NFC taking off will only happen with focused education

Most of us belong to a group that are fascinated by new payment technology and also (often) love gadgets. This is why it comes so naturally to us to consider using our phone to tap and go. For many others this is quite a strange concept, if we want think about it for a while. In the mind of the average person, this is quite a strange way to transfer payment.

In a recent study conducted by Barclaycard in the UK, more than 80% of UK citizens now can recognize the contactless symbol (this has doubled in the past year). (Read here). Forrester research, in a recent article expects that it will still take a decade for NFC to become mainstream. They predict that it will take three to five years for critical mass (15% to 25%) to be reached (Read here).

For NFC to become mainstream, most subscribers will have to be educated. The payment mechanism will have to be explained and supported with clear instructions and guidance. Only when the average consumer understand and have been made comfortable with the implications of NFC payments will it be used extensively.This will only be possible through extensive education.

The balance of non-competitive behavior in mobile payments

Some-one recently showed me a Spanish article published in Columbia (Read here). My Spanish is almost non-existent with only a few emergency words like "cerveza", so the only way that I could understand the article was to get it translated with Google Translate. Turns out, that the local banking council has been complaining about the business practices displayed by Claro (the dominant carrier in Columbia).

According to the article (and the cryptic Google translation), Claro decided to charge between seven and thirteen times more for banking transactions on their network. If I understand the article correctly, this is to fund the additional infrastructure required to offer banking services on their network. We that work in the industry has seen this behavior in other markets where carriers use their unique position to effectively block banks to offer financial services (or even worse) to compete with them, by implementing punitive commercial tariffs to effectively keep banks out of mobile banking.

This behavior is absolutely deplorable and a reflection on the ethics of companies that follow these practices. It is probably illegal in most countries and carriers following these practices should be confronted with legal procedures. By following such practices, the development of branchless banking will be delayed and slowed down. The result of this is that the poor and the most needy will suffer most. Some-one, somewhere should feel ashamed of their way of doing business.

This time round, Google may have launched a Wallet that might work

When Google Wallet was released last year, I predicted that it would fail (Read here). I based my argument on the fact that it would be too difficult for them to build a workable payment eco-system for the thing to take off. Based on the fact that the first version of the wallet was scrapped and a totally new version (Google Wallet 2.0) was launched seems to me that I was right.

This time round, I think that they have launched something with real potential. While the model is still extremely risky, it is worthwhile to watch. Google has effectively linked two transactions together to provide a pseudo-experience that you are paying with your own card. Google is prepared to loose money on every transaction in the process (Read here). They are probably doing this to get to the crucial purchase data. The risks is that they would loose significant money before they can show sufficient monetary value.

The other risk is that they expose the payment eco-system to liability risks. Because of the two transactions (tied together), existing dispute mechanisms will not work. Charge-back rules and other protections built into classical payment schemes are broken. This is probably why Google Payments Company (GPC) require the subscriber to hold them harmless in the Terms and Conditions ("You agree to release, GPC, .... and their agents, contractors, officers and employees, from all claims, demands and damages" (Read here))

So providing that Google can manage the significant risks and provide sufficient incentives (maybe in the form of coupons and special offers) for subscribers to use the service, this time round, the wallet may just get traction.

Are we seeing the start of a mobile payment bubble.

The definition of a stock-market bubble is a high activity of purchase of shares in stock that cannot support the prices being paid on the fundamentals of the business. Since the inception of stock-markets investors were warned not to invest during bubble times. In an article published in August Dan Freed alluded that one may be seeing the start of a bubble in mobile payment shares. (Read here).

In the article the following valuations/transactions are quoted as red flags:

• The growth in eBay's value on the announcement of the deal between Discover and Paypal.
• Square's implied valuation of $3.25B after recent fund-raising
• Starbucks valuation on the back of mobile payment announcements.

Since the article, further investments in mobile payment companies have shown very high valuations (not supported by real revenue). Below are some examples:

• iZettle raises $31.4M dollar Series B funding (Read here).
• Paynearme (a start-up mobile payments company) raises $16M (Read here).
• Braintree (a supplier of payment services - including mobile payments, to start-ups) recently raised $35M (Read here).
• Paydiant (a start-up providing a white-label solution to banks) raised Series B funding of $12M (Read here)
• Monitise confirming that they are in talks to raise £100M (Read here).

It does look as if we may be seeing some of a bubble forming. Question is; what does this mean?

Summer was a bit late for Isis

Isis is a wallet solution for many payment instruments that reside on your phone. It is a product supported by key mobile operators (Verizon, AT&T and T-Mobile) with the prime objective to activate the NFC capabilities in mobile phones. The drive is to create an acceptance mark (Isis Ready, Pay and Go or Pay and Save) where Isis phone app can be used to pay.

Isis were planning to have the first deployments ready and start accepting transactions at the end of summer. Austin and Salt Lake City was selected as the first cities where the solution would be trialed. But unfortunately, some snags lead to delays. (Read here). Good news was that the delay was not too long with the promised launch taking place this month - a bit late for summer (but just) (Read here).

The reason why this offering is interesting (and probably on the right track) is that the security is based on a special SIM card. (In other words, the secure element resides on the SIM). It also seems that the participating operators have constructed a commercial model that could potentially work. This is much more likely to succeed than Google wallet.

