Churn Reduction Often More Valuable Than Direct Revenue

Not many mobile or fixed network service providers are likely to make huge amounts of direct revenue, or profit, from mobile banking services. Instead, value is going to come from indirect mechanisms, such as reducing churn.

The total transaction value of mobile financial services in emerging markets (including domestic money transfers, deposits on loans, insurance products, and savings accounts) will approach $500 billion in 2021, up from an estimated $198 billion in 2016, according to Juniper Research.

The Telenor Suraksha life insurance offer in India, for example, has seen nearly 50 percent of its 45 million user base sign up since its December 2015 launch. That might help with customer acquisition, but it certainly will help with retention.

Decreasing churn by one percent can yield a revenue improvement of 0.6 percent to 0.8 percent, some argue.

So churn reduction might yield more benefit than direct mobile financial services revenue. Retaining a single voice customer in a $7US ARPU market with three percent monthly churn would preserve approximately $250 in lifetime value.

To generate the same amount of revenues from a mobile money user would require the user to conduct transaction value of  $350 every month for three years (the average lifetime of a voice customer) and pay the operator two percent in fees.