Tuesday, October 22, 2013
Complex eco-systems only works in equilibrium. An argument for using Chaos Theory in Mobile Payments.
Lately, there has been a drive to find solutions for using mobile to pay in a retail environment. These types of payments are mostly done in cash (and sometimes using traditional card solutions). While the existing solutions work well, they are still open to fraud and theft. Utilising the existence of many mobile money wallets in retail environments seems to be a logical next step. Many solutions have been deployed in this domain. Some have shown acceptable traction, but we are still waiting to see the big breakthrough. The challenge is to design a solution that is easy to operate, safe and fast. This is not so easy in a world where (almost) no phones have any NFC capabilities.
Some of the interesting or more relevant solutions that I am aware of are the following:
Orange Money have partnered with Total in a number of countries to offer retail payment solutions in Total outlets. (Read here). It is not clear how different this is to the existing Person to Person functionality. The most widely published example is the Lipa na mPesa service rolled out in Kenya. This service is build on some technology innovation, but it is the well-developed fee-structures and commercial framework that really makes this very real in Kenya. (Read here). An interesting innovation is the Imara card in Uganda (Read here), that can be linked to any of the mobile money schemes in the country. By swiping the Imara card, the customer is asked to authorize the transaction on their phone after which the payment is debited to the mobile wallet.
All of these initiatives are very interesting and most have a good chance to grow to critical mass, but the future sustainability is not clear.
Thursday, August 22, 2013
The industry have made big gains getting to understand the need and the benefits to women through the work of the GSMA mWomen Programme with support from Visa. Research reports covering these aspects have been released conducted in five key countries Indonesia, Kenya, Pakistan, Papua New Guinea and Tanzania. It is worthwhile to have a look at some of the clips posted where women talk these studies (Video for Indonesia, Kenya, Pakistan and PNG). USAid also performed a study looking at the access that women have to mobile technology in Afghanistan. (Read here). This report is particularly interesting to read. It does not refer to mobile money, but talks about many other aspects ranging from being informed and connected to security and health care benefits.
With Mobile technology women are empowered to entry into the financial mainstream much more easier. They now get access to life-enhancing services such as savings, payments, health-care, education, and entrepreneurship. However, the research show that the gender gap in mobile phone ownership and usage still reduce the access that women have in many countries to these benefits. In order to achieve the full potential of the role mobile technology can play in women’s empowerment globally, it is critical that service providers understand what women need and design products that effectively reach this audience.
Some of the specific findings in Kenya (one of the more mature markets) are that younger women generally valued the ability to use mobile money to send money to their mothers more. (They view their mothers more reliable and likely to save for the good of the household than their fathers.) Married women also appreciated that mobile money provided them the facility to save money separately from their husbands. For some users, convenience is a powerful means of improving their security as it reduces the likelihood of being mugged.
In the case of a country like Tanzania for instance women generally feel that using mobile money improved their lives (either in their personal capacity or in cases where they run small businesses) because of its ease and convenience. In a country where almost three quarters of the population relies on agriculture-related activities for income, people often keep crops such as maize as savings. The process of liquidating these assets when there is an immediate financial need has been improved through mobile money capabilities.
There are three key characteristics to women’s financial management that is of relevance in looking at mobile money: the difference in roles between men and women for managing money, the demands living in rural areas - compared to cities and the general lack of control women often have over their own finances. It is clear that the new capabilities made available through mobile money do and will have an positive impact in the lives of women in emerging markets.
Thursday, August 08, 2013
Tuesday, August 06, 2013
Governments and other parties have been urged to join the alliance. At this stage, the alliance have fourteen members and hope to entice more to join.
At a breakfast hosted by Bill Gates, the benefits of a cash-less economy was discussed (Read here). There was general agreement that numerous benefits can be achieved, but five specific benefits were highlighted. These were (quoted from the article):
- Transparency: Less corruption and theft when payments can be easily tracked.
- Security: The money gets where it’s supposed to go.
- Financial inclusion: Electronic payment is a way for unbanked people to establish a record of on-time payment of their bills.