What did the Olympics do to mobile payments

It has been some time since we experienced the magic of the Olympics. The thrills of competition and the drama of the opening and other events of the games will be remembered for a long time. But for payment specialists it will also be remembered as the biggest NFC payment exhibition ever undertaken. Visa (one of the sponsors of the games) invested a lot of money to rig many outlets, vending machines and taxis with proximity accepting devices. Some reports indicate as many as 140 000 outlets.
Special prepared Samsung SIII phones with suitable SIM card was distributed to athletes, representatives of the media and other interested parties. Many of these people used the NFC phones successfully to purchase various articles in London during the games. The media gave very favourable feedback on the experience (Read here and here). One factor that was disappointing was the fact that the processing speed for a payment was not seen to be fast enough (less than 500ms) for the London Underground, so the NFC technology is not yet allowed there. (Read here).

So what does this mean? For a start, it was demonstrated (successfully) that a large eco-system of NFC payments could be rolled out in a real-world environment. This infrastructure will remain deployed and could potentially trigger a critical mass of payments. Furthermore, the educational value of the exercise should not be underestimated. Many members of the public are now aware (and in some cases are looking forward) that payments is possible by just tapping your phone. It is now up to the British banks to leverage the infrastructure and awareness and propagate the momentum. It would be a pity if one of the more exciting legacies of the Games are left to decay.

Some worthwhile Mobile Money Blogs to read

I started writing my mobile banking blog in 2006. Since then the number of blogs or websites that published mobile banking/mobile money articles on a regular basis exploded. I have blogged about some of these in the past, but have felt that it may be a good idea to publish a collection of the best ones that I am aware of. It is almost impossible to keep track of all the blogs, as almost every month sees the initiation of another source of information.

Unfortunately, the moneyblog domain: has not got anything to do with mobile money, but rather is a blog for entrepreneurs giving tips and articles on how to make money on the mobile web.
 
Quite a number of mobile money vendors publish blogs. These blogs are obviously biased towards specific products, but are still interesting reads. Blogs in this category are: Telepin, Roamware and Sybase. Of course, we are all biased towards some product or service and it is important to keep that in mind when reading a blog. By stating a preference for a specific vendor in the beginning is actually not a bad idea.

Other blogs are maintained by staff (or collaborators) working at NGO’s, like the industry-leading blog published by CGAP (and that I spoke about in a previous blog), the GSMA mobile money for the unbanked blog or some blogs published by the worldbank (like for instance this blog as an example).

There are regional blogs (just focusing on specific regions). Mobile money Africa is definitely worthwhile keeping track of. Not only is it a prolific publisher, but also seems to be able to pick up on the inside moves in the market well. Mobile money Asia is also a worthwhile blog that I have referenced recently.

Then there are the blogs published by individuals. The Mobile Payments blog published by Brandon McGee has been around for a long time and always seems to be able to produce a good summary of most important trends and announcements. (the information do seem to be US-centric). A blog that sometimes touch on mobile money and that I personally enjoy reading is Digital Money Blog by Dave Birch. His writing style and insights is really worthwhile reading. Philippe Lerouge is a prolific blogger on mobile payments. Unfortunately his blog "le paiement mobile" is in French, but still worth a read (even using Google translation services). Also read Simon Lelieveldt's blog on Payments and Money.

Other blogs not mentioned are:
Mobile Payments World.
Payments News.
Mobile Payment Magazine
ePayment News

Keep on reading

The future of your money is Orange

 In June, Orange announced that they have crossed the threshold of four million mobile money subscribers. With deployments in ten countries (Côte d’Ivoire, Botswana, Cameroon, Kenya, Madagascar, Mali, Niger, Senegal and lately in Jordan and Mauritius) the service now have a penetration of 14% of the target base. (Read here).This is an example of a slow consistent growth in mobile money subscribers throughout Africa and the Middle-East. Mobile money solutions are available in most countries in this region and number of subscribers have grown to a few hundred million.

What is interesting in the case of Orange is a recent announcement (in about the same time frame) that Orange mobile money subscribers will now also have access to Visa payment infrastructure (Read here). This is another example of activation of Visa Mobile Prepaid and an indication that the strategy of Visa in this space is getting some momentum.

Big strides to replace cash with digital payments in Africa

Late in 2011, the Bill & Melinda Gates Foundation commissioned pollster Gallup to carry out face-to-face interviews with 1000 adults in a number of sub-Saharan countries (Botswana, DRC, Kenya, Mali, Nigeria, Rwanda, Sierra Leone, South Africa, Uganda, Tanzania, and Zambia). The purpose of the research was to analyse the payments and money transfer behaviour of people in these countries. The report was comprehensive and was published in June 2012. I am not aware of any subsequent research as this would show trends in the findings, but the results of the report still require some analysis. (The report can be downloaded here).

Some of the conclusions that one could draw from the findings are:

• More than half of the people interviewed (effectively representing 134 million people in these countries) had paid someone over a distance (meaning that the payer and the payee were not physically in the same place) in the past month
• The profile of each country surveyed is vastly different. For instance the percentage of people that have made a remote payment varies from 76% (in Kenya) to as low as 24% and 27% (in Rwanda and in Mali)
• Generally, countries with higher percentages have less people sending money in cash. (For instance only 20% of transactions in Kenya are cash-only, where-as 93% of transactions in Mali are cash only)
• The percentage of digital only (account to account transactions, with no conversion to cash) is above 15% in only five countries (Kenya, South Africa, Botswana, DRC and Zambia), whereas others are still very low (3.4% in Sierra Leone and 3.7% in Mali).

I am sure that these results have improved significantly in the about two years since the research have been done, but it is clear that Africa is a country changing into a digital payment world – although much must still be done.

