Much of the dialogue around mobile money is shifting from how to build a basic mobile money proposition (regulatory enablement, industry partnerships, cash merchant networks, technology choices) to how to transition to an e-payment ecosystem, whereby funds are born and used digitally. New product development in mobile money is central to this much-awaited transition.
The key battleground in the future will be to increase usage levels, and that means providing more customers reasons to do more things using their mobile. Despite the growing clutter in mobile money menus, customers remain very limited in what they do: according to the latest MMU State of the Industry report, 92.5% of mobile money transactions globally are either airtime purchases or basic person-to-person transfers. I suspect that dispensing with the mobile wallet and allowing for over-the-counter transactions (which may make good business sense in the short run but limits the opportunities for customer growth) has been the biggest innovation in the last few years.
But beyond the headline products: how diverse are the offerings of mobile money platforms across the world? How much product experimentation is going on? Is there a healthy supply of creative new product ideas?
In a new paper written in collaboration with my former Gates Foundation colleague Mireya Almazán who is now with the MMU, we have sought to shed light on these questions by creating a first-of-its-kind catalogue of mobile money functionalities and services. We include offerings that have been rolled out or are being piloted, as well as service concepts that have been proposed. For each product class, we describe the range of implementation modalities in detail. We hope this report will be viewed as a comprehensive product definition reference guide by practitioners.
We found that while the range of product categories is still rather narrow, the specific ways in which services are defined and packaged does vary to a surprising extent across operators and markets, especially for payment services (peer-to-peer transfers, bill payment, merchant payments, transfers to/from linked bank accounts) and for linking mobile money accounts to regular bank accounts.
The paper did not get into the factors which may be hindering more far-reaching innovation, but let me posit some hypotheses here. First, many mobile money providers have inflexible platforms which are run by small teams on tiny budgets; for them, innovation is seen as more of distraction than a solution to their business problems. Second, practically all mobile money providers run closed systems without adequate application programming interfaces; they are unwilling or unable to enlist partners to experiment for them. Third, unnecessary regulatory barriers to entry prevent smaller, nimbler, more innovation-minded players from mounting credible competing propositions. (I'm thinking here about the unjustified regulatory insistence that cash in/out presents agency problems, hence requiring a strong contractual binding of cash merchants to individual banks or mobile money providers, which precludes the spontaneous development of cash in/out networks serving all providers. Or the unjustified regulatory insistence that non-bank players shouldn't promote savings services or pay out interest, even if they are 100% backed-up into fully regulated bank accounts.)
I believe that embracing innovation will be the only way to achieve scale by most players. And for any transactional business, scale is job #1.
Much of the discussion in financial inclusion revolves around poverty, and how to provide low-income people with the formal financial products and services they need.
But according to mobile money consultant and thought leader Ignacio Mas, poverty itself isn't the biggest thing keeping the unbanked out of the formal financial system. "The key distinction between the formal and the informal – those with a bank account and those without – doesn't have to do so much with income," he says. "We tend to focus a lot on 'the poor,' but you have plenty of very low-paid security guards, for example, in Africa, and they have bank accounts. Why do they have bank accounts and other equally low-paid people do not? Because they have a salary. And I think the correlation between those people who are banked and those people who receive a regular salary is very high."
As Mas describes it, having a regular salary is a major part of what's driving financial relationships at the BoP today. It's also contributing to the growth of mobile finance, since when someone gets a salary, their employer has the incentive to arrange to pay them electronically. But the real question is how to reach those who don't get a regular paycheck. "I think what we're trying to do is to go beyond the salaried – which happens to be the vast majority of people," says Mas. "No one is guaranteeing them an income. And that means that their money is not being delivered into an account, they're being paid in cash. It also means they feel like they need more protections around them to smoothe all the volatility that there might be in their income flows.
"The real deep implication of this is that rules don't work for them," Mas explains. "For those of us with fixed salaries, financial planning is really a simple, infrequent affair. If I need to save money to go on a Christmas holiday with my family, I need to set aside 5 percent of my salary for the next three months. It's not difficult to come up with that number. And tomorrow, there's no reason to re-plan that, because there's no new information – basically, tomorrow, the world will look very similar to how it looks today, because I'll still be waiting for the same paycheck at the end of the month. So once you've made a plan, you stick to it."
