In the absence of mobile banking

What do people do when they do not have access to Mobile banking and payment solutions. Surely if a major need exist they consumers must utilise alternatives. The fact of the matter is that they do, often with major risks and costs associated with the alternatives.

The most often used alternative is the use of Premium SMS's. This is still by far the most often used mechanism to pay for content in the mobile world. Few consumers realise this, but the cost of performing a transaction with premium SMS's are as high as 50%. This means that half the price of the goods (content in this case) is paid in order to perform the transaction. If this type of payment were utilised in the purchase of lets say groceries, goods would cost twice as much as they do now.

Another example is payments being charged to your phone bill for broadband usage for instance.

The use airtime as currency is gaining momentum especially where money must be sent over a distance. This means of payment is hugely expensive and also unsafe. This mechanisms does not provide for any consumer protection, yet is being used daily to solve problems that consumers in the lower income bracket are confronted with. In some instance, I have even seen airtime being used as hedging against currency fluctuations. This practice is not only technical illegal, but also inherently dangerous for participants in such schemes.

All of the above is indicative for the need for cost effective, secure, easy to use payment solutions available on mobile phones.

South African Mobile Banking Initiatives

I am sure that readers of this blog know that I am the founder of leading mobile banking solutions company: Fundamo (www.fundamo.com). But as I mention in the disclaimer of this blog, I write about mobile banking in general and not specifically about Fundamo. Although my experience in deploying mobile banking solutions is with my company, I am frequently exposed to other very exciting initiatives in this space. Growth in the mobile banking industry is a function of more professionals, more solutions and most important more success stories.

For people that follow the industry, I am sure most would agree that solutions and professionals from South Africa are playing important roles in moving the industry forward. The reason for this is not clear to me, but a possible topic for a future blog. All (most) banks in South Africa have launched mobile banking offerings (some on their own, or some deploying packaged solutions). The results of these deployments are often quoted as examples of successful deployments. The most notable success-story here is the results achieved by First National Bank (FNB). One of the mobile operators (MTN) launched a ground-breaking solutions with many world firsts.

What I find most interesting is the number of smaller initiatives. Some that have been around for a relative long time, some dubious in their proposed solutions, but nevertheless even in the entrepreneurial space, South Africa boast numerous initiatives. I think that this is another indication of the soundness of our mobile banking industry. Some of these initiatives are listed below:

Wizzit (www.wizzit.co.za) is probably the best-known deployment with exposure in CNN and with the CEO (Brian Richardson) speaking on many platforms. Their distribution strategy and exciting brand serve as an inspiration to many. Then the claims of Cobus Potgieter with his Mopay (www.mopay.co.za) initiative raises doubt in many industry players, but still he soldiers on. WiWallet (www.wiwallet.co.za), and VMT (www.virtualmobiletech.com) are two new kids on the block with exciting and innovative offerings. The two independents Paym8 (www.paym8.co.za) (out of the Radiospoor stable) and Simplus (www.simplus.co.za)(out of the Cointel stable) have been around for some time now. I am not sure if the inventors of First Wireless from the Paarl have run out of steam, but their website is still up (www.1stwireless.co.za). Then the of course, the experienced guys at Mobus (www.mobux.net), with the Pretoria team from Swap Mobile (www.swapmobile.co.za) not to be forgotten. I have probably left out some guys, but you know what, I would love to hear from you.

Mobile Banking at 30 000ft

This is my friends at Absa again. They really know how to innovate. The latest "first" is to have two bankers from Absa on every 1time flight. This means it is now possible to do your banking at 30 000 ft, without even having to log on our visit your branch. (Read more here).

It is possibly only with the fees that is charged by Absa (very high) and the fees charged by 1Time (very low) that this venture actually have a business case.

PS. I am a client of Absa (both in my personal capacity and as a business)

Made in Africa

I would like to take this opportunity to welcome Monitise to Africa. On face value, the recent announcement regarding a their collaboration with "Made in Africa" seems to be a great deal. As a listed company, it is important to announce this transaction as well as the commercial terms associated with the deal. (Read the press release on their website).