Buy your airline tickets with mobile money

Someone sent me a note highlighting the fact that one can now use EasyPaisa (the leading mobile payment system in Pakistan) to purchase airline tickets on Pakistan Air. I checked and this seems to be the case (Read here). The advantage of this service compared to using PAI booking offices and airline travel agents is that it is available twenty-four hours a day. I found it so fascinating that a payment service designed for low income people could also be used for purchasing airline tickets that I decided to investigate. It turns out that this service is not just offered in Pakistan ....
A similar service is available in Ghana. MTN Mobile Money subscribers who use a Starbow service can now purchase their air tickets through Mobile Money. (Read here). In Tanzania is also possible to purchase airline tickets on Precision Air (a local airline). This service is available to mPesa subscribers and tickets purchased in this way would receive a 20% discount. (Read here). Further research indicated that a similar service is available in Nigeria where tickets on local airline, Aero can be purchased from the U-Mo electronic wallet. (Read here).

It seems that the availability of a flexible, digital payment system can lead to applications that one would not have envisaged initially.

Quality of software platforms for payments - differnt requirements?

The fast changing world of Internet and Mobile applications requires a new type of development approach. In this approach, where subsequent versions of the software are released in short intervals, the emphasis is not to catch out all bugs before release, but to rather fix them quickly after they are found (or reported). The user community then in effect becomes the final quality assurance step in the software cycle. Sometimes referred to as Agile, this is a very effective way to get functionality into the market and then quickly fix anything that is reported by the users of the software and works beautifully for most applications.

Some months ago, a flaw in the Google wallet on Android phones emerged (Read here). This flaw disabled the wallet functionality following a simple factory reset on NFC-equipped Android handsets. It seemed as if the reset trips the secure element in the device and in the process rendering the Wallet functionality useless. This was of course fixed quickly and no money or transaction histories were lost, but it made me think about the suitability of modern development approaches for payment applications.

The potential damages caused by mal-functioning software to money eco-systems and the integrity of payment systems can be devastating to individuals and corporations. Lost or duplicate transactions, money-records that do not balance or that is out of sync with master records, pending transactions without information to resolve payments that have not cleared, slow (or absent) confirmation of payments and user-interfaces that display wrong or inaccurate information are just some of the things that can go wrong.

Agile is without doubt the best way to build software quickly and fast. It is the best way to ensure that results are seen quickly and to allow for less-costly adjustments early in the life-cycle. But, when building payment solutions, one probably needs an additional (traditional), robust quality assurance step prior to releasing it into the wild.

Mobile Money in Asia

After a few months of well-earned rest, one of the pioneers of mobile banking is back at work. Brad Jones, who established Wing in Cambodia some years back, has recently launched his own advising firm Mobile Accelerate.

During the past period, he and other specialists (like Paul Reynolds, Michael Joyce and Joep Roest) launched a portal for mobile money initiatives in Asia. (Read here). With information related to capital for initiatives, ancillary services (like payroll) and regulatory considerations (like KYC) it is definitely worth a read - or to keep an alert going.

It is important that practitioners in this new industry don't just execute, but also share their insights with a wider audience. With this in mind, Mobile Money Asia must be applauded.

Mobile banking could boost economic growth according to World Bank

The World Bank recognized the important role that mobile banking can play in the fight against global poverty. (Read here). Research based on a poll of
150 000 people in 148 countries, shows that 2.5 billion people do not have bank accounts. This is 59% of the population in developing countries.

Some of the biggest reasons why people don't have bank accounts are the high cost of traditional banking products, the distance that must be travelled to get to banks and amount of paper work involved in opening accounts. However, the report shows that these problems are increasingly being tackled with mobile phones and that mobile banking is being used more and more to solve this problem. The impact of mobile banking in the fight against financial exclusion is visible and now recognised by the World Bank.
Or, as Robert Zoellick, president of the World Bank put it: "Providing financial services to the 2.5 billion people who are 'unbanked' could boost economic growth and opportunity for the world's poor. Harnessing the power of financial services can really help people to pay for schooling, save for a home, or start a small business that can provide jobs for others."

loan and savings innovation for mobile payments

The mobile payment revolution that is sweeping through emerging markets is just the start. In many markets "mobile money" has become the real alternative to paying with cash. With all the advantages (like better security and ability to pay remotely) over cash, it is no wonder that more and more people are opening accounts to experience a better way to pay.

Most practitioners know this, but it is important to consider that the real benefit will come as behaviour change towards a new way of saving and lending/borrowing. With better information access for savings  (how much have I saved; at this rate, when will I have enough; etc.) and lending (what is the outstanding balance; when will I repay my loan if I increase repayment; etc.), "mobile money" will lead to more educated consumers. But it is also the process that will get streamlined, making it more cost-effective and applicable.

However, the most exciting potential is to re-invent savings and loan products to be more relevant to the target market. By packaging products in a different way, think of re-payments differently and interest rates/penalties/admin fees structured differently, this is where we will really see "mobile money" have a lasting effect. 

Monitise acquire Clairmail. Old news but important

Monitise announced the acquisition of Clairmail in March and this article should have been written then. The lateness of the article is a reflection on how busy I have become lately, but the post must still be written, because this is an indication of definitive consolidation in the market and this is extremely important as it points to maturity in the market.

By combining the clients, end-consumers and the sheer volume of the two companies, a clear leader have emerged in the UK and US in an important sector in the industry. Both companies offer their services primarily as a managed service to banks. By making use of this service, banks are able to offer access to their bank accounts by means of mobile phones, enabling a number of transactions previously not possible. The size and reach of the new Monitise in first world markets is such that they have now established themselves as the clear leader. (They probably now serve between 'n third and half the market).

Smaller players (and especially niche players) in this consolidating market is in a difficult position as banks must be considering moving their business to the market leader.