But if you're informal, rules and plans go out the window, Mas says. "Because if today was a good day and you made twice as much money as you normally make, you shouldn't be saving 5 percent, you should be saving 100 percent of the extra income. And if today was a bad day, you should probably be dis-saving to put food on the table. So the informal majority cannot live by rules – they need to decide what to do with their money every time they touch it. Which is why, in my view, financial planning is the core of the financial problem that they face."
In Part 6 of our Mobile Money Movers series, Mas describes some long-standing informal mechanisms of financial planning and money management that are common among low-income communities, from indivisibility to peer pressure and "money guards." He also discusses the possibility that these mechanisms could be incorporated into mobile money products – and the difficulty in getting financial partners to adapt their systems to low-income customers' existing needs and behaviors – in the first part of a fascinating and wide-ranging interview.
[From liveMint, 19 February 2014, with Abhishek Sinha]
The Nachiket Mor committee on financial inclusion’s recommended objective of banking for all by 2016 is a tall order. There is no doubt about the need for that goal, but India’s record on achievement of such objectives has been dismal. Education for all and health for all are two striking examples where the goal post kept shifting by 10 years, till eventually the field was changed. Moreover, often government mandated services are converted into achieving hard parameters—how many new accounts, new branches, new agents, etc. Soft parameters such as the quality and usability of services are overlooked. The recommendation to introduce payment banks to enable ubiquitous access and creation of universal electronic bank accounts is an opportunity for banks to genuinely transform financial inclusion and recognize the high aspirations of persons with small wallets. The new banks should aim to service all Indians and channel their aspirations: reduce risk and stress, help stretch budgets, and support a better future. There are some things that need to be done to achieve all this.
For starters, consumers need to be given all options. Instead of differentiating customers into different categories, all those who want to be banked, should be given all options. Low income shouldn’t mean no-frills.
Product miniaturization is another area that needs to be addressed. In India, remittances are small, but volumes are large. India Post alone handled 96 million money orders having a total value of about Rs75 billion in 2009 but the average size of remittances is about Rs780. Why limit accounts to either zero balance or a minimum of Rs5,000-10,000? Slabs for Rs100, Rs150, etc., should be introduced. Similarly, credit needs differ across income groups. Introducing credit facilities offering Rs500 or Rs1,000 for seven days make more sense than those that offer Rs50,000 for 20 days.
The new banks also need to carefully design the pricing of products. Quality, reassurance and flexibility are universally appreciated. People willingly pay for useful services that address their concerns. Disrupt pricing; take hints from prepaid packs offered by mobile network operators and so-called freemium models of Internet companies. Don’t obsess about offering lowest prices, and certainly don’t hammer low-income customers with this message.
Technology can be another aid for levelling and inclusion. The new banks need to go mobile, go online and take advantage of the sense of immediacy that mobile phones deliver while ensuring reduced credit risk of real-time payments. Take the case of ING Direct—a branchless retail bank that successfully provided a range of banking products only through call centres and Web access. The advantage of having a branchless bank is that it leads to a higher return on investment and low capital expenditure. The immediate payment service for online transaction saw close to two million transactions in December 2013 through 55 million mobile money IDs.
Digitized financial services won’t make cash go away. With 600,000 villages to cover and banking to be brought within 15 minutes of walking distance of all Indians, there is enough of a pie to be shared. The independent white-label business correspondent network envisaged by the Reserve Bank of India (RBI) will make an effective medium especially for first-generation banking customers to get acclimatized. But banking correspondent networks are hungry beasts: economics will make sense only at substantial transaction volumes. Sharing such representatives between banks makes sense if one has to achieve scale; banks can differentiate in more interesting ways than mere availability of cash points. Rather than fighting cash, it is important to make persons comfortable crossing the physical-digital divide.
Profitability comes from credit and payments. Banks have to capture the savings of customers. Observing how individuals manage their money is the first step in that direction. For instance, persons who make payments electronically also hold their money electronically. Savings is the engine that turns other financial products into cogs. Bottom line: banks won’t make money on empty accounts, no matter what.
Finally, it is important to emphasize the scale of operations. It has been estimated that in India the value of domestic remittances is about $13 billion, with 80% being directed to rural areas. Embracing scale is imperative for success on a mobile-led strategy: digital payment services are premised on network effects, and banking correspondent networks are premised on economies of density. Systems need to perform robustly at scale, and processes need to be streamlined to avoid bottlenecks). There are many technically and commercially smart ways of doing all of this. The developing world needs to draw inspiration from successful mass-market banks.