As an African myself, I was intrigued about many things related to the announcement. If I were an investor in this publicly traded company (which I am not), these are the questions that I would have had. In the interest of debate, I thought that I should publish the questions:

• Who is "Made in Africa"? A quick search for Made in Africa on Google returns film-makers, cotton and aloe-distributors. I am sure these are not the Made in Africa that we are talking about. Maybe it is a company established with a specific aim and have not been around for a long time?
• Who is the guys behind "Made in Africa" and what is their credentials? We all know and respect Ozwald Boateng, who is one of Africa's best-known clothes designers and living in London, but who is Chris Cleverly and Prince Hassan Kimbugwe (who is the other two backers of "Made in Africa"). Chris (according to his profile on LinkedIn) has been quite busy in Uganda, starting and selling bio-fuel companies... bio fuel companies?
• From a technology perspective, how will Monitise deploy their secure Java-based solutions in Africa, when relatively small percentage of handsets support Java and few subscribers have data-contracts?
• In most of the target countries very few people have bank-relationships. How will Monitise adapt their ATM-based (register-your-card-to-get-access-to-mobile-banking) solution paradigm?
  

I have worked in the countries mentioned in the press release and we have made very successful mobile banking deployments there. We have also experienced the challenges and understand the realities of these countries well. I welcome my UK friends to Africa and wish them well - it is going to be an interesting ride.

Top five posts

I track the visitors to my blog, thanks to Google Analytics. I can report that the blog is being visited, and (hopefully) read. With an average time of almost two minutes spent on the blog (yes, they can measure that), it does seem that some people find some of the entries interesting.

As part of the feedback that I get from Google Analytics, I get statistics on the blog-entries that are visited most. Although not a statistically big enough sample, I started keeping a record of my top five blogs. Those entries that have been visited the most during the past month. I thought that this may be an indication of what people are interested in. Well, here are the top five posts on my blog:

• Why SIM solutions are best for mobile banking (read here)
• Airtime as Currency (read here)
• Mobile banking in Africa (read here)
• Africa as mobile banking benchmark (read here)
• Important elements of mobile banking (read here)

I don't know what it means, but I thought it is interesting. Maybe I should write some more about these topics...

MMT Summit Insights

After attending the Summit in Cairo and with enough time to reflect, I would like to share the following insights on the Summit.

• The importance of ensuring that mobile wallet solutions are deployed with the correct regulatory dispensation. This means that all players should take the emergence of this industry serious and contribute to ensure solid regulations. Banks and Regulators have major roles to play as it requires their involvement. Schema where they do not participate could lead to risks to the money eco-system (the potential side-effects can potentially be much more than the sub-prime were)
• The lack of standards will prevail for very long. I do not believe that it would be possible to agree on (or develop) any standards in this industry for a long time. Those organisations that elect to wait for the standards to emerge, will wait for a long time. Rather they should select mainstream suppliers and deploy "similar" solutions to ensure that their solutions are sustainable.
• The complexity of technology required to deliver solutions that are being talked about, should not be under-estimated. I am worried that some suppliers are presenting a simplified view on what is required to deliver these very complicated solutions. It was quite clear to me, when companies had made serious deployments: they were much more restrained.
• In the end the customer will decide to what degree the solutions will be successful. This should not be underestimated. Factors like ease-of-use, perceived security and cost will have to be mixed in such a way that individuals love it. This is the primary challenge.
• It is great to work in an industry where the opportunity exist to make a lot of money, yet, at the same time, be able to make a difference in the life's of the many poor people around.
  

I can't wait for the next Summit planned for Florida. If the excitement and activity of this Summit is anything to go by, the next Summit will be a "must-attend" affair.

Mobile Payments have arrived

Just arrived during the early morning in Egypt, showered and had breakfast. As I walked into the conference hall of the Summit, I had such a positive experience. I have been working on this dream of mobile payments being available to all for so long. Sometimes, I almost got despondent, but this morning I knew: Mobile Payments have arrived. The level of interest and the seniority of the participants was an indication that this is now for real.
The conference was different to many in the past that I attended in the following ways:
a. Representatives were truly from everywhere. Previous conference had a very regional character. Either Asian, American or European. This time round it was from every continent. Interesting that it should be happening in Africa...
b. The level of participants were of a very senior level: CEO's of major corporations, Ministers and senior officials
c. A general spirit of: "Let's build the industry" rather than criticise each other prevailed.

Reference to mBanking in French!

I just found out that Denis quoted my blog in one of his blogs. I am honored.
Denis, I would like to comment on your blogs too, but my French is only of an acceptable standard after at least half a bottle of good French Champagne. Unfortunately, my keyboard then is a bit blurred.

"The Branch is Back"

VRL Knowledgebank recently announced a new report: "the branch is back" (see more info here). The summary of the report reads as follows:
"The global retail banking industry is now in a period of innovative commitment to the branch, arguably not seen since the early 1990s. This quiet revolution is dealing with a more broadly-based agenda than just branch design, and is focusing on creating more customerorientated experiences and greater retail banking profitability."
If interested in the content, you can pay almost € 2000 to get access to the content.