Alliance for Financial Inclusion leads the way in collaboration

In complex financial eco-systems it is extremely important that good coordination and collaboration exist. Many organisations exist that attempt to provide a forum for collaboration on financial, payment and banking matters, but till recently no organisation provided this forum for financial regulators of low income consumers in emerging markets.

Established in 2008, the Alliance for Financial Inclusion (AFI) objective is "to build a community of policymakers who can share their collective knowledge on policy solutions to promote financial access for the poor." Funded by money from the Gates Foundation, AFI has been able to draw participation from regulators from emerging markets everywhere (Africa, Asia, Eastern Europe and South America). The discussions, networking and knowledge developed during the many interactions under the auspices of AFI contributed substantially to a better environment for the establishment of mobile money.

Under the able direction from Alfred Hannig (executive director) and a steering committee from countries like (Nigeria, Kenya, the Philippines, Mexico, Peru and Thailand), expect much more good things to come from AFI.

MFS Africa innovating on top of Mobile payments

Dare Okoudjou is one of the pioneers of mobile payments. He has been making waves in this industry for some time. The company that he founded three years ago (MFS Africa) is an interesting case study in how ancillary businesses can evolve in emerging markets using the utility of mobile payments.

During the past year, MFS Africa, launched a number of innovative products that is only possible on mobile phones, using mobile payment platforms. The ability to perform immediate, irreversible payments at very low costs points, enables totally new business models.  Some of the ventures that I find particularly interesting are the following:

• The ability to purchase micro-insurance from your cellphone. This is a service launched in collaboration with Hollard insurance in Ghana. See Dare explain these services in YouTube here.
• Sending money direct from a debit card in Europe to be credited in a mobile wallet in Africa. I understand that this service is live in two countries at the moment. See the landing page of this service here.
• An employer backed salary advance in countries like Cameroon. Because of the efficiencies of mobile banking, MFS Africa is able to advance payment amounts as small as $2-00. (Read here)

Mobile banking security should be balanced with risk

There has been numerous reports on mobile banking security (specifically about the supposedly inadequacy of it) (Read here, here and here). Reading between the lines, many of these articles are predominantly produced to support a specific agenda, I think. Also, there have been reports of fraud in mobile banking recently. (Read here and here). While this is worrying, it is an indication of substantial business growth. (making criminal activity worthwhile and also big enough to get reported in the media.). I would have liked to more directly comment on one of the specific frauds referenced here, but this will have to happen later (after investigations are completed).

However, considering that this is a hot topic, I would like to make the following comments:

• It is important to balance the implementation of security with usability. It is of no use having stirling security, but to implement it in such a way that it is difficult to use the system.
• The first objective of mobile banking security is to provide consumer protection. Consumers must have the confidence that their money can not be stolen. This can be achieved via secure authentication, but best would be if it is backed up by some kind of guarantee.
• Fraud is most often perpetrated by employees (or even sometimes management) that steals from the company. Good business process and segregation of duties is critical to ensure that these types of fraud does not occur.
• Security is more relevant when things go wrong. The criminally-minded, often target elements of the system when a phone stop working, or when a PIN is forgotten to design fraudulent attacks. It is important to give sufficient attention to design security into these business processes.

A big Mobile Money step for Bangladesh with bKash

Kamal Quadir is a Bangladeshi American entrepreneur, probably best known for starting CellBazaar. Last year, Kamal got involved with mobile banking in emerging markets and was instrumental in the launch of bKash in Bangladesh. In January the Bangladesh Bank Governor Dr Atiur Rahman inaugurated bKash for GrameenPhone (see photo and Read here). This was a major milestone in the provision of full mobile banking services to the underbanked in Bangladesh.

Bangladesh is a large country with a large unbanked population. Because of the high levels of poverty and a large rural population, it is difficult to offer commercially viable services to this sector of the community. The more than forty banks offer limited electronic access to financial services and customers have to visit branches (predominantly in the cities) to be served. The functionality of existing mobile payment services are limited (typically only offering bill payment and airtime top-up). (Read the following source).


That is why the new bKash service launched in collaboration with BRAC bank, conforming to the central bank guidelines, backed by Visa and offering a comprehensive service is such a big step forward. Utilisation of an extensive agent network through small retailers, this service is available in all parts of the country and has already shown good growth since it was launched in July 2011. (Read here and here)

The story of Nokia Money from cradle to grave

When Nokia announced the end of the road for Nokia money earlier this year in March (Read here), it did not come as a major surprise for many practitioners in the industry. The sad thing was that it had to take the best part of five years and tens of millions of dollars for the realisation to set in.

I was doubtful about the ability of Nokia to successfully enter the mobile banking space in a number of blog-entries on this blog (Mar 2009 and again in Sept 2009) and so were others. What has gone unnoticed was that Nokia was involved in a number of mobile payment initiatives prior to Nokia money, all of them failed. Most famous venture was the Meridea initiative started in about 2003 with other partners (including Accenture, Sampo and venture capital firms). Meridea filed for bankruptcy in Aug 2007. (Read here).

At about the same time (in 2005 until 2007) a number of groups within Nokia were planning mobile payment initiatives. These groups ranged from teams based in Helsinki, Munich and India. The merger of the Nokia infrastructure group with Siemens, killed some of the initiatives; but the India plans prevailed. After considering a number of approaches, Nokia invested $70m in Obopay in March 2007 (Read here) and selected the US company (with relatively little experience in emerging markets) as their technology partner. I believe that this was the first mistake - selecting a partner with little applicable experience.

