NFC gathers momentum with strong endorsement by a large nyumber of carriers

 I have been quite critical of the potential and the likelihood of NFC payments becoming a mainstream solution soon. (Read here and here). I did however say that it is going to require a large eco-system to get established. Many players should agree on standards and start executing on it at the same time.

This seems to have happened in November when the GSMA announced that 45 carriers (and a few handset-manufacturers) have accepted and endorsed the single-wire protocol for NFC phones. (Read here). This is extremely relevant for the NFC industry for the following reasons:

• The common commitment will provide the basis for developers of payment systems to start focussing their efforts around an agreed architecture.
• The fact that phones, processes and systems can now be deployed that will be interoperable and inter-changable, will support a more viable business case.
• Lots of the energy that was spent on alternative solutions will loose momentum.

With these building blocks in place, the grading of NFC as becoming a viable payment technology must be increased with a few notches. While it is unlikely that many of the predictions made by analysts will materialise, we can now safely say that NFC payments will become a reality in the not too distant future.

Great mobile payments and branchless banking Videos - a limited collection

It is often said that a picture paints a thousand words - well if that is the case, I suppose a good video can write a book. In the early days of mobile banking some crude mobile banking video's were made - a clear indication that the product specialists could not describe what they wanted to build to the video producers. But since a few years ago, some brilliant little video-clips were produced - either to advertise a new service or to inform or educate stakeholders. Below are some of the best clips that I know of:

• The first mPesa advert (according to rumour produced on a very small budget). (Watch here)
• One of my favourite adverts, ever, is the one used for the launch of the product (Watch here). Telenor has subsequently produced a few more masterpieces (Watch here and here).
• The documentary produced in collaboration with the Worldbank for Wizzit in 2007 was also one of the great videos (Watch here)
• A delightful little ad (that I really enjoy) was produced for MTN in West Africa in 2010 (Watch here)
• Great Airtel Money ad (Watch here)
• Using local comedians in a series of adverts for mKesh in Mozambique was very successful (Watch here and here)
• A simple, but very cute advert for BSP bank in PNG, was produced recently (Watch here)
• The energy and pace of the Gemalto advert for their NFC product is a lot of fun (Watch here)
• And many others (Watch here, here, here and here)

I am sure that there are many more and look forward to readers of this blog post posting links to others.

The new Visa card for emerging markets - applicable rules for a different market

Digital payments are difficult to deploy in emerging markets where cash-transactions accounts for the majority of payments. Furthermore, it is even more difficult to connect digital payment solutions to global payment networks, like Visa. This is because the rules and regulations controlling global payment systems have evolved with the realities of first world markets in mind.

Deploying these rules in emerging markets are difficult because of major differences in laws, subscriber behaviour and availability of infrastructure. What is needed is a fresh look at the rules that dictate global payment products. To re-think the rules and re-define them in the context of emerging markets.

The new Visa product (mobile pre-paid) (Read here) recently announced attempts to do just that. It is a fully fledged Visa product, but with a re-worked hand-book where the rules have been re-defined to cater for emerging markets. I would not like to comment on how well this has been done, as I am directly involved, but believe that it should be reported on in this blog.

CGAP's rich heritage of mobile banking articles

Few organisations have contributed so consistently towards the establishment of mobile payments than the Consultative Group to Assist the Poor (CGAP). I have written about their efforts previously (Read here and here), but felt that some of the recent articles, as well as their other efforts necessitates a seperate and new blog.


The contributors to the CGAP blogspace have consistenly produced well-researched, insightful articles. The collection of information on this space is probably one of the most comprehensive and best quality in the industry. The fact that the posts now span five years plus and that the editorial intention is to provide accurate information (rather than commercial gain), have made this such a valuable resource. Authors like Mark Pickens, Toru Mino, Sarah Fathallah, Claudia McKay, Prakash Lal and many more, should be complimented on their excellent work. 


Some recent articles that caught my eye were:

• What can we learn from selling soap (Read here)
• The case for more innovation in mobile money and branchless banking (Read here)
• The lurking challende of barnchless banking: Activating the inactive customer (Read here)
• Can mobile be "free" (Read here)
• Boosting the business case for Agents (Read here)
• Interoperability and related issues in branchless banking and mobile money (Read here)

In addition to the blog-space, CGAP also organises the CGAP Microfinance Photography Contest, provides advisory services and are sometimes instrumental in the sourcing of donors and funding. The research publications produced on a regular basis are also of emmense value. I salute everyone working and making a difference at CGAP. 

Digital identification and mobile payments

The fundamental problem with all payment systems is to accurately verify the identification of the buyer. If one can be hundred percent sure that the identification of the buyer is absolutely accurate, one can be hundred percent sure that the payment is not fraudulent. In the physical world this is achieved by verifying physical documentation (for instance ID documents, fingerprints etc.). The problem is of course much more difficult in the digital world.

That is why solving digital identification is almost the same as building a fraud-proof digital payment system. This is emphasised by a recent announcement from Paypal (Read here). In this announcement, Paypal aims to become the custodian for their clients' digital ID's. Similarly, deploying well-designed mobile payment solutions in emerging markets is similar to rolling out robust identification systems. One should consider combining both problems: rolling our national ID systems at the same time as deploying mobile payment systems.

Very positive surveys for Mobile Banking

It is all good and well to talk about a trend based on trivial observations or individual war stories, but trends get substantiated by rigorous research only. That is why one can now confidently proclaim that there is a spectacular growth in the adoption and potential for mobile banking. This is true on the basis of a number of research reports released in the past few months that all corroborate this trend.