From a mobile banking perspective, this is of course bad news, so I tried to get a bit more information on why a report could come to such a conclusion. I did not want to pay such a big price-tag just to find why these analysts see a different world that I do, so I used the information available for free. I could find no reference in the Contents page on how the evaluation was done to get to such a conclusion - now survey, no relative profitable measurements, nothing that could make one make such a statement.

I saw that the report refers to many case studies (predominantly in the UK and the US - not the markets where branchless banking is expected to be big), but did see reference to a case study in India (where, I presume "the branch is back"). The case study is for a bank called YES bank, which when you do a Google Search returns the following:

"Obopay India and YES Bank launch instant money transfer via mobile..."

Maybe the branches are required to sign up the mobile banking customers.

Regulatory Challenge to Mobile Banking

South African tax year ends at the end of February and tax returns must be completed and filed by about July every year. This is a terrible time for me, because I have to go through all the forms and filing to ultimately submit this declaration. Sure it is a challenge for me as I do not like filling in the forms and collecting all the information, but I get it done every year, now for almost thirty years. I also draw on the expertise of my accountant who has been doing this for a long time and actually enjoys doing it.

When talking about regulatory challenges for mobile banking, I was trying to get this clear in my mind, what we mean by challenges:
a. Is it impossible to do, or we don't know how to do it and therefor a major barrier to deploying mobile banking
b. It is possible to do but maybe complex. We can do it but we have to fill in a number of forms and conclude agreements. We can work with experts that have done this before and know exactly what must be done.

In terms of my reference framework, it is b). What do you think?

Gartner is cautious

Gartner produced research indicating that mobile payment subscribers will increase from 33 million to 104 million subscribers in the next three years. This is quite conservative compared to some of the other recent results (see my blogs on this here and here) that were produced by other research companies. Especially their estimate of (only) 500 thousand mobile payment subscribers in Europe at the moment. I think companies like paybox in Austria would be surprised that they have more subscribers in Austria than those that Gartner counted in Europe... wait a minute, last I checked Austria was in Europe. Also the fact that they did not count African subscribers - does that mean that they do not know about the massive penetration of mobile payment subscribers in Africa (my estimate between 7 and 12 million), or that Africa does not exist?

I still remember a previous estimate that Gartner got terribly wrong: the "75% probability that 60% of companies were not ready for Y2K" predication. After all the angst that they produced during 1999, maybe policy now is that they should play everything down?

Airtime as Currency

I should have blogged on this before, as this is a hot topic. Many examples of schema that utilise airtime as an alternative to real currency can be found. These solutions either provide for person to person payments and also for remittance solutions in a number of cases. The question now arises if this is not the way to go.

My take on this, is an emphatic NO! This is for one just not sustainable (see some of my comments below), but also potentially extremely hazardous to the underwriter of this currency (the mobile operator). If this approach really takes off and more and more currency needs to be produced to support the demand (money supply), serious problems like inflation, run-on-the-bank etc. could materialise. Mobile Operators are not in a position to deal with this. If they fully assess the potential implication on a devaluation of their airtime stock, I believe that they would put measures in place to stop it immediately (like elapse dates on pre-paid airtime). They should be apprehensive to ever start treating their airtime like money in the hands of consumers.

In addition, I think that using airtime for money in any format is totally unsustainable, because I believe that using airtime as money would be:

• Very expensive
• Totally inefficient as compared to proper e-money solutions
• Does not provide security to the client
• Would be illegal in any properly regulated environment

If airtime is being used as currency, it should be seen as an absolute indication of banks failing to
provide in an obvious need.

So what about NFC?

I have been critical of many things on my blog. I have highlighted the problems with premium SMS's, Internet payments, Chip and Pin and many other approaches to solving payment problems. In the same way I have discussed problems that I see with NFC solutions (As far as I can re-collect twice: here and here)

I don't think that we can ignore the growing interest in NFC payments and when today I was asked twice why I don't support NFC payments, I realised that I should post a firm position on this blog.

Card-based proximity payments is nothing new. We have stirling examples of these having been deployed successfully. I am the proud owner of a Oyster Card myself (even though I don't live in London). I really enjoy seeing how seamless everything work, each time I have to use the underground.

So here is my position: To merely replicate these kind of payments by replacing the card with a mobile phone does not add much value, and I believe that most business cases will be rickety. If we were to utilise the new NFC capabilities in phones, I think it is critical to be much more innovative about these features. Some of the things that we should possibly develop (not an exhaustive list) is:

• On phone wallet applications
• Phone to phone NFC interaction (I personally think that this is one potential killer app)
• OTA issuing (another killer, but extremely complex and challenging)
• Mobile data interactions between the application on the phone and back-office
  

At the end of the month, I will be speaking at a high-level NFC conference. I was invited...