[From Savings Revolution blog, 11 February 2014 (with Kim Wilson)]
from a core set of powerful higher-level ideas/ideals expressed vividly. So
what fires up the savings revolutionary? Shouldn´t we be putting our core
beliefs accountably on the table, much as we are expecting people to place
their money on banking tables?
No select group should be
deciding those core beliefs, but hopefully we can offer a starting point for a
discussion within this forum. How about this:
There´s a conviction that
people can regularly achieve goals by saving, in a value-accruing way, rather
than necessarily by tying themselves to a costly debt-mast.
There´s a strong feeling
that transactions within a community carry much broader social significance
than the pure monetary value assigned to them, and that such social signaling
aspects are worth preserving because they help provide a sense of security and
comfort to people.
There´s a notion of
community self-reliance and resilience, which can be promoted by recycling
funds within it.
There´s a distrust of
centralized institutions, whose interests tend to become dissociated from the
people they are meant to serve.
There´s a fear of
technology as an alienating factor, socially (digital divide between the haves
and have-nots) as well as personally (level of comfort in use).
Is this what you believe?
What key beliefs do you think are missing and which of the above need not be
core to a savings revolutionary? Have your say, we are curious to hear from
[From NextBillion blog, 2 February 2014]
constantly create stories about ourselves and our experiences to help us make
sense of the world. These stories even help us manage our finances. They do so
by permitting an intuitive and highly personal basis for classifying and
interacting with our money. Various pots of money can be individualized and
ranked through stories, based on the different moral qualities and mental
states the stories evoke. Through these stories, pots of money become actors in
one’s own life dramas.
Let’s take a look at three types of money stories, which often
Origin stories have to do
with how the money was gotten. Money may have appeared in a regular drip or
through a windfall; easily with a stroke of good fortune or through grinding
hard work; through honest or crooked means. All these will likely conjure
different feelings about how the money should be subsequently handled and
spent. People often don’t like to mix these monies and lose track of these
Handling stories hinge
not on how money was gotten but how it is being managed. Saved money can be
sitting relatively idle (money under custody) or it may be working for you
(money as investment). It may be concealed to discourage requests to share it,
or it may be displayed publicly to build status and social capital. Saved money
can represent reassurance through stable, transparent value accretion - or it
can generate surprises, like when you break an unexpectedly full piggybank or
earn riskier returns. All these choices translate into mental stories, which in
turn heavily condition when and how the money is subsequently used.
Destination stories have
to do with how money is intended to be used in the future. Monies can relate to
spending cycles that are immediate (pocket money), a matter of weeks (household
expenses) or longer-term (education, wedding, retirement). They can be loose
(entirely discretionary) or virtuous (for things of a certain level of
importance). Monies can also be for personal, domestic or business use.
stories can intertwine into fuller stories. For instance, the inheritance money
which needs to be treated as an investment and which will be used to pay for
the children’s college tuition. Or the fistfuls of rice that the wife sets
aside every time she cooks, which she will eventually resell back to her
husband in order to buy herself a dress that he would otherwise not pay for.
When linked together, money stories become mini-novels that combine elements of
duty, uncertainty, integrity, love and sacrifice.
emotions onto money, these stories let people put money management on
autopilot. They help create a set of money management rules which you don’t
have to think about too much, which feel intuitive and right, and which you are
happy running with for a while. The emotions become the enforcers of those
rules. By removing money choices from the purely rational, you avoid regularly
questioning your prior decisions.
Thinking of money
management in this way has powerful implications for financial product
development. Products should, first and foremost, act as magnets not so much
for money as for stories. The stories shouldn’t come with the products
themselves (“this is a school fees account”), but with the monies that users
deposit into them. Financial institutions should let this money retain and
acquire new stories. Thus users will make the financial products their own.
