Thursday, December 29, 2011

Digital identification and mobile payments


The fundamental problem with all payment systems is to accurately verify the identification of the buyer. If one can be hundred percent sure that the identification of the buyer is absolutely accurate, one can be hundred percent sure that the payment is not fraudulent. In the physical world this is achieved by verifying physical documentation (for instance ID documents, fingerprints etc.). The problem is of course much more difficult in the digital world.

That is why solving digital identification is almost the same as building a fraud-proof digital payment system. This is emphasised by a recent announcement from Paypal (Read here). In this announcement, Paypal aims to become the custodian for their clients' digital ID's. Similarly, deploying well-designed mobile payment solutions in emerging markets is similar to rolling out robust identification systems. One should consider combining both problems: rolling our national ID systems at the same time as deploying mobile payment systems.

Wednesday, December 21, 2011

Very positive surveys for Mobile Banking


It is all good and well to talk about a trend based on trivial observations or individual war stories, but trends get substantiated by rigorous research only. That is why one can now confidently proclaim that there is a spectacular growth in the adoption and potential for mobile banking. This is true on the basis of a number of research reports released in the past few months that all corroborate this trend.

Some of the more interesting reports that I have seen are:
  • Javeline Strategy and Research reporting a jump of almost 60% in mobile banking take-up, concluding that mobile banking has now moved from a "nice-to-have" to a "must-have". (Read here)
  • A McKinsey research poll of major European banks report a jump of more than 50% in banks that are planning to launch some mobile banking application (Read here).
  • A Comscore research reports a jump of 45% on a year to year basis of consumers using mobile banking. This now represent about 14% of all mobile users in the US (Read here).
  • Both Starbucks (reporting 20 million mobile transactions) and Paypal (expecting $3.5 billion of mobile transactions in 2011) reporting strong growth in their mobile banking initiatives (Read here)
Good news for the industry.

Friday, October 14, 2011

Pacific Inclusion Programme; doing excellent work to bring financial services to the poor

Mobile payments enable the provision of financial services to the poor. It is one of the key building blocks to bring sophisticated financial services to communities that were previously excluded. The low cost of delivery, flexibility and ease of use makes this an ideal platform to deliver these services. As such, we are frequently introduced to amazing organisations working in this industry, making big inroads, often with very little resources.

One such an initiative is the Pacific Inclusion Program (PFIP), an initiative supported by the United Nations Development Fund. It is an organisation working in the Pacific region with the aim to increase access to quality financial services to the people of the region. (Read more here). A very qualified and capable team is working on diverse projects ranging from branchless banking to financial literacy. The team is working closely with central banks and contribute towards ensuring more friendly regulations to facilitate the delivery of financial services to the dis-enfranchised.

It is people like these that are the unsung heroes; working to bring quality financial services to more people and making the world a better place for more.

Different classes of retailers in emerging markets, requires fresh merchant thinking.

Merchants are clearly defined in card payment terminology. A merchant is someone that accepts a card from a client and then initiate a payment request/authorisation. A merchant usually have a relationship with a specific bank (called an acquiring bank) and should have secure infrastructure (terminals) that can accept a card and initiate the authorisation transaction. This model is proven and tested and works well in many markets. Trillions of dollars are processed in this way and these merchants form the foundation of retail economies of the world.

However, in many emerging markets, large volumes of transactions are processed (usually in cash) by retailers looking very different and operating within a very different economic model. These traders often do not do business in permanent structures and work irregular hours and with much more flexible business models. These merchants generally cannot afford terminals, do not have connectivity, nor have reliable electricity available. The needs for reconciliation and cashier management are also significantly different for these retailers.

It is inconceivable that these merchants be served in a model that does not consist of the four parties (as is the case with interoperable, open card payment models). However, digital payment models for this sector (most likely based on mobile phones), will have to be designed with very different liability structures, different fees and less overhead. At the same time, these solutions would also offer less utility and features compared to the established schemes.

The time is ripe for the development and prototyping of these type of payment solutions.

The source of funds dictate the use of mobile wallets

What is of critical importance in making mobile wallets work in emerging markets is making sure that the wallets are properly funded. Getting money into these wallets is a big challenge, especially considering the predominantly cash economies. The boundary between cash and digital currency is often difficult to navigate.

Cash-in strategies at agents, retailers and bank branches (a kind of cash deposit feature) are the most frequently used approach to get money into wallets. Some solutions utilising scratch cards and/or "top-up PIN's" have been implemented with limited success.

Other mechanisms to fund wallets are providing tools to pay salaries or wages directly into the wallets and the distribution of aid or grants. Using wallets to perform these functions are not only cost effective, but also provides the basis to drive secondary transactions. Another source of funds (of course) is remittance flows. While it is often customary to accept remittances as cash payments, it is far better, more secure and cost effective to fund nominated wallets with the remittance amount. This then also could lead to secondary transactions.

It is often those operators that deploy the most effective funding strategies that show the biggest usage.

Thursday, October 13, 2011

Mastercard making mobile payment waves

It is clear that MasterCard have taken mobile payments seriously, if the number of initiatives announced during the past period is an indication. As one of the big card payment providers and a major player in payments in mature economies, this is further ratification of the importance of this industry for emerging markets.

