Prosperous 2008

Just a thank you for every-one that has made some time to read my blog during the past year. Thank you for bearing with me and some of my wayward ideas. I also appreciate all the feedback and comments. Also thank you for referencing this blog on others. I am humbled to see what great entries on mobile banking are published on the other blogs in this space. See the links on the side (all worthwhile reading).

Anyhow, wishing all of you a prosperous 2008. It is (no doubt) going to be an amazing mobile banking year.

A new record!

Today's Google Alert for "mobile banking" delivered 29 hits. This is by far more than what has been delivered to me in the past. Although not a direct metric of mobile banking take-up, it does indicate an fast growing interest in mobile banking. Much more people are talking and writing about it.

Three rules to defend against e-Fraud

After having read my previous blog-post, I realised how scary it can be for un-informed people doing their banking in the electronic world. I thought one can make it simple by giving three simple rules to consumers that will make banking much safer. In my view these are:

1. Never write your passwords, PIN's or any security information down. Make sure that no-body can see this information or steal it in any way. When you feel that this information has been compromised, contact your bank or log on to the website or mobile phone and change the secret information to something else immediately.

2. Never communicate with your "bank" via a mechanism or channel that you are not fimiliar with. If your "bank" phone you or send you an e-mail or SMS requesting you to give security information, don't do it. Rather contact your bank via channels that you have used before (a known website, a known telephone-number or menu on your phone) to check this unsolicited request.

3. When your phone dies unexpectantly, phone your phone from another phone. If your number rings and it is not the phone in your hand that rings, chances are that your SIM has been swapped illegally. Phone your mobile Operator and report your phone as stolen so that they can switch it off immediately. Even if this does not stop a bank fraud, at least it will stop some-one calling on your account.

As with anything in life, safety is common-sense. People feel safe in their houses only because they know that they must lock-up at night. People feel safe in their cars, because they put on safety belts.... to feel safe in doing banking remotely, one must stick to a few simple rules.

Another SIM swap fraud

I was phoned by one of South Africa's popular radio hosts (Bruce Whitfield) on 567 Cape Talk on Friday to ask my opinion on another recent fraud perpetrated by means of swapping the SIM of the target account holder (See story) (Transcript of the call). It is of concern that these incidents are creating the perception that mobile banking is not safe, as it does not have anything to do with mobile banking.

In order to explain this statement, I need to describe how South African banks have improved Internet Banking by utilising an additional channel to improve the security of sensitive transactions. Most South African banks enable customers to log into their Internet banking websites in the acceptable ways through entering Username/Account-number and a secret password. Some have even improved on this by utilising soft-keypads (to counter key-logging attacks) and partial passwords. Typically this would be viewed as "strong-enough" security in most places in the world.

However, most South African banks have improved on this security by also sending a one-time password to a client's mobile phone for sensitive transactions (e.g. registration of a new beneficiary). The client is then required to enter this one-time password into the Website. This is an ADDITIONAL security mechanism for Internet Banking.

If the passwords of a victim were compromised (either by means of phishing, resetting or physical stealing), a fraudster would have been able to commit a fraud in most other countries. However in South Africa, the fraudster is now also confronted with the need to have access to the one-time password that will be sent to the victim's mobile phone. It is in these instances that an illegal SIM swap is performed to get access to the one-time password.

This fraud is solely to perform an Internet Banking fraud and has very little to do with mobile banking. We at Fundamo have deployed more advanced functionality that would have countered even these types of frauds which I will not publish. What we have deployed for one of our clients is a feedback mechanism from the Mobile Operator that would render the sending of a one-time password temporary suspended in the case of a SIM swap. The customer is then required to confirm the SIM swap with the bank first (via other security mechanisms), before the transaction can be completed.

More evidence of traction

According to a number of press releases today, Bank of America have reached 500 000 subscribers to mobile banking within five months. Amongst others, the story wqs picked up by CNN. I am of the opinion if this was the case with any other product launched by the bank, everybody would hail it as a big success. I looking at Bank of America's mobile banking offering, a number of things struck me:

• A link to mobile banking can be found on the Bank of America home page. This is an indication that they view mobile banking as mainstream.
• They have registered a .mobi domain-name (www.bofa.mobi). No sense in doing this, if you don't view it as important.
• They spend a lot of effort to demonstrate the solution, by making use of the media, special blog pages, videos etc. At least they understood that the public would only respond if told about things... and it seems as if they were right.

Now they just need to improve the offering with more innovative services.

Secure Mobile Banking

The perception still exists that mobile banking transactions in Africa is based on low security SMS technology in the clear. Nothing can be further from the truth. All of the more serious mobile banking security deployments (MTN banking, Celpay, 121Cellmoney, mPESA, MODE) are much higher than most other payment solution. The advantage of the deployments on mobile phones is that you can design extremely secure transactions. This is achieved by making use of the crypto keys that are resident on the SIM card in GSM phones. In our solutions, we employ many innovative designs to ensure very security solutions:

1. All messages are encrypted on the phone using the keys on the SIM with 3DES encryption algorithms. This is application-based encryption - not just carrier encryption.
2. All messages on GSM networks are compressed and then encrypted again using GSM protocols (every message is thus encrypted twice)
3. The PIN entry is accepted by a special program resident on the SIM card (impossible to replace with Trojan horses or Phishing attacks).
4. The PIN is never stored, it is encrypted on the SIM card according to Banking specifications. (As a matter of fact, Fundamo technology was the first to be certified by Mastercard according to PPED specifications for banking transactions)
5. Each payment message is MAC'ed with a special tamper-proof algorithm, that protects against Man-in-the-middle attacks and possible re-playing of messages.

By the way, the biggest transaction value on our solution was a business to business payment of more than US$ 50 000. This will never be possible with SMS's in the clear.

Research confirming growth in Mobile Banking

Recent research released in South Africa by World Wide Worx, have some very interesting findings about Mobile Banking in South Africa. The advantage of this research is that it has been conducted for the past three years. Clear trends can now be formed comparing the findings of 2005, 2006 and 2007. The results show an explosion in the usage by end-consumers of mobile banking. In this survey the number of respondents that have used mobile banking during 2007 have jumped to 17% (from 8%). In addition the research found that more than 50% of respondents plan to be using mobile banking by 2008.

However, the most interesting result of the research (which also tracks other services delivered via mobile phones) is that mobile banking is by far the mobile service used by older people. According to the research the likelihood of using cellphones for banking services increases with age, in contrast to the usage of other cellphone functions going down as users get older. For instance, urban cellphone users aged from 46 to 55 years are twice as likely to use cellphones for banking as those in the 19 to 24 age group.

