Being a relatively nascent industry hasn’t stopped the mobile money space from making headlines. And why shouldn’t it? The technology being used is advancing daily, as are the number of subscribers signing up for the service. Also, let’s not forget, the services portfolio itself is improving slowly and steadily with many innovative and unique propositions. Sample this-in end-2013, according to the GSMA’s State of the Industry 2013 report, mobile money services were available in most emerging markets. The stats speak for themselves-219 services were live in 84 countries during this time. If this wasn’t evidence enough, the report goes on to state that every operator worth its salt is rushing to make mobile money an integral part of their business strategy. In fact, over 70 per cent of operators plan to increase their investments in the mobile money business this year alone! If that doesn’t signify progress, nothing does!
Before we begin applauding the industry’s success, though, let’s sit back and take a long, hard look at the issues still at large. Everyone following the mobile money space will agree that the biggest challenge before this space still remains lack of interoperability between mobile money services.
So, why has interoperability (or lack thereof) occupied the pride of place in almost every industry debate? Simply put-imagine you walk into a store and after a hard day’s shopping, proceed to the payment counter, only to be told that you cannot use a particular debit or credit card. Why, because the merchant in question does not have a point-of-sale machine that supports that particular bank! To be fair, however, this isn’t such a big issue today thanks to the MasterCard and the Visa’s of the world. Mobile money, though, has many miles to go before it reaches this stage. Another example is the customer not being able to transfer funds from their bank to another. Sounds tedious, doesn’t it? Now, let’s talk about what benefits having an interoperable mobile money ecosystem can offer. First off, it would sound the death knell for cash-which is already underway globally.
Of course, the various stakeholders in the mobile money ecosystem stand to benefit too. For operators, it would mean providing customers with more flexible payment options which could increase the overall number of transactions and the velocity and volume of money in the ecosystem. For regulators, it is an opportunity to draw more cash into the formal financial system; for customers-more accessible and flexible services and last, but not the least, financial inclusion is expected to get a significant fillip. In a nutshell, having interconnected platforms for mobile money sounds like a no brainer.
The next obvious question-why aren’t the various players in this space ensuring their mobile money services are interoperable? Do they not want to capitalize on the amazingly high demand for the same, thereby ensuring this industry meets its potential? Well, yes and no. For now, most mobile money services currently work as closed loop systems, unconnected to other payment services. This approach has its advantages though, namely minimized costs, simplified operations, and access to real time transactions. Why did operators adopt this model? At the time of its conception, mobile money was originally designed to replace cash for customers who did not have a bank account. For this purpose, a closed loop system fit the bill perfectly. However, as time went by, demand for the service grew by leaps and bounds and now consumers are looking at using these products for most of their financial and payment requirements. . So, naturally, the need for open-face interfaces to make the service interoperable is assuming more importance. Another factor hindering any attempt at interoperability in these services is the significant challenges involved in any initiative that brings competing companies together and the road to success is arduous. Yet another reason is the still nascent state of many markets.
Luckily, the overall industry is beginning to sit up and take notice of the importance of interoperability. In fact, this cause has been enthusiastically taken up over the past year by several players in the global mobile money ecosystem. The trailblazers in this context were Indonesia’s three leading telecom operators-Telkomsel, Indosat and XL. In May 2013, these players went “live” with a ground-breaking initiative which enabled their mobile money customers to send and receive money across each other’s networks. For the first time in this space, mobile money platforms run by telecom operators could “talk” to each other-account-to-account or wallet-to-wallet in real-time. What’s noteworthy is that this initiative helped demystify the concept of interoperability to a large extent. To illustrate, despite the fact that all three deployments operated different mobile money platforms, the technical development to enable the platforms to talk to each other took only four months by agreeing to standard interfaces and protocols. The business and technical teams from the three operators jointly defined the functionality of the inter-scheme collaboration and how information could be exchanged between them. How’s that for collaboration between traditionally warring entities to further the overall market!
Of course, let’s not forget that when it comes to mobile money, Africa remains the biggest success story. So, not surprisingly, in June this year, Tanzania’s three mobile money heavyweights-Airtel, Tigo and Zantel – signed an interoperability agreement, as per which, users of their respective Airtel Money, Tigo M-Pesa and Zantel’s EzyPesa services will be able to send money to each other from their handsets. Naturally, the hopes of over 16 million mobile money customers in Tanzania are pinned on this, as it is the first agreement in Africa to adopt interoperable mobile services.
What of the rest? Well, players MTN Group, Bharti Airtel and the Orange Group haven’t been letting the grass grow under their feet either. The MTN Group and Bharti Airtel recently announced a cross-border remittance partnership to facilitate the transfer of money between Cote d’Ivoire and Burkina Faso. Meanwhile, in 2013, the Orange Group launched the Orange Money International Transfer service, a mobile-to-mobile money transfer service between users, for its customers in Senegal, Mali and Cote d’Ivoire. A good move, I think, given that over $250 million in money transfers is moved between these three countries!
Now let’s talk about how this issue is being addressed in other markets. In the context of banking, interoperability is already a ground reality. For example, in India, the Industry alongwith the regulator introduced the immediate payment service (IMPS) which allows customers to seamlessly transfer money between various banks with the mobile number as the identifier. According to data pertaining to Payment System indicators released by the Reserve Bank of India, in financial year 2013-14, the volume of IMPS transactions stood at 15.36 million, valued at Rs 95.81 billion.
Yes, interoperability is becoming a reality, albeit slowly. Yes, there are (and probably, will remain) several issues to tackle before it does. But-a word of caution-before the mobile money industry can leverage the awesome power of interoperability, the various faces of this concept need to be clearly understood, prioritized and then introduced. Otherwise, the exponential growth witnessed will be a thing of the past.