Some of the announcements that I picked up on lately are the following:
  • Launching NFC based payments in conjunction with RIM's Blackberry and Etisalat in the UAE (Read here)
  • Utilising Intel two-factor authentication in conjunction with Symantec to bring more secure mobile payments to market (Read here)
  • Talks about launching a MasterCard mobile payment gateway in Indonesia (Read here)
  • Making key appointments in Nigeria (some with prior mobile telecommunications experience (Read here)
  • Launching a online payment model utilising mobile phones in conjunction with Airtel and Standard Chartered (Read here)
  • Application to link a MasterCard number to a mobile phone to perform mCommerce transactions in Hungary with a number of telco's (Read here)

Bill payment integrations to mobile wallets in Africa

Mobile payment solutions cover Africa with basic services including domestic remittances, person to person payments and airtime top-up capabilities. All of these are only possible because of "cash-in" and "cash-out" features installed at agents. Even these are amazing on their own, but these solutions are not constrained by these basic features.

Many examples of integrating mobile wallets with bill payment applications can be found. This is an area that shows a lot of growth. Either deployed by mainstream brands or also by small entrepreneurs, this is an area that requires further investigation. Some examples are the following:
  • Celpay (one of the pioneers of mobile banking in Africa) provides payment solutions for multiple billers in the countries that they operate (Zambia, Zimbabwe and Tanzania) (Read here)
  • MTN Mobile Money recently implemented a "bulk payment" capability that allows companies to offer new payment solutions. This application is currently utilised most for the payment of salaries (Read here)
  • M-Sente (a mobile wallet provider in Uganda) recently announced the launch of MultiChoice payments. (MultiChoice is a regional payTV provider) (Read here)
The rate of innovation and launching new services on multiple live products in Africa is an indication of the health of the industry in emerging markets.

Tuesday, October 11, 2011

Interesting mobile payment activities in South America

I have reported previously on the plans of Telefonica to deploy mobile payment solutions in South America. (Read here). With one of the fastest growing mobile subscriber bases, large un-banked populations and economies dependent on remittance flows, one would have thought that this would have been a fertile space for mobile payment successes. Yet, it seems as if activities are limited to high profile announcements.

Recently, America Movil announced a major commitment to deploying mobile payments in the region. The intention is to create a JV with Citibank called Transfer with an estimated investment of $50 million (Read here). The intention is to roll this out in Mexico first and then to replicate it into other markets in the region. The complexities in regulating a JV between a bank and a mobile operator has proved difficult in other markets, so it will be interesting to see how this pan out.

It seems as if this region may get defined by smaller players with solutions that are deployed swiftly and with a better understanding of the actual needs. Yellow Pepper (read here) is such a player with a large subscriber base in a number of countries in the area. Monique has been working on launching eZuza in Mexico for some time now and it seems as if this is imminent
(read here), whereas Tagattitude (like in many places around the globe) assisted an initiative in Nicaragua called mPeso (read here).

This region will either be defined by the mega-corporations with a lot of resources but a less clear vision or by smaller players with limited capacity but slightly more focused.

Using mobile payments for online payments

According to the International Telecommunication Union (ITU), Internet-user penetration in sub-Saharan Africa has grown from 0.5% in 2000 to 10.6% last year. The penetration in Nigeria is for instance estimated at 28% (Read here). While the Internet activity is growing at a massive rate, online shopping is curtailed by the lack of suitable electronic payment solutions.

A number of localised payment solutions can be found. These are all dependent on acquiring relevant merchants. Some examples are FloCash or options where bank branches receive online shopping payments (offline payments at GTBank). Further challenges for these digital payments are the challenges to integrate with cash, consumer education and trust, as well as a sustainable business case.

In most of these markets mobile payments are well-established, with good penetration and a motivated network of agents with cash-in and cash-out capabilities. Consumers are also often well informed of these payment mechanisms and generally have a high level of trust. It stands to reason that mobile payments will fill the gap needed for suitable payments to make online shopping work in Africa.

Friday, September 30, 2011

The core to the cost associated with Debit Cards

Much has been said about the costs associated with debit cards. This recently culminated in a US senate approved amendment called the Durbin amendment which is designed to reduce the "swipe fees" charged for debit cards. The intention is that the Fed would ensure that these fees are reasonable and proportional. (Read here). Some banks responded by indicating that they would charge a monthly fee to cater for the cost of providing debit card functionality to their customers. (Wells Fargo, BofA). The question that needs answering is: why are debit cards generating more cost than for instance credit cards?

What costs do a bank incur by providing debit cards, that is not present in credit cards? In a way the transactions run on the same infrastructure; merchants do not have to get new equipment and the risks for fraud are similar (if not the same)? The only real fundamental difference between debit and credit cards is that the value available - the balance - is managed in a different way. Debit cards requires a tight integration to the bank's core banking system. Could it be that this integration, the complexity created with bank processes and implications for other payments streams add to the costs? and that this additional costs are so high that it is problematic?