I think some analysts might want to take notice of these findings.

Qualcomm investing in GSM technology

This was a major announcement last week and quite a surprise to every observer of mobile banking: Qualcomm intends purchasing Firethorn for $210 Million. In looking at this announcement many questions will probably stay unanswered, but it is still good fun to ask them:

1. On what basis did Qualcomm get to a valuation of $210 Million? Firethorn had very little revenue and to all accounts technology that have not yet been proven in robust business environments. The number of subscribers utilising Firethorn technology is so low that this could also not have been the basis of the valuation. Seeing that Qualcomm is a publicly traded company, one would expect some more info being made available rather than the sketchy press release provided last week.

2. How does the major partners of Firethorn feel about the acquisition, and have they been consulted? It is really interesting that Qualcomm (major CDMA and Brew supplier) should purchase a Java based company with some of the major GSM Operators as customers (Verizon and Cingular). Interestingly, neither Verizon nor Cingular are mentioned in the press release (only the banking partners).

3. Qualcomm is currently an investor in Obopay - a direct competitor to Firethorn in terms of their technology and business model. What does this acquisition say about the future of Obopay? Does this mean that Qualcomm has discarded Obopay? Are they thinking of merging the propositions... very difficult. I just have difficulties getting my mind around this.

4. Which investors will gain most from this transaction and how could they have influenced the transaction? Maybe this deal does not have anything to do with the fundamentals of the solution and how this will change the landscape of mobile banking, but rather about more complex economic principles that not all of us can understand.

If I were a Qualcomm shareholder, I would really have felt aggrieved about this transaction, but then, I am not and now I am just frowning...

Mobile banking in Africa

Fundamo was one of the first companies that demonstrated a working mobile payment solution with the first pilot in conjunction with Boland Bank announced during 2000. Absa Bank launched the first commercial mobile banking solution during 2002 in South Africa. Absa claims that more than 300 000 subscribers have enrolled for the service to date. This early launch have been followed up with launches of different types of solutions from Standard Bank, FNB, Nedcor, Investec and others. Although numbers are not readily available, a rough estimate of more than a million mobile banking subscribers is not far off. This is amazing if one considers the short time that mobile banking has been available.
During the past five years many initiatives were announced and often launched in South Africa. Many large technology companies and smaller ones made announcements and then disappeared again. South African companies that offered mobile banking solutions include Prism, Namitech, Cointel and Paym8. The launch of Wizzit in conjunction with Bank of Athens was so spectacular that they featured on CNN, Financial Mail and many other publications. Citibank and Standard and Chartered played with ideas to use the mobile channel to enter the South African market with a different and exciting angle, but did not implement.
The launch of MTN Banking during 2005 can be considered as the ultimate mobile banking solution with many new angles and an exciting offering. Combining mobile concepts with banking a totally new banking experience was created. Some of the concepts like "a banking starter pack", "pay as you bank" etc. worked well to grow a subscriber base quickly into hundreds of thousands of subscribers.
Today, South Africa is one of the leading examples of successful mobile banking deployments.
With the exception of South Africa and the successful deployments of Celpay in the DRC and Zambia (supported by Fundamo technology), quite a number of other examples of mobile payment and banking solutions exist in Africa. Celpay is one of the first mobile payment solutions deployed in the world and provides advanced payment functionality in countries with little (if any) payment infrastructure. It has been reported that Celpay payments in Zambia now accounts for almost 4% of the GNP.
Nigeria has turned into a hotbed of mobile payment innovation with one of the mobile operators Glo offering a product called Glomoney since launch. This solution provides mobile payment features on ATM cards from most banks. The solution is supported by one of the ATM switches called Interswitch who is now rolling this out to other banks and talking of providing it also via Celtel. (The solution initially available on special SIM cards, is now also available via a Java client to be downloaded on the phone). Other successful initiatives are from a company called eTranxact whom operates the solution themselves. The same technology is currently in production in Zimbabwe with Kingdom Bank. Flash-me-Cash is a SMS based viral payment mechanism that are claiming to have more than 500 000 subscribers and is based on a structured SMS solution.
Another area in Africa with a number of initiatives under way or in production is Kenya and surrounding countries. A number of banks recently announced mobile banking solutions. A noteworthy example is Consolidated Bank with a USSD mobile banking offering. South African company, Paym8 have deployed their solution since 2005 with Safaricom and is claiming an acceptable take-up. Card payment acquirer, iVeri (a Blue Label company) offers mobile payment functionality in Rwanda. One of the most important initiatives, however is the Vodafone backed mPesa initiative. This technology (developed in London) has been in pilot deployment since early 2006 and was recently placed in production with Vodafone subsidiary Safaricom. mPesa is receiving massive backing from London and is poised to be rolled out to other Vodafone networks (Egypt and possibly South Africa). The technology is SIM based and well designed with good “cash-out” functionality. A recently announced collaboration with Citibank allows for money remittance from London to Kenya.
A North African example is the roll-out of a mobile payment solution in conjunction with VISA in Morocco. The technology utilised was provided by French company Upaid and supported in country by Maroc Telecom and BCP (a bank). Other examples in North Africa are initiatives launched in Egypt and Tunisia.

A perspective on the History

The first mobile banking and payment initiatives was announced during 1999 (the same year that Fundamo deployed their first prototype). The first major deployment was made by a company called Paybox (largely supported financially by Deutsche Bank). The company was founded by two young German’s (Mathias Entemann and Eckart Ortwein) and successfully deployed the solution in Germany, Austria, Sweden, Spain and the UK. At about 2003 more than a million people were registered on Paybox and the company were rated by Gartner as the leader in the field. Unfortunately Deutsche Bank withdraw their financial support and the company had to reorganise quickly. All but the operations in Austria closed down.
Another early starter and also identified as a leader in the field was a Spanish initiative (backed by BBVA and Telephonica), called Mobi Pago. The name was later changed to Mobi Pay and all banks and mobile operators in Spain were invited to join. The product was launched in 2003 and many retailers were acquired to accept the special USSD payment confirmation. Because of the complex shareholding and the constant political challenges of the different owners, the product never fulfilled the promise that it had. With no marketing support and no compelling reason for adoption, this initiative is floundering at the moment.
Many other large players announced initiatives and ran pilots with big fanfare, but never showed traction and all initiatives were ultimately discontinued. Some of the early examples are the famous vending machines at the Helsinki airport supported by a system from Nokia. Siemens made announcements in conjunction with listed and high-flying German e-commerce company, Brokat. Brokat also won the lucrative Vodafone contract in 2002, but crashed soon afterwards when it run out of funds.
Israel (as can be expected) produced a large number of mobile payment start-ups. Of the many, only one survived – Trivnet. Others like Adamtech (with a technically sound solution called Cellpay) and Paytt disappeared after a number of pilots but without any successful production deployments.
Initiatives in Norway, Sweden and France never got traction. France Telecom launched an ambitious product based on a special mobile phone with an integrated card reader. The solution worked well, but never became popular because of the unattractive, special phone that participants needed in order to perform these payments.
Since 2004, mobile banking and payment industry has come of age. Successful deployments with positive business cases and big strategic impact have been seen recently.