But by and large,
financial institutions haven’t leveraged the power of users’ stories, and this
contributes to some of the challenges they’ve faced in serving low-income
customers. For instance, liquidity is money that’s not very well-storied, which
is why it is so vulnerable to impulse and misuse. Yet the general-purpose
savings accounts banks tend to offer blend different types of monies and as
such are story killers. This is why - just as they’ll take cash out of their
pockets – many people empty their savings account as soon as they contain some
money. Others avoid this temptation by using a savings account to only hold one
type of (well-storied) money, mentally converting the product into something
that uses these stories’ emotional pull to help them achieve their financial
Financial service providers could make this easier for customers
by designing products based around their money stories. Exactly how products
would achieve this isn’t fully clear, but there are a number of possibilities.
For instance, bank accounts could allow for separation of monies into discrete
pots, within one big account. These pots might have playful names which
invite association with different origins or destinations of money in
subtle and imaginative ways. These pots might also have illiquidity features
which support the feelings people have about the monies they choose to deposit
We may not yet know
how to translate people’s money stories into financial products, but it’s time
to start experimenting. This will require a firm departure from the traditional
financial education-led approach: define your goals, draw up a budget, set
yourself some rules, now start saving. That approach was never based on
low-income customers’ actual behaviors and needs - most don’t have concrete,
well-defined goals beyond paying the next round of bills. But what they do have
is different classes of monies with different emotional values expressed
through stories – the sooner financial service providers recognize this, the
better their products will be.
[From MicroSave’s Financial Inclusion in Action blog, 14 January 2014]
There are two glaring facts the mobile money industry needs
to face up to. First, digital accounts have very little value stored in them,
and the practice everywhere is to withdraw any e-money received immediately and in full.
This makes people not
naturally inclined to pay electronically, except for
remote payments for which people will take the trouble specifically to cash in.
Second, there is surprisingly little systematic use of
electronic payments by formal businesses, a space in which cash and especially
checks prevail, even
in Kenya. The predominant business use is in fact by
informal traders, though no product development is aimed at them.
These two gaps work together to limit the electronification
of merchant payments. While that’s the case, mobile money will not become part
of customers’ everyday life, and many providers will struggle to reach
The failure in the value proposition in both cases –for
savers and for businesses— is that mobile money doesn't offer manageability
tools around the money balances that are kept and the payments
that are made or received. As a saver, it does not make me feel in
control of my money, because it doesn't let me separate my money
out into various pots and play mental discipline games around them (jam
jarring). As a business, mobile money does not make it
easy for me to keep accounts, reconcile receipts with invoices, and match
against things like inventory and sales leads.
We got to this situation because there is indeed very little
manageability (beyond doing the actual transaction) that one can offer on
simple mobile phones. But now, subject
to some caveats, we can foresee the day in the not too
distant future when people at the base of the pyramid, and especially traders
and entrepreneurs, will all have smartphones. Moreover, by designing compelling
user experiences, financial services could become an important driver to
accelerate smartphone penetration in developing countries.
It is time to start thinking about a new generation of more
intuitive mobile money services on touchscreen smartphones
– a mobile money app. With this app, mobile money providers can offer a full
upgrade path to heavier mobile money users who like the convenience of payments
on the fly, but want much more interaction, structure and information around
their money matters.
At the personal use level, this banking app should let
people express much more visually and cogently the heuristic games they play in
their own minds every time they face a money decision. In other words, it
should be conceived more
like a game than an internet banking site.
At the business use level, it’s about helping (formal and
informal) businesses manage the information around transactions, not just
helping them pay/receive money. To adopt mobile money as a way of doing
business, enterprises need to make sure that payments can be tracked,
reconciliations can be made, frauds can be avoided, and payments can be linked
to other business processes (e.g. such as order, inventory and fleet
The manageability of payments on the business side will not
be achieved at the handset level alone. The challenge needs to be solved by
developers and integrators working on behalf of business clients. For that,
they will need a set of flexible application programming interfaces (APIs)
which allow them to integrate the payment flows from the mobile money system
with the enterprises’ own accounting, resource and workflow management systems.
mobile money to the next level has got to be about solving the savings and
business use challenges. To crack that, it is time that we start experimenting
with smartphone apps, supported by appropriate network-level APIs. There needs
to be much more bundling of software services with payments. Only then can we
really think about mobile money being not only more inclusive but also more
relevant daily – and hence more impactful.
[From Savings Revolution blog, 21 December 2013]
Being a relative newcomer to the field of microfinance, I
have been a spectator to the microcredit boom and bust. I do wonder what made
the notion of having poor people live in perpetual
high-cost debt such an irresistible concept for so
many people. How did it get so over-hyped? In a recent post in this blog, Paul
Rippey feared this kind of triumphalist over-hyping taking over the sub-culture
of savings groups, asking people to shut their marketing
mouths, at least some of the time.
