The beneficial impact of e-payments on GDP

It is one of my pet topics. The fact that converting cash into e-payments directly lead to an uplift in the macro economy of a region. I have blogged about this previously (Read here), but feel so strongly about it that a recent report (commissioned by Visa) made me think about this again. The main finding of the report was that almost a quarter of the GDP growth in Canada can be directly attributed to growth in e-payments. (Read here).

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.  

Corporate mobile payments - another mobile money application?

It is amazing how many different (and innovative) applications appear now that critical mass mobile-money solutions are available in many countries. One could probably write a whole blog about these solutions. An angle that is worth looking at is the use of mobile money in the corporate world. A good friend, Killian Clifford (from Mobile Money Consulting), recently published a white paper on Corporate Mobile Payments (Read here). He looks at the different types of applications (paying suppliers, collecting debtors and others), he describes the eco-system and discusses the different players. It ts definitely worth a read.

 

The important take-away is that the availability of digital payments in emerging markets have changed the game. Tasks that in the past (constrained by cash-payments) were expensive, mundane and slow, can now be re-engineered to be efficient and fast. Not only can this lead to cost-savings, but it could allow corporates to re-think how they do business. Mobile payments can change the competitive landscape drastically. It is important that corporates in emerging markets embrace this, hoping that their competitors don't.

 

New Year resolutions - in February

I have way more ideas about blogs than time to write them all. So what happens is that blog ideas go on a list and then (when I have time), I write them. One blog idea that I had, was to reset my expectations on what I can get into my blog this year - a kind of new year resolution.

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.

NFC taking off will only happen with focused education

Most of us belong to a group that are fascinated by new payment technology and also (often) love gadgets. This is why it comes so naturally to us to consider using our phone to tap and go. For many others this is quite a strange concept, if we want think about it for a while. In the mind of the average person, this is quite a strange way to transfer payment.

In a recent study conducted by Barclaycard in the UK, more than 80% of UK citizens now can recognize the contactless symbol (this has doubled in the past year). (Read here). Forrester research, in a recent article expects that it will still take a decade for NFC to become mainstream. They predict that it will take three to five years for critical mass (15% to 25%) to be reached (Read here).

For NFC to become mainstream, most subscribers will have to be educated. The payment mechanism will have to be explained and supported with clear instructions and guidance. Only when the average consumer understand and have been made comfortable with the implications of NFC payments will it be used extensively.This will only be possible through extensive education.

The balance of non-competitive behavior in mobile payments

Some-one recently showed me a Spanish article published in Columbia (Read here). My Spanish is almost non-existent with only a few emergency words like "cerveza", so the only way that I could understand the article was to get it translated with Google Translate. Turns out, that the local banking council has been complaining about the business practices displayed by Claro (the dominant carrier in Columbia).

According to the article (and the cryptic Google translation), Claro decided to charge between seven and thirteen times more for banking transactions on their network. If I understand the article correctly, this is to fund the additional infrastructure required to offer banking services on their network. We that work in the industry has seen this behavior in other markets where carriers use their unique position to effectively block banks to offer financial services (or even worse) to compete with them, by implementing punitive commercial tariffs to effectively keep banks out of mobile banking.

This behavior is absolutely deplorable and a reflection on the ethics of companies that follow these practices. It is probably illegal in most countries and carriers following these practices should be confronted with legal procedures. By following such practices, the development of branchless banking will be delayed and slowed down. The result of this is that the poor and the most needy will suffer most. Some-one, somewhere should feel ashamed of their way of doing business.

This time round, Google may have launched a Wallet that might work

When Google Wallet was released last year, I predicted that it would fail (Read here). I based my argument on the fact that it would be too difficult for them to build a workable payment eco-system for the thing to take off. Based on the fact that the first version of the wallet was scrapped and a totally new version (Google Wallet 2.0) was launched seems to me that I was right.

This time round, I think that they have launched something with real potential. While the model is still extremely risky, it is worthwhile to watch. Google has effectively linked two transactions together to provide a pseudo-experience that you are paying with your own card. Google is prepared to loose money on every transaction in the process (Read here). They are probably doing this to get to the crucial purchase data. The risks is that they would loose significant money before they can show sufficient monetary value.