Will People Use It?

It is such an amazing situation for me - this constant question: "will people use it?". It is like self-fulfilling prophecies. It seems to me that that is what analysts do. They take positions and then their positions make things happen... and we easily forget when they were wrong.

Take Y2K. Even weeks before 31 December, the world was only 63% ready. Yet nothing happened, except that the world spent billions to be "ready".
So why can't analysts get themselves to say that if banks don't deploy mobile banking they will be out of business in ten years.... like they did with Internet banking? Maybe it is because there is nothing sexy about stating the obvious. Lets just take one case study in South Africa. A bank called First National Bank (FNB), launched mobile banking in little more than two years ago. This is some of their results:

• Have more mobile banking customers than Internet banking customers within two years. It took them more than fifteen years to get to the same numbers with the Internet
• The monetary value running through their mobile banking deployment have risen to a point where it is conceivable to outstrip credit card purchase volumes in the next year.
• The service became profitable within eighteen months - now adding a sizable value to the bottom line.

Will people use it? Come-on, get real..

Mobile Banking Fraud!

Two cases of transactional fraud was recently reported in South Africa. The one related to the arrests of waitresses at a well-known restaurant. Waitresses were paid for "skimming" of credit card information, which were later utilised for fraudulent transactions. Read more here.

In the other it was reported that criminals conducted fraudulent transactions on ABSA clients, by swapping client's SIM cards. Read more about it here. This was a much more elaborate sting and was based on a security measure implemented by ABSA where a one-time password is sent to a clients cellphone for entry into a website. By swapping SIM cards, criminals could intercept this critical and important password in order to complete the fraud.

Both of these fraudulent acts were possible because of a weak Dual Factor Authentication (DFA)implementation (or the lack thereof). Criminals were able to steal clients' identity, because this was solely based on one factor (the card, or the mobile phone). If one managed to intercept this device (only one factor), one would have access to the client's financial information and it is possible to commit a fraud.

An improved version of DFA would have prevented these frauds. For instance, even if the SIM have been swapped, the one-time password would only be visible after entry of a private key, or if the card have been skimmed, could only be used if a secret PIN entry is required before a payment can be completed. Both these designs are incorporated in Fundamo technology, which makes it the most secure mechanism to interact with your bank.

Perceptions of Banking in Developing Worlds

It is a phenomena that many observers have seen: Mobile banking is taking off in developing world more rapidly than in first world economies. Many people have asked why? I have now come across a number of people that seems to imply that this is because people in developing countries are prepared to use inferior products, that they would not mind using mobile banking if it is insecure or not usable - this is so far from the truth and is an indication of a lack of exposure and understanding.

Mobile banking deployments in Africa are far more advanced (both technologically and conceptually) than what is available in other parts of the world. These solutions deploy the highest degree of security and design than any I have seen. (and I have been around). As a matter of fact these solutions represents a quantum jump in security and features. If true (which I think you may doubt anyhow), why would this be the case?

I believe this came about because of the following reasons:

a. Development of mobile banking in Africa was developed "under the radar". It was not scrutinised as is usually the case with advances in technology. Nobody felt like copying the developments or even to analyse them in more detail. This lead to the development of extremely advanced secure solutions over almost TEN years, without any-one else doing it.

b. Africa do not have any legacy systems. As we all know, legacy systems often constrain systems development. Mobile banking systems in the early days were not exposed to these constraints.

c. When you have very little and have lots of needs, you are more prepared to experiment. This was/is the case in Africa, where subscribers, corporates and governments embraced mobile banking as a means to alleviate many of the problems of Africa. Also in these situations you are more forgiving. This allowed mobile banking to evolve to a very powerful solution.

It pains me when people belittle the technology from developing economies. This technology is far more advanced than what is available in developed economies. If you don't believe me, come and have a look.

Mobile Money

Mobile Money is the brand that MTN banking also use in their deployments in South Africa and on their other networks in Africa. We are the primary technology partner for all of these deployments.

But then, "Mobile Money" is a very widely used brand name, as a simple Google search show. I know that everyone can do a Google search so at the risk of boring the reader I thought I would pick my fovorites:

1. Mobile money is the name of a lending company in the UK. I don't know why they call it MM - probably because the loans fly off the shelf.
2. In Malaysia Mobile Money is owned by entrepreneur Lee Eng Sia, who is also known for Cutie Compact toilet rolls which he pioneered and seems to be a well known brand in Malaysia. An yes, MM in Malaysia is the name of a mobile payment solution.
3. The mobile payment solution mPesa (currently being deployed in Kenya and supported by Safaricom/Vodafone) is supposedly Swahili for "mobile money".
4. Mobilemoney is the name of an application that can be loaded on the iPhone, Palm or Winodws CE devices with which you can manage your financial information.

So it is absolutely clear that Money is getting more and more mobile.

Mobile Banking's additional layer

I am often asked why a dedicated mobile banking installation is needed. Some of the companies that we deal with have already deployed excellent Internet banking services or run advanced ATM networks. They sometimes feel that they may as well make the same service available on the mobile.

Many reasons exist for deploying an additional layer between the core banking and the mobile network. The most important ones can be summarised under the following headings:

State management
The Mobile banking layer have to be able to manage the "state" of the interaction of a mobile phone with a back office system that often has not been designed to work with a mobile front-end. In its most simple format, let us look at a balance inquiry. If the back office is busy and a balance is not returned in an acceptable timeframe, the mobile logic should return a message that says: "Service not available, please retry later". In more complex situations where balances are debited and credited across multiple systems with many possible points of failure, state management can be even more challenging, with capabilities to be able to manage (and resolve) transactions in a "pending" state essential.

