In this paper, the authors examined the effects of platform interoperability on competition and financial inclusion in Africa. In particular, they studied interoperability among mobile money operators, a mechanism that allows users to transfer money between different mobile money providers and across mobile networks. The analysis began with a new dataset of mobile money fees charged by 129 operators across 42 countries in Africa. The authors collected this data from archived webpages from the years 2010 to 2020.
Dr Brunnermeier and his colleagues found that the introduction of interoperability into a district tended to increase competition among mobile money operators. This was associated with a decrease in transaction fees, particularly for the smallest transactions, which make up the bulk of usage.
However, mobile money companies and mobile network operators are typically vertically integrated. Thus a decrease in fees collected sometimes resulted in a decrease in network coverage. This is because mobile network operators re-focused their resources on areas where they could monopolize the mobile money market. Thus the benefit to consumers of lower fees that can come with interoperability may be offset by negative effects on mobile network coverage. Hence, the authors suggest policymakers must seek “to strike a balance between competition and financial inclusion in the mobile money market.”
This is a summary of a paper by Markus K Brunnermeier, Nicola Limodio and Lorenzo Spadavecchia; published as a working paper by the National Bureau of Economic Research (NBER); September 2023; 95 pages; available at https://www.findevgateway.org/paper/2023/09/mobile-money-interoperability-and-financial-inclusion.
By James Stevenson, Research Associate
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