Mobile Money and Branchless Banking in Nepal

As authorities and developers work hard to help families somehow struggle through the devastating results of the 7.8 magnitude earthquake of April 25 and the second major earthquake of May 12, my thoughts turn to the longer term benefit to be had, in promoting the development of financial services that will help recovery over the next 5 years.

 

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Mobile money clearly has a key role to play in this breathtakingly beautiful country, to help to empower the population in a variety of different ways. Thanks for joining me in reflecting on this, as I share some of our findings from our recent report “Digital Money in Nepal 2014”.

A clear need

The biggest driver of digital money in Nepal is the need for financial inclusion. Of the population of 28.9 million, only around 33.5% are banked, but there are over 18m mobile subscriptions. Mobile phones are therefore a good way to reach people with financial services, with Internet penetration only an estimated 28.9%.

Moving from cash to non-cash, appropriate electronic payments can reduce the cost whilst allowing outreach to poor and remote people in a manner never possible before. But the rate of adoption greatly depends on the actions of government, commercial and development entities in moving payments to the new instruments.

While the Kathmandu area is a hotspot for banking, the concern has been to reach areas outside the valley. While Nepal Rastra Bank (NRB) has set up branch opening policies to promote this (1 branch in Kathmandu after 3 outside the valley), the challenge is to create economically viable, alternate and appropriate services.

Regulations and the challenge of Shadow Banking

In December 2012 NRB issued a circular to allow branchless banking agents and direct how internet- and mobile-based services like branchless banking, mobile banking, internet banking and card services offered by banks and financial institutions (BFIs) must obtain approval.

Where there are needs, services rise up to meet them. NRB is concerned about the rise of shadow banking in the form of unlicensed and unregulated cooperatives and Dhukuti and Hundi services, but in the absence of alternatives, these informal activities play a key role in servicing needs.

Card services are still relatively new, and branches and ATMs are simply not sufficient to reach into the remote areas of the country. Banks in Nepal began to offer online banking and mobile banking for over 10 years now. However while the Class A banks (around 30 in Nepal) were first to launch services, the Development banks (around 90, with an additional 21 Micro Finance banks) and NGOs (around 40) will play a critical role in taking the services in the appropriate manner to where they are needed most.

New mobile wallet and mobile money services are being launched and their success will depend on the partnerships forged, and the extent to which this results in new value-added services.

Why Branchless Banking?

Given the historical and geographical challenges, the share of the population living below the poverty line is still as high as 31.5%, though this has fallen recently driven by the flow of remittances into the country.

Branchless Banking can play a vital role in building a country asset from the vibrant informal economy. Remittance income from the 2 million Nepalese diaspora is crucial for the country, and constitutes an estimated 17.3% of gross domestic product. As money goes digital, more of the informal economy gets reflected on the balance sheet of the country. With an annual remittance inflow of over $14 billion from the 2 million diaspora, it is expected that as much as 90% of remittances may well be informal.

If formal remittances increase, it is a win-win for consumers who get the safety and convenience of receiving money directly into their BB accounts, and the government who see more of the money on the books. Again, as Government disbursements turn digital, much of the spending gets accounted for, driving investments as providers see the hope of viable markets.

The story so far

In June 2012 Laxmi Bank launched Hello Paisa in Kavre and Sindhupalchowk. Hello Paisa provided by Finaccess, is a shared and interoperable managed service provided to BFIs. It uses IVR and SMS to allow money transactions using smartphones. The Hello Paisa network has over seven BFI partners. In 2013 the Prabhu Group network, consisting of more than 3,500 money transfer agents and 1,500 cooperatives nationwide entered an agreement with them to provide end-to-end mobile financial services (MFS) offered by the Hello Paisa Network.

Digital networks indeed play a key role in disbursements, as do the various mobile banking and mobile wallet services, including 14 key services that had launched by the time of our study.

Where next?

Today as people around the world are in solidarity with folks in Nepal, this is an inflection point for the country.

I believe change of the right kind can and should happen, and decisions taken in the next months will critically contribution to this.