Buffering of peak transactions
Banking systems are generally designed to deal with transaction peaks of not more than hundreds of transactions a second. In mobile telephony is is possible to be confronted with peaks of tens of thousands of transactions per second. It is good practice to "shield" banking core systems from these levels of transactions while still communicating with subscribers in a meaningful way. It is also important to "shut down" in a structured way when the system is flooded rather than crashing. The problem with most mobile payment/banking deployments is that they have never been exposed to these levels of transactions. Quite a few of Fundamo's deployments are managing transaction volumes that sometimes peak at around fifty transactions a second. I have learned from hard experience that the challenges in this regard are not trivial.

Channel management
Mobile banking/payment solutions are often designed from the front to the inside. This means that the decision regarding the channel (SMS, USSD, Java or xHTML) is taken first and the rest of the system is then developed to support this channel only. These systems are quite simple, but also very inflexible. It is preferred to deploy "channel agnostic" solutions where many different front-end technologies can live together and can be utilised as required. This approach enable banks to offer more advanced solutions that can actually be used.

Unique mobile security elements
Effective, (but also usable) security can be deployed using mobile phones. Unfortunately this is often different than ATM's or the Internet. Characteristics like CLI, SIM certificates, phone and location based data are all available and should at least be catered for. A dedicated layer is the best way to harvest this.

The above factors are just some of the reasons why a separate mobile banking and payment channel is recommended in all serious installations.

Redundancy in Mobile Payments

I was training for the Argus cycle race last night and when I fell off my bike and hurt my right arm. Luckily I still have a left arm that I can use for shaving and brushing my teeth etc. This made me think how amazing humans are put together. In many ways the body is built with full redundancy: two kidneys, two eyes, pair of limbs etc. etc. Even if one breaks the body still works.

This is of course exactly the way financial systems are usually built and this is the only way to ensure 100% availability. Unfortunately this challenge is amplified ten times when financial systems connect to mobile phones. Suddenly many points of "single failure" exist. And of course this situation is amplified. The availability of systems is a factor of the availability of the individual components.

The need for redundancy in mobile payment solutions is even more visible because of the perception of subscribers that the service should be available all of the time (and everywhere). This sometimes create almost unsurmountable challenges. Often these challenges are not even visible to companies that deploy mobile payment solutions the first time. It is only when problems occur in production that design flaws become visible.

This is why it is even more important to contract experienced suppliers for the delivery of mobile payment systems than is the case with other financial systems.

The mobile banking "take off or not" dilemma

When I was much younger I learned to fly hang gliders. (That is why I still have three stainless steel bolts in my right shoulder). The interesting thing about hang gliders is that they stall at about 40 km/h. This means that if you are taking off into a headwind of say 20km/h it is absolutely important to run as fast as you can when going over the edge of the cliff. This will give you the best chance of actually flying. When you are tentative about getting airborne, you increase your risk of crashing.

That is why I cringe when I hear banks talking of trying out mobile banking to see if it will work, or "the jury is still out if people will use mobile banking". If banks deploy mobile banking half-heartedly, it will fail. This is called self-fulfilling prophecies. What product ever in a consumer market space today work and receives massive take-up if not properly supported by co-ordinated marketing and sales efforts? One way to guarantee the failure of a mobile banking deployment is to go to the market tentatively.

We at Fundamo have helped our clients deploy many different mobile banking initiatives. Yes we have seen some fail and this have taught us valuable lessons. We have also seen some be successful in dramatic ways. The single most consistent factor in all the success stories have been commitment and determination to make it work. If you want to fly, run like hell...

The real cost of banking

How do you get banking to become cheaper? By making it less expensive of course. It is only possible to offer affordable banking to the bottom of the pyramid if the real cost of banking is understood and changed. It does not make sense to reduce the price of banking when the underlying cost remains the same.

So where are the fundamental cost of banking?

This would probably take a comprehensive study to understand and clarify, but if we look at well known facts applicable on any other industry that sell something on a recurring basis, it must be the cost of distribution and indirectly the effect of churning. In order to translate this into banking terms, this is the cost of opening a bank account and then get people to keep on using it. To keep the account on the books (even if it is been used heavily) does not take much cost nowadays. With the cost of equipment and systems as low as they are (compared to the past), it does not cost much to run a bank account. Costs associated with disputes and complaints (I think) will also add to the real expense.

So how to reduce the cost of banking? ... by reducing the cost of opening a bank account. We have demonstrated how to achieve this by enabling clients to open a fully functional (and legal) bank account on a mobile phone. This has been deployed successfully in South Africa and we can now show metrics that indicate savings of more than 95% on the cost of opening a bank account.

Using Credit Cards on the Internet

I received a comment on one of my previous posts regarding shopping with your credit card on line and the dangers associated with it. This writer then pointed us in the direction of a company with an interesting solution. It seems that this solution allows one to go to an ATM and receive a number (similar in structure to a credit card) that one could use on the Internet. This is of course an extremely clever mechanism to ensure that your card number is never used on the Internet and could combat fraud effectively. This is a solution obviously invented by a technologist (Not that there is anything wrong with this - I am a technologist). But it lacks the insight in how end-users would use this feature. Imagine a shopper at the point of buying something on the Internet, suddenly having to get to the closest ATM to get a number to enter into the website... won't work.

Of course one have seen many initiatives to combat Internet shopping fraud. These solutions have ranged from very ambitious initiatives (like Verified by Visa or SET-remember SET?) to clever schemes that would probably win limited (if any) support. Many utilise alternative numbers or some provide a feedback loop (either through powerful fraud protection logic) and others still guarantee secure transmission of card information etc.

The most obvious way to protect consumers is to utilise their mobile phone to achieve peace of mind to the card holder. We (at Fundamo) have implemented successful solutions to our clients (in production running thousands of transactions) where we harness the characteristics of the mobile to protect the card holder. We have done it in a number of ways ranging from SMS alerts when the card has been used to the ability to block the card from the phone. We have also implemented mechanisms where the card is "unlocked" for MOTO (card not present) transactions and can only be used in such instances if it has been unlocked. In this way we have increased the security of using your card on the Internet without changing the card or the Internet.

Safe shopping on the Internet

It is actually much safer to shop on the Internet than doing that in a shopping center. It is literally impossible to get involved in a car accident or to be mugged on your way back from the shop. It is highly unlikely that you would slip on the floor in the supermarket or that you contract a disease from the many shoppers that you mingle with.

Internet shopping is only unsafe in the sense that you do not necessarily know what you get when you buy. There is also a risks that you enable someone to steal your information or identity and then use this to de-fraud you.