Positive report on mobile banking

Juniper Research released a very positive report on the growth of mobile banking from now till 2011, today. According to the research, subscribers will grow tenfold from now till 2011 to ultimately be 816 million (this is very close to the predictions made by Edgar Dunn (see my comments on this here). In addition transactions will increase from 2.7 billion to 37 billion during the same time.

What I found particularly interesting about this report is that the analysts tried to not only predict number of subscribers, but also number of transactions. This is of course important because it is an indication of how much banking will be used. I have done some quick calculations of the findings and this is what I found:

• The prediction is that every subscriber would (on average) do more than three banking transaction per month on their mobile. I found this to be quite low based on the experience that we have had with Fundamo deployments. We have seen transaction volumes that is as high as three transactions a day (or even higher).
• The volume of transactions will have to more than double every year to grow to these volumes. If the hockey-stick is more steep, growth could even be more spectacular.
  

Seems like we should be expecting some very interesting times in mobile banking.

Regional Regulations

This is something that have always intrigued me. Everyone that knows would agree that none of the countries that constitute the Eurozone is the same. Especially if one were to consider the different payment solutions and customer orientation towards these, one observe massive differences. Some countries are still heavily dependent on cash payments, while others have installed sophisticated PIN-based payment systems. In some it is acceptable to do Internet payments and in others cheques are still in circulation.

Especially, if one were to consider mobile payments, differences are even more distinct. Initiatives in Nordic areas are not at all comparable to what is happening in Austria nor some of the great work happening in the Iberia peninsula. The challenges regarding money supply and cost of doing business are all different from one country to another.

So here is my question: "How can you regulate all these different countries with the same banking regulation?"

The Emperor without clothes

This is something about the Mobile banking and payment (MB&P - I have decided to acronymise this term now, because I use it such a lot) industry. We have more than our fair share of people and companies that make claims that is so far removed from what is possible and also what they are obviously capable of. This is possibly because such a lot of people have turned MB&P into something romantic - the next big thing...

One of the best know examples of a nude emperor were of course Simpay. While this organisation were busy with grand schemes in Europe, many were modeling their strategies on what Simpay was supposed to deliver. Many millions of dollars were spent on this grand plan that most of the industry was expecting to come true. I recall companies that were basing their whole product strategy on the assumption that Simpay would have dictated the standards for mobile payments. Yet for a lot of us (especially those that were intimately involved with the industry), we did not see any clothes. We did say so, but not too loudly, because others were looking strange at us.

There are other examples, I believe. Some with grand plans and ever more spectacular visions. Who will be brave enough to name them this time round. Well, let me give you a clue: A nude emperor this time round have a name that starts with F and have just been acquired by a company with a name that starts with Q.

What do you think?

Tridge Banking

The term “tridgets” made their debut in Barcelona, meaning mobile devices that depend 100% on the network for all controls and data. The term was coined (invented) by some-one in Accenture and it has been used in good slogans: "The first trillion tridgets".

As an aside, I was wondering where the inspiration for the name came from, when I found this little piece on the web:

"There were exactly fifty Tridgets, separated like stars on an American flag, perched upright, balancing skillfully on pegs that protruded from an angled board near the back of the booth. They looked soft, like chipmunks, no more than five inches tall. They had fur of variable designs. Some were spotted, some were striped, some were calico and some were patchy, with dominant colors of light grey, white or tan and accent colors ranging from bright orange to deep blue.

They had little pug, almost human faces, with little noses that curled slightly up. Their bulging eyes were blue, green or hazel. They all had tight, curly, tails that were similar, but fatter and much furrier than that of a pig. Perhaps the most adorable thing about these little fuzz balls were the large pointed ears, bent at different angles just below the tips. " see webpage

Little "fuzz balls"?

Anyhow, I tried to understand the implication of our banking software now not just being available on mobiles, but also on Tridgets. This means we can now start talking of Tridge banking?

Killer applications

Most would agree that doing payments or banking is not fun. It is not something that we would do if we could help it. (Well, maybe with the exception of receiving payments!). To provide sexy banking services is a contradiction in terms in my book. This is one of the reasons why mobile banking and payments will never prove to be successful unless it can be used for something, ... well sexy.

The mobile banking and payment industry refer to these things that you can do with mobile banking and payments as the "killer applications". Giving access to your consumers to "killer applications" that they can pay for easily on their mobile phone is the trigger (and key) to a successful mobile banking/payment implementation. In this blog-post, I list a few categories of what applications have been "killing" and which ones are likely to "kill" in the future.


