Sunday, November 22, 2009

How do you regulate to ensure interoperable mobile payments?

I was recently asked: "What needs to take place, both from a technical and regulatory perspective, for mobile banking to be fully interoperable...". This is such a good question as it verbalise a growing need (specifically from subscribers) to have this functionality available, as well as highlighting the two factors that must be addressed in order to solve this complex problem: technical and regulatory.

Before talking about the technical and regulatory requirements, just some general observations that will illustrate the extremely complex nature of mobile banking interoperability:
  • Mobile banking payments are of a totally different nature than any other type of payment, because of the following two characteristics, in combination: The payment is initiated by the payer (not the payee as is the case with most electronic payments). This simple fact have major ramifications in as far as clearing, disputes, roll-backs etc. is concerned. The complexity is aggravated because mobile banking (by nature) should be real-time.
  • Current game plans in big eco-systems are to build a competitive advantage over other competitors through mobile banking. The mobile banking supplier with the biggest market share (and thus having the best chance of ensuring interoperability) usually do not want this to happen as it would dilute their competitive advantage.
  • While it is possible to route a telephone call to a unique telephone number, this is not as easy with a payment. Some factors that could complicate this are more than one bank account associated with one telephone number, implications of wrong numbers and other incidents where reversals may be required.
I will describe some of the technical requirements of interoperable payments in the next post.

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