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.