The other risk is that they expose the payment eco-system to liability risks. Because of the two transactions (tied together), existing dispute mechanisms will not work. Charge-back rules and other protections built into classical payment schemes are broken. This is probably why Google Payments Company (GPC) require the subscriber to hold them harmless in the Terms and Conditions ("You agree to release, GPC, .... and their agents, contractors, officers and employees, from all claims, demands and damages" (Read here))

So providing that Google can manage the significant risks and provide sufficient incentives (maybe in the form of coupons and special offers) for subscribers to use the service, this time round, the wallet may just get traction.

Are we seeing the start of a mobile payment bubble.

The definition of a stock-market bubble is a high activity of purchase of shares in stock that cannot support the prices being paid on the fundamentals of the business. Since the inception of stock-markets investors were warned not to invest during bubble times. In an article published in August Dan Freed alluded that one may be seeing the start of a bubble in mobile payment shares. (Read here).

In the article the following valuations/transactions are quoted as red flags:

• The growth in eBay's value on the announcement of the deal between Discover and Paypal.
• Square's implied valuation of $3.25B after recent fund-raising
• Starbucks valuation on the back of mobile payment announcements.

Since the article, further investments in mobile payment companies have shown very high valuations (not supported by real revenue). Below are some examples:

• iZettle raises $31.4M dollar Series B funding (Read here).
• Paynearme (a start-up mobile payments company) raises $16M (Read here).
• Braintree (a supplier of payment services - including mobile payments, to start-ups) recently raised $35M (Read here).
• Paydiant (a start-up providing a white-label solution to banks) raised Series B funding of $12M (Read here)
• Monitise confirming that they are in talks to raise £100M (Read here).

It does look as if we may be seeing some of a bubble forming. Question is; what does this mean?

Summer was a bit late for Isis

Isis is a wallet solution for many payment instruments that reside on your phone. It is a product supported by key mobile operators (Verizon, AT&T and T-Mobile) with the prime objective to activate the NFC capabilities in mobile phones. The drive is to create an acceptance mark (Isis Ready, Pay and Go or Pay and Save) where Isis phone app can be used to pay.

Isis were planning to have the first deployments ready and start accepting transactions at the end of summer. Austin and Salt Lake City was selected as the first cities where the solution would be trialed. But unfortunately, some snags lead to delays. (Read here). Good news was that the delay was not too long with the promised launch taking place this month - a bit late for summer (but just) (Read here).

The reason why this offering is interesting (and probably on the right track) is that the security is based on a special SIM card. (In other words, the secure element resides on the SIM). It also seems that the participating operators have constructed a commercial model that could potentially work. This is much more likely to succeed than Google wallet.

What did the Olympics do to mobile payments

It has been some time since we experienced the magic of the Olympics. The thrills of competition and the drama of the opening and other events of the games will be remembered for a long time. But for payment specialists it will also be remembered as the biggest NFC payment exhibition ever undertaken. Visa (one of the sponsors of the games) invested a lot of money to rig many outlets, vending machines and taxis with proximity accepting devices. Some reports indicate as many as 140 000 outlets.
Special prepared Samsung SIII phones with suitable SIM card was distributed to athletes, representatives of the media and other interested parties. Many of these people used the NFC phones successfully to purchase various articles in London during the games. The media gave very favourable feedback on the experience (Read here and here). One factor that was disappointing was the fact that the processing speed for a payment was not seen to be fast enough (less than 500ms) for the London Underground, so the NFC technology is not yet allowed there. (Read here).

So what does this mean? For a start, it was demonstrated (successfully) that a large eco-system of NFC payments could be rolled out in a real-world environment. This infrastructure will remain deployed and could potentially trigger a critical mass of payments. Furthermore, the educational value of the exercise should not be underestimated. Many members of the public are now aware (and in some cases are looking forward) that payments is possible by just tapping your phone. It is now up to the British banks to leverage the infrastructure and awareness and propagate the momentum. It would be a pity if one of the more exciting legacies of the Games are left to decay.