Friday, September 16, 2011

"The most important Mobile Payment Infographic Ever" is a misrepresentation

Infographics is a technique to display lots of data and information in a graphical way so as to be able to easily comprehend the information and interpret the facts. Knowing how complex information about mobile payments could be, I was very happy to read about "The most important Mobile Payment Infographic Ever", (Read here). It surprised me to find out that there are now five types of mobile payments, so I decided to investigate.

It seems that there are something magical about "five types", as the mobile payment industry has been categorized into five types frequently:
  • In a very interesting and informative study performed by Simon-Kucher and Partners about consumer readiness for mobile payments (Read here).
  • In a recent survey of executives conducted by KPMG on when mobile payments will be mainstream (Read here)
  • In the topics of a course about the basics of mobile commerce offered by MobiBlueprint (Read here)
  • Even Cindy Krum in her book on mobile marketing seems to believe that one can find five types of mobile consumers (Read here).
Only problem is that none of the experts agree on what the five types are - not even close. It is clear that the information on how to categorise mobile payments is not stable, nor agreed on. To make the claim of "The most important Mobile Payment Infographic Ever", is therefore a slight misrepresentation.

Tuesday, September 06, 2011

Update on Eko - success will breed success

I wrote a blog on Eko about eighteen months ago. Eko is a start-up in India focussing on bringing financial services to the poor by making use of mobile technology. The management team did a lot of good work on the operational models and have learned a lot about the specifics of India. In my blog I emphasized that Eko is doing three things well: running the operations at a very low cost point, getting the economics of the agents right and having a passion to genuinely assist the communities that they serve.

This seems to be paying off now. It has been reported in the media that Eko now have more than two thousand agents activated, that almost a million subscribers have now been registered and that close to $300 million of value were transacted in the past year. Transaction volumes are growing at close to 50% year on year. (Read here). (While these numbers are impressive, they are still very low from an Indian perspective.) In addition, Eko was one of only six Indian projects recognised in the annual prestigious Tech Awards by the Tech Museum of San Jose. (Read here)

I am sure that their success and recognition will breed more success, and I would like to congratulate them.

Continuous innovation and new start-ups - why radical innovation cannot work for payments

The innovation required to re-do payments is quite complex. The reason for this is that payments is like a multi-tentacle octopus: it is a extremely complex eco-system that is integrated with many other systems. It is therefore unlikely to see a radical innovation changing payments as we know it overnight. Yet, one sees new start-ups all the time with a new angle on how payments can be re-vamped to be more effective, more ubiquitous and more secure.

A case in point is Zunguz (Read here). Zunguz is a payment system where you can pay any other person that is registered on Facebook - merging the world of payments with the world of social networks. This is a great idea of course and probably logical. So I jumped on to Facebook and attempted to register for Zunguz. I gave up when I had to change my Facebook security profile in order to support the security requirements of payments. As an aside, I noticed that twenty people have already registered for Zunguz.

Maybe this is too a radical innovation in a world where continuous innovation is required.

Monday, September 05, 2011

UID and mobile banking in India - too ambitious to succeed?

One of the biggest challenges with the distribution of mobile banking is a unified, national identification system. In many developing countries this does not exist, or, if it does, it is polluted with fraudulent data. That is why the UID project in India must be lauded. (Read more here). It is an ambitious project to provide a unique national identification number to every citizen of India and to do it in such a way that it is tightly coupled to unique biometric data. As this project is rolled out, it would theoretically streamline the issuance of mobile banking accounts.

Ultimately, every Indian citizen will have a unique identification number that can be traced to biometric data (fingerprints and iris scans) stored in a central data repository. The vision is that this will drastically reduce identity fraud, while at the same time, form the basis for many other industries to thrive: banking, social security and many more.

Unfortunately, the ambitious nature of the project is placing the whole project at risk. This is primarily because of three reasons:
  • The use of biometrics as the primary mechanism to uniquely identify citizens has never before been used successfully. To role this out in the second most populous country in the world without successful case studies in smaller countries is a bold move. Furthermore, the use of biometrics as the primary identification mechanisms for citizens is being questioned by some academics. (Read here).
  • The cost associated with a fully functional UID issuing agent is relatively high. (Considering the cost of fingerprint and iris capture systems as well as the need for connectivity etc.) The initial costs estimates to provide UID numbers to all citizens seem to be too low, and in addition, government might cut the allocated budgets (Read here)
  • In order to drive the take-up of UID, government has started to create demand for UID numbers. For instance, it is now only possible to be paid certain grants or apply for certain jobs if you have a UID number. (Read here). With a system not fully funded and an unbalanced demand, it is likely that loopholes will be found to issue fraudulent UID numbers.
It is in everyone's interest that the UID project succeeds, but will the degree of ambition ultimately lead to the downfall of the project?

PayD. A new way to pay with a Debit Card.

Some months ago, MTN announced a new payment initiative that has been launched in South Africa in collaboration with Standard Bank and Nedbank (Read here). The technology utilised in this product uses SIM cards and PIN entry to turn mobile phones into secure encrypted point-of-sale terminals.

In a related announcement, Paygate (one of the largest online aggregators in South Africa), announced that they will allow PayD (Read here). This opens up a large merchant community (ranging from major airlines to smaller retailers) for consumers that have registered their debit cards with PayD.

