Mobile Money and SMS services
- PaygOps
- May 17, 2021
- 9 min read
Updated: Mar 7
How much does it truly cost?
This is the second piece in a series of articles by PaygOps -and guest contributors- on TelCo.
Introduction
Across emerging markets, millions of people living in rural areas are still lacking access to essential services i.e. lightning, drinking water or healthcare as they live miles away from the nearest city. Indeed, they suffer from poor infrastructure (often lacking tarmac road or electricity access for instance) and thus collecting payments in cash for a service is also a struggle that contributes to their isolation from a range of offerings such as prepaid energy or prepaid water services that are only available in cities; or from other types of offers such as essential products sold in a leasing model (solar home systems, water pumps, other solar appliances, among others...). Last-mile distributors serving these isolated communities face two challenges to be able to scale up their impact.
The first one is related to the collection of payments: how can they collect the payments from underbanked people without having to regularly send agents to each individual household of the hundreds or thousands of clients they have? Mobile Money (MoMo) has been a cornerstone of last-mile distributors’ strategy to reach households in hard-to-reach areas and therefore enabling them to scale their operations faster.
But if MoMo solves the first challenge, its implementation brings an additional challenge to last-mile distributors: with the double impact resulting from such payment mechanisms and customers moving away from traditional retail to adopting a payment method based on the payment of multiple instalments, the IT/payment infrastructure of last-mile / PAYGO operators becomes more complex as ideally, they have to use a platform (CRM or Paygo software) that needs to be integrated with a Mobile Money provider and SMS services. These are the Telco Integrations, which allow distributors to automatically manage mobile payments and send automated SMS with the code to activate a PAYGO device, with the confirmation of the payment and to seamlessly engage with the customers through text messaging.
Last-mile and Paygo operators often struggle to have an exhaustive breakdown of the costs of these integrations and thus have difficulties doing a more precise budget.
By reading this article, last-mile distributors will have an overview of the costs associated with the Telco Integrations (both MoMo and SMS). The concepts presented in the Tables of Prices are described below:
Types of Integrations
1. Direct Integration or Full Telco Integration
Integration between the Paygo platform and a specific Telco in a specific country. The integration is done via the API documentation of the Telco and requires an agreement between the distributor and the Telco. This agreement allows the distributor to access and use Telco's APIs. This is usually a contractual agreement that may take several months to be approved as it requires complex compliance and administrative procedures that the distributor must face (Recommended article: Why Telco Integrations Can Take Time).
2. Basic Telco integration through an external application
There is the possibility to use an external application such as Telerivet and SMS Sync as an intermediate tool between the distributor’ customers and their Paygo platform. These external apps are downloaded in a smartphone that will remain in the main office of the distributor (with some data and internet connection) and will be integrated with the Paygo software, being capable of receiving Mobile Money Payments, sending the notification of the payments to the software and then receiving the SMS information with the activation code or payment confirmation from the Paygo software, and sending then this information to the customer via SMS. For each Telco provider, an individual Basic Telco Integration needs to be done. As in this situation, the distribution does not need a contractual agreement for the use of the APIs with the Telco, setting up this Basic Telco Integration may take a few weeks to be operational.
3. Integration through an aggregator
On the other hand, a Paygo operator may want to give his customers the ability to send him messages and collect payments from multiple networks. He will therefore connect a Paygo platform to an “International SMS service provider” (such as Africa’s Talking) or an “Aggregator” (such as Beyonic and IPN Hub).
In the case of SMS Integrations through an aggregator, there are 2 possibilities: to have a dedicated short code or a shared short code.
The dedicated short code is typically a 3 digit phone number that will immediately send a request to the specified application. These are the easiest for users to remember but are the most expensive for distributors because there is a finite number of them available.
A shared short code is when multiple different applications (distributors) use the same one dedicated short code and then each of them gets a “channel” which consists of adding some digits to the end of the dedicated short code, making it longer and thus more difficult for the distributors’ clients to remember; but less expensive for distributors as there are plenty of numbers available.
IoT services
In specific situations where there are needs to monitor solar power production or battery storage, distributors may also require additional IoT services to services consisting in data transfers from a connected device to an IT infrastructure.
By reading this article, last-mile distributors will have an overview of the costs associated with various services offered by mobile network operators. This will enable them to get a full picture of the venture they are jumping into. Taking the examples of Kenya and Uganda (for mobile money), we highlighted below the estimated pricing information we collected regarding the services described previously.
Disclaimer: The information below is only applicable to distributors operating in Kenya and Uganda.
For more detailed information on the costs of Telco Integrations and Paygo software management, we invite you to use our Pricing Simulator tool.
SMS Integration*
(All the costs are provided in $USD Dollars).
Mobile Money Management
From the tables above, it can be concluded that for Full Telco Integrations, the initial set-up of the integration can take several man-days and thus IT consultants doing the integrations can charge different prices according to the estimated number of days of work. For the specific prices for each SMS sent/received and the mobile payments transactions, the pricing disparity among various operators really stands out: For SMS services the costs are typically minimum $0.005USD and maximum $0.2USD. For mobile payment transactions, the fees can be free for the smallest transactions (up to $0-46USD to $0.91 USD) or have a cost up to $1.92USD for the most expensive transactions. There is not a standard of the fees, it depends on each operator and each country and thus the distributor needs to consult this directly with the MoMo provider. Running costs vary by country and according to the volume of SMS sent.