If it possible to eliminate (or drastically reduce) these risks from Internet shopping by utilising the unique characteristics of mobile phones. Mobile phones provide an alternative channel (that is often very difficult to intercept - not like the Internet) that can be used for alternative security communication. In addition the phone is a very simple (yet extremely secure and easy to use) second factor for authentication. This provides for an easy implementation of dual factor authentication.

Lloyds TSB announces SMS alerts service

This article caught my eye. Lloyds felt compelled to announce that they have actually implemented a system whereby they would send you an SMS to warn you of a possible overdraft problem. Amazing!

No don't get me wrong, I don't think that this is an amazing service provided by Lloyds... I am amazed that this is newsworthy to the point that one actually would want to announce it. This kind of service is so old and have been implemented by all South African banks that you would actually expect to get it. This is not something that you would draft a press release about. A South African bank would be so ashamed that they only now release such service that they would rather keep it quiet. In South Africa and in other developing countries, the mobile banking features that are generally available, seems to me, might not even be on the release plan of European banks.

This thought really made me think. Is mobile banking services so far behind in developed markets that their announcements make us in developing countries laugh? or don't I get it? I think that the answer is yes. Developing countries have deployed advanced mobile banking solutions and have perfected the offering because the need is much higher. Also, we were not confronted by constrained thinking about new standards (read SIMPAY) nor complex integration to legacy systems. We could merely get on with the job. The result is that mobile banking solutions from developing markets are far superior to those that are available in developed markets.

Maybe Lloyds should work on opening branches on Saturdays first. Now that would be something to do a press release on.

Online fraud is growing

I found a recent research report produced by consultancy firm 1871 Ltd very interesting. According to this report (based on data for the United Kingdom), more than three million online crimes were carried out last year. These included more than 200,000 cases of financial fraud, twice the official number of real-world robberies carried out during the same period. A breakdown of the crimes committed include more than 90 000 incidents of online identity theft and unauthorised access to someone’s PC with ulterior intent reached 144,500. According to the report, 90% of cybercrimes go unreported with victims deterred from coming forward as they wrongly believe the activity is not criminal or that the police will be unable or unwilling to investigate.

A security briefing published by Lloyds during August, indicate that 51% of people surveyed indicate that they are worried about Internet banking fraud, with more than a quarter indicating that they believe that nothing can be done about this crime as "these things happen".

This is absolutely shocking to me! We are living in a virtual world with crime on the rampant (I would say out of control) and almost nothing is done about it. As a matter of fact, we all visit this unsafe world, because we have to, but we all feel extremely unsafe there. What is so sad about this situation is that a very simple and extremely successful deterrent exists to combat this crime effectively. It is very easy to implement and can almost eliminate virtual fraud as it connects every banking transaction to something physical - something that we have with us all of the time.

The solution is mobile banking - implemented with simple cryptographic tokens. We at Fundamo, have been supplying these solutions to major banks for the past eight years and have excellent case studies to prove the point.

Where will we get enough bank accounts

All of us are well aware of the mobile revolution. During the past eighteen months, Mobile Network Operators have added another half a billion subscribers, with projections expecting that the planet will have three and a half billion connected cellphones by 2012. That is a lot of mobile phones.

By far the majority of these new connections are happening in developing economies: India, China, Indonesia and large parts of South America and Africa. This is great, because more and more people will get connected and will have all the benefits associated with the free market and being able to participate in economic transactions. This is the vision that every-one gets excited about and a lot of effort is being invested to make this a reality.

The irony for me is that most of the solutions that is being presented is based on the assumption that transactions will flow from the cellphone holders credit card. And if this person do not have a credit card, then maybe their debit card (if we can figure out how to accept a PIN on the phone securely). This is where I loose the argument...

Where will we get all the credit cards from (three and a half billion to be precise)?

It is obvious that one should be looking for another solution that is much easier to execute on, is legal and conform to banking rules and regulations, yet can be executed with much less effort and overhead. In order to provide these masses with a transacting account, one will have to think different and develop new solutions that will enable transacting capabilities to grow at the same rate as mobile phones do.

My take on this is that we will see the development of a new kind of mobile wallet associated with a mobile phone (preferably identified by the mobile number), but low cost to open and to operate. This wallet will have to be able to initiate and terminate payment transactions in a secure, easy way, that is both intuitive and rigorous. Payment transactions should be possible across networks and must also cater for multi-currency transactions (like making local and international calls). Furthermore, the only way that this will be possible, would be if Mobile Operators and Banks start to collaborate (rather than fighting each other).

If this starts happening, we will truely make this world a better place.

Africa as a mobile banking benchmark

Africa probably boast the most advanced, oldest and most successful examples of mobile banking solutions on the planet today. It is not difficult to understand why, as this is also one of the fastest growing markets for mobile telephony in the world.

The Celpay deployment in Zambia was one of the first mobile payment solution deployed and is still operational today. This implementation currently manages about 2% of Zambia's GNP on mobile payments. I am not aware of any other mobile payment solution that can make the same claim. One of the other Celpay deployments (in the DRC - a country as large as most of Europe and with a population of more than 120 million people) runs roughly five million mobile payment transactions a month.

Other solutions (like the m-Pesa deployment) is often quoted by Vodafone as THE Vodafone mobile payment reference. This solution runs on the Vodafone network in Kenya (Safaricom) and boasts advanced cash management capabilities. Wizzit (an innovative mobile banking deployment for the under-banked) is often quoted as an example of empowerment of under-banked and the creation of jobs.

In a country like Nigeria (one of the most oil-rich countries in the world) one finds many advanced mobile banking and payment solutions - supported by advanced central bank regulations. Deployments like eTranzact, Flash-me-Cash and mobile banking provided by the central switch (Interswitch) must definitely be rated as some of the most advanced deployments in the world, with a large take-up and growing.

Every bank in South Africa have deployed advanced mobile banking and payment solutions. This market is currently growing at the rate of more than thirty-five thousand subscribers per month. The mobile banking market have grown to one million subscribers in just over two years. Few countries can claim this achievement. The MTN banking deployment in South Africa (an innovative product supported by MTN - the largest operator in Africa and Standard Bank - the largest bank in Africa) features advanced and unique characteristics (like a banking starter pack and "pay-as-you-go" banking to name a few).

It is no doubt that Africa is one of the leaders in mobile banking with advanced solutions and successful references.