Now I fear that another kind of hype boom and bust may
happen in the area I have been working on: mobile money and branchless banking.
Let me be precise: my issue is not so much overhyping of the potential of
mobile money, but of the pace of growth and impact
on the ground. It’s only natural that progress be slow,
the Kenyan experience notwithstanding: retail payment systems and cash in/out
networks are costly and operationally complex to build.
But what exactly compels the burgeoning mobile money support
industry to project a stretched view of reality? I can identify five specific
1. Social media’s love of success stories. Social
media offer low-cost mechanisms for individuals and organizations to build
brands around specific topics. This creates much volume of content, much of it
unfiltered. At the very least, social media act as an unfettered amplifier of
conventional wisdoms. More perversely, social media sites often have a bias
towards positive stories: many blog editors are not interested in analysis and
nuance as much as in showcasing successes and promoting best practices. Eager
writers, take note. Moreover, the pressure to express success stories briefly
are an open invitation to create sound bites by selective quoting of numbers,
out of context and proportion. These sound bites can take a life of their own
through repetition across the numerous conferences and fora.
2. Donors acting as project promoters. Many donors
think of themselves increasingly as venture capitalists: investing money in
select projects which may become catalytic examples. That they become more
selectively and deeply engaged is good, they gain a better understanding of
business realities. The downside is that they have every incentive to use their voice in
public, professional and social media to talk up their projects,
not only with the crass objective of basking in reflected glory, but to
maximize the possibility of success of their investees. Higher-profile projects
will find it easier to recruit good people, raise funding, close deals with
important partners, etc. It’s hard to reconcile being both a venture capitalist
and an impartial observer.
3. Developmentalists and technologists seeking silver
bullets. The spread of new technologies gives wings to those who think that
change can happen quickly. Small developments on the ground may be taken as
ink-blot-like indications that we are approaching the vertical part of the
adoption “S” curves which we have become so used to in the internet age.
Except, alas, that other things always seem to get in the way. Today’s mobile
money, which is built around retail payments with strong network effects, is
too dependent on all-or-nothing type of scale. Middling success is hard to
imagine, so any progress is easily interpreted as inertia towards full success.
4. Money corrupts content. When much of the industry
depends on donor money, justifying old money and asking for new requires that
even small successes be trumpeted beyond proportion. In the area of financial
inclusion we are also seeing major corporate PR machines engaging, driven more
by a corporate social responsibility (CSR) interest than a direct commercial
concern. Spinning stories becomes an objective in its own right.
5. The modern business school culture of being always
positive and enthusiastic. Must one really be so enthusiastic about
everything that one does, as if it was the most important thing? Must passion
be measured by how optimistic one is? Is it so unbecoming to have doubts about
what one does? I certainly don’t, I declare myself an impatient
pessimist. The pessimism is what gives me the sense that we can’t just
carry on doing what we are doing today, that we have to find a better way. But
oftentimes it’s easier to fit into donor or NGO cultures if you project the
image of total conversion to the cause.
The sad part of overhyping a particular model or solution is
not the consequent bursting of the bubble – let them who caused it deal with
it. It is the fact that those caught within it come to see their solution as
all-encompassing. In the appetite to hog sound bites, donor funding and
adulation, it becomes their solution against any other. But in reality our
solutions will always fit into and support a
variety of other solutions – yes, even M-PESA.
[From Savings Revolution blog, 10 December 2013]
Lack of traction with formal financial services is often
attributed to an insufficiently granular understanding of client needs. I think
the bigger failure is in not knowing how to distil the mass of research we
continue to produce into compelling products.
Of course, there is always an element of conceit whenever
one proposes any kind of new development intervention, even if it is something
as mundane as a new financial service offering. And if the proposed service
relates to microsavings, I can imagine how naive one must appear to so many
doers and experts who for several decades now have focused on the credit side
of things mainly because it’s so much easier to instill a habitual practice on
We need to approach the topic of microsavings with an
entirely pragmatic, open mind. I have a strong sense that among all financial
services, savings is the one where informal solutions are generally least bad.
