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. 

Digital identification and mobile payments

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

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

Very positive surveys for Mobile Banking

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

Some of the more interesting reports that I have seen are:

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

Good news for the industry.

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

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

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

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

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

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

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

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

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

The source of funds dictate the use of mobile wallets

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

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

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

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

Mastercard making mobile payment waves

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

Some of the announcements that I picked up on lately are the following:

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

Bill payment integrations to mobile wallets in Africa

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

Many examples of integrating mobile wallets with bill payment applications can be found. This is an area that shows a lot of growth. Either deployed by mainstream brands or also by small entrepreneurs, this is an area that requires further investigation. Some examples are the following:

• Celpay (one of the pioneers of mobile banking in Africa) provides payment solutions for multiple billers in the countries that they operate (Zambia, Zimbabwe and Tanzania) (Read here)
• MTN Mobile Money recently implemented a "bulk payment" capability that allows companies to offer new payment solutions. This application is currently utilised most for the payment of salaries (Read here)
• M-Sente (a mobile wallet provider in Uganda) recently announced the launch of MultiChoice payments. (MultiChoice is a regional payTV provider) (Read here)

The rate of innovation and launching new services on multiple live products in Africa is an indication of the health of the industry in emerging markets.

Interesting mobile payment activities in South America

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

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

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

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

Using mobile payments for online payments

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

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

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

The core to the cost associated with Debit Cards

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

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

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

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

It seems that there are something magical about "five types", as the mobile payment industry has been categorized into five types frequently:

• In a very interesting and informative study performed by Simon-Kucher and Partners about consumer readiness for mobile payments (Read here).
  
• In a recent survey of executives conducted by KPMG on when mobile payments will be mainstream (Read here)
  
• In the topics of a course about the basics of mobile commerce offered by MobiBlueprint (Read here)
  
• Even Cindy Krum in her book on mobile marketing seems to believe that one can find five types of mobile consumers (Read here).
  

Only problem is that none of the experts agree on what the five types are - not even close. It is clear that the information on how to categorise mobile payments is not stable, nor agreed on. To make the claim of "The most important Mobile Payment Infographic Ever", is therefore a slight misrepresentation.

Update on Eko - success will breed success

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

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

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

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

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

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

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

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

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

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

Unfortunately, the ambitious nature of the project is placing the whole project at risk. This is primarily because of three reasons:

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

It is in everyone's interest that the UID project succeeds, but will the degree of ambition ultimately lead to the downfall of the project?