Some of the more interesting reports that I have seen are:

• Javeline Strategy and Research reporting a jump of almost 60% in mobile banking take-up, concluding that mobile banking has now moved from a "nice-to-have" to a "must-have". (Read here)
• A McKinsey research poll of major European banks report a jump of more than 50% in banks that are planning to launch some mobile banking application (Read here).
• A Comscore research reports a jump of 45% on a year to year basis of consumers using mobile banking. This now represent about 14% of all mobile users in the US (Read here).
• Both Starbucks (reporting 20 million mobile transactions) and Paypal (expecting $3.5 billion of mobile transactions in 2011) reporting strong growth in their mobile banking initiatives (Read here)

Good news for the industry.

Pacific Inclusion Programme; doing excellent work to bring financial services to the poor

Mobile payments enable the provision of financial services to the poor. It is one of the key building blocks to bring sophisticated financial services to communities that were previously excluded. The low cost of delivery, flexibility and ease of use makes this an ideal platform to deliver these services. As such, we are frequently introduced to amazing organisations working in this industry, making big inroads, often with very little resources.

One such an initiative is the Pacific Inclusion Program (PFIP), an initiative supported by the United Nations Development Fund. It is an organisation working in the Pacific region with the aim to increase access to quality financial services to the people of the region. (Read more here). A very qualified and capable team is working on diverse projects ranging from branchless banking to financial literacy. The team is working closely with central banks and contribute towards ensuring more friendly regulations to facilitate the delivery of financial services to the dis-enfranchised.

It is people like these that are the unsung heroes; working to bring quality financial services to more people and making the world a better place for more.

Different classes of retailers in emerging markets, requires fresh merchant thinking.

Merchants are clearly defined in card payment terminology. A merchant is someone that accepts a card from a client and then initiate a payment request/authorisation. A merchant usually have a relationship with a specific bank (called an acquiring bank) and should have secure infrastructure (terminals) that can accept a card and initiate the authorisation transaction. This model is proven and tested and works well in many markets. Trillions of dollars are processed in this way and these merchants form the foundation of retail economies of the world.

However, in many emerging markets, large volumes of transactions are processed (usually in cash) by retailers looking very different and operating within a very different economic model. These traders often do not do business in permanent structures and work irregular hours and with much more flexible business models. These merchants generally cannot afford terminals, do not have connectivity, nor have reliable electricity available. The needs for reconciliation and cashier management are also significantly different for these retailers.

It is inconceivable that these merchants be served in a model that does not consist of the four parties (as is the case with interoperable, open card payment models). However, digital payment models for this sector (most likely based on mobile phones), will have to be designed with very different liability structures, different fees and less overhead. At the same time, these solutions would also offer less utility and features compared to the established schemes.

The time is ripe for the development and prototyping of these type of payment solutions.

The source of funds dictate the use of mobile wallets

What is of critical importance in making mobile wallets work in emerging markets is making sure that the wallets are properly funded. Getting money into these wallets is a big challenge, especially considering the predominantly cash economies. The boundary between cash and digital currency is often difficult to navigate.

Cash-in strategies at agents, retailers and bank branches (a kind of cash deposit feature) are the most frequently used approach to get money into wallets. Some solutions utilising scratch cards and/or "top-up PIN's" have been implemented with limited success.

Other mechanisms to fund wallets are providing tools to pay salaries or wages directly into the wallets and the distribution of aid or grants. Using wallets to perform these functions are not only cost effective, but also provides the basis to drive secondary transactions. Another source of funds (of course) is remittance flows. While it is often customary to accept remittances as cash payments, it is far better, more secure and cost effective to fund nominated wallets with the remittance amount. This then also could lead to secondary transactions.

It is often those operators that deploy the most effective funding strategies that show the biggest usage.

Mastercard making mobile payment waves

It is clear that MasterCard have taken mobile payments seriously, if the number of initiatives announced during the past period is an indication. As one of the big card payment providers and a major player in payments in mature economies, this is further ratification of the importance of this industry for emerging markets.

Some of the announcements that I picked up on lately are the following:

• Launching NFC based payments in conjunction with RIM's Blackberry and Etisalat in the UAE (Read here)
• Utilising Intel two-factor authentication in conjunction with Symantec to bring more secure mobile payments to market (Read here)
• Talks about launching a MasterCard mobile payment gateway in Indonesia (Read here)
• Making key appointments in Nigeria (some with prior mobile telecommunications experience (Read here)
• Launching a online payment model utilising mobile phones in conjunction with Airtel and Standard Chartered (Read here)
• Application to link a MasterCard number to a mobile phone to perform mCommerce transactions in Hungary with a number of telco's (Read here)

Bill payment integrations to mobile wallets in Africa

Mobile payment solutions cover Africa with basic services including domestic remittances, person to person payments and airtime top-up capabilities. All of these are only possible because of "cash-in" and "cash-out" features installed at agents. Even these are amazing on their own, but these solutions are not constrained by these basic features.

Many examples of integrating mobile wallets with bill payment applications can be found. This is an area that shows a lot of growth. Either deployed by mainstream brands or also by small entrepreneurs, this is an area that requires further investigation. Some examples are the following:

• Celpay (one of the pioneers of mobile banking in Africa) provides payment solutions for multiple billers in the countries that they operate (Zambia, Zimbabwe and Tanzania) (Read here)
• MTN Mobile Money recently implemented a "bulk payment" capability that allows companies to offer new payment solutions. This application is currently utilised most for the payment of salaries (Read here)
• M-Sente (a mobile wallet provider in Uganda) recently announced the launch of MultiChoice payments. (MultiChoice is a regional payTV provider) (Read here)

The rate of innovation and launching new services on multiple live products in Africa is an indication of the health of the industry in emerging markets.