In the absence of mobile banking

What do people do when they do not have access to Mobile banking and payment solutions. Surely if a major need exist they consumers must utilise alternatives. The fact of the matter is that they do, often with major risks and costs associated with the alternatives.

The most often used alternative is the use of Premium SMS's. This is still by far the most often used mechanism to pay for content in the mobile world. Few consumers realise this, but the cost of performing a transaction with premium SMS's are as high as 50%. This means that half the price of the goods (content in this case) is paid in order to perform the transaction. If this type of payment were utilised in the purchase of lets say groceries, goods would cost twice as much as they do now.

Another example is payments being charged to your phone bill for broadband usage for instance.

The use airtime as currency is gaining momentum especially where money must be sent over a distance. This means of payment is hugely expensive and also unsafe. This mechanisms does not provide for any consumer protection, yet is being used daily to solve problems that consumers in the lower income bracket are confronted with. In some instance, I have even seen airtime being used as hedging against currency fluctuations. This practice is not only technical illegal, but also inherently dangerous for participants in such schemes.

All of the above is indicative for the need for cost effective, secure, easy to use payment solutions available on mobile phones.

South African Mobile Banking Initiatives

I am sure that readers of this blog know that I am the founder of leading mobile banking solutions company: Fundamo (www.fundamo.com). But as I mention in the disclaimer of this blog, I write about mobile banking in general and not specifically about Fundamo. Although my experience in deploying mobile banking solutions is with my company, I am frequently exposed to other very exciting initiatives in this space. Growth in the mobile banking industry is a function of more professionals, more solutions and most important more success stories.

For people that follow the industry, I am sure most would agree that solutions and professionals from South Africa are playing important roles in moving the industry forward. The reason for this is not clear to me, but a possible topic for a future blog. All (most) banks in South Africa have launched mobile banking offerings (some on their own, or some deploying packaged solutions). The results of these deployments are often quoted as examples of successful deployments. The most notable success-story here is the results achieved by First National Bank (FNB). One of the mobile operators (MTN) launched a ground-breaking solutions with many world firsts.

What I find most interesting is the number of smaller initiatives. Some that have been around for a relative long time, some dubious in their proposed solutions, but nevertheless even in the entrepreneurial space, South Africa boast numerous initiatives. I think that this is another indication of the soundness of our mobile banking industry. Some of these initiatives are listed below:

Wizzit (www.wizzit.co.za) is probably the best-known deployment with exposure in CNN and with the CEO (Brian Richardson) speaking on many platforms. Their distribution strategy and exciting brand serve as an inspiration to many. Then the claims of Cobus Potgieter with his Mopay (www.mopay.co.za) initiative raises doubt in many industry players, but still he soldiers on. WiWallet (www.wiwallet.co.za), and VMT (www.virtualmobiletech.com) are two new kids on the block with exciting and innovative offerings. The two independents Paym8 (www.paym8.co.za) (out of the Radiospoor stable) and Simplus (www.simplus.co.za)(out of the Cointel stable) have been around for some time now. I am not sure if the inventors of First Wireless from the Paarl have run out of steam, but their website is still up (www.1stwireless.co.za). Then the of course, the experienced guys at Mobus (www.mobux.net), with the Pretoria team from Swap Mobile (www.swapmobile.co.za) not to be forgotten. I have probably left out some guys, but you know what, I would love to hear from you.

Mobile Banking at 30 000ft

This is my friends at Absa again. They really know how to innovate. The latest "first" is to have two bankers from Absa on every 1time flight. This means it is now possible to do your banking at 30 000 ft, without even having to log on our visit your branch. (Read more here).

It is possibly only with the fees that is charged by Absa (very high) and the fees charged by 1Time (very low) that this venture actually have a business case.

PS. I am a client of Absa (both in my personal capacity and as a business)

Made in Africa

I would like to take this opportunity to welcome Monitise to Africa. On face value, the recent announcement regarding a their collaboration with "Made in Africa" seems to be a great deal. As a listed company, it is important to announce this transaction as well as the commercial terms associated with the deal. (Read the press release on their website).

As an African myself, I was intrigued about many things related to the announcement. If I were an investor in this publicly traded company (which I am not), these are the questions that I would have had. In the interest of debate, I thought that I should publish the questions:

• Who is "Made in Africa"? A quick search for Made in Africa on Google returns film-makers, cotton and aloe-distributors. I am sure these are not the Made in Africa that we are talking about. Maybe it is a company established with a specific aim and have not been around for a long time?
• Who is the guys behind "Made in Africa" and what is their credentials? We all know and respect Ozwald Boateng, who is one of Africa's best-known clothes designers and living in London, but who is Chris Cleverly and Prince Hassan Kimbugwe (who is the other two backers of "Made in Africa"). Chris (according to his profile on LinkedIn) has been quite busy in Uganda, starting and selling bio-fuel companies... bio fuel companies?
• From a technology perspective, how will Monitise deploy their secure Java-based solutions in Africa, when relatively small percentage of handsets support Java and few subscribers have data-contracts?
• In most of the target countries very few people have bank-relationships. How will Monitise adapt their ATM-based (register-your-card-to-get-access-to-mobile-banking) solution paradigm?
  