- Cost savings: Moving physical cash around is costlier than zipping electrons.
- Access to new markets: This benefit is mainly for providers of financial services.
Saturday, July 27, 2013
The Central Bank of Nigeria has been extremely active in promulgating rules to reduce cash usage (especially in Lagos). Much can be read about the philosophies ans actions to create a "cashless Lagos". (For instance read this report). The approach of placing limits on cash-transactions may not have the desired effect as the right eco-system may not exist to support a cash-less economy. Other central banks use the usual levers to try and change cash-transactional behaviour. These banks use interest rates, money supply and penalties to change cash-usage behaviour. This light touch, while probably the text-book approach may not have good traction fast.
I am a big proponent of taxing bad behaviour. Not only will tax generate revenue, but it will discourage consumers to change their behaviour. One should ask which actions taken by consumers will trigger more cash usage and one should then tax this (withdrawing cash from a bank or ATM, cashing in a check, doing a retail transaction in cash). On the other hand, one should look at behaviour that one would like to encourage and then reduce (or eliminate) tax of these activities (electronic payments, depositing cash into an account etc.). Unfortunately, because the latter is digital, traceable and known, these transactions are often taxed and the former not.
In emerging markets where regulations are often the biggest inhibitor to innovation in payments, having a currency that is fully predictable could be a big advantage. No-one can therefor be blamed to reach out to Bitcoins as the possible solution to roll-out digital payment solutions in emerging markets. It were therefor not a surprise when the first Bitcoin-backed mobile payment solution was recently announced in Kenya. (Read here). Called Kipochi, the wallet is integrated with mPesa, allowing value to be transferred to and from Bitcoins. And this touches on the first of two major problems:
- Bitcoins have been successfully growing in the digital world where many exchanges exist to convert Bitcoins between other currencies and vice versa, but it will prove extremely difficult to build these exchanges in markets where the bulk of currency are still in hard cash. Not only will it be difficult to sign up agents that will be willing to convert cash into Bitcoins, but to do this legally at the same time. By transfering cash into a mobile wallet before it can be transfered to Bitcoin (as is the case with Kipochi) really limits the application.
- As is the case with most new things, the ultimate take-up and growth of Bitcoins in emerging markets will be a function of how well it is understood and trusted. While new technology has been embraced in emerging markets (look at mobile phones for instance), I am not so sure if the Bitcoin paradigm (don't trust in dollars - or other government backed currencies, trust the system), will be naturally embraced in emerging markets. It will take a lot of education, I think.
Qiwi is a very successful, Russian payments company. (I am still trying to figure it out why it is called Qiwi and have a logo that make you think it is a New Zealand company). The beauty of the products provided by the company is the scope of the offerings (from virtual to mobile, it even recently start issuing Visa cards).
But it has not always been so. The consumer-base and transaction volume was initially built on providing payment services through kiosks. My information is that Qiwi currently run more than 200 000 kiosks predominantly in Russia and CIS countries. This is quite a unique situation. One sees kiosks in many places (shopping malls, bank branches and small retailers), but never has it been rolled out to be the back-bone of the growing business. So what is it that one can learn from Qiwi?
- Roll out kiosks with a well-thought-out integrated transactional strategy. The services offered and how these are integrated in the back-office is critical to build a sustainable business.
- Put a lot of emphasis on branding. It is important that the customer should be able to associate a service that is available at a kiosk with a well-defined brand. The brand-promise should be clear and must be delivered faultlessly.
- Build other payment services around and in support of the kiosk. For instance, soon after launching the kiosk service, Qiwi followed this up with the Qiwi wallet that can be loaded at a kiosk, but can be used for payments remotely. This innovation lead to further brand re-enforcement, client-loyalty and an increase in traffic.
Tuesday, June 04, 2013
In this post I would like to explore the impact on end-user perception and understanding of how payments work and the risk associated with payments.
I believe that most people know that a credit card payment without the physical card is not as secure as one when the card is not present. Some of my friends go as far as to never use their card on the Internet because they feel exposed doing a card transaction without the card being present. I believe that this is the case because people know that their payment credentials are stored on their card.