That is the main reason why it’s hard to attract people’s sustained interest
in, or generate much if any willingness to pay for, formal savings services. We
can get people to open accounts, but we don’t know enough about how to get
people to fill them, that is, to displace much of the informal savings behavior
that people are accustomed to.
Informal solutions may not be so safe and convenient, but
they work well for people because they are so intuitive. Through
tradition and observation, people have come to play their
informal financial mechanisms (the jars and lockboxes with cash and other
valuables, the gifting and the loaning and the repaying of friends and
relatives, the livestock and the bricks accumulating in the back yard) in a way
that corresponds with how they think about their needs and their dreams and
their fears. This thinking may be fuzzy and changing, but it’s always going on.
People have a much stronger sense of control over their circumstances and their
future if they are able at any point in time to project intentions on the
various informal savings mechanisms they have at their disposal. A very small
set of informal financial solutions turn into a kaleidoscope of financial
thoughts and experiences.
In a new paper,
I review several reasons why projecting these mental thoughts and sense of
control in the digital domain is not at all straightforward. Digital accounts
operate within a continuum of value, while informal options resolve themselves
into distinct lumps which are easier to project ideas onto. Digital accounts
make money more fungible and hence make any separation of money seem more
artificious. Digital accounts may embody certain illiquidity features that
people desire, but these are often deemed to be arbitrary and unfair when
people’s circumstances or expectations change. Digital accounts imply an
invariant, hierarchical relationship with the bank, as rule-setter and
record-keeper, which is at odds with the variety of roles people assume in
their informal financial arrangements.
In order to stand a shot at displacing informal savings
options, digital savings solutions must give people much more sense of being in
control over their money and their circumstances. Digital savings solutions
need to make it easy for people to play out the mental processes by which they
decide which financial levers to pull. The opportunity is for digital solutions
to express much more visually and cogently the heuristic games people play in
their mind every time they face a money decision.
Now, shouldn’t gaming be precisely a core advantage of
digital? I can’t wait until smartphones become the norm and we can start
seriously experimenting with colorful and tactile (and, why not, musical too)
mobile user interfaces on which to render a kaleidoscope of financial
experiences for everyone.
We are far from being able to build these user experiences,
but let’s start by understanding the nature of the attraction of today’s
informal solutions and the inherent limitations of merely digitizing stores of
value. This is as much as I hoped to achieve in writing this paper.
[From CEME Inclusive Commerce blog, 7 December
With M-PESA and the whirl of innovations that it has
triggered, there is no doubt that Kenyan payments are becoming more electronic.
But, at the same time, are they any less paper-based? It’s hard to argue that
is the case, if one looks at the Central Bank’s data. (Currency and GDP are
from its statistical bulletins, and check volumes are from its Annual Reports;
and remember that M-PESA was launched in April 2007).
[Click here to view charts.]
The value of currency in circulation has remained
essentially flat, especially if you discount the 2007 high blip (I doubt that
M-PESA’s cash-busting bang was largest during its first nine months of
operation). Likewise, the volume of checks is on an exceedingly gentle decline.
The average check value has dropped quite significantly, but surely that’s due
to competition from electronic funds transfers at the high value end rather
than from M-PESA with its small-ticket transactions.
To me this lack of visible impact on paper highlights the
two key pending transitions that M-PESA –and mobile money more generally—needs
First, customers need to see value in storing their balances
electronically. As long as most customers have the practice of withdrawing any
electronic money they receive immediately and in full, M-PESA will remain
essentially a cash-to-cash service, and as such it sustains rather than reduces
the role of cash in the economy. (My recent mantras: M-PESA is better cash, not
better than cash and you
can’t go cash-lite on empty accounts.)
Second, businesses need to see mobile money as an easier way
not only of paying and getting paid, but also of managing the information
around those payments. It needs to link with order management, invoicing,
accounting, reconciliations; possibly even inventory and fleet management.
Mobile money needs to have the kind of flexible application programming
interfaces that allows corporates to handle transaction flows seamlessly within
their own systems rather than as a separate universe of transactions. It must
solve basic trust issues that arise when there is no prior relationship between
buyer and seller. (My recent mantras: solve
business paint points around mobile payments and think
of cash as a highly-evolved visual-acceptance
these two transitions, to more electronic storage of value and flexible
interfaces into business IT systems, mobile money will continue to be an
extremely useful extension of the Kenyan payments system, but it will hardly be
at the core of it. The core remains very paper-centric.