In order for this service to succeed it is now important to make it available to a large community of subscribers, for the subscribers to sign up to the service and to use it in earnest. The transaction volumes will ultimately dictate if this service will be seen as successful or not. It will take dedicated attention and some smart marketing initiatives to drive transactions.

Payment eco-system must lead to cross-industry collaboration

The complexity of payment systems and the inter-dependencies of the many players in the value chain, necessitates collaboration. Fifty years ago, this need created the big payment brands (Visa and Mastercard) when the major banks understood the importance to collaborate. Today many efforts are made to form new alliances and collaboration groups. This is especially visible in instances where mobile operators form groups to establish shared payment mechanisms. For instance read here.

It is clear that with new ways to pay and the ability to change the whole payment experience, that other players could join the payment eco-system. This is why I found a recent Forbes article so interesting. (Read here). The article emphasises that many players must collaborate the create new payment eco-systems. The usual players are named, but then a new player is added: consumer packaging. With some very good motivations on why one should involve this industry in payments, this was quite a stimulating article.

The business case for mobile payment applications

I recently saw an article about using mobile payments to pay for parking in New York. (Read here). This is of course not new and has been effectively deployed in many countries (particularly in Eastern Europe). This is one of the coolest and most logical applications for mobile payments. It is of course important to redesign the whole business process - to change it from a proximity payment to a location-independent payment. But the biggest problem (of course), is to build a workable business case for it. The revenue from parking revenue and the investment required to make it work, just does not do it.

For mobile payments to become ubiquitous, it is important that multiple business applications be deployed at the same time, based on the same payment infrastructure. The combined business cases now add up into a viable investment case. It is important to approach mobile payment applications in such a way, as it would otherwise never be realised.

Tuesday, August 30, 2011

What is financial inclusion and why is it important

"Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low income segments of society" is the way that Wikipedia describes this. (Read here). The estimate of the number of people that do not have access to digital financial services usually runs into the billions and many organisations are working diligently to provide some infrastructure to make this happen.

Many motivations for progressing towards a cashless society exists. Some people are talking about the elimination of poverty through financial inclusion. Much is being said and being written about how this will be achieved, but success are limited and usually comes at a big cost. Many organisations and companies sees this drive as an opportunity to profit - to get access to a much bigger market, and this drives many of the initiatives.

But why is financial inclusion really important? And why should we care? Is it worth the effort and the investment? If we are not clear about this, our efforts will be wasted.

I believe that the answer lies in a honest assessment of the real needs of the people that we are trying to "help". If we cannot put ourselves in their position and truly understand what will be a better world for them, we will not succeed.

Sunday, August 28, 2011

Mobile payments could make EMV obsolete

It seems as if the EMV wave is about to break over the US. The ultimate technology to protect against the cloning of plastic cards has been tested in many markets and enough evidence exist to show a dramatic reduction in fraud (especially based on card cloning). (Read here). A perceived growth in card fraud in the US may necessitate a major drive to deploy this technology. The massive potential cost of retail infrastructure is of course the biggest stumbling block.

It seems as if there are a perception that a move to EMV is required in order to effectively implement mobile payments. (Read here). While this may be the case (to some degree) in preparation for retail NFC, this is of course not true at all. Mobile payments could successfully be deployed without any EMV infrastructure available. The best evidence of this is to look at the dramatic growth of mobile payments in emerging markets where no EMV infrastructure is available.

To the contrary, a clever deployment of mobile payments, may actually lead to making plastic cards redundant and thus eliminating the need to protect against cloning... making EMV obsolete.

Monday, August 15, 2011

How crypto is being used in banking

Traditional banking security is dependent on well-designed cryptographic equipment. These devices are hosted in ATM's, Pinpad in branches and retail infrastructure. The crypto codes generated on these devices during transactions are evaluated within the host systems by tamper-proof hardware security modules. The whole banking system was designed and built on robust cryptography (almost impossible to breach).

That was the case until online banking arrived. Consumers now interact with banking systems via the Internet with no cryptographic devices involved. The cost of these devices, the integration with online systems, lack of standards and complexity in the distribution are barriers to making this a standard component in online banking. Some of these barriers are aggressively being attacked and some progress has been seen lately:

HSBC use a on-time password for business users to secure online transacting. This crypto security device is available to customers in all countries. (Read here).
Bank of America offer a device to their customers producing one time passwords, called Safepass. (Read here).
This technology was released by Visa recently with the brand name Codesure. (Read here). The question is how readily will it be distributed and could this lead to more secure online banking.

It is also important to think of the implications for mobile banking.

Two divergent views on mobile banking security

Two very similar articles were published on the 10th of October. Both discusses the security of mobile banking, yet they get to totally different conclusions:

The first argues that mobile devices are much less sophisticated in defending against malicious attacks, it does not come with firewalls and subscribers are more likely to download bad applications on their mobile phones. Mobile banking are therefore much more vulnerable than online banking.

The second article
reckons that many of the hacking tools that exist for PC's are not available for mobile platforms. With so many variants of operating systems and hardware it is difficult to find common access mechanisms to launch malicious attacks. In addition, because mobile banking can be implemented with transactional security, utilising various additional techniques it is much more difficult to penetrate. The writer then concludes that mobile banking are much more secure than online banking.