Some worthwhile Mobile Money Blogs to read

I started writing my mobile banking blog in 2006. Since then the number of blogs or websites that published mobile banking/mobile money articles on a regular basis exploded. I have blogged about some of these in the past, but have felt that it may be a good idea to publish a collection of the best ones that I am aware of. It is almost impossible to keep track of all the blogs, as almost every month sees the initiation of another source of information.

Unfortunately, the moneyblog domain: has not got anything to do with mobile money, but rather is a blog for entrepreneurs giving tips and articles on how to make money on the mobile web.
 
Quite a number of mobile money vendors publish blogs. These blogs are obviously biased towards specific products, but are still interesting reads. Blogs in this category are: Telepin, Roamware and Sybase. Of course, we are all biased towards some product or service and it is important to keep that in mind when reading a blog. By stating a preference for a specific vendor in the beginning is actually not a bad idea.

Other blogs are maintained by staff (or collaborators) working at NGO’s, like the industry-leading blog published by CGAP (and that I spoke about in a previous blog), the GSMA mobile money for the unbanked blog or some blogs published by the worldbank (like for instance this blog as an example).

There are regional blogs (just focusing on specific regions). Mobile money Africa is definitely worthwhile keeping track of. Not only is it a prolific publisher, but also seems to be able to pick up on the inside moves in the market well. Mobile money Asia is also a worthwhile blog that I have referenced recently.

Then there are the blogs published by individuals. The Mobile Payments blog published by Brandon McGee has been around for a long time and always seems to be able to produce a good summary of most important trends and announcements. (the information do seem to be US-centric). A blog that sometimes touch on mobile money and that I personally enjoy reading is Digital Money Blog by Dave Birch. His writing style and insights is really worthwhile reading. Philippe Lerouge is a prolific blogger on mobile payments. Unfortunately his blog "le paiement mobile" is in French, but still worth a read (even using Google translation services). Also read Simon Lelieveldt's blog on Payments and Money.

Other blogs not mentioned are:
Mobile Payments World.
Payments News.
Mobile Payment Magazine
ePayment News

Keep on reading

The future of your money is Orange

 In June, Orange announced that they have crossed the threshold of four million mobile money subscribers. With deployments in ten countries (Côte d’Ivoire, Botswana, Cameroon, Kenya, Madagascar, Mali, Niger, Senegal and lately in Jordan and Mauritius) the service now have a penetration of 14% of the target base. (Read here).This is an example of a slow consistent growth in mobile money subscribers throughout Africa and the Middle-East. Mobile money solutions are available in most countries in this region and number of subscribers have grown to a few hundred million.

What is interesting in the case of Orange is a recent announcement (in about the same time frame) that Orange mobile money subscribers will now also have access to Visa payment infrastructure (Read here). This is another example of activation of Visa Mobile Prepaid and an indication that the strategy of Visa in this space is getting some momentum.

Big strides to replace cash with digital payments in Africa

Late in 2011, the Bill & Melinda Gates Foundation commissioned pollster Gallup to carry out face-to-face interviews with 1000 adults in a number of sub-Saharan countries (Botswana, DRC, Kenya, Mali, Nigeria, Rwanda, Sierra Leone, South Africa, Uganda, Tanzania, and Zambia). The purpose of the research was to analyse the payments and money transfer behaviour of people in these countries. The report was comprehensive and was published in June 2012. I am not aware of any subsequent research as this would show trends in the findings, but the results of the report still require some analysis. (The report can be downloaded here).

Some of the conclusions that one could draw from the findings are:

• More than half of the people interviewed (effectively representing 134 million people in these countries) had paid someone over a distance (meaning that the payer and the payee were not physically in the same place) in the past month
• The profile of each country surveyed is vastly different. For instance the percentage of people that have made a remote payment varies from 76% (in Kenya) to as low as 24% and 27% (in Rwanda and in Mali)
• Generally, countries with higher percentages have less people sending money in cash. (For instance only 20% of transactions in Kenya are cash-only, where-as 93% of transactions in Mali are cash only)
• The percentage of digital only (account to account transactions, with no conversion to cash) is above 15% in only five countries (Kenya, South Africa, Botswana, DRC and Zambia), whereas others are still very low (3.4% in Sierra Leone and 3.7% in Mali).

