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. 

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.