Both articles published on the same day, yet with different conclusions. Which one is right?

Bank Simple Thoughts

Someone once said:"Banks are dead, banking not". We all talk about how inadequate banking is and how our needs are not met. However, few initiatives ever succeed in replacing the old brands and we keep on banking with them. Who will forget the waves that Egg made in the UK and Twenty20 in South Africa. Both these initiatives had limited success and ultimately got eaten by the establishment. Yet, we would still like to dream.

That is why it is so refreshing to see initiatives like BankSimple that recently raised a further Ten million (Read here). A bunch of entrepreneurs working on a new banking model that plans to bring retail banking wrapped in a new presentation. As is to be expected, part of the offering is to bring the service on mobile phones, But the complexity of new systems, regulatory conformance and integration into the payment systems have delayed the launch of this bank.

Let's hope that this company can steer through the hurdles successfully and that they achieve success. We need renewal in the banking industry.

Importance of trust in brand to conduct mobile payments

There is a lot of trust involved in performing a payment transaction. It is probably the most important ingredient in making sure that consumers complete payments. While it is relatively easy for first mover people to try out new payment schemes, this is not the case for the majority of people.

In an online survey performed by Ogilvy & Mather, 500 Americans were asked which brand they would trust most in mobile payments. (Read here). (The graph can be found here). The results (while predictable) were quite interesting. Visa (and Mastercard, American Express etc.) carried the most trust, while companies like eBay and Facebook had a much lower score. This means that even in the online world, a brand carries a lot of weight when it comes to payments.

Some questions:
  • How to ensure that criminals don't masquerade as a trusted brand.
  • How will consumers recognise a brand in a mobile world - especially when space to display brands are limited.
  • How to build products that carries the brand promise.


Sunday, July 24, 2011

A business case for the elimination of PCI

The PCI (Payment Card Industry Data Security Standard) program is one of the most important initiatives ever undertaken by banks and the card associations. Fundamentally PCI is about masking card numbers so that it cannot be used for purposes that it is not intended for. Because credit card numbers (if known to criminals) can be used to perform fraudulent transactions, it is important that these numbers not be available in the open.

While it is critical to implement PCI, the cost implications are high. Consider for a moment the number of systems and business processes that work with credit card data. All of these systems must be changed, maintained and supported without ever displaying, storing, logging or exchanging the actual credit card data. It is almost the same as making telephone calls without ever using a telephone number. The complexity and cost of conforming to PCI is huge.

If it was possible to create a payment system where fraudulent payments were not possible, even if card numbers were used in the open, the payment industry would save a lot of money. If we could have a payment systems even if you had my number you could only send me money, then it would be okay if you had my number. PCI would then not be required. This is possible through mobile payments.

This is a thought: maybe the business case for the implementation of mobile payments could be built on the elimination of PCI.

Monday, July 18, 2011

Mobile banking for low bank balances

In a very interesting move, one of the largest banks in Nigeria (UBA) advised their clients that they would systematically be closing bank accounts with a balance lower than N 25 000 (about $ 150) (Read here). They advise their clients that they would want them to still do business with the bank, but by making use of their new mobile facility called U-mobile. This basically means that clients with small balances would not be served in branches, but can still transfer money by making use of their phones. Interesting...

This begs the question if mobile banking facilities are designed to cater for customers with low balances only. Is the reason why banks would be interested in making mobile banking available to get customers with low balances out of the branches? Or are the needs of customers with low balances just different and they do not need to visit branches?

Friday, July 15, 2011

Branchless regulations to stimulate

Banking regulators have a very important job to do. They are the custodians of the stability of our financial systems. We should not under-estimate this responsibility. It is interesting how different regulators approach this task. Some have a very restrictive and prescriptive approach: their regulations are characterised by offering the banking fraternity with systems cast in stone. In these countries it is extremely difficult to innovate as the central bank does not allow anything to be different than what they prescribe. As one can imagine, progress in these markets are slow. I am sure the readers will be able to name such countries without me being explicit about them.

On the other hand, central banks can create rigid frameworks that will ensure the stability of the financial systems, yet allow for innovation within these frameworks. As the solutions start to evolve, the central bank could then loosen some of the limits and constraints in these frameworks. This is of course a much better approach, as it stimulate growth, without compromising the financial system.

A case is point is the State Bank of Pakistan (SBP). The initial branchless banking guidelines released by the bank providing sufficient room for very innovative solutions to be launched in Pakistan - solutions that achieved good traction. The SBP has now released new guidelines that relaxes some of the previous guidelines. (Read here). Some of the steps forward is the creation of a new level of KYC-compliance, that relaxes some of the previous constraints, as well as an increase in limits. This approach should lead to faster growth in the industry in Pakistan.

Sunday, July 10, 2011

The pre-occupation of the world with m-Pesa.

"Will there ever be another mPesa?" reads the headline of a recent article. "Of course not", I wanted to say, but what is the point of the question? In the same way there will never be another Celpay or EasyPaisa for that matter. Yes, without any shadow of a doubt, mPesa had a major impact on the world's understanding of bringing financial services to the unbanked, but it has never been the only success and in many ways we can learn from many other similar solutions deployed in different parts of the world.