I have worked in the countries mentioned in the press release and we have made very successful mobile banking deployments there. We have also experienced the challenges and understand the realities of these countries well. I welcome my UK friends to Africa and wish them well - it is going to be an interesting ride.

Top five posts

I track the visitors to my blog, thanks to Google Analytics. I can report that the blog is being visited, and (hopefully) read. With an average time of almost two minutes spent on the blog (yes, they can measure that), it does seem that some people find some of the entries interesting.

As part of the feedback that I get from Google Analytics, I get statistics on the blog-entries that are visited most. Although not a statistically big enough sample, I started keeping a record of my top five blogs. Those entries that have been visited the most during the past month. I thought that this may be an indication of what people are interested in. Well, here are the top five posts on my blog:

• Why SIM solutions are best for mobile banking (read here)
• Airtime as Currency (read here)
• Mobile banking in Africa (read here)
• Africa as mobile banking benchmark (read here)
• Important elements of mobile banking (read here)

I don't know what it means, but I thought it is interesting. Maybe I should write some more about these topics...

MMT Summit Insights

After attending the Summit in Cairo and with enough time to reflect, I would like to share the following insights on the Summit.

• The importance of ensuring that mobile wallet solutions are deployed with the correct regulatory dispensation. This means that all players should take the emergence of this industry serious and contribute to ensure solid regulations. Banks and Regulators have major roles to play as it requires their involvement. Schema where they do not participate could lead to risks to the money eco-system (the potential side-effects can potentially be much more than the sub-prime were)
• The lack of standards will prevail for very long. I do not believe that it would be possible to agree on (or develop) any standards in this industry for a long time. Those organisations that elect to wait for the standards to emerge, will wait for a long time. Rather they should select mainstream suppliers and deploy "similar" solutions to ensure that their solutions are sustainable.
• The complexity of technology required to deliver solutions that are being talked about, should not be under-estimated. I am worried that some suppliers are presenting a simplified view on what is required to deliver these very complicated solutions. It was quite clear to me, when companies had made serious deployments: they were much more restrained.
• In the end the customer will decide to what degree the solutions will be successful. This should not be underestimated. Factors like ease-of-use, perceived security and cost will have to be mixed in such a way that individuals love it. This is the primary challenge.
• It is great to work in an industry where the opportunity exist to make a lot of money, yet, at the same time, be able to make a difference in the life's of the many poor people around.
  

I can't wait for the next Summit planned for Florida. If the excitement and activity of this Summit is anything to go by, the next Summit will be a "must-attend" affair.

Mobile Payments have arrived

Just arrived during the early morning in Egypt, showered and had breakfast. As I walked into the conference hall of the Summit, I had such a positive experience. I have been working on this dream of mobile payments being available to all for so long. Sometimes, I almost got despondent, but this morning I knew: Mobile Payments have arrived. The level of interest and the seniority of the participants was an indication that this is now for real.
The conference was different to many in the past that I attended in the following ways:
a. Representatives were truly from everywhere. Previous conference had a very regional character. Either Asian, American or European. This time round it was from every continent. Interesting that it should be happening in Africa...
b. The level of participants were of a very senior level: CEO's of major corporations, Ministers and senior officials
c. A general spirit of: "Let's build the industry" rather than criticise each other prevailed.

Reference to mBanking in French!

I just found out that Denis quoted my blog in one of his blogs. I am honored.
Denis, I would like to comment on your blogs too, but my French is only of an acceptable standard after at least half a bottle of good French Champagne. Unfortunately, my keyboard then is a bit blurred.

"The Branch is Back"

VRL Knowledgebank recently announced a new report: "the branch is back" (see more info here). The summary of the report reads as follows:
"The global retail banking industry is now in a period of innovative commitment to the branch, arguably not seen since the early 1990s. This quiet revolution is dealing with a more broadly-based agenda than just branch design, and is focusing on creating more customerorientated experiences and greater retail banking profitability."
If interested in the content, you can pay almost € 2000 to get access to the content.


