Sunday, January 20, 2008

The Mobile Banking Eco-system

One of the most complex problem in deploying mobile banking systems is solving (or establishing, or nurturing) an eco-system for the development of mobile banking services. Generally, observers describe mobile banking as a clash between banks and mobile operators. But in reality the different players that are impacted by the deployment of a mobile banking solution are much more. It is critical to understand all the players, their fears and aspirations before starting to tinker on the delicate eco-system of payments.

Of course, if mobile banking is limited to balance enquiries and a few simple transactions, the impact is much smaller. However, when advanced and (sometimes) radical mobile banking solutions are deployed, the impact on the eco-system is much bigger. The participants that should be considered are the following:

1. The banking community should be the custodians of banking and payments in all markets. Banks usually have strong ideas about payment systems. They tend to try and conform to industry standards and are generally more conservative... rightly so. They look after our money.

2. Sometimes card issuers are different entities than banks. They are usually driven by the number of cards that they issue and the number of merchants that would accept their cards. Any scheme that could potentially disrupt this gameplan are usually viewed with aggression.

3. It is possible to offer mobile banking without the collaboration of mobile operators. However, if they are part of the mix, they can bring their distribution network, their strong brand to bear to ensure a much more successful deployment. Collaboration with operators also lead to more effective and secure solutions.

4. Central banks and other regulatory bodies are central to effective deployment of mobile banking. Often specific challenges (like deposit taking, open of new bank accounts, settlement and foreign currency transactions) can only be solved with the support from the central bank.

5. Cash handling companies are important in many countries - especially when the economy is still a cash-based economy. These companies (sometimes they are banks and sometimes even the mobile operators - but often independent) deliver and fetch cash from remote places and are often key to the functioning of micro-economies. Mobile banking and payments puts the business of these companies at risk.

6. Payment processors are often highly influential in the payment profile of a market. These companies process millions of transactions from ATM's and POS's. Their businesses are totally dependent on ensuring that the source of these transactions are not threatened. Mobile payment can be an opportunity for them or they could see it as a dangerous initiative.

7. Airtime distributors are often-time very powerful companies. In some cases the mobile operator distribute their airtime themselves, but in most markets these are independent (yet very powerful) companies. Any change to their margins, marketshare and control over the distribution of airtime can have a major impact in their livelihood.

8. Infrastructure suppliers could either benefit or loose out depending on the way that mobile payments are deployed. Often mobile payments lead to a reduction in the need for ATM's and other payment infrastructure.

This is not a complete list, but serve to illustrate the complexity of the environment. Also, different players will have a different relative strength in different markets. The important fact is to consider all of these (and more) and to develop plans to address threats and opportunities. Failing to do this, will seriously jeopardise any mobile banking deployment.

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