I am sure that these results have improved significantly in the about two years since the research have been done, but it is clear that Africa is a country changing into a digital payment world – although much must still be done.

Buy your airline tickets with mobile money

Someone sent me a note highlighting the fact that one can now use EasyPaisa (the leading mobile payment system in Pakistan) to purchase airline tickets on Pakistan Air. I checked and this seems to be the case (Read here). The advantage of this service compared to using PAI booking offices and airline travel agents is that it is available twenty-four hours a day. I found it so fascinating that a payment service designed for low income people could also be used for purchasing airline tickets that I decided to investigate. It turns out that this service is not just offered in Pakistan ....
A similar service is available in Ghana. MTN Mobile Money subscribers who use a Starbow service can now purchase their air tickets through Mobile Money. (Read here). In Tanzania is also possible to purchase airline tickets on Precision Air (a local airline). This service is available to mPesa subscribers and tickets purchased in this way would receive a 20% discount. (Read here). Further research indicated that a similar service is available in Nigeria where tickets on local airline, Aero can be purchased from the U-Mo electronic wallet. (Read here).

It seems that the availability of a flexible, digital payment system can lead to applications that one would not have envisaged initially.

Quality of software platforms for payments - differnt requirements?

The fast changing world of Internet and Mobile applications requires a new type of development approach. In this approach, where subsequent versions of the software are released in short intervals, the emphasis is not to catch out all bugs before release, but to rather fix them quickly after they are found (or reported). The user community then in effect becomes the final quality assurance step in the software cycle. Sometimes referred to as Agile, this is a very effective way to get functionality into the market and then quickly fix anything that is reported by the users of the software and works beautifully for most applications.

Some months ago, a flaw in the Google wallet on Android phones emerged (Read here). This flaw disabled the wallet functionality following a simple factory reset on NFC-equipped Android handsets. It seemed as if the reset trips the secure element in the device and in the process rendering the Wallet functionality useless. This was of course fixed quickly and no money or transaction histories were lost, but it made me think about the suitability of modern development approaches for payment applications.

The potential damages caused by mal-functioning software to money eco-systems and the integrity of payment systems can be devastating to individuals and corporations. Lost or duplicate transactions, money-records that do not balance or that is out of sync with master records, pending transactions without information to resolve payments that have not cleared, slow (or absent) confirmation of payments and user-interfaces that display wrong or inaccurate information are just some of the things that can go wrong.

Agile is without doubt the best way to build software quickly and fast. It is the best way to ensure that results are seen quickly and to allow for less-costly adjustments early in the life-cycle. But, when building payment solutions, one probably needs an additional (traditional), robust quality assurance step prior to releasing it into the wild.

Mobile Money in Asia

After a few months of well-earned rest, one of the pioneers of mobile banking is back at work. Brad Jones, who established Wing in Cambodia some years back, has recently launched his own advising firm Mobile Accelerate.

During the past period, he and other specialists (like Paul Reynolds, Michael Joyce and Joep Roest) launched a portal for mobile money initiatives in Asia. (Read here). With information related to capital for initiatives, ancillary services (like payroll) and regulatory considerations (like KYC) it is definitely worth a read - or to keep an alert going.

It is important that practitioners in this new industry don't just execute, but also share their insights with a wider audience. With this in mind, Mobile Money Asia must be applauded.

Mobile banking could boost economic growth according to World Bank

The World Bank recognized the important role that mobile banking can play in the fight against global poverty. (Read here). Research based on a poll of
150 000 people in 148 countries, shows that 2.5 billion people do not have bank accounts. This is 59% of the population in developing countries.

