Some thoughts on the liquidity at agents

One of the biggest challenges in rolling out mobile financial services is the establishment and the effectiveness of the agent network. Agents are the touch-points where the subscribers of the service can get money into and out of the system. (Agents are often also referred to as cash-in and cash-out points).

In instances where a subscriber arrives at an agent with the need to withdraw a large amount it does happen that the agent do not have enough cash to satisfy the cash-out request. This leads to frustration and is one of the reasons why take-up of these systems are slower than what is expected. This problem is referred to as the agent liquidity problem - how to ensure that the agent has sufficient cash available to satisfy the need of the system.

This problem is often approached in a way where the system keeps track of the actual cash available in the drawer of each agent in order to guide subscribers where they can withdraw big amounts. This approach is overtly complex and often fail because of the informal nature of agents businesses. I have recently seen a system that works on averages (what is the average pay-out at an agent or in a town etc.). The system also calculate deviations from real-time on the basis of the amount. For instance, if you want to withdraw $100 you will be able to do so in six hours. This enables the agent to collect sufficient cash if they are pre-warned about a pending withdrawal.

It is plans and innovations like this, that will help deliver financial services to the poor.

The Governor of the Bank of Zambia's approach to mobile banking regulations

One of the contributors to the mobile banking conference in Zambia was the governor of the Central bank (Bank of Zambia), Dr Caleb Fundanga. I do believe that his approach to mobile banking contributed to the success story that we see developing in the country. When confronted with mobile banking during the early part of this decade, he did not dismiss it as too risky or unproven. He and his team worked in a responsible manner to establish a dispensation that seems to nurture mobile banking, creating benefits to all.

During his speach Dr Fundanga made a number of points of which the following I found enlightening:
1. The Bank of Zambia (BOZ) must implement the law. This is what guide them and they cannot deviate from this.
2. In tackling new challenges and interpreting the law, the approach of the BOZ is to collaborate with all and to develop policy in a transparent manner
3. If a situation calls for a change in the law, this is done in a structure process with wide consultation of all parties.

His approach of finding solutions, rather than listing problems will lead to an even better adoption of mobile banking in the country.

One of the most successful Mobile Banking Conferences ever: hosted by Celpay

What makes a conference successful? For a start, the speakers should know their topic and be able to present it in an entertaining way while at the same time ensuring that they convey key messages. In addition, I also believe that the participation of the audience is crucial. Nothing is as frustrating as a passive audience or an audience demonstrating their ignorance by the questions they ask. Of course, conferences are a networking opportunity and meeting the right people and quality interaction with them also contribute to making a conference successful. Lastly, the logistics of the conference - arrangements, the venue, food etc. are also important.

I recently attended one of the best mobile banking conferences ever. This was hosted by Celpay in Lusaka (Zambia) and scored high on all of the criteria of making a conference successful. The biggest reason, however, was that each of the speakers at the conference was experienced in the topic that they presented on. They were not trying to make a quick commercial point or using the platform as a badly disguised marketing exercise. The contributions was well-thought out and I personally learned lessons from each presentation. In addition, the contribution from the audience was of an extremely high calibre.

This made me think why it was that a conference with predominantly local speakers in a country like Zambia can be so stimulating. I believe that the reason for this is that mobile banking is not theoretical any more - it is an integral part of the economic situation in the country. Mobile banking has grown to be a vibrant, growing eco-system that contribute to improving many aspects of the economy (from small businesses anfd agriculture to the under-banked). The Zambia mobile banking market is one of the oldest (first commercial deployments were in production during 2002). Maybe we should make a point of listening to the practitioners more.

Every mobile banking vendor picking a big elephant?

During the past few weeks many mobile banking vendors aligned themselves with big brands. To mention a few: Obopay with Nokia, Monitise and Visa and the purchase of Macalla by Roamware. All of these alignments happened on the basis of an equity arrangement. Also in the past two weeks, Sybase/paybox announced deployment relationship with IBM and mCom a distribution agreement with Microsoft.

This flurry of activities could be on the basis of two possible reasons. Either this market is getting so attractive that the big elephants all want a piece of the action or it is getting so dangerous that the small elephants need protection. In aligning themselves with a big elephant these vendors receive numerous benefits, ranging from brand awareness to access to markets. But these transactions also come with a big downside: the relinquishing of strategic control and direction and the ability to dictate their own destiny. In the end it will be results and customer satisfaction that will dictate the ultimate leaders and not the label used to sell the solution.

Macalla disappears as Roamware MFS emerges

Just like that... Almost overnight, Macalla has also disappeared. One of the pioneers of the mobile banking and payment space have now been rebranded as Roamware MFS. I still recall some of the early days when we spoke with the founders of Macalla about this new industry and how we will make it work. Now very few independent suppliers remain. (also read my previous post). It seems as if the industry is now attracting the big guys. This is an acknowledgement of the importance and the size of mobile financial services.

The marriage of Roamware and Macalla must be evaluated separately though. While I respect both companies and the people that are in charge (I know them all well), I am doubtful that this merger will work. The culture and approaches of the two companies are so different that it would without doubt lead to friction in my opinion. It would be interesting to understand the rationale and reasoning for making this marriage happen. Could it be that the merger was required because of some urgent matters that could not be postponed?

The Luup side of Nokia Money

I have decided that I will not blog while on holiday, but the Nokia Money announcement is so big that it just cannot be ignored. While I am spending time with good food and wine in a beautiful region, I also cannot help thinking about mobile banking. So I decided to give my penny-worth:

I recently posted some of my observations on the hook-up of Luup with Deutche Bank (read more here). According to my understanding, Luup discarded their retail focus to hook-up with Deutche Bank to bring their mobile banking solution via the distribution reach of the bank to many countries in the world. Luup must be complimented on their focus on this initiative as this will allow them the best chance of succeeding.

In a similar way, Obopay have now teamed up with Nokia to bring their mobile banking technology to many countries by making use of the retail distribution network (and consumer brand) that Nokia allows them to use. I believe that this hook-up is similar to the Luup initiative and I would expect that Obopay would (over time) relinquish their own retail aspirations. It will also be difficult to develop an enterprise strategy at the same time as developing Nokia Money. It is not clear whether they will also (like Luup) focus exclusively on Nokia as a distribution strategy.

The biggest difference for me is the fact the the Bank is a much stronger distribution (almost retail) brand, whereas Nokia is a very strong product brand. A strategy based on utilising Nokia as a distribution brand would fail I think (with some exceptions like maybe India). It is my experience that Nokia is seldom distributed exclusively through a Nokia channel. Distribution networks in most countries also distribute other handsets. The impact of bundling a Nokia Handset with a Financial service will have to be evaluated carefully as I am sure Nokia cannot afford that their flirting with Money should impact their mainstream business.