The most frequently quoted killer application is the ability to buy pre-paid airtime directly from your bank account using a mobile phone. I have heard some observers talk of this as being not that sexy, but some of the case studies are immense and only thing I would say is:"ignore air-time purchases at your own peril"

Others that have already been implemented and have proved to be successful are bill payments (low margins are the biggest challenge here), cash on delivery (big money here), payment for parking (requires enough cars and less parking to work - not the case in many countries), some examples of retail payments, payments for content and other pre-paid (e.g. pre-paid electricity).

Payment for the purchase of lottery tickets and other gambling applications have been implemented by a few operators, but it is my opinion that this has not proved to be that successful. I am of the opinion that this is because we have not yet figured out how to do this effectively on mobile phones - so that it works for the new form factor. Many people have ideas on how to turn this into killing applications, but I have not seen them yet.

Others that should also be mentioned in this blog are of course money remittance. Many examples of this type of application have been deployed with good successes. The challenge in this area is working with regulatory constraints and to turn localised deployments into global deployments.

Other killers that I sense are lurking will come from micro lending, export/import, other financial services and many niche applications (like transport, medical, content etc.)

Once again, what do you think?

Security is in the eye of the bank

It is a common saying that security is only as secure as it is perceived to be. It is quite possible to develop many different security solutions that can protect what it is supposed to protect economically. (The cost of the system is less than the fraud that could be committed in the absence of the system)


Unfortunately this is not the criteria for a successful security solution that will be deployed and used. Rather it is if the security solution is perceived to be secure. In the case of mobile banking, the question should be asked "perceived by who?" and "what will convince them that it is secure enough?"

In the case of mobile banking, I would like to argue that it is not end-consumers that are the primary evaluaters of security. The key is not to ensure that end-consumers perceive mobile banking as secure, but rather bankers. In my experience, it is the banking fraternity that are uncomfortable with mobile banking security more often than not. Only if they are made to be comfortable with the security is it possible to launch a mobile banking solutions. Even when the end-consumer would have been happy long-ago, or even if the security solution can be proven to be economically sound, bankers will still resist.

So what is it that banks look for in a mobile banking solution:

• Conforming to banking standards. Banks are comfortable if some-one else says something is secure (VISA or the PCI etc.) Problem is that few of these standards exists that can be applied directly to mobile banking. Also read this blog-entry.
• Bankers like security if it looks like the security that they know and understand. They like PIN-blocks that are never stored and is never in the clear. They like digital security keys where the master keys are well-managed (preferably by a bank or a banking body)
• Bankers like security where the liabilities are clearly defined in the case if something do go wrong.
• Bankers like security systems where all of the functionality/components are under the direct control of the bank

Generally bankers are not enthused by maverick, sharp and innovative solutions to manage security, but rather using tried and tested approaches that can be mapped to existing procedures and internal banking rules.

In deploying mobile banking solutions, it is critical to keep this in mind.

Where is the money?

Mobile payments is an interesting concept. I have heard a lot of people talking about how making payments from a cellphone could be earth-shattering - how it would change the way that people shop and do business for ever. And I believe that they are right, but in order to make this vision happen we have to solve a difficult problem... where is the money?

No, I don't mean, how we are going to make money by running a mobile payment scheme. I mean, what are people going to use as money to pay with. If they complete a transaction and they hit "send" (or "pay") where will the money come from to do this payment. To put it in another way: "which account will be debited". Many different solutions have been suggested and implemented, but all have significant challenges. Below is a summary of some of the Value Stores that could be used as the money in mobile payments:

• Using an existing credit card as the source for doing a mobile payment would seem to be the most obvious approach. This has successfully been implemented, but suffers from the following challenges: A relatively small percentage of people with mobile phones have credit cards globally, the transaction can be expensive as credit card fees must be paid before any other revenue can be generated and the rigid (but sound) rules regarding fraud places a very big risk on such an approach.
• Using the mobile operator's billing engine as the source for payments have been proposed, but this approach can even be more expensive than credit card transactions. (See one of my previous blogs) . In addition, expect regulatory problems and significant challenges to extract cash out of the system. It is also unlikely that the mobile operator would be happy with sharing money earmarked for telecommunications with other retailers.
• Utilising existing bank accounts could be interesting, but integrating telecommunication systems to core banking systems can be expensive and time-consuming. Also the strain on a banking system when millions of small transactions starts hitting it, can be outside the design limits of such a system.
• A new dedicated mCommerce account may be the way to go. Remember that when credit cards (a new payment system) were launched in the 1970's, it came with its own dedicated account management system. Why should that not be the case for mobile payments?