[From AfricaFinance Forum blog, Making Finance Work for Africa, 25 November 2013]
Let me say again that I see a huge gap between
the potential of new electronic channels and the results that are being
observed on the ground. Much as we might convince ourselves of the inexorable
logic of bringing financial services to the corner shop near where people live
(agent banking) and right onto their hands (mobile money), what I see as I
visit country after developing country is too much effort and too many
resources being expended in entirely sub-scale operations. Must getting there
feel so hard?
Commercial players: don't play hero
As in any network business, mobile money operations are
about numbers of customers and breadth of ecosystems. Unless you have the kind
of scale Safaricom had in Kenya, are you sure you want to tackle the whole
mobile money ecosystem on your own?
Are you sure you can convince people to get off using that
grimy physical cash which touches and is immediately accepted by everyone, and
instead hop onto your private, exclusive electronic cloud? Your cloud would
cast such a bigger shadow on cash if it was combined with all other similar
clouds into a single, interconnected electronic payment network for everyone.
Are you sure you want to make the management of cash in/out
(CICO) -that thing which wears you down and which you so dearly would like to
go away-the key competitive battlefield with everyone else who abhors cash as
much as you do? Your cloud would be much more accessible for those sadly stuck
on cash if you joined forces with all the other electronic types and worked
together to create CICO networks that work for all of providers.
Are you sure you want to take it upon yourself to sign up
every primary school who wants to bill parents, and to sign up every small
employer who wants to pay employees, one by one? They will not want to force
all their parents and employees to join your cloud, and yet they will not have
the appetite to sign up with every other cloud, so they'll feel it's easier to
just continue with cash like they have always done. They would be so much
amenable to e-payments if the various players empowered a few payment
aggregators to work on their collective behalf in signing up those schools and
employers and distributing the transactions according to who has which parents
and workers as their customers.
If players are able to leverage the collective scale, the
total will be more than the sum of the parts. But getting to this result
requires that the industry as a whole work out which areas they must
collaborate on and which areas they want to fight tooth and nail on. Now
competition between mobile money operators tends to be focused on size of
payment network, ubiquity and liquidity of cash in/out points, and the length
of the list of billers/bulk payers signed up. Those are precisely the aspects
on which scale matters most, but the resulting fragmentation is only making
cash loom more supreme. How about if these became areas of collaboration, and
the competitive field was shifted to brand, customer service, product
development and quality of user interface instead? Aren't these, in fact, the
things that should turn on modern digital-based services?
Regulators: tear down those walls
Many regulators have gone to surprising lengths to allow new
services to emerge, often without explicit regulation, against prevailing
orthodoxy. But still, when the supply response is so weak as it is in many
countries, policymakers have to wonder whether there are other tacks they can
take to spur the market on.
For one, free up CICO networks
from the clutches of banks and mobile money operators. Forcing service
providers to be contractually responsible for anything that goes on in
thousands of stores (the current regulatory mantra) is not only illusory but
counterproductive: how can such fuzzy liability not lead to smaller,
proprietary cash networks? Instead, create a license for CICO networks, with
clear consumer protection rules, and let them operate for any and all financial
service providers. All they would need to be a CICO point for a given bank or
mobile money provider, beyond having a CICO licence, would be to have a funded
account with that institution and access to their secure, real-time electronic
Many regulators can also give up on their aspirations to be
match-makers for happy bank-telco partnerships. These are not natural things,
they remain rare on the ground to this day. They may emerge in time, but don't
predicate the development of the sector on two species with different genetic
make-up mating and working together (India's RBI, take note). Let banks and
telcos compete, under clear guidelines and a level playing field. Let telcos
and other non-bank players contest the market with an e-money license that
exempts them from onerous prudential regulations for the very good reason that
(if they are licensed and supervised properly) they do not create new
prudential risks. Let banks compete on the basis of the same third-party CICO
and account opening regulations that apply to non-banks, for the equally good
reason that CICO and anti-money laundering risks are the same no matter who the
account issuer is.
Regulators need to offer pathways to mobile money providers
that require less commercial brute force. And providers need to develop a more
nuanced view of how they can cooperate to build a new market and compete to
gain share within that market. Such is the modern way with most network and