Your thoughts

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Trends in Mobile Money and Mobile Financial Services – Views from a veteran

 

The origins of Mahindra Comviva date back to 1999. Since then the company has enabled mobile operators and financial institutions around the world to address opportunities presented by money going digital. As part of Shift Thought’s assessment of the state of the market, it was a real pleasure to speak to Srinivas Nidugondi, to obtain his views on the latest trends and future directions. In this post I share highlights of our discussion on mobile money and mobile financial services.

 

Srinivas, thanks for your time today. Could you please give us a bit of background about your expertise and your role at Comviva?

 

imageI head the mobile financial solutions unit at Mahindra Comviva. For four years now, I head the entire commerce portfolio within Comviva. We have 3 verticals that include commerce, content and data, all with the underlying theme of mobility.

Within our horizontal of managed services, our fastest & largest pillar is commerce. I look at the overall opportunity, to grow our operations into a leadership position. I have a background in banking and payments, commerce and smartcards. My last position was at ICICI bank where I was Head of Internet Banking platform and Mobile Banking and worked on the launch of ICICI’s first mobile banking app 8 years ago; further I was involved in a collaborative offering with Vodafone to cater to the unbanked and under banked segments in India.

 

Could you please give us a brief background about Comviva?

 

imageWe’ve been around for 15 years, beginning with the Telecom Revolution in India and other emerging markets focussing on products that would help mobile operators, in our capacity as part of the Bharti group.

Our mobiquity® Money solution now has over 50 deployments in 40 countries, enabling over 35 million registered customers to transact approximately USD 13.5 billion transactions annually.

Over the last five years we have streamlined and also broad-based our focus. As a product company we complement Tech Mahindra’s IT services and also obtain access to new geographies, such as our recent forays into North America, Europe and Australia. Further, we have been able to penetrate into Latin America with several deployments on-going across the region.

 

Could you give us highlights of the kinds of products and services, and the kind of competition you face?

 

In our mobile financial services unit our philosophy is to leverage mobility, commerce & payment services. What this means is we do not just focus on providing payments solutions but are experts in the whole commerce process. Also we have refocused from mobile to mobility, to cover new devices that I expect will become an active part in the way people transact, for instance through wearables like Apple Watch or Google Glass.

We focus on payments behaviour within each segment that includes consumers, businesses and merchants. So we look at a diverse set of scenarios that range from under banked consumers to evolved consumers to large merchants. We are one of the largest providers for Mobile Money in the world, with services provided to pretty much every major mobile operator.

We are going up the value chain with services such as mobile wallets, mobile payments, and QR codes, BLE, HCE, NFC and Apple Pay and offering these solutions to banks, processors and retail industries apart from the traditional customer base of telecom operators. Our recent customers include banks in the North America and Asia pacific regions as well as a new age retail chain in South America. And further, we are working with a telecom operator in Europe for launching NFC based payments. Our competitors include for instance C-SAM, Toro, Airtag and Monetise.

On the business and merchant side we offer an integrated payment solution payPLUS that allows both large and medium merchants as well as SMEs to use their mobile phones as a POS, and we work with First Data and not just small & medium - there is a market for mobility based for insurance, e-commerce down to small and medium.

We are entering the US through one of the largest processors where competition is different. We don’t really see Square and iZettle as our competition as we don’t go direct to market but rather work with banks and processors. We also face localised competitions such as from Easytap in India.

 

What are some of the major implementations you’ve been involved in around the world?

 

We have over 50 mobile money implementations including a number of implementations with Airtel, Orange, Econet Wireless, Grameenphone, Banglalink, Tigo and others. In Bangladesh we are deploying with DBBL, one of the largest banks in the country.

We are working with First Data and other large processors and also with some of the largest banks for HCE, MasterPass. We are with the largest 4G operator in India for Mobile POS and Mobile Wallet. Some of our latest wins include a retailer in Chile, and US work with a processor for mobile POS, and a wallet for a bank in Canada.

 

In 2014, mobile money service became interoperable in 3 new markets. Could you tell us a bit about how this works and how effective this strategy has proved?

 

I don’t think every market could be a success. This is a function of multiple factors. In Kenya Safaricom became successful with a position of leader in the mobile business. Now Tanzania is becoming an overall leader in mobile money, but there no one operator has a monopolistic position.