Mobile payments to really take off

The Juniper research company predict a massive growth in mobile payment volumes. This prediction is based on the assumption that 204 million users will generate transactions worth approximately $22bn by 2011. The analyst firm predicts that the market will be driven by increased uptake of person-to-person fund transfers, along with the commercialisation of mobile payments using near field communications (NFC) technology. The prediction is based on the awareness in large industry players to start embracing mobile phones as transactional devices.

What does this mean?

It is now imperative for serious players in the transactional payment and banking arena to consider their position regarding mobile payments. These companies should develop positioning strategies and consider investment in early pilot projects and mainstream business initiatives. It is important to partner with leading suppliers with relevant track records, so as to minimise risks in this complex solution space. Fundamo is the leading supplier of mobile banking solutions and is the ideal partner for large banks and mobile operators considering the deployment of mobile payments.

New initiatives in Mobile Banking

New initiatives in mobile banking is now being announced all of the time. Just a sample of the announcements made during the past week is given below.

Citibank launches mobile bill payment service in Malaysia - Citibank launched a new service in Malaysia that will enable its customers to pay bills using their mobile handsets. The SMS-based service enables customers to use their credit cards to pay bills. Customers can also receive reminders when bills need paying and personalise their payments by assigning key words or texts.

Masabi signs YourRail to mobile ticketing technology. YourRail has contracted London-based Masabi to build a mobile application which enabled train tickets to be securely bought and displayed on mobile phones.

Vodafone offers direct access to bank accounts via MoniLink. The service allows customers of MoniLink banks to check their balance, request a mini-statement and top-up their or their friends'/family's 'pay as you talk' mobile phones. The Monilink system has been set up by Monitise and VocaLink and has so far signed up HSBC, first direct, Alliance & Leicester, Royal Bank of Scotland, NatWest and Ulster Bank in Northern Ireland.

Wells Fargo and Visa to conduct public mobile payments trial. Wells Fargo and Visa are to undertake a public trial of mobile payments technology with up to 500 customers in the fourth quarter of the year. The move to a public pilot follows positive feedback from an internal laboratory trial conducted by the bank in April.

Alliance & Leicester is to pay younger customers £10 for signing up to its mobile banking services. A&L is introducing the offer to customers who have signed up to its Premier 21 current account. But the bank says only the first 20,000 customers who register for the m-banking service and use it before the end of June will receive the £10.

Telsecure launches securePay m-payments system in UK. UK mobile payments start-up Telsecure is launching its securePay front-end payments system that is designed to protect customers from card-not-present (CNP) fraud. Telsecure said in 2003 that it was teaming with business and technology consultancy Generics Group to develop the mobile authentication system, which uses a cardholder's mobile hand set to verify and authenticate transactions made via the Internet, mail and telephone.

What is interesting about most of these announcements is that they almost all are from UK banks and mobile operators. Does this mean that the UK has now become the hot-bed for mobile banking/payments. Or is this only because the British like to talk about what they do more?

It would be interesting to know how many initiatives are being launched that is not announced. We at Fundamo, have deployed a number of mobile banking initiatives for clients that has not been announced. So this may point to much more activity in this space that is just not visible to all. I think it is safe to say that mobile banking is taking off.

Mobile Prepaid Cards

Prepaid cards are being utilised for many applications today. These range from giftcards to low cost banking applications. Applications for payrolls and cheap alternatives for cash distribution have been rolled out many times. All of these applications are based on plastic cards. The use of magnetic stripe solutions are by far more popular than any other solution.



However the technology is available today to deploy prepaid card products by making use of mobile phones. This means that no plastic is produced and any communication, redemption and payment is dealt with by mobile phones. The use of mobile phones as the means to "virtual" prepaid cards can lead to a lot of benefits:

• Prepaid cards can be distributed much more easily and cost effectively (e.g. by making use of SMS's)
• Prepaid cards can be distributed and activated with much mre security features
• Additional payment functionality can be made available that was never possible before, and
• Information related to the use of pre-paid cards can now be gathered more easily and acted on

Retailers should consider the use of mobile pre-paid cards in future

Competition for Credit Card Companies

Some quotes off the Internet the past month:

"A group of Europe's largest banks are holding secret discussions to establish a pan-European debit card scheme that would challenge those operated by MasterCard and Visa" (Read the article on the 11th May 2007)

and

"India's banks are considering setting up a domestic card payment settlement system to rival the networks operated by Visa and MasterCard" (article)

Why would banks want to do this? Surely, as the only shareholders in MasterCard and Visa they benefit primarily because one standard exists and that allows them to transact with each other in many different countries and with as many currencies - totally seamlessly. Just doesn't make sense. I can think of only two reasons why this should even be considered:

The first is the cost associated with a transaction as it is passed through the Credit Card settlement network. This is a function of the number of parties that must benefit from the transaction as well as some of the complexities regarding dispute resolution and fraud management. However, I am sure that if the different parties put their mind to it and make some compromises this should never be a problem.

The other reason can be because the organisations behind credit card transactions have started to morph into companies that are starting to compete with the banks. They may even be perceived as potential competitors and threats. In the Lafferty article the following words are being used: "....they do not have to rely upon foreign states or organisations for the provision of critical infrastructure services, including payments." (foreign organisations?)

It is a fact that credit card organisations do not play a neutral role in facilitating mobile payments. (One more than the other). These organisations are often prescriptive on designs and architecture and sometimes even develop competing product to what banks should be doing. It could be worthwhile to define the ideal role of credit card organisations in the world of mobile payments.

Mobile banking is taking off this time

Since I was a small boy, Barclays bank epitomise banking. Other banks may try to do banking, but Barclays has always been the pinnacle of banking to me. When credit cards were launched, Barclays called their credit card a Barclaycard and this brand attached itself to credit cards. One could say that Barclays did to credit cards what Hoover did to vacuum cleaners.

So when Barclays announced the availability of their mobile banking solution in the United Kingdom last month, everyone should take notice. Barclays would not launch a product and attach the word "banking" to it, if this is just another fad. I think we can now safely say that mobile banking has moved from the maverick fringe to an enterprise necessity.

Suppliers of mobile banking solutions should also take note of this. The time for experimental pilots is gone. The need for mature, proven products that can be guaranteed by the supplier has now arrived. Only suppliers that are able to provide acceptable levels of support conforming to agreed service levels will be able to compete in this market going forward.