In Nov 2009 Teppo Paavola (vice president mobile financial services) announced that the services will be commercially available in Q1 2010 (Read here). Only a pilot was deployed in Pune with Yes bank during Feb 2011. Soon afterwards, Nokia announced that it would acquire Obopay India operations (Read here). This basically meant that all operational expenses would be for Nokia's account going into the future. While this might not have looked as a mature mistake, it created a cash-flow commitment into the future, that would drain resources for the next few years.

Soon afterwards, Nokia realised that it would be difficult to follow a similar strategy into other emerging markets. An approach where Nokia would rather partner with successful deployments in other regions became apparent with the announcement of a relationship with MCB in Pakistan (July 2011) (Read here). MCB successfully launched their own mobile banking service on the Fundamo platform and has won a number of awards for this service on global platforms.

Nokia finally launched the service commercially in India in Nov 2011 (Read here) - almost two years late. The service was a well designed consumer-facing service with rich features running on any Nokia phone (independent of the carrier). The service reportedly started showing good traction by the end of the year, but was still at negative cashflow only a few months later when the plug was pulled.
This is really a very sad story, specifically because the initiative was suspended just at the point when the possibility of a successful business was actually real. I think that many lessons can be learned from this tragedy, and maybe history will show that this would be the main benefits that Nokia money will bring to the industry. For me, the two main lessons are: not to pick an inexperienced partner and to be careful about major, future cashflow commitments - especially if these are motivated on too ambitious targets.

Drastic innovation is possble in a framework of digital payments

I have often said that mobile payments is probably not a good name for what is happening. One should rather think of it as digitising cash payments. As we know the majority of payments today in the world is carried out by the exchange of something physical: cash. The mobile payment revolution is about turning this into a digital exchange. This in itself can add significant value to the world of many.

However it is the fact that systems can now access the digital nature of payments that will really lead to drastic innovation. The fact that individuals can now be charged for something (immediately, directly and in small quantities) will trigger more and more innovation.

We are already seeing this in countries where mobile payments have taken root. Innovative solutions to distribute money, to pay for diverse things like solar power, to distribute grants and to collect small contributions are already being deployed by small companies with great plans and exciting visions. Some of these companies are tackling important issues like health and unemployment, while others are working on social media solutions. Much is happening, but this is just the beginning.

Changing from a Platform to an Eco-System question

When mobile payments solutions were invented early in the previous decade, all wanted to build the best system. Different providers compared their solution platform to others. Richness of features, reliability and ease of use were compared and new angles to building a better platform was the topics of the day. Some even competed on price.

Nowadays the required features have largely stabilised and mainstream platform providers have emerged. The evaluation criteria for the selection of a mobile payment platform is starting to converge to a standard set and analysts have started plotting suppliers on their two-dimensional grids. That is why I believe that the question is not about a specific platform or which solution is best, but rather how will the solution fit into a bigger payment eco-system.

Nowadays it is more important to consider how easily can the payment platform integrate with others, what are the network payment services that will become available. Considerations like inter-operability, under-writing of payments, the width of acceptance etc. are much more important than what the system will do. The game has changed from a platform discussion to an eco-system consideration.

Tax Cash

Cash is bad in so many ways. The average consumer, suppliers and retail, manufacturers and government all, are detrimentally impacted by cash economies. Reduced tax collection, the ability to launder money, relative ease to counterfeit money, cost of printing and handling of cash, direct impact in the reduction of growth are all reasons to get rid of cash. There has been many initiatives to reduce cash in many countries with relative success.

Some years back, the Republic of Korea (South Korea), implemented a scheme where retailers would pay a reduced VAT rate for payments received electronically (compared to cash). The effect of this arrangement was that Korea is one of the countries with the most advanced electronic payment infrastructure. Cash transactions, constitute a smalerl percentage of retail payments. By making electronic transactions more attractive from a tax dispensation perspective, will change behaviour towards electronic payments, reducing cash and indirectly leading to growth.

Governments should consider schemes to make cash payments unattractive from a tax perspective. This can be done in many ways, but will indirectly eliminate the bad effects of a cash economy.

Mobile payments are poised to redefine the fibre of society

Sanlam is a major South African financial services company. Listed on the JSE, the company has interests in insurance, asset management and health and operate in many emerging markets. Sanlam was one of first investors in Fundamo and I have got to know them well. I found many parallels with the founding of Sanlam in the 1920's and the start of the mobile payment industry.

Sanlam was started as a co-operatibe insurance company, with products designed for the poor and a distribution model utilising local representatives. These representatives sold the Sanlam products in rural areas, but also provided client services and support. This created the opportunity for many people in rural areas to start businesses as representatives (agents) that contributed to the development of the region. The Sanlam products encouraged saving, with many secondary benefits and lastly, the assets raised through these long-term savings products were invested in local industry. In this way much infrastructure was built and large and famous South African companies were founded with investments collected through the premiums of relatively poor people.

I find many similarities with the current roll-outs of mobile money for the unbanked in emerging markets:

• The distribution of the product through agents in rutral areas 
• Getting subscribers to effectively save by changing their financial behaviour
• Converting cash into electronic assets that can be invested in industry.

Considering the impact that Sanlam had on the South African economy, the potential of mobile money to redefine the fibre of society seems very plausable.

Greenwich white paper highlights strategy to growth for mobile money schemes

Greenwich consulting is a boutique consulting firm with a good track record in providing advisory services to the telecommunication industry. Jean-Marie Letort and his colleagues have done many assignments, but have made a special impact in the deployment and operations of mobile money.

A recent white paper produced by the firm, highlights some of the challenges in making mobile money deployments successful and is worth a read. (See here). The report emphasise the fact that mobile money projects do not deliver on their potential.