Mobile money has taken off where there is low banking penetration and high mobile penetration. Agents must find it viable. Also the services need to go beyond just P2P or Cash-in/Cash-out. People must not just withdraw cash but make payments through their mobile money account. That is when profitability goes up.

It is also really important to be able to offer remittances. There is a service called Terra that is getting all the operators together for this to make the money flows easier in corridors such as Mozambique to Malawi, Zimbabwe to Malawi and South Africa to Zimbabwe.

If each operator has say a maximum of 40% market share, this means that 60% of the market is excluded, so interoperability is not a luxury but is critical for operators to explore in each market.

 

What are some of the other trends you observed in mobile money in 2014?

 

Mobile Money is used in a developmental context, where third party provides bring financial services to people who don’t have access to them.

I observed three key trends in mobile money over 2014.

Firstly, the evolution to cover more services has been recognised to be of huge importance. From cash-in/ cash-out, it is now about enabling every transaction that people have to make. So this is interoperability in the context of payments.

Secondly, there is a focus on interoperability in the context of remittances. We saw a spurt in transactions with Tigo and Airtel making their transactions interoperable in Tanzania.

Thirdly, it’s about how to build a path to offer a full suite of services, not just mobile money. We’ve had to solve for enabling payments, micro-loans, investments and insurance, so as to build a “One-Stop Shop” for all these services.

 

Did regulations have to change in order to enable these trends and new services added over 2014?

 

No I think the regulations did allow it, but it was a matter of the maturity level having grown over the last 3 years. As this grows further we’re seeing more such examples in Tanzania, Zimbabwe and elsewhere.

 

What is the outlook for mobile money going into 2015?

 

I see an evolution of the services to straddle multiple areas. From over-the-counter and one time transactions it’s now all about the mobile wallet. This needs a better understanding of the end-to-end customer journey and experience.

 

Srinivas, thanks very much for your time today. It has been a great pleasure speaking to you. I wish you the very best for your success in 2015 and beyond.

 

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Srinivas Nidugondi is Senior Vice President at Mahindra Comviva, based in Bengaluru, India and has led the Mobile Financial Solutions area in Comviva since 2011.

Srinivas brings a keen interest in financial inclusion, especially as enabled by mobile phone and digital channels and has a wealth of experience in banking, payments, Internet and e-commerce. He set up & led the business for online banking and mobile payments in a large multinational bank and has led product management & business development in start-ups and IT product companies.

 

Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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http://www.linkedin.com/in/charmaineoak

Join me on Twitter @ShiftThoughtDM and The Digital Money Group on LinkedIn

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The impact of new technologies on global remittance costs and flows

A new report from the World Bank shows that alternatives to cash are helping to drive down the cost of remittances around the world. The global average cost of sending $200 declined from 8% in Q4 2014 to 7.7% of the amount transferred in Q1 2015. But is this progress enough?

As development efforts have intensely focussed on driving down the cost of remittances (5% less over 5 years) it raises questions on why more has not been achieved.

Separately a report from World Bank that measures financial inclusion around the world, out this month, indicates that between 2011 and 2014, 700 million adults became account holders, with the number of unbanked dropping by 20% to 2 billion. While 2 billion adults without access to financial services is still hugely concerning, it seems that the 130 live mobile money services have achieved great things within domestic areas. People are increasingly gaining access to basic banking facilities thanks to the use of alternatives to bank branches, such as mobile-based accounts, agent networks, kiosks and other advances.

Domestic remittances (people sending money to other people within a nation) have thus benefited from the use of new technologies, in particular the services that leverage access to mobile phones. While the ownership of fixed line phones remains poor in certain African countries, large numbers of population now have access to mobile phones.

In my interviews with experts who are launching innovative services around the world I understand a lot more needs to be done to make sure that it's not just every household that has access to mobile phones. The key individual who can ensure household money is spent as it should, often the woman of the house, needs control of a mobile phone. This is likely to happen as government benefits and subsidies are routed directly to these individuals, often while providing free SIMs as is happening in Indonesia. This has the important side-effect of bringing down the cost of person-to-person money transfer.

