In part one Srinivas Nidugondi, Senior Vice President & Head of Mobile Financial Solutions at Mahindra Comviva discussed the importance of interoperablity between mobile money services and explained some of the barriers that are holding the market back.
Here he discusses the benefits and drivers of the mobile money space in this second instalment of a two-part article which also appears in MEF’s most recent free Mobile Money eBulletin.
The drivers of interoperability
Mobile money providers are recognizing the need and benefits of interoperability and have started to put their full weight behind it.
Today 15 countries have account-to-account interoperability, a sharp increase from just one country with interoperability in 2013. These countries are India, Indonesia, Madagascar, Mexico, Nigeria, Pakistan, Peru, Philippines, Rwanda, Tanzania, Thailand, Bolivia, Egypt, Philippines and Jordan.
The opportunity for interoperability is massive because out of the 60 countries that have two or more mobile money services, 45 countries do not have account-to-account interoperability.
Interoperability between mobile money operators is an indicator of the growing maturity of the mobile money market and evolving service offerings. In mature markets, operators develop a better understanding between themselves to drive interoperability. For example, in Tanzania and Madagascar, operators are committed to interoperability based on mutually beneficial revenue sharing agreement.
Catalysts for increasing interoperability include operator willingness to interoperate, national level switches, as well as increasing regional cooperation for realizing interoperability goals.
- Africa’s first interoperability services between Airtel Tigo, Zantel and Vodacom in Tanzania allowed customers to send and receive money directly between the mobile money services of these operators.
- Madagascar is the second country in Africa to go fully interoperable. Airtel, Orange and Telma have signed a deal to adopt interoperability between their mobile money services.
- National interoperability switch in Jordan: In many countries, it is the government that is taking the initiative for rolling out interoperable services. For example, JoMoPay, a central switch that is owned by the Central Bank of Jordan, connects Umniah Mahfazti, Zain Cash and Bank of Jordan Mobile banking.
Benefits of interoperability
Interoperability drives the network effect, helping to grow the user base of mobile money. With more users in the mobile money ecosystem, it becomes easier to receive or pay in digital money.
On an individual level, interoperability improves the user experience in many ways. It saves time and money spent on travelling to the agent for cashing-out. The recipient gets instant access to digital money. It is safer as there is already a growing body of research that shows that when a society uses less cash, the rate of crime goes down and the sense of personal security.
The sending operator saves on agent commission and earns interchange fees. The receiving operator has access to an additional source of fund as the money directly comes into the recipient’s wallet.
“In future we expect that interoperability will extend beyond P2P money transfer to other use cases such as bill payments, merchant payments, salary payments and cash-in and cash-out transactions.”
It drives customer stickiness and user experience by facilitating quick and easier money transfer. It also provides operators with a treasure trove of data on financial transactions which may help them to drive further use cases in credit banking, insurance and so on.
On a broader level, by lowering the usage of cash in the society, interoperability will help the government to lower the cost of managing cash, which takes up as much two per cent of the GDP in many countries.
Interconnect between banks and mobile money providers In addition to providing account to account interoperability, mobile money providers are also connecting with banks to enable money transfer between bank account to mobile money account (B2M) and mobile money account to bank account (M2B).
In 2016, 45 per cent of the mobile money service providers were connected to at least one bank. Interconnect between mobile money providers and banks creates a strong foundation for the mobile money ecosystem by enabling a quick and seamless payments experience for customers as well as agents.
The enablers for this increase in partnership between mobile money providers and banks include factors such as:
- Increased regional corporation: South African Development Community Bankers association and the West African Economic and Monetary Union and the East African Community taking the lead.
- Peruvian Bankers association: Peru’s three telecom operators and 32 Banks adopted a new digital payments platform called BIM, which laid down consistent business rules for transactions.
- Central bank of Mexico mandates SPEI – its interbank payments system for settling payments among mobile money providers. The Way Ahead In future we expect that interoperability will extend
The Way Ahead
In future we expect that interoperability will extend beyond P2P money transfer to other use cases such as bill payments, merchant payments, salary payments and cash-in and cash-out transactions.
With the growth of interoperability all stakeholders in the mobile money ecosystem will benefit. For example, the extension of interoperability to merchant payments will help merchants using mobile money services of one operator to receive payments from any customer irrespective of the mobile money services they use.
Download our sixth quarterly Mobile Money eBulletin which takes a look at some of the issues that are forming the ecosystem.
It includes contributions from Srivinas Ndugondi, Head of Mobile Financial Solutions at Mahindra Comviva discussing the importance of interoperability between mobile money platforms and Wirecard’s EVP of Global Product Strategy provides thoughts and analysis of MEF’s recently pubished Mobile Money Report.
The eBulletin also includes news, stats and Mobile Money market forecasts and analysis from Amrish Kacker, Lead Analyst from Analysys Mason’s Operator Strategy Consultancy Practice.