A structured approach is described with the objective to boost take-up and usage. The white paper emphasise seven elements that should be considered and then describe a case study where the performance of a mobile money deployment was spectacularly improved in three months. The report is a must read to highlight the importance to not just think about the platform and deployment, but to focus on the operations and profitability.

Why the Indian Mobile Payment market is like a regatta

I have written about the Indian mobile payment market quite a few times. (Read here, here, here and more), but this is such an important market that it cannot be ignored. Recently, Nokia withdraw out of the market (I will write a blog on this later) and Airtel launched a service with a lot of media. Much has happened since the first RBI guidelines were published and a fresh look at the market is probably overdue.

The Indian Mobile Payment market reminds me of the start of a sailing boat race. The key is to cross the starting line just after the starting gun. Those boats that crossed the line early have to either go round, or withdraw. Boats getting up to speed before the starting gun, may have to tack sails and slow down, so not to run the risk of having to come round. There is a lot of traffic and jostling at the starting line to try and find a good position out of the starting blocks.

The question is if the starting gun has already sounded in India and if not when. What is clear though, is that many players are lining up and getting ready to join the race. Some are big and have a lot of resources... it is going to be a very competitive race.

Re-inventing the Euro with digital currency

It is an interesting exercise to consider how important the role of printed notes is in the creation of a new currency. A decade ago, it was unthinkable that a country could have a viable currency without printing a lot of bank-notes. The process of designing bank-notes, the inherent meanings in the symbols, the security considerations incorporated in the physical bank notes; all of these were important considerations in creating a new country currency.

It has been shown with the invention of schemes like DigiCash, Bitcoin and others that it is conceivable to have a currency backed by some sort of structure or organisation without having any physical representation. With advances in mobile payments and new forms of acquiring, is it possible that a country some-where may have a currency with no printed notes available? (For cash transactions, notes and coins from another country could be used as an interim arrangement at a premium - but the fundamentals of the new currency could all be managed digitally).

That is why I found a recent article (Read here), quite interesting on the possibility of some countries potentially leaving the Euro. Maybe Greece can be the first country offering a cash-less (digital-only) currency. Naw! there will be huge protests in the streets...

Institute for money, technology and financial inclusion: doing research on emerging markets in Los Angeles

This is what I like about this industry: finding new entities doing interesting things in the strangest places. Who would have thought that good research on financial inclusion is being conducted in the same city that gave us Hollywood? Enter Prof Bill Maurer and the Institute for Money, Technology and Financial Inclusion (Read here). The institute is housed in the University of California (Irvine) School for Social Sciences. Research conducted by the institute have looked at financial inclusion in countries as diverse as Nigeria, India, Haiti, Kenya, PNG and Afghanistan.

The great thing about the research is that it is done well (with proper surveys and measurements) and with no commercial drivers. (So many research in the industry are funded by companies with a vested interest and expect results to be in support of their commercial focus). It is really worthwhile to visit the site and browse through the wide collection of research. A recent survey on the status of Mobile Money in Nigeria for instance provides such good insight into this large and complex country. (Read here).

I am sure that, in addition to the great research, students and graduates from the institute will make an impact in the development of the industry, as they start to get assimilated into commercial companies. The work of academics like Prof Maurer should be applauded. 

Recent reports again confirm emerging markets leading the mobile banking revolution

When discussed, it is generally agreed that the deployment of mobile banking solutions in emerging markets are leading the industry. Not only have many achieved significant scale and also proven a positive business case, but the features and technology used are also much richer. Yet, many silent observers think that this is only emerging markets, with no smart phones and NFC enabled terminals: what can they really teach us?

That is why, I found it interesting that many articles was published recently, (re)-confirming the leadership of deployments in emerging markets. Some that have caught my eye are the following:

•  Research done some time ago by McKinsey in conjunction with the GSMA and CGAP seems to indicate that the market for mobile financial services in emerging markets can be as big as 1.7 Billion (Read here)
• Research done by TNS indicated that the number of new users of mobile banking soared over 100% in 12 months in many emerging markets, as banks leapfrogged traditional service models and moved directly to mobile. (Read here)
• Bergh Insight, reported that the mobile banking market is set to grow from 133 million in 2011 by an average of 40% each year to reach 709 million in 2015 (Read here)
• Ovum research indicates that mobile banking is central to maintaining growth momentum in emerging markets. Some of their proprietary research seems to also indicate the growth. (Read here)
• Emerging technology news describe the rapid growth achieved by the major SA banks in mobile banking (Read here)
• The governor of the State Bank of Pakistan shares big growth statistics in branchless banking at a recent conference (Read here)
• Pyramid Research provides insight into Mobile payments in emerging markets (Read here)

 One may have to consider what we can really learn from these deployments, also for first world markets. 

Merchants and Agents - not the same at all

The industry of emerging markets are built on the back-bone of traders. It is the informal markets that distribute most goods and create most jobs. Anybody that have traveled in Africa, would be able to vouch for massive markets of informal traders selling everything conceivable. The nature of the commerce happening in emerging markets are also almost always based on cash transactions.

With the growth of mobile money initiatives throughout Africa, some of these traders have been signed up to perform a critical role; to provide cash-in and cash-out services to wallet holders. These traders are referred to as Agents in the new digital money world. They have to be formally registered, trained and must use a mobile phone to perform this function. It is also a requirement that they should have a certain level of literacy as they frequently have to keep book of transactions for audit purposes. Most of the schema's require these Agents to make a "substantial" pre-payment as a kind of float in order to manage cash flow risks.