Additional value-added services are being launched, to hopefully stop people from immediately withdrawing the money, and reducing the amount of cash in circulation. The new mobile money and branchless banking services have helped to bring down the cost of domestic remittances – for instance by 20% in Cameroon.

Yet the average cost of remittances still exceeds 8% in East Asia, the Pacific and MENA. In Sub-Saharan Africa, the home of mobile money, costs of sending money across borders remains the highest. Sending money from South Africa to Zambia, Malawi, Botswana and Mozambique are the highest in the region. With the global average cost for sending money standing at 8% in Q4 2014, it is substantially higher at an estimated 12% in Sub-Saharan Africa (SSA).

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In the Figure above, courtesy of the World Bank Migration and Development Brief for April, we see just how much higher SSA costs are, and the lift in MENA costs. What strikes me is the sharp decline in cost of SSA transfers over 2009 was arrested in Q2 2010, and sharply rose then. We do not see a similar decline in spite of many new entrants and launches of services by global technology companies, card networks, mobile operators, handset manufacturers, retailers and others – indeed the list of industries alone is endless, leave alone individual providers.

Although there are more international migrants than ever before, with an expected 250 million in 2015, flows to developing countries are expected to slow down to 0.9% growth in 2015, increasing only from $436b in 2014 to $440b in 2015. Global remittance estimated at $583b in 2014 could rise to $586b in 2015, with recovery expected over 2016 to bring the figure to $636b in 2017.

Factors that are affecting these flows include uneven recovery in developed countries, lower oil prices and the Russian problem, tighter immigration controls and conflicts that are driving forced migration.

With an expected slowdown in the remittances market in 2015, it is vitally important that causal factors that stand in the way of better cross-border remittance services be better addressed. These include a number of factors that are well-understood (compliance, regulatory, exclusivity, interoperability) but others that are not yet under discussion, and may prove more critical. 

What is your view on this? What has helped in the progress towards cheaper and more accessible cross-border remittances, and what has hindered? With technologies now well-understood, what needs to happen to put people more in control, not just for sending money home, but also for gaining other forms of livelihood in the vibrant, rapidly evolving global digital economy?

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How payments changed in UK in 2014, and the perfect storm brewing for 2015

 

We in the United Kingdom already use so little cash that we could easily have gone the way of the Nordics, where consumers have such good payment systems that mobile payments took a back seat. Yet this year the UK pulled ahead in The Digital Money Game. At the player category level too we saw major upsets to the apple-carts of more than one category of providers, and a perfect storm is now in the brewing for others.

While the acceleration happened on several levels, in this blog I focus on how mobile payments took off this year and consumers now enjoy a raft of payment services on the go. It is fortunate that the Payments Council, Vocalink and Zapp had time to get a head start, as the likes of Apple Pay and Alipay prepare to descend on the UK in early 2015.

What do British consumers really need?

ukIn the UK with a population of 64 million, we have over 84 million mobile connections and more than 72% of these are smartphones. An increasing number of ‘phablets’ are rapidly coming into use.  We have 90.5% banked and a high penetration of internet services of over 84%.

We take internet banking for granted, and have enjoyed bank transfers in minutes for years now, thanks to Faster Payments. An estimated 5.7 million mobile banking transactions take place daily in the UK. We expect to pay everywhere with cards, with over 55 million credit cards and 95 million debit cards issued over the last year.

So do we really need mobile payments? We may feel overcharged by our banks, and while we may resent surcharges on card payments at some merchants in general domestically the use of cash is more of a lifestyle choice than a necessity. I can’t recall when I last used a cheque book. Yet survey results this month claim that enthusiasm for mobile payments has skyrocketed over the last 15 months, with 44% of those polled prepared to even switch accounts to access mobile payments.

London transport goes cashless

Absence of a real need may be one reason why the promise of NFC remained unfulfilled since 2005, but neither consumers nor merchants quite invited it in- until recently. I have been closely involved in projects involving mobile payments and NFC since the early days when Transport for London (TfL) was considered to be the major prize that everyone worked hard to win. Yet it took a decade before mobile payment services on the TfL network launched and even today while it is possible to pay using mobile phones, people are just beginning to use their contactless cards. While in theory mobile payments are available on EE and Vodafone, in practice some elements of the consumer experience remain to be ironed out.