Some of the biggest reasons why people don't have bank accounts are the high cost of traditional banking products, the distance that must be travelled to get to banks and amount of paper work involved in opening accounts. However, the report shows that these problems are increasingly being tackled with mobile phones and that mobile banking is being used more and more to solve this problem. The impact of mobile banking in the fight against financial exclusion is visible and now recognised by the World Bank.
Or, as Robert Zoellick, president of the World Bank put it: "Providing financial services to the 2.5 billion people who are 'unbanked' could boost economic growth and opportunity for the world's poor. Harnessing the power of financial services can really help people to pay for schooling, save for a home, or start a small business that can provide jobs for others."

loan and savings innovation for mobile payments

The mobile payment revolution that is sweeping through emerging markets is just the start. In many markets "mobile money" has become the real alternative to paying with cash. With all the advantages (like better security and ability to pay remotely) over cash, it is no wonder that more and more people are opening accounts to experience a better way to pay.

Most practitioners know this, but it is important to consider that the real benefit will come as behaviour change towards a new way of saving and lending/borrowing. With better information access for savings  (how much have I saved; at this rate, when will I have enough; etc.) and lending (what is the outstanding balance; when will I repay my loan if I increase repayment; etc.), "mobile money" will lead to more educated consumers. But it is also the process that will get streamlined, making it more cost-effective and applicable.

However, the most exciting potential is to re-invent savings and loan products to be more relevant to the target market. By packaging products in a different way, think of re-payments differently and interest rates/penalties/admin fees structured differently, this is where we will really see "mobile money" have a lasting effect. 

Monitise acquire Clairmail. Old news but important

Monitise announced the acquisition of Clairmail in March and this article should have been written then. The lateness of the article is a reflection on how busy I have become lately, but the post must still be written, because this is an indication of definitive consolidation in the market and this is extremely important as it points to maturity in the market.

By combining the clients, end-consumers and the sheer volume of the two companies, a clear leader have emerged in the UK and US in an important sector in the industry. Both companies offer their services primarily as a managed service to banks. By making use of this service, banks are able to offer access to their bank accounts by means of mobile phones, enabling a number of transactions previously not possible. The size and reach of the new Monitise in first world markets is such that they have now established themselves as the clear leader. (They probably now serve between 'n third and half the market).

Smaller players (and especially niche players) in this consolidating market is in a difficult position as banks must be considering moving their business to the market leader.

Alliance for Financial Inclusion leads the way in collaboration

In complex financial eco-systems it is extremely important that good coordination and collaboration exist. Many organisations exist that attempt to provide a forum for collaboration on financial, payment and banking matters, but till recently no organisation provided this forum for financial regulators of low income consumers in emerging markets.

Established in 2008, the Alliance for Financial Inclusion (AFI) objective is "to build a community of policymakers who can share their collective knowledge on policy solutions to promote financial access for the poor." Funded by money from the Gates Foundation, AFI has been able to draw participation from regulators from emerging markets everywhere (Africa, Asia, Eastern Europe and South America). The discussions, networking and knowledge developed during the many interactions under the auspices of AFI contributed substantially to a better environment for the establishment of mobile money.

Under the able direction from Alfred Hannig (executive director) and a steering committee from countries like (Nigeria, Kenya, the Philippines, Mexico, Peru and Thailand), expect much more good things to come from AFI.

MFS Africa innovating on top of Mobile payments

Dare Okoudjou is one of the pioneers of mobile payments. He has been making waves in this industry for some time. The company that he founded three years ago (MFS Africa) is an interesting case study in how ancillary businesses can evolve in emerging markets using the utility of mobile payments.

During the past year, MFS Africa, launched a number of innovative products that is only possible on mobile phones, using mobile payment platforms. The ability to perform immediate, irreversible payments at very low costs points, enables totally new business models.  Some of the ventures that I find particularly interesting are the following:

• The ability to purchase micro-insurance from your cellphone. This is a service launched in collaboration with Hollard insurance in Ghana. See Dare explain these services in YouTube here.
• Sending money direct from a debit card in Europe to be credited in a mobile wallet in Africa. I understand that this service is live in two countries at the moment. See the landing page of this service here.
• An employer backed salary advance in countries like Cameroon. Because of the efficiencies of mobile banking, MFS Africa is able to advance payment amounts as small as $2-00. (Read here)