With the growth of mobile money solutions in emerging markets, some traders are starting to accept electronic payments (in stead of cash). The incident of this is still very small and informal. It is likely that this practice will grow and will also become more formalised. Traders accepting mobile money (digital) payments can be classified as merchants (in a similar way as for Card Association merchants). It is pretty clear that these two roles (merchants and agents) are very different, and while they may be performed by the same trader in some instances, should be dealt with in totally different ways.

Where is Paypal going

Paypal recently announced that one could use a Paypal account to purchase at any Home Depot shop in the US. (Read here). The service require a Paypal App on a smarphone that generates a 2-D barcode that can be read by POS-equipment in the store. While this is a really innovative solution that takes an on-line product and turns it into a product that can be used in the physical world, it is an open question if this will lead to wide adoption for the mass market.

However, it is important to take cognisance of the following very important implications:

• It is now possible for non-traditional brands to enter the payment domain and go after the more profitable niche markets. Many other players have successfully done this in the past (consider Starbucks), using strategies that build on a wider eco-system than just providing a dependable payment experinece.
• The need for super-security mechanisms are not that critical. With niche solutions, relatively small balances and small take-up, it is just not worth the effort to break the security to steal money. It will be different when the service get to scale and really attracts large amounts.
• Consumers (as is the case with almost everything today), will be confronted with so many choices to pay that it will be difficult to decide what to select and how to manage these diverse options. It will be interesting to observe how the mass consumers react with a prolifiration of payment choices.

The underbanked market in the US may just go Boom!

I have now been writing this blog for the past six years and it is getting more difficult to write about things that I have never written about. I have previously written about the unbanked communities in the US(Read here and here), but I think is important to take another stab at it.

This was triggered by an article based on the Visa announcement of Visa Mobile Prepaid (VMP), aimed at banking the unbanked. (Read here). The author (Bryan Yurcan) makes the point that the US has an estimated 40 million un- (or under-) banked market. This makes it one of the bigger markets in the world for these types of products. While the new Visa product is relevant, it is currently not targeted at this market. This is why many other solutions are made available to this market to serve their needs, ranging from cheque-cashing services to new mobile payment solutions.

One such a service, referenced in this article is the new Boom services recently launched by m-Via. (Read here). The service is a mobile based payment solution focussed on the underbanked market with a lot of emphasis on remitting money offshore, especially to Mexico. If it was not for the ssss, m-Via could have been confused with the new Visa product.

A look at the spectacular growth in Pakistan's branchless banking industry

I have written a lot about the mobile banking revolution in Pakistan on this blog (Read here and here for some samples). It is possibly because we have done such a lot of work in this country and also because the country and its people are so close to my heart. But in fairness, one must also look at the emmense progress just on the merits of it. Pakistan is the only country with a population of more than a hundred million that have embraced branchless banking (from regulators, to banks and mobile operators) and have made a success of it.

The StateState Bank of Pakistan (SBP) recently signed a MOU with the Pakistan Tellecomunication Authority (PTA) - making it one of the first instances where the two relevant regulatory bodies governing mobile banking have formally joined forces to grow the market (Read here). During the signing ceremony, the governor of the SBPquoted some impressive statistics in terms of agent penetration and volume of transactions. At the same time the The World Economic Forum global report on Mobile Financial Services praised Pakistan for the fast growth in branchless banking in the country (Read here). The report described Pakistan as "a breeding ground of innovation for branchless banking" involving a wide range of players collaborating in this new eco-system, including MNOs, technology companies and even courier businesses.

 It therefore does not come as any surprise that one of the biggest investors in the country, the Abu Dhabi Group (ADG) recently announced that they would launch an independent mobile financial services company. (Read here). It seems that the plan is to bring branchless banking products to the market through two of its investment companies: Bank Alfalah (a leading bank) and Warid (one of the bigger operators in the country).

Mobile World Congress is bigger than ever

There was something nostalgic about this year's mobile world congress. This was the last year for this key event in the mobile calendar to be held at these premises on Plaza Espanja. Next year the event is planned in a brand new location, but still in Barcelona. as a matter of fact Barcelona started marketing the brand "mobile capital" this year.

And everything was bigger this year: more people, more exhibitors, more flash and bling, more claims, more press releases and more new products. There is nothing like this in the world of business. Any-one attending the congress has been blown away when they experience the sheer size and scale of the event. After four days of intensity, it is almost an anti-climax to take the taxi to the airport.

The key impressions of this year's event was the contrast beween the significant and the insignificant. Many announcements were over the top significant; ranging from new phones to ground-breaking technology. From statements by Google to collaborations between the world's biggest corporations. But, this year again, the spirit and possibility of mobile was actually captured in the insignificant. I was touched by so many small entrepreneurs with great ideas and products. The initiatives of the industry to grow the contribution of women and make innovation in emerging markets more important are the examples that makes this industry special.

Cards integrated with mobile money

Cards are not part of the scene in the case of most mobile money initiatives.Subscribers of mobile money deployments can do a myriad number of transactions just by making use of their mobile phones. It is now easy to send and receive remittance payments, do person to person payments, buy airtime and pay bills. So why would you still want to offer plastic to mobile money subscribers.

And the answers is very simple: some transactions in the payments domain are only possible with a card and or a sixteen digit (with CVV) number.

It is very complex and difficult to perform a payment transactions at a traditional merchant (with a POS) or to withdraw cash at an ATM without a plastic card. To really get the benefit of these huge traditional payment networks it is essential to offer plastic cards in conjunction of mobile money accounts.