Cellphone remedy for Financial Fraud

This is a picture of an ATM with a card skimming device installed in front of the existing card slot. Very difficult to spot, not so? Recently, Westpac announced that they blocked 900 card accounts of cards that were used at a ATM in Melbourne that was tampered with and where the card information was skimmed. (Read article). All of the cards that could be effected were blocked, but fraudulent transactions were only conducted on 75 cards. The total amount of the fraud amounted to $ 100 000. Westpac also announced in the same press release that they are in the process of installing anti-skimming devices on their ATM's. It has been reported that these devices actually vibrate the card as it is being pushed into the slot, making it impossible to be read by a static device. Three things spring to mind when reading this story:

• Westpac must be congratulated that they actually tell this story. I often hear banks saying that it would break confidence in the banking industry if cases of fraud were to be reported. I believe that this attitude aggravates the problem. By telling people what can possibly happen, they can be more prepared to fight the fraud and report any suspicious things.


• Second thing, it does spring to mind that Westpac may be publishing the story to highlight the fact that they might be the only bank in Australia that is installing the vibrating card trick. I was wondering what the cost of this change to all the ATM's is and if this is an indication of the size of skimming fraud in Australia. If this project is being executed with a positive business case, many other skimming incidents must have occurred to make it worth the cost and effort.


• So is this vibrating card reader the only anti-skimming and anti-fraud mechanism that can be deployed for card fraud, and a related question: Why talk about this on a mobile banking blog?

Fundamo successfully deployed a number of very powerful anti-fraud mechanisms for card systems by making use of the unique characteristics of mobile phones. Solutions provided by Fundamo to combat card-related fraud include transaction alert services delivered to the card-holder's phone, ability to change a card PIN on a phone, or even block the card and mechanisms where the mobile phone is utilised as "something you have" in two factor authentication for transactions performed on the Internet... In addition, most phones can vibrate too (for free).

Blogging busy

It is a sign of our times that we don't have time to do anything anymore. Looking back at the end of a week to take stock of what has been achieved, one often feel as if nothing has been achieved. At a previous job that I had at a big corporate, I asked a senior manager what his typical day looks like. The manager replied that he basically just goes to meetings every day. I then asked him why does he go to these meetings, what is the objective and what does he achieve by attending meetings. To this he replied, quite seriously: "I go to meetings to find out what is going on".

At least we now have blogs that we can read "to find out what is going on."

I notice that I have not posted anything since 22 May. The reason for this is that we concluded some very interesting agreement at Fundamo during the past two weeks and I was quite busy with the activities related to these agreements. We will be making a media release on some of these deals next week, so I don't want to use my blog to "jump the gun". I intend to start posting in earnest many thoughts that I would like to share and get comments on. Some of the topics that I would like to discuss in the next few days are:

• New types of fraud in banking now, and how we can use mobile banking help to fight these.
• Some advances in mobile banking in specific markets (e.g. the UK and the US)
• Some ideas on applying mobile banking in money transfer
• Thoughts on least cost routing of payment clearing
• The pre-paid card market and opportunities in this market
• And some of the interesting "competition" that are emerging for Mastercard and Visa and the chances of them succeeding

See I am already tired just thinking of what I would like to post, but at least I have committed myself now.

Mobey Forum

The Mobey Forum was founded in 2000 - almost at the same time that Fundamo was established. Many companies and industry organisations that was founded during those early times, disappeared. There something of a resilience that I sense in the survivors. Now that the industry is starting to take off and that more and more banks are starting to announce their interest in mobile banking it is important to take cognisance of organisations that have been around. Some of the lessons learned and the insights (like good wine) can only be gathered through time.

What is refreshing about the Mobey Forum is the changes that have been made in the past few months. I believe this is a direct result of good leadership and expect the Forum to play an important role to make mobile banking mainstream banking business as it should be. Some of the important advances at Mobey Forum are the following:

• Invitation to other players in the ecosystem to join the Forum. Up to recently the Forum was definitely bank-centric, but some of the leading mobile operators as well as solution providers have now also joined.
• Discussion and communication with the GSM Association is also a step in the right direction.
• The development of specific models, but with sufficient emphasis on bank-robust security requirements is also good. In the end mobile banking and payments is about dealing with client's money and the same levels of security available in other channels should also be made available on mobile phones.
  

JupiterResearch Mobile Banking Findings

JupiterResearch released a research report on the 6th April with interesting findings regarding Mobile Banking. This concept report (according to Jupiter website) is five pages long and can be purchased for $750 - that is $150 per page... not bad. I am not sure what have been written in the report and how the analysts that worked on the report came to the conclusion that they did get to, as I was not prepared to buy the report.

What I did read, was the media release made by Jupiter (probably to get people to buy the report). This release was featured on many online newspapers (Newsweek, Finextra, Slashphone, to name a few), and highlighted the fact that only 8% of people with cellphones and regular online customers of existing banks would like to get their balance from their cellphones.

It also seems that the analysts came to the groundbreaking conclusion that " banks should not offer mobile services that aim to mirror or duplicate the online experience" and also "Mobile banking can add an anywhere element, but banks should identify where such ubiquity is crucial." In addition, another amazing insight was that younger and 'under-banked' consumers were identified as consumers who might want to use this service.

The conclusion reached by Jupiter: "that consumers have limited interest in mobile banking" seems to me then only holds true for a percentage of customers that already log on to their Internet banking regularly. It seems to me that this conclusion would not be applicable to banks that would want to sell to younger customers or those customers that are 'under-banked'. This conclusion is also not applicable to banks with a need to augment existing services and provide "an anywhere element" to their services.

To summarise, executives in banks without the need to grow their subscriber base or launch new innovative products, without the need to augment existing functionality and provide functionality to younger customers, should rush out and pay $750 for this five page report.

Some of the activities in mobile payment

Just to show the activity in this space, I thought I would just list announcements and newsfeeds on Finextra since January in mobile payment and banking:

January
2 - Online Resources announced the launch of its mobile banking and bill payment service
2 - US bank Wachovia is offering online banking customers a patent-pending mobile account information and intra-account funds transfer service
8 - Visa has formally launched its mobile payments platform
10 - Hybyte has launched AirPayment,) billing solution that supports PayForIt
23 - Norway-based LUUP has signed National Bank of Abu Dhabi (NBAD) to its mobile payments system
24 - Obopay, the first comprehensive mobile payment service in the U.S., today announced that it is entering the Indian market

February

8 - MasterCard has partnered with Taipei Fubon Bank and Taiwan Mobile to launch an NFC mobile phone payment pilot programme across the island.
8 - Royal Bank of Scotland to offer mobile banking via MoniLink.
12 - MasterCard is to work with GSM wireless network operators to pilot an international remittance system using mobile payments technology.
12 - An agreement with Telus will bring ClairMail's mobile banking systems to a large customer base in Canada.
12 - Vodafone and Citigroup announce worldwide mobile financial remittance venture.
13 - Bank of America is to roll out a comprehensive mobile banking service to its 21 million online banking customers nationwide.
13 - China Unicom and SmartPay launch 'mobile wallet' in Guangdong.
15 - Morgan Stanley credit card unit Discover Network is working with Motorola to trial a combined mobile account management and payment service
20 - Cyphermint announced that it has released the PayCash Mobile Wallet.
27 - Japanese telco NTT DoCoMo iteam with McDonald's to enable payment for purchases via customer mobile phones.
28 - Citibank and Obopay launch a pilot person-to-person mobile payment service for its credit and debit card customers.