From a mobile banking perspective, this is of course bad news, so I tried to get a bit more information on why a report could come to such a conclusion. I did not want to pay such a big price-tag just to find why these analysts see a different world that I do, so I used the information available for free. I could find no reference in the Contents page on how the evaluation was done to get to such a conclusion - now survey, no relative profitable measurements, nothing that could make one make such a statement.

I saw that the report refers to many case studies (predominantly in the UK and the US - not the markets where branchless banking is expected to be big), but did see reference to a case study in India (where, I presume "the branch is back"). The case study is for a bank called YES bank, which when you do a Google Search returns the following:

"Obopay India and YES Bank launch instant money transfer via mobile..."

Maybe the branches are required to sign up the mobile banking customers.

Regulatory Challenge to Mobile Banking

South African tax year ends at the end of February and tax returns must be completed and filed by about July every year. This is a terrible time for me, because I have to go through all the forms and filing to ultimately submit this declaration. Sure it is a challenge for me as I do not like filling in the forms and collecting all the information, but I get it done every year, now for almost thirty years. I also draw on the expertise of my accountant who has been doing this for a long time and actually enjoys doing it.

When talking about regulatory challenges for mobile banking, I was trying to get this clear in my mind, what we mean by challenges:
a. Is it impossible to do, or we don't know how to do it and therefor a major barrier to deploying mobile banking
b. It is possible to do but maybe complex. We can do it but we have to fill in a number of forms and conclude agreements. We can work with experts that have done this before and know exactly what must be done.

In terms of my reference framework, it is b). What do you think?

Gartner is cautious

Gartner produced research indicating that mobile payment subscribers will increase from 33 million to 104 million subscribers in the next three years. This is quite conservative compared to some of the other recent results (see my blogs on this here and here) that were produced by other research companies. Especially their estimate of (only) 500 thousand mobile payment subscribers in Europe at the moment. I think companies like paybox in Austria would be surprised that they have more subscribers in Austria than those that Gartner counted in Europe... wait a minute, last I checked Austria was in Europe. Also the fact that they did not count African subscribers - does that mean that they do not know about the massive penetration of mobile payment subscribers in Africa (my estimate between 7 and 12 million), or that Africa does not exist?

I still remember a previous estimate that Gartner got terribly wrong: the "75% probability that 60% of companies were not ready for Y2K" predication. After all the angst that they produced during 1999, maybe policy now is that they should play everything down?

Airtime as Currency

I should have blogged on this before, as this is a hot topic. Many examples of schema that utilise airtime as an alternative to real currency can be found. These solutions either provide for person to person payments and also for remittance solutions in a number of cases. The question now arises if this is not the way to go.

My take on this, is an emphatic NO! This is for one just not sustainable (see some of my comments below), but also potentially extremely hazardous to the underwriter of this currency (the mobile operator). If this approach really takes off and more and more currency needs to be produced to support the demand (money supply), serious problems like inflation, run-on-the-bank etc. could materialise. Mobile Operators are not in a position to deal with this. If they fully assess the potential implication on a devaluation of their airtime stock, I believe that they would put measures in place to stop it immediately (like elapse dates on pre-paid airtime). They should be apprehensive to ever start treating their airtime like money in the hands of consumers.

In addition, I think that using airtime for money in any format is totally unsustainable, because I believe that using airtime as money would be:

• Very expensive
• Totally inefficient as compared to proper e-money solutions
• Does not provide security to the client
• Would be illegal in any properly regulated environment

If airtime is being used as currency, it should be seen as an absolute indication of banks failing to
provide in an obvious need.

So what about NFC?

I have been critical of many things on my blog. I have highlighted the problems with premium SMS's, Internet payments, Chip and Pin and many other approaches to solving payment problems. In the same way I have discussed problems that I see with NFC solutions (As far as I can re-collect twice: here and here)

I don't think that we can ignore the growing interest in NFC payments and when today I was asked twice why I don't support NFC payments, I realised that I should post a firm position on this blog.

Card-based proximity payments is nothing new. We have stirling examples of these having been deployed successfully. I am the proud owner of a Oyster Card myself (even though I don't live in London). I really enjoy seeing how seamless everything work, each time I have to use the underground.

So here is my position: To merely replicate these kind of payments by replacing the card with a mobile phone does not add much value, and I believe that most business cases will be rickety. If we were to utilise the new NFC capabilities in phones, I think it is critical to be much more innovative about these features. Some of the things that we should possibly develop (not an exhaustive list) is:

• On phone wallet applications
• Phone to phone NFC interaction (I personally think that this is one potential killer app)
• OTA issuing (another killer, but extremely complex and challenging)
• Mobile data interactions between the application on the phone and back-office
  

At the end of the month, I will be speaking at a high-level NFC conference. I was invited...