Contributed by: Ambar Sur, Founder and CEO, TerraPay
Mobile payments have revolutionized emerging markets; allowing mobile phone users easy access to bank accounts and facilities associated with banking. They also have a direct impact on the economy of a country and can lead to an increase in GDP when transactions became painless, efficient and cashless. Ultimately, this encourages entrepreneurship and helps businesses grow quickly. However, when it comes to interoperability, mobile payments still have a long way to go. Take for instance, mobile money networks. Currently, they cannot ‘talk’ to one another and customers on one network cannot pay people using another network.
Interoperability in mobile networks already exists. This allows a user to send text messages and make calls to friends on other service provider/network without worrying about the network they belong to. The originating network even pays the terminating network a service fee to “accept” the call. This is exactly how mobile payments should work. In this regard, from the customer’s perspective, mobile payments become as seamless as SMS or call. To achieve this, interoperability in financial services comes in; the ability to send money across disparate networks (for a small fee of course) and ensuring the least number of interchanges / handshakes in between.
Now, interoperability in itself is a challenging task and collaboration is the key to its achievement. Not only do we need multiple stakeholders to coordinate with each other but we require legal frameworks, business models, enterprising solutions and policies at par with international standards for it to ever function as a whole.
Interoperability brings tremendous benefits to the table. It creates a network effect which helps in the growth of the user base which in turn helps boost the economy. Once digital money becomes easy to remit, users automatically flock towards that network. And if all banks and all mobile networks are interconnected, account to account transactions (A2A) will no doubt become affordable and effortless. Interoperability in mobile money ecosystem can bring about cost efficiencies and allow for a better risk management.
Now let’s think on an even larger scale.
“ avenue of digital cash has no limit. ”
If everyone chose mobile money over cash to transact within the country, the government itself would benefit as they will not have to manage cash so much. Interoperability would have lowered the cash management cost.
Interoperable payment solutions benefit individuals as well. Here is an example. John prefers to shop online for stuff because it means saving the hassle of going to a mall, but some vendors prefer PayPal only and so the options suddenly become limited, as John prefers to use his card. Looking at this from the lens of mobile payments, he happens to be an account holder in only one of the three mobile payment networks in his country. If he shops at a local store online that supports only one mobile payment network that isn’t his, he’s stuck!
It makes no sense that a single vendor should support and maintain accounts with three different mobile payment networks (in this digital age no less) only to accommodate everyone on different networks to pay online. That is as bad as thinking that a person should hold Gmail, Hotmail and Yahoo email accounts to send an email to each email client.
When interoperability in mobile payments comes into effect, it guarantees an increase in sales because this avenue of digital cash has no limit. Also, let’s not forget how much the network would earn on the interchange fee and save on sending. In fact, that is a two-fold benefit while the added third benefit is a given when the receiving network gets funded with money.
Now of course, taking a step back again, we need the governments to understand how their approach is affecting the market and the regulatory bodies are struggling to tackle the right balance between the key market players and the customer’s interest. As mentioned before, interoperability is a challenging feat and collaboration is the only key.
We know that customers use network operators to transact, so why not create a robust, interoperable system that can accelerate financial inclusion and benefit all the participants in the mobile money network?
Let’s take a moment and identify these participants –
Providers would be the financial institutions such as the banks, processors and network service provides. Beneficiaries would be the customers, dealers, governments and anyone else who deems it easy to accept and make digital payments. These market players will not be able to gain the kind of benefit interoperable ecosystem offers if we continue with the closed-loop system we have running currently.
Interoperability in International Mobile Money Remittances
International remittances through mobile payment systems face bigger challenges when it comes to interoperability. Here, there is a need for Anti Money Laundering (AML) compliance and the need to establish a Remittance Service Provider (RSP) to handle cross border payments and complying with relevant regulatory requirements.
East Africa is currently the leader in international remittances through mobile payments. While the service is limited to only eight out of twenty countries, it allows international remittances straight to mobile money accounts when using money transfer services. Other regions where international remittances through mobile money are making headway are South Asia and Asia Pacific.
What is more interesting is that among the countries where there is high penetration of Mobile money, there are very few countries where money can be transferred between different mobile money services within a country.
Here is a parting thought…
Imagine the size & scope of the untapped potential on offer if there was interoperability between mobile money networks within each country.
About the Author:
Ambar Sur is the Founder and CEO of TerraPay. TerraPay is a B2B company incubated by Mahindra Comviva, a global leader in delivering mobile financial solutions and is part of the USD 19 billion Mahindra Group. Ambar combines his deep knowledge of technology with an appreciation of market and business drivers – skills that have enabled him to lead teams that develop winning propositions, delivered in a customer-focused manner. With a strong strategic vision and a keen focus on processes, people, and fault-free product delivery, Ambar has been able to win customer loyalty with leading operators, globally. He has handled various roles within Mahindra Comviva, including Chief Marketing Officer, Director- EMEA and Vice President – Airtel market unit. Ambar began his 19 year career in Washington DC as a project manager with LCC, a pioneer in wireless voice and data services for the telecom industry, where he set up various networks around the world. Having gained experience of the wireless world, Ambar moved to India to work with BPL Mobile, where he oversaw Network Performance & RF Planning for the company. He later moved to BPL Innovision to establish OyeIndia, the group’s web technology company.
In 2001, Ambar co-founded CellCloud Technologies, where he was a key driver of business growth, building sales of the company’s innovative prepaid solution in India, and helping ensure the company became profitable within a short period. CellCloud merged with Mahindra Comviva in 2002.