Buying online mobile implies some payment challenges

 Internet on a big screen (meaning a PC) is still the most popular for on-line purchases. One would think that the limitation of input devices, size of screen and usage of mobile phones would limit their use as a means to purchase on-line goods. But this seems to be not the case.

A case in point is the ShopSavvy application that allows users to shop for the best on-line price while scanning products in a physical shop. ShopSavvy allows subscribers to perform a purchase on the mobile in real-time. (Read here). According to research done by Coremetrics, almost 10% of on-line purchases now comes from mobile devices in the US. In the same article Amazon reports that mobile on-line purchases have tripled since last year. (Read here).

Of course paying for goods using a mobile device is a bit more tricky. It is not as easy to enter card and CVV numbers standing in an aisle in a shop. Just not practical. So what most on-line app providers do, is allow subscribers to store their payment instrument with them. Payment is then just a "one-tap" instance. With the proliferation of mobile on-line purchasing, this may lead to a situation where you may have registered your credit card details with many different suppliers - some potentially less responsible than others. The complexity when wanting to charge something to an alternative card and the management of payment information sored all over the cloud are just some of the problems that I see.

The challenge is to find a mobile-friendly, easier to use and secure payment solution that can be used across many different applications.

NFC gathers momentum with strong endorsement by a large nyumber of carriers

 I have been quite critical of the potential and the likelihood of NFC payments becoming a mainstream solution soon. (Read here and here). I did however say that it is going to require a large eco-system to get established. Many players should agree on standards and start executing on it at the same time.

This seems to have happened in November when the GSMA announced that 45 carriers (and a few handset-manufacturers) have accepted and endorsed the single-wire protocol for NFC phones. (Read here). This is extremely relevant for the NFC industry for the following reasons:

• The common commitment will provide the basis for developers of payment systems to start focussing their efforts around an agreed architecture.
• The fact that phones, processes and systems can now be deployed that will be interoperable and inter-changable, will support a more viable business case.
• Lots of the energy that was spent on alternative solutions will loose momentum.

With these building blocks in place, the grading of NFC as becoming a viable payment technology must be increased with a few notches. While it is unlikely that many of the predictions made by analysts will materialise, we can now safely say that NFC payments will become a reality in the not too distant future.

Great mobile payments and branchless banking Videos - a limited collection

It is often said that a picture paints a thousand words - well if that is the case, I suppose a good video can write a book. In the early days of mobile banking some crude mobile banking video's were made - a clear indication that the product specialists could not describe what they wanted to build to the video producers. But since a few years ago, some brilliant little video-clips were produced - either to advertise a new service or to inform or educate stakeholders. Below are some of the best clips that I know of:

• The first mPesa advert (according to rumour produced on a very small budget). (Watch here)
• One of my favourite adverts, ever, is the one used for the launch of the product (Watch here). Telenor has subsequently produced a few more masterpieces (Watch here and here).
• The documentary produced in collaboration with the Worldbank for Wizzit in 2007 was also one of the great videos (Watch here)
• A delightful little ad (that I really enjoy) was produced for MTN in West Africa in 2010 (Watch here)
• Great Airtel Money ad (Watch here)
• Using local comedians in a series of adverts for mKesh in Mozambique was very successful (Watch here and here)
• A simple, but very cute advert for BSP bank in PNG, was produced recently (Watch here)
• The energy and pace of the Gemalto advert for their NFC product is a lot of fun (Watch here)
• And many others (Watch here, here, here and here)

I am sure that there are many more and look forward to readers of this blog post posting links to others.

The new Visa card for emerging markets - applicable rules for a different market

Digital payments are difficult to deploy in emerging markets where cash-transactions accounts for the majority of payments. Furthermore, it is even more difficult to connect digital payment solutions to global payment networks, like Visa. This is because the rules and regulations controlling global payment systems have evolved with the realities of first world markets in mind.

Deploying these rules in emerging markets are difficult because of major differences in laws, subscriber behaviour and availability of infrastructure. What is needed is a fresh look at the rules that dictate global payment products. To re-think the rules and re-define them in the context of emerging markets.

The new Visa product (mobile pre-paid) (Read here) recently announced attempts to do just that. It is a fully fledged Visa product, but with a re-worked hand-book where the rules have been re-defined to cater for emerging markets. I would not like to comment on how well this has been done, as I am directly involved, but believe that it should be reported on in this blog.

CGAP's rich heritage of mobile banking articles

Few organisations have contributed so consistently towards the establishment of mobile payments than the Consultative Group to Assist the Poor (CGAP). I have written about their efforts previously (Read here and here), but felt that some of the recent articles, as well as their other efforts necessitates a seperate and new blog.


The contributors to the CGAP blogspace have consistenly produced well-researched, insightful articles. The collection of information on this space is probably one of the most comprehensive and best quality in the industry. The fact that the posts now span five years plus and that the editorial intention is to provide accurate information (rather than commercial gain), have made this such a valuable resource. Authors like Mark Pickens, Toru Mino, Sarah Fathallah, Claudia McKay, Prakash Lal and many more, should be complimented on their excellent work. 


Some recent articles that caught my eye were:

• What can we learn from selling soap (Read here)
• The case for more innovation in mobile money and branchless banking (Read here)
• The lurking challende of barnchless banking: Activating the inactive customer (Read here)
• Can mobile be "free" (Read here)
• Boosting the business case for Agents (Read here)
• Interoperability and related issues in branchless banking and mobile money (Read here)

In addition to the blog-space, CGAP also organises the CGAP Microfinance Photography Contest, provides advisory services and are sometimes instrumental in the sourcing of donors and funding. The research publications produced on a regular basis are also of emmense value. I salute everyone working and making a difference at CGAP.