Contactless payments – here at last!

imageIt was quite a novelty to see the new Barclaycard contactless payment gloves trialled for Christmas shopping at some stores this season. The Barclaycard gloves have an embedded contactless chip that is linked to a credit or debit card to pay for transactions of up to £20. Contactless payments are also supported by the Barclaycard PayTag on London buses, McDonalds, Pret, Starbucks and many other chain stores.

We’ve had contactless payments infrastructure building up for years now, accelerated by the 2012 Olympics, attracting major investments from Visa Europe and others. Today across the UK, an estimated 300,000 terminals accept contactless cards. There are over 48.3m contactless cards issued, with a quarter of all plastic new cards being contactless-enabled. Over 2014 UK consumers are expected to spend £2 billion through contactless payments,

What does it mean for the consumer in everyday life?

As a British consumer, paying for things has now become easier. Apart from the danger of card clash, for which we have been most soundly educated, we have to be savvy to protect ourselves from a constant stream of marketing offers. From the consumer perspective, the winners are those who use the new features to shop smarter, save money and stick to their budget.

We now need even less cash, and at stores there are many more self-service checkout points that there were in 2012. You won’t have to tote around a load of loyalty cards either – Tesco has already begun to trial their PayQwiq service at 32 stores. Triallists use the online grocery service and add card details for use through the app. In store they buy up to £400 a day, sign into the app with a four-digit PIN and pick the card they want to use. A QR Code appears on their phone which the till scans to take payment and credit them with Clubcard points.

Life has become easier in many ways. Just as you can easily hail a cab and pay for it through the Uber app, something that London black cabs have not been too pleased about, expect more “Uber-like” innovations wherever there are pain points to be found.

New ways to pay: Pingit, Pay-em or Zapp-em?

paymThis April the Payments Council launched an important service called Paym. This allows convenient transfer of money between participating UK bank account holders. Earlier, Barclays supported Pingit, since 2012 as a great new way to send money in minutes using a phone, but Paym is integrated into customers’ existing mobile banking or payment apps as an additional way to pay, making it possible to send and receive payments using just a mobile number.

Customers register their phone number and the account they want payments made into with their bank or building society and people can then pay directly into the account using just a mobile number – no sort codes or account numbers are needed.

How Paym works

To send a payment, you select the mobile number to pay from your list of contacts, along with an amount and a reference. Behind the scenes the sender’s bank accesses the Paym database to confirm that the recipient is registered with the service and to retrieve their bank or building society account details.

The app helps to confirm details and receive immediate confirmation. The real magic behind this is managed by the Faster Payments Service or by the LINK network, whether or not the recipient phone is on or within coverage. In most cases the payment reaches the recipient account almost immediately and they see it in recent transactions on their account.

How Zapp proposes to work

zappZapp, announced early in 2014 now claims partnerships with major merchants including Asda, Sainsbury, House of Frasers and more. People will be able to pay for goods and services using Zapp, authorising the transaction from their mobile banking app. The payment will be made directly from their bank account, with the use of tokens to offer better security.

What is most interesting really is the effect this will have in enabling payments to small businesses. Shaving off pennies on each transaction can bring welcome relief to a number of traders and servicemen who can expect to take payments using their mobile phones.

A perfect storm brewing

If you are a provider, this is no time to be complacent. Consumers are set to “select and forget” their means of payment and many will make their choice in 2015. Merchants too are selecting their partners just now.

With Paym, banks continue to compete through P2P services that bear their own brand and can be differentiated in some ways. Zapp, on the cards for (delayed) launch in early 2015 will further put the banks in the driving seat as far as payments go.

Weve, a joint initiative of mobile operators in the UK was to roll out Pouch but has already announced it would close the wallet this year. With the HCE initiative announced by the card schemes in February this year, mobile operators no longer dictate terms with regard to NFC services, and in the UK also have the larger consideration of M&A on their minds, with the proposed acquisition of EE by BT on the cards.

applepayWith Apple Pay, already in use in the US and preparing to enter the UK market, I think we may expect a mega-battle on the cards for 2015. Google Wallet, Amazon and others are already highly active in the market.