For Basic Telco Integrations, the cost of the initial set-up may vary depending on the IT company in charge of doing the integration, but it is usually offered for free by PAYGO software providers. Then, the distributor has to pay the costs associated with the SMS sent to the customers and to the SMS received to the phone with the notification of the mobile payment. In this case, the costs of SMS vary depending on the operator going from $0.005USD to $0.2USD approximately.
When the Mobile Money Integration is done through an aggregator, the cost of the initial set-up may vary depending on the IT company in charge of doing the integration, but it is usually offered for free by PAYGO software providers. For SMS services, the distributor pays the cost of SMS which is usually low compared to Full Telco and Basic Telco integrations; and for the short codes the distributors pay directly to the aggregator the setup costs and the monthly maintenance. The monthly maintenance depends on the country legislation and on each Telco legal and administrative fees.
For Mobile Money through Aggregators, distributors pay typically a monthly fee to the aggregator (a fixed fee per month or a percentage of the total of the transactions per month).
An example of a user case
Cynthia is the CEO of Light all World (Fictitious company), a last-mile distributor based in Uganda that did a pilot installing 200 SHS to validate the interest of the communities they are targeting in purchasing the devices they offer. Now that the pilot has been successful and the interest has been confirmed, they obtained funding to install 2000 systems in the first year and in order to reach this goal they want to offer their customers the possibility to pay through mobile money the monthly instalments and also send payment reminders via SMS. They have already chosen a software provider for their Paygo platform and now they are thinking about how to integrate it with Mobile Money and SMS services (Telco Integration).
These are the options they have:
1. As they have less than 2000 systems, they could start with a Basic Telco Integration (using Telerivet, for example), which would allow them to receive mobile money payments and send automated SMS. The costs and timeline for setup would be as follows:
Integration of Telerivet with the dedicated distributor’s Paygo platform: The integration can take from 3 to 15 days. Usually the Paygo software does the integration at $0 cost.
No recurring or maintenance costs.
Between $0.005 and $0.2USD per SMS (depending on the operator). Light all World should take into account that they would have to pay minimum 3 SMS per client per month (one SMS for sending the payment reminder; one SMS for receiving the Mobile Money Payment notification; one SMS for sending the payment confirmation and the code to activate the device).
2. They can opt for a Full Telco Integration (Direct integration with the Telco via the Telco’s API). If Cynthia decides this option, Light all World will need to have a contract with Telco in order to have access to the use of their API. She could start with the Basic Telco to have an operational platform soon enough and in the meantime do the compliance process to have the contract with the Telco. The timeline and costs of doing a Full Telco integration would be as follows:
Integration between Telco and Paygo platform: 3-6 man day. The costs are usually between $2000 and $4000 USD, although Paygo platform providers may offer the integration for free in selected countries.
A fee per mobile money transaction between $0.06 and $1.92USD (depending on the value of the transaction and the Telco provider)
Between $0.005 and $0.2USD per SMS (depending on the operator).
3. The third option Cynthia could choose is doing the integration between the Paygo platform and Mobile Money / SMS through an aggregator. Usually, Paygo platform providers have agreements with aggregators to be able to speed up the integration process and offer the initial set-up for free. If Cynthia chooses this option, then she would have to choose between having a shared short code account or a dedicated short code account for mobile money payments. With the shared account, her customers would share the USSD menu with other distributors, having a specific channel that differentiates them from other distributors (the number to be typed by the customers would be longer). While with a dedicated short code account, Light all World would have a shorter dedicated number.
The prices of doing the integration via aggregators would be as follows (in the case in which the SMS integration would be done via Africa’s Talking and the Mobile Money via Beyonic):
Initial setup of the integration is usually provided at $0 cost by PAYGO software providers.
If Cynthia chooses the dedicated short code option, she would have to pay Africa’s Talking a deposit of $91 USD and a monthly maintenance fee of $137 USD per Telco.
If Cynthia chooses the shared short code option, she would have to pay Africa’s Talking a one-time fee of $46 USD and a monthly maintenance fee of $18.21 USD.
The cost per SMS would be around $0.005 USD (usually aggregators charge less for bulk SMS).
For the Mobile Money integration with Beyonic, the initial setup of the integration is usually provided at a $0 cost by PAYGO software providers.
She would have to pay Beyonic up to 3% of the total money collected per month and $0.07USD per transaction.
For more information about Telco services (SMS and Mobile Money integrations) in relation to Paygo operations, go visit our dedicated page.
To know how much PaygOps costs, visit our simulator page and engage with our team to discuss further via our Contact Page.
1. BFA Global (2018): “Serverless USSD with Africa’s Talking”, https://medium.com/f4life/serverless-ussd-with-africas-talking-62c97ef91fdd
3. Twilio Pricing: https://www.twilio.com/sms/pricing/ke
About PaygOps:
We empower suppliers of essential products and services with flexible, inclusive IT solutions that amplify their mission to serve the unbanked worldwide, even in the most remote areas. PaygOps seamlessly integrates with enterprise applications, payment systems (Mobile Money), and API services, enabling the smooth management of lease financing (for both Paygo and non-Paygo products) and operations across key sectors including solar, agriculture, clean cooking, access to water, e-mobility and microfinance. Designed for modularity and interoperability, PaygOps simplifies access to credit, streamlines distribution, and provides investors with critical financial data and insights.