Ambar has a BS in Electrical Engineering from Virginia Tech in the USA and an MS in Telecom from Brooklyn Polytechnic, USA.
*Previously published in Issue 9
Bank of England’s Haldane says inflation “tiger” is prowling
By Andy Bruce and David Milliken
LONDON (Reuters) – Bank of England Chief Economist Andy Haldane warned on Friday that an inflationary “tiger” had woken up and could prove difficult to tame as the economy recovers from the COVID-19 pandemic, potentially requiring the BoE to take action.
In a clear break from other members of the Monetary Policy Committee (MPC) who are more relaxed about the outlook for consumer prices, Haldane called inflation a “tiger (that) has been stirred by the extraordinary events and policy actions of the past 12 months”.
“People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely,” Haldane said in a speech published online. “But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.”
Haldane’s comments prompted British government bond prices to fall to their lowest level in almost a year and sterling to rise as he warned that investors may not be adequately positioned for the risk of higher inflation or BoE rates.
“There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” Haldane said.
He pointed to the BoE’s latest estimate of slack in Britain’s economy, which was much smaller and likely to be less persistent than after the 2008 financial crisis, leaving less room for the economy to grow before generating price pressures.
Haldane also cited a glut of savings built by businesses and households during the pandemic that could be unleashed in the form of higher spending, as well as the government’s extensive fiscal response to the pandemic and other factors.
Disinflationary forces could return if risks from COVID-19 or other sources proved more persistent than expected, he said.
But in Haldane’s judgement, inflation risked overshooting the BoE’s 2% target for a sustained period – in contrast to its official forecasts published early this month that showed only a very small overshoot in 2022 and early 2023.
Haldane’s comments put him at the most hawkish end among the nine members of the MPC.
Deputy Governor Dave Ramsden on Friday said risks to UK inflation were broadly balanced.
“I see inflation expectations – whatever measure you look at – well anchored,” Ramsden said following a speech given online, echoing comments from fellow deputy governor Ben Broadbent on Wednesday.
(Editing by Larry King and John Stonestreet)
Bitcoin slumps 6%, heads for worst week since March
By Ritvik Carvalho
LONDON (Reuters) – Bitcoin fell over 6% on Friday to its lowest in two weeks as a rout in global bond markets sent yields flying and sparked a sell-off in riskier assets.
The world’s biggest cryptocurrency slumped as low as $44,451 before recovering most of its losses. It was last trading down 1.2% at $46,525, on course for a drop of almost 20% this week, which would be its heaviest weekly loss since March last year.
The sell-off echoed that in equity markets, where European stocks tumbled as much as 1.5%, with concerns over lofty valuations also hammering demand. Asian stocks fell by the most in nine months.
“When flight to safety mode is on, it is the riskier investments that get pulled first,” Denis Vinokourov of London-based cryptocurrency exchange BeQuant wrote in a note.
Bitcoin has risen about 60% from the start of the year, hitting an all-time high of $58,354 this month as mainstream companies such as Tesla Inc and Mastercard Inc embraced cryptocurrencies.
Its stunning gains in recent months have led to concerns from investment banks over sky-high valuations and calls from governments and financial regulators for tighter regulation.
(Reporting by Ritvik Carvalho; additional reporting by Tom Wilson; editing by Dhara Ranasinghe, Karin Strohecker, William Maclean)
Britain sets out blueprint to keep fintech ‘crown’ after Brexit
By Huw Jones
LONDON (Reuters) – Brexit, COVID-19 and overseas competition are challenging fintech’s future, and Britain should act to stay competitive for the sector, a government-backed review said on Friday.
Britain’s departure from the European Union has cut the sector’s access to the world’s biggest single market, making the UK less attractive for fintechs wanting to expand cross-border.
The review headed by Ron Kalifa, former CEO of payments fintech Worldpay, sets out a “strategy and delivery model” that includes a new billion pound start-up fund and fast-tracking work visas for hiring the best talent globally.
“It’s about underpinning financial services and our place in the world, and bringing innovation into mainstream banking,” Kalifa told Reuters.
Britain has a 10% share of the global fintech market, generating 11 billion pounds ($15.6 billion) in revenue.
“This review will make an important contribution to our plan to retain the UK’s fintech crown,” finance minister Rishi Sunak said, adding the government will respond in due course.
The review said Brexit, heavy investment in fintech by Australia, Canada and Singapore, and the need to be nimbler as COVID-19 accelerates digitalisation of finance all mean the sector’s future in Britain is not assured.
Britain increasingly needs to represent itself as a strong fintech scale-up destination as well as one for start-ups, it added.
The review recommends more flexible listing rules for fintechs to catch up with New York.
“Leaving the EU and access to the single market going away is a big deal, so the UK has to do something significant to make fintechs stay here,” said Kay Swinburne, vice chair of financial services at consultants KPMG and a contributor to the review.
The review seeks to join the dots on fintech policy across government departments and regulators, and marshal private sector efforts under a new Centre for Finance, Innovation and Technology (CFIT).
“There is no framework but bits of individual policies, and nowhere does it come together,” said Rachel Kent, a lawyer at Hogan Lovells and contributor to the review.
Britain pioneered “sandboxes” to allow fintechs to test products on real consumers under supervision, and the review says regulators should move to the next stage and set up “scale-boxes” to help fintechs navigate red tape to grow.
“It’s a question of knowing who to call when there’s a problem,” Swinburne said.
($1 = 0.7064 pounds)
(Reporting by Huw Jones; editing by Hugh Lawson and Jason Neely)
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