Besides, we have not even begun to discuss the wider digital money picture. This includes a host of innovation from newly funded players including not just Fintech startups but well-funded Alipay, richer by $25 billion with the largest IPO having come through this year, and WorldRemit and Transferwise, expanding rapidly in remittances.

UK then is the place to watch. Shift Thought continues to do in-depth research on this market. Our detailed interviews with leading UK providers will shortly be published. Do drop me a line at contact@shiftthought.com if you have further questions.

Photo Credits: Promotional material from Barclaycard, Apple Pay, Zapp and Paym

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WorldRemit share the secret to their success and rapid scale-up over 2014

 

WorldRemit has enjoyed a rapid trajectory with a number of launches recently. Ismail Ahmed started up this company with the vision of providing a low-fee digital service, moving the agent model of money transfer to an online one in the $580 billion remittances market.

Curious to understand how WorldRemit grew so rapidly into digital channels, I caught up with Jeffrey Alan Pietras, Vice President, International Product Development at WorldRemit. As the year draws to a close Jeffrey reflects on the progress made this year and their ambitious plans for 2015.

 

imageJeffrey, please could you give us a brief background about yourself and an introduction to WorldRemit?

WorldRemit was founded in 2010 by Ismail Ahmed with an idea of changing the money transfer industry, having experienced a degree of expense and inconvenience first hand. WorldRemit began as an online service that enabled people to send money to friends and family in other countries.  Customers can today use WorldRemit anywhere, anytime on their computer, smartphone or tablet. For those receiving money, WorldRemit offers a range of options including bank deposit, cash collection, Mobile Money, and mobile airtime top-up.

This year WorldRemit has seen significant expansion, with new products, channels and partnerships in important corridors around the world.

I joined WorldRemit this year, and bring to my role a combination of experience from working with global players and growing start-up companies. I have worked within the converging financial services, payments, mobile & digital commerce industries at global players including J.P. Morgan, Western Union, Nokia and Yahoo!. This is complemented by my transactional experience with growing start-up companies.

WorldRemit has been expanding rapidly recently. Could you please give us a background, and a summary of your current footprint?

imageYes, WorldRemit’s international reach has grown significantly in the past year. Our service is now available to senders in 50 countries, up from 35 earlier in the year. Last month WorldRemit launched in the United States, which is expected to become one of the company’s largest markets, once fully online in 2015.

The number of countries to which people can send money with WorldRemit’s platform has also increased significantly over 2014, growing from 100 to 117. Among the new additions were 15 countries in the emerging Central & Latin America region.

Those are significant achievements indeed. What has driven your recent growth?

A critical enabler has been the $40M investment by Accel Partners (an early backer of Facebook, Dropbox and Spotify) in March this year. We have since been steadily growing our staff as well as our market presence. We now have over 110 employees and plan to open a new US office in Denver, Colorado shortly.

From a product perspective, we recently launched a successful version of our mobile App for iOS as well as Android. We continue to be one of the most flexible remittance platforms in terms of service interoperability, providing more choice for the way in which senders and receivers can conduct their transactions.

We have a growing number of mobile partnerships to enable instant mobile wallet transfers which have seen great traction in 2014. We currently enable mobile wallet transfers to EcoNet Wireless subscribers, as also to Safaricom, Globe, Smart, MTN, and Vodafone to name just a few.

Jeffrey, what has been the secret to your success?

imageIn my opinion there are two things that set us apart in our industry:

1) the interoperability of our digital money transfer platform and

2) our customer satisfaction rates

As I mentioned before, the WorldRemit platform is one of the most flexible in terms of the interoperability which we offer – this allows us to stay relevant to senders as well as receivers in facilitating the means by which they would like to conduct their transaction.

For instance, aside from cash pickup and bank account transfers, the WorldRemit platform easily integrates with mobile operators to tap into quickly evolving payment ecosystems whereby we can enable mobile wallet transfers. Our platform provides us the flexibility to offer new send and receive options in alignment with partners to truly service the evolving needs of the international remittance market globally, as “one size fits all” does not work in this changing industry.

And on a related note, our flexible money transfer platform & business model equates into a high level of customer satisfaction. Without an agent intermediary (like in the traditional money transfer business), WorldRemit can be truly customer-