March
9 - Marcus Theaters and Mobile Candy Dish today announced the pilot launch of a new service that allows consumers to use their mobile phones to buy movie tickets and more.
15 - US e-payments firm First Data is teaming with Germany's NCS to offer mobile payment processing services to its merchant and banking customers worldwide.
16 - Masabi, the secure mobile applications company, today revealed a working prototype of a graphically rich, secure mobile banking application.
16 - Vodafone is teaming with German rail operator Deutsche Bahn to develop and implement a mobile phone-based electronic ticketing and payment service called Touch&Travel.
20 - Belgian payments network Banksys and network operators Base, Mobistar and Proximus launched a system for consumers to pay for high street purchases via mobile phone.
23 - US mobile telco Cellular South is teaming with phone manufacturer Kyocera Wireless to launch a multi-city consumer trial of NFC-enabled wireless wallet technology.
27 – Monitise team up with American fintech vendor Metavante to launch and operate a wireless payments and banking network in the US.
28 – Obopay announced the introduction of Obopay Checkout.
29 - Firethorn Holdings, LLC, confirmed today that Verizon Wireless is working with Firethorn to introduce its mobile banking and payments solution.

April
2 - Visa USA president and CEO John Coghlan called for closer collaboration between the payment card and mobile industries
2 - SmartPay and China Unicom team for mobile payments in Shandong
3 - Citibank launched a mobile banking application, called Citi Mobile, that customers can download to their hand sets
16 - The Mobey Forum has signed up Dutch banks ING and Rabobank and mobile operators Telenor, TeliaSonera and SK Telecom as new members
17 - MonVia, a specialty firm that helps accelerate the growth of early stage start-ups, today announced the launch of MobiBucks, a mobile payment solution
18 - Gresham Computing, the real-time financial solutions specialist, today announced the enhancement of its Clareti Connect product suite to include mobile banking
20 - Fidelity Express is teaming with e-payments outfit Cyphermint to launch a service that will enable its customers to pay bills using their mobile handsets
24 - Morse is to spin off its mobile banking arm Monitise and list the business on the AIM
24 - Altair Financial Services International has launched a totally revolutionary addition to Altair’s Prepaid Card services that makes use of SMS on mobile phones
27 - MFoundry announced a formal agreement with wireless leader Sprint that will bring mobile banking to subscribers
30 – Analyst report : Opportunities and challenges for m-banking and m-payments by Katy Jacob and Caroline Boyd of the Centre for Financial Services Innovation
30 - Japanese telco KDDI and Mitsubishi-Tokyo-UFJ Bank have joined forces to launch a mobile Internet banking business later this year

I know that we at Fundamo are busy with a number of accounts that we don’t even talk about. If this is the number of announcements then I don’t even want to know how many things are being worked on that people are not talking about at this stage. I think this is an absolute indication that the tipping point has been reached.

The SIM Summit

I attended the SIM Summit in Prague last week. It was quite interesting from a number of perspectives for me. I had the distinct feeling that some of the delegates were looking at finding a reason for having a SIM card in a phone. On the Wednesday-afternoon I presented a talk during the "mobile payment" portion of the conference. I shared the platform with some of the older companies in this space (paybox, SK telecom) and some of the newer ones (Monetise).

The usual questions on why it is taking so long and why we have not seen the "google" of mobile payments yet where asked. I almost had the feeling that critics were saying that one should stop working on this type of solutions since it does not seem to deliver any benefits. In the meantime, the discussions on the "ecosystem" of NFC payments almost reached fever pitch at some stages. Every-one was talking about their pilot projects and what they have found. Yet it was clear that almost no phones would be available for this kind of thing (estimates were that not even 20% of phones will be NFC enabled by 2012), that nobody really knows where and what the business model for mobile NFC will be.

For me, though, mobile payments and banking is succeeding dramatically. From where I am sitting and what I am seeing a massive revolution is happening and growth in mobile payments is at a rate that have never before been seen in financial services before. If we compare any other change in financial services with mobile payments, none is happening at the rate of mobile payments. Look at how long it took credit cards to become mainstream, or ATM's or Internet banking (and how much has been invested before it was successful). In countries like South Africa, DRC and Nigeria (where we have deployed solutions) and others like Austria, Slovenia, South-Korea and (of course) the Philippines, it is clear that mobile payments are delivering good solutions to subscribers, stakeholders and banks.

Failures like Simpay and others should not be taken as the template for this industry.

Utilising Agents to distribute low cost Banking

One of the biggest challenges of bringing low cost banking to rural areas are the cost of distributing banking products. It takes a lot of time and effort to get someone to open a bank account - especially given the stringent regulatory requirements. I have seen some instances where banks have a requirement to have a photo-copy of this and that, as well as firm identification, in addition to a form that must be filled in and signed - quite a cumbersome and difficult process.

So some companies have started deploying a mechanism where agents are utilised to distribute these bank accounts. This means that some-one works on a commission basis to get people to open bank accounts. These agents do not earn a fixed salary, but rather get paid for each account that is opened by them. Great idea! Often this is also a mechanism to create work for people that do not have work. I have always been intrigued by this approach. I do subscribe to creating work and getting the community involved with banking themselves, but I am not sure if the economies work. How many accounts do an agent have to open to be able to earn a living wage? This is especially difficult if the commission must be earned on a low cost bank account. All of the sums that I do make this approach a marginal employment for the agents and I am not sure if it will work.

Low cost banks have two remedies:

a. Enable an agent to open bank accounts, but also sell more lucrative products (that have better margins) - preferably products that require a bank account (like insurance, loan products etc.). or

b. Enable customers to open a bank account themselves (even on their phone) with no assistance and no photo-copies. This is possible, and have been implemented by Fundamo.