Other notable success-stories (to mention a few) are:
  • The Celpay deployment in Zambia, achieved remarkable commercial success with very low capital investment. Frequently recognised, Celpay has shown that this type of technology can be run profitably. Both mobile money deployments in the Philippines have shown significant impact in the social fiber of this company. Solutions ranging from micro lending and money remittances have been pioneered on these platforms.
  • The MTN Mobile Money deployment in Rwanda have shown faster growth (both in terms of take-up and transaction values) on a relative basis than mPesa in Kenya. In a country much smaller than Kenya, the growth in take-up has been phenomenal.
  • The Easypaisa implementation in Pakistan has been particularly impressive with a different business model in a very competitive market where banks are much more responsive and innovative than many other countries.
This pre-occupation with mPesa being the only example of a successful deployment of mobile financial services is harmful to the industry as a whole.

Friday, July 08, 2011

Facebook money implications.

I previously wrote a blog about the Facebook credits and the likelihood of it becoming a serious currency. It is unclear how much money is locked into this currency and how this will grow. It is also interesting to speculate how it will evolve to become an important component of the Facebook business case. The potential size of revenue does not seem to be that big and will not substantially increase the $ 2 Billion revenue that Facebook is making (predominantly) out of advertising.

What is interesting, though, is other aspects to consider. Finextra reported recently (Read here), that Facebook silently tweaked some of the rules to ensure that they do not breach US anti-trust laws. (They needed to ensure that they do not use their dominant position to arrange an unfair advantage to themselves.) Other considerations that will be important in future are consumer protection considerations and ensuring that the scheme is not contravening deposit-taking laws.

Also, the economics of funding the credits are interesting. When buying credits, one can use the usual payment options (credit cards, paypal etc.). But facebook as also teamed up with Zong and Boku and it is possible to also buy credits with these solution providers. This means that credits can be bought with airtime. If Facebook credits take-off and the scale become much bigger than now, this could have interesting implications for the revenue models for mobile operators.

Thursday, July 07, 2011

The key to the Nokia Money strategy is a flexible mobile application

Nokia announced a collaboration with MCB bank in Pakistan recently. With this move, they have demonstrated that they could move the concept started in India into other markets. (Read here). MCB have successfully used Fundamo technology to roll out their mobile strategy and have won numerous awards for the success that they have achieved in the Pakistan market. (Read here). Not only then is this move extending Nokia's regional reach, but also an extension of technology suppliers. This is of course a positive move.

The ability of Nokia to offer mobile banking as a primitive feature on all of their handsets will be critical to the success of these initiatives. According to some media reports, it is the intention of Nokia to offer the mobile banking application on all of their handsets (from the basic sets to smartphones). (Read here). It is going to be their ability to do this in a seamless way, integrating into multiple different back-office systems, ensuring compliance with different regulatory dispensations and doing so in different languages, that is going to be the proof point of the strategy.

BNZ mobile banking in the spotlight, but what is really happening in New Zealand?

It seems as if the new mobile banking solution developed by BNZ met with a lot of positive feedback when launched recently in Kiwi Land. The application and mobile web solution was reported to have been well-received in the social media and the iPhone app quickly rose to be the application downloaded most. (Read here). The bank must have done something right and reading between the lines, I believe that they treated mobile as mobile and developed a mobile banking solution, specifically designed for new requirements.

On the other hand, it could also be that this is a light shining in an industry with a mediocre and ill-conceived offering to consumers. Kiwibank refers to their mobile banking as being available to "phones that can access the internet" and to "use your internet banking access number" to do mobile banking (Read here). Whatever happened to the Kiwibank mobile banking launched in 2007 with "features not previously available anywhere in the world"? This was supposed to be the springboard for local technology company (Fronde) to tackle the world. (Read here).

Similarly, Westpac New Zealand refers to something called Mobile Online Banking on their website and claims that it "offers all the same services as online banking". Clearly just internet banking on the phone. (Read here).

Signature-based security is the biggest source of Fraud attempts

At the risk of stating the obvious: The chances of fraud is significantly higher with payment instruments based on signatures than those using PIN's. This is made clear in a blog posted on the 27th June on Retail Payment Risk Forum. Based on information collected during 2010, fraud is more likely by a factor for instruments that use signatures as payment authorisation.

The relevance of this research in my mind is that the cost component allocated to security could be reduced by as much as 80% by making use of a more secure mechanism. By taking these concepts into consideration in the deployment of mobile payments, it is possible to offer much less expensive solutions. It is important to consider security designs from this perspective.

Friday, June 24, 2011

A few Tweets tell a thousand stories

A sample of recent tweets oof the most famous mobile banking.

