9 things that would happen if mobile money transaction fees were removed.

Here's a thought, 'The removal of mobile money transaction fees would be the most significant decision in Uganda's economic history.'  Why? well here are some things I expect to happen shortly after such a decision is made by the Mobile Money service providers.

Everyone becomes an agent: Today, if you wish to make a mobile money withdrawal you have to find an agent and do the withdrawal through them. However, without transaction fees, anyone with cash and a mobile money account could become an agent. Just make a transfer from your mobile money account to theirs and get cash from them, neither of you loses any value in that. It probably saves both of you a trip to a bank (or mobile money agent).

Everyone starts accepting it as payment:  With no transaction fees paying for a 300shs bubble gum will cost you 300shs. So why not pay for it that way? Similarly, to vendors, it provides much more accountability. No need to worry about employees pocketing cash when there's an electronic account of transactions easily accessible. I wouldn't be surprised if it went so far as certain vendors offering discounts for payments made through mobile money.

Cheap cross-network fund transfers: No transaction fees will make transfers across different mobile money providers also incredibly cheap regardless of what the providers set as their fees. Unlike voice and data services, a cross network relay on mobile money is very easy to implement. Say the providers set high inter-network transfer rates for whatever reason; A third party with two accounts on different networks could then act as a relay at rates undercutting the providers by simply receiving a cross network transfer on one account and then completing the transfer using another.

Mobile Money Providers start to grow off each other: With low inter network rates and no transaction fees, the different mobile money providers will start to grow off each other. Users of smaller networks like orange money will inevitably find themselves receiving transfers from the bigger networks like MTN. This will make those users more active since having money on your phone means you are definitely going to use it. Network effects get amplified as the main reason not to use mobile money (it costs more than cash) gets eliminated.

Providers get a lot more Money: Currently, mobile money is more of a money transfer system than a banking system. With the bulk of the money transferred being withdrawn from the system the same day it is sent. However, without transaction fees, deposits into the system start staying in the system much longer and used for multiple transactions while still in the system. If someone sends you money on mobile money, you would be less inclined go to an agent to pick it up, you'd rather be more inclined to leave it in the system and use it to pay your bills, do some grocery shopping and more, and through all these transactions the money would still be in the mobile money system.

Providers become investors: The mobile money service providers will of course look to invest all that cash sitting in their system. They they could even simply bank it and earn interest. But if banked in Uganda it is likely that this account would quickly grow to be bigger than all the other accounts combined. While banks in Uganda typically have peoples savings, mobile money without transaction fees could grow to have a significant portion of the money in circulation. Consider how much NSSF makes from  investing the 10% compulsory contributions of the small percentage of Ugandans formally employed. Now try picture how much they'd make if they had access to the spending money of even just half of the population with a mobile phone. Telecoms could earn more from mobile money than they do from voice, text and data services.

Growth becomes a big deal again: The telecom companies at the moment seem to have settled where they are, the price wars of the past have cooled. But with no transaction fees it becomes extremely important that they have as much money as possible within their mobile money systems. As a result they will do a lot more to make sure they acquire new customers and that all of their customers are using the mobile money system if possible. With widespread use of mobile money it becomes less important how much airtime they buy and more important that the make as many purchases and accept as many payments as possible using mobile money.

Better Network Quality: To encourage vendors to accept payments through mobile money, the mobile money service providers will have to offer certain service level guarantees to the vendors and their customers. To honor these guarantees, among other things, they will have to implement redundancies in their networks to ensure that their systems are as robust and fault tolerant as possible. Nobody wants to be unable to pay for groceries simply because the phone network is down. It might become necessary for telecom companies to make sure that their Mobile Money system is network agnostic, capable of running on any internet connection.

Banks will fight it: One party likely to be unhappy about all this is the traditional commercial banks. They've already raised some complaints, and should transaction fees be waived these complaints will likely escalate. It is very hard for traditional banking systems to compete with mobile money which without transaction fees becomes even better than a mobile ATM.

The changes that could be brought up by this relatively simple move of eliminating transaction fees are numerous, new businesses such as delivery services will pick up; All that money sitting in the mobile money systems will mean a lot more money available for investments, implying more jobs. this also means effective savings rate of Uganda will shoot up. 

The technical work needed to implement a system at such an increased scale is significant but hardly novel. Parallels could be drawn between mobile money at such a scale and credit and debit cards. They might actually end up being the same in the back end. One thing I believe though, is that the decision to remove mobile money transaction fees will be one of the most significant economic decisions in Uganda's history.