The most important question to be asked (I think) is where the average consumer would want their payment credentials to be stored. Would they like to have their payments associated with their phone, with their SIM card (or something else, like for instance the sticker that they got from their bank that they stuck on their phone). I don't know the answer to this, but I think that it depends and that it will differ from market to market. It is my guess that customers in the US would be happy if it is on the phone (some may not even know that they have a SIM card in their phone), whereas in other markets (especially developing markets), my guess would be the SIM card.
It is important to consider this when rolling out phones with secure elements integrated into the phone.
Saturday, May 25, 2013
It amuses me to see how payment schemes use all kinds of ways to reach an already seriously confused consumer. It seems as if it is almost required to show that customers can reach you in every conceivable different way. A company that is taking this to an extreme at the moment is American Express. By making use of their new Sync product (Read more here), one can now connect your valuable American Express card to (wait for it), Facebook, Foursquare and Twitter. Linking your card in this way allows you to buy special offers from these social networks without having to be re-directed to AmEx. This means of course that you trust the security of your twitter account with your purchase activity.
Proponents of these type of systems argue that it is easier for a subscriber to learn the payment system as it is based on something that they are already used to. They would not need to download a specific application and can start usinng the system immediately. It is also ideal to build viral characteristics into the system as many people are already using BBM. Similar arguments are being used for the recently launched Google payment solution to be based on gMail. (Read here)
The more interesting challenge from my perspective would be to ensure that the registration process is secure, that the source of funds are well worked out (for instance will this service require robust cash-in eco-system, or will it be based on debit cards) and ensuring that subscribers will be confident in using a messaging system to do payments too. There is still a lot of work before these type of payment systems will become mainstream.
Wednesday, April 17, 2013
Wednesday, March 27, 2013
Tuesday, March 26, 2013
Wednesday, March 20, 2013
Wednesday, March 06, 2013
- Payment credentials are now tied to your physical phone and not your mobile number. While not so critical any-more, one cannot take out a sim card and transfer the payment credentials to another phone. The wallet would now be attached/tied to the actual phone hardware.
- Version and change-management will be extremely hard. As an illustration, when your secure element has been compromised/corrupted, one will have to replace the phone (even though it may still be in perfect working order) and not just the sim card.
- One will have to provide secure tools that can be fully trusted to remove a secure element or re-install new ones when a phone changes ownership for instance. Sim cards almost never change ownership, bit phones do.
- The process of buying a phone will now have to be controlled from a KYC perspective, as it would become critical to know who owns which secure element. We have this process already in place for sim cards, this will now have to become a double whammy process. Mister client, now that we have done the KYC for your sim card, we will also have to do it for the phone.
Friday, February 15, 2013
The assumption of the report is that e-payments lead to an acceleration of payments. Money arrive in wallets faster and can then be spent faster. This acceleration directly increase the total value spent over a given period, which (in turn) leads to higher economic activities.
Other secondary benefits of a reduction in cash, towards a auditable e-payments are (virtual) elimination of counterfeiting, a reduction in fraudulent transactions, lower operating costs of the overall payment eco-system, more efficient collection of statistics about the payment system and a more efficient collection of tax. All of the above can also contribute to growth in the economy.
The case for "electronifying" cash payments because of the beneficial impact on macro-economic indicators are staggering. By enabling an environment where cash payments are reduced, governments will benefit all.
Thursday, February 14, 2013
Friday, February 08, 2013
My life has taken a new dimension with more responsibilities. With new shareholders, working for a major corporation with a well-known brand, I have been extremely busy and time for blogging became less. Also my infrastructure changed (became more secure), which meant that I now blog with much more difficulty. On the other hand, I see so much more; what is now possible is so much more, and I would love to share more.
The fact that I post a new year resolution in February, is in some ways an indication of how difficult it became to keep on blogging. But here is my resolution: I will keep on blogging. My aim is to have at least one blog per week. I will try to keep on pushing the boundaries... but I will try and keep it short.