  • Stuck at an mpesa shop in juja thanks to safcom.Unreliable as always.Leo nitapigwa ngeta aki!
  • #safaricomltd should buy more mpesa servers and switch them on, on fridays.
  • @hardcorekancil they are still working on setting up the mpesa in kenya
  • @SafaricomLtd Mpesa has been down! Forced to travel to kisii via my nakuru home coz i cldn't transact in Nbi.How can i do an ATM trnsction?
  • @armuisME: Who is still surfering at the hands of these wankers @safaricomltd ==>if it wasn't for mpesa...i'd be so off them
  • whats up with mpesa? is this back up? @SafaricomLtd
  • @SafaricomLtd why is Mpesa not working ??!!!
  • T @Ekymani c'mon safaricom @bobcollymore ..the Mpesa downtime of late is unforgivable?
  • @antwaRogue Mpesa iko down n my chums are there so u better have ur cab guy on speed dial incase we are stranded in town.
  • @bobcollymore sir whats up with mpesa? It is nt working. I appreciate your response in advance.
  • @shique08 i've tried my mpesa too..it aint workin
  • #ThatWTFmoment when safaricom net and mpesa are both down #wtf
  • @safaricomltd whats happening to the Mpesa services.manze nimesota en i need to withdraw some cash like right now!!!!!!!!!!!!!!!!!!!!!!
  • How predictable that everyone & they cousins have decided to go shopping with MPESA right at this minute.......
  • @emmalilbecky: Teacher:what does colour green mean in our flag? Njoroge:MPESA
The moral of the story is: Even if the delivery of the service is not the best, but you provide an indispensable product, mission accomplished

Thursday, June 23, 2011

Physical mobile banking backwards step

Seeing that I have a lot of interest in mobile banking, I try and track what is happening as much as possible. I was therefore quite surprised when I learned of a new mobile banking service being launched in Uganda that I have never heard of before. The service launched by Centenary Bank and partially funded by US Aid aims to bring banking to 300 00 farmers in the northern part of Uganda. According to the article the project required investment of almost half a million dollars. (Read here).

It would be interesting to find out if they ever considered using mobile phones and deploying (much more cost effective) agent networks as has been proven to work in many deployments in the region. Just considering the status of some of the roads in the region, it would also be interesting to see the projected maintenance cost of the project.

Sunday, June 19, 2011

A fresh breeze in India

Standard Chartered recently announced the launch of Breeze - a brand associated with their mobile banking initiative. (Read here) Making use of the capabilities providing by UK solution provider, Monitise, this offering must be evaluated as it introduces an important new concept in mobile banking. Exclusively focussed on existing Standard Chartered clients, much of the focus is on providing a richer and more intuitive consumer experience.

In the past, mobile banking services were often evaluated on the basis of criteria like scope of service, security, scalability and accessibility. In preparing the launch of this service, the bank placed a lot of emphasis on making sure that the user experience will be a competitive advantage. The methodology used in developing and supporting the service was carefully considered. The result is a new look and feel and a fresh approach to how mobile banking can be presented.

It would be interesting to get feedback on penetration and usage. The results will help answer important questions such as if people will do more banking if they enjoy the experience.

It is not that easy to Zap a brand

Last year, the Zap mobile money service provided by Zain in Africa, received the award as the best mobile money service for the unbanked at the MWC in Barcelona (Read here). This year, the service won an innovation award at the same event for a virtual card product (Read here).

Since then a few things happened that could have an impact on the future of Zap. George Held (generally recognised as the main driver behind the roll-out of Zap in Zain) left to join Etisalat as the head of products. Furthermore the Africa operations of Zain (where the main roll-out of Zap was spearheaded) was sold to Airtel from India. All of the Zain operations in Africa has now been rebranded to Airtel and the business philosophy of the company has been changed to aggressively compete for marketshare.

As a result of these changes, all Zap money services were also rebranded as Airtel Money with immediate effect. The Zap brand literally disappeared overnight (Read here). The Zap brand was so powerful, that it is extremely difficult to kill as even in official websites of Airtel, it is still referred to as Zap (Read here)


http://networkedblogs.com/iTcIg
http://www.zapp.ro/

Is Mobile banking really serving the poor?

I recently noted that Michael Joseph (the father of mPesa) participated in a forum on the topic of banking the unbanked (Read here). Many observers are asking if mobile phones can be used to bring previously unbanked people into the domain of electronic banking. Much is being said about it and it is analysed from different directions, but should we not just ask the simple question: "Is mobile banking really serving the poor?"

It seems that there are overwhelming evidence that it does (and not just in Kenya):
  • In a recent research paper prepared by CGAP, it was found that more than 40% of Easypaisa users in Pakistan live on less than $2.50 a day. (Read here). It was also found that almost have of the users of the service do not have a bank account.
  • Berg Insight research indicate that about 133 million people benefit from mobile banking services in emerging markets. (Read here). According to this research more than a billion dollars was remitted to mobile banking accounts in 2010.
  • The Boston Consulting Group recently produced a report highlighting the big progress that has been made (Read here). Big growth in the penetration of the unbanked community is projected.
So in summary, we must surely say: "Yes, mobile banking is definitely serving the poor". Much must still be done, but sometimes it is important to just reflect and to realise that we are on the right track.

Friday, June 17, 2011

The risk-profile for mobile operators

Online banking in South Africa is much more secure because of the use of SMS to deliver one time passwords (OTP) to banking customers. Unfortunately, even this practice can be manipulated by criminals to intercept passwords. This was recently highlighted when it was reported that a Vodacom employee colluded with criminals to intercept the OTP's sent to customers. In the process fraud of R2.4 million (about $340 000) was committed. (Read here). The immediate question is if Vodacom is liable in any way for this damage and the answer is quite clearly: no.

The commercials and infrastructure that supports existing telecommunication services (the delivery of voice and data products), were never designed to cater for the additional liability of financial services. Many examples exist where banks have been held liable for fraud perpetrated on their networks (Read for instance here). Banks have to implement systems to cater for this, they have to price their products accordingly and take out insurance to achieve this. The question is if Mobile Operators understand these implications and if they are able (and willing) to act accordingly.

In the meantime, consumers have to be made aware that the protection that they may expect from utilising telecommunication infrastructure to secure their banking , are not as rigorous as they may think. This is demonstrated by a resent post on the Internet Security Awareness Portal (Read here).

Thursday, June 09, 2011

Mobile Money in Mexico

Mexico is such an important market from a mobile money perspective. The profile of the citizens, the proximity (and dependency on) a large remittance market and the big growth in mobile phones make this country one of the best candidate for the next big mobile money deployment. Not much has been achieved in the past years. With many false starts (and failures), have marked the early stages of mobile money in Mexico.

The big success of micro lending institutions to bring financial services to the lower income is an indication of the need that exist at the bottom of the pyramid and that fact that well-defined and managed services can be rolled-out to reach a large part of the population. Changes in the regulatory framework have made the possibility to roll-out more financial services grow. I have reported on this in a previous blog (Read here).

In a recent CGAP report a very good clue is given to why the rate of deployment is low. (Read here). None of the initiatives launched has been focused on growing the banking fraternity. Rather mobile banking initiatives have largely been focused on existing banked customers. This is really of extreme importance as the slow growth is not as a result of regulations, lack of technology etc., but because of a mindset that lower income customers are not worth the effort. What will change this mindset?

Wednesday, June 08, 2011

Taking location out of the payment process

In the early days of mobile payments, I found the mobile payment application for parking in Estonia interesting (Read here). Paying for parking the way that I am used to, was always location-dependent... and still is where I live. You could only pay for your parking when you were actually, physically present at the parking space. Now, with mobile payments, location is taken out of the equation. The payer could be different to the parker and could be anywhere in the world!

Another implication of taking location-dependency out of the payment process, is that the role of payer and buyer can now be separated. It is not necessary now to send money (or a cheque) with the buyer as one could authorise a payment without having to be present.

The impact on business process and implication related to risks and disputes must be analysed carefully in order to unlock the real benefits. It is not possible to deploy everything immediately, but it is important to at least consider the implications. When thinking about mobile payment applications, it is worthwhile to break the paradigm that it is necessary that the payer should be present at the location where the transaction occurs.

The Google Wallet will not work. Here is why.

So Google announced their wallet solution recently and it was a big event. Even people that does not know anything about payments asked me about it. The marketing budget and the ripples created by this announcement won't be replicated easily. Lots have been written about it and many opinions exist about the wallet. One that I particularly enjoyed reading is the following.

Many analysts talk about the relevance and how important this move is for the industry. Others predict that it "might" work or that it could have some impact in payments going forward, but nobody seems to be able to bring themselves to saying the obvious: "this will never work". It will be an expensive exercise by a corporation that can afford it. It will make many claims and rock the industry in many ways, but it will not be used by consumers en mass.

The reason for this is simple. Payments is an eco-system game. Many things must happen at the same time for it to become acceptable and it is actually a very delicate system built on trust. If any of the players in this system withdraws, or don't play according to the laws, then the thing does not work. And the problem with the Google Wallet is that many of the players will not play in this game. They may not say this up-front, but they will not participate in this big Google play. Some of the candidates that I think will not play are the banks (the issuers of the cards), players in the acquiring space (big merchants and merchant aggregation), mobile operators and the most important participant; the consumer.

The players that will play in the Google Wallet space will be the hackers and the fraudsters. Deploying a critical piece of payment software on a hyper-open platform is indeed a bold move.

Wednesday, May 25, 2011

Mobile banking India style

"Mobile banking to most Indians is complex and too technical" said A.P. Hota, chief executive of National Payments Corporation of India. (Read here), and it shows. According to this article the potential target market for mobile money subscribers are in the hundreds of millions. This is larger than the population of most countries. Yet, very few people actually use mobile phones to do financial transactions.

The Reserve Bank of India have relaxed many of the restraining, regulatory rules and have licensed 39 banks to offer mobile banking, yet only a few hundred thousand subscribers use mobile banking regularly performing less than a million transactions a month! (According to the referenced article) This is off the scale disappointing.

With such huge potential, it is important to figure out what is the deterrent to not more people using a service for which a clear need exist. While I do not know enough to provide a clear opinion, the following may provide some clues:
  • Do the existing service provided for in the Indian market really solve a defined need, or is it just, well... mobile banking.
  • Mobile banking (in most countries) is not perceived as "complex and too technical", as is the case (it seems) in India. Is this because Indians are not as technically astute as citizens of other countries, or because the implementations in India are too complex?