chose the Gulf region as a key area for expansion ahead of the more traditional European or Chinese regions due to its exceptional economic performance over the past four years.
Says Swart: "Research we've been conducting over the past two years on the Middle East gave us some important key indicators. There's high mobile penetration and SMS adoption, driven by the region's high GDP and a strong financial services sector."
More importantly, Swart says, is that mobile commerce in the Gulf was still in its infancy. "The market remains fairly untapped, with fewer vendors vying to have a share of this growing sector." Although Swart is guarded about details, he confirmed that a deal with one of the region's established banks is on the cards. "Just one deal is enough to open up a lot of opportunities."
Dubai – fast becoming the region's preferred investment destination – is spearheading the region's massive economic uptake. The Gulf's mobile penetration growth rate has averaged 7% to 10%/year. For example, in Kuwait penetration currently stands at 96%, Qatar 81% and Bahrain at 173%.
A characteristic of the region that easily enables uptake of m-commerce applications – including mobile banking – is that its 18m subscribers travel a lot throughout the region. So "roaming" conditions agreed upon by local mobile operators should empower users to conduct mobile banking transactions from anywhere with the region.
Islamic banking institutions in the Gulf have been posting double-digit growth figures. New banking institutions to address that growing market are opening almost on a daily basis.
Says Swart: "The emergence of new banking institutions in the region gives us options on who we should partner in service provision. Whereas the entire Gulf region is experiencing an economic boom – driven chiefly by spoils from petrol dollars – Fundamo is focused mainly on establishing a foothold in Saudi Arabia and the UAE. Together, those two countries account for 77% of the Gulf's IT expenditure – estimated at more than $5bn/year."
Despite the lure of easy money, the Middle East isn't known for being an investor friendly destination. Thus the prospect of doing business in a country where rights to ownership of a business aren't entirely protected by legislation could prove unsettling to executives accustomed to autonomous control of a business.
Though Swart acknowledges it's a challenge, he's quick to caution SA companies contemplating breaking into that market to partner local companies. "It all depends on how you go about it. Just as in SA, every country has regulations that investors must comply with. And the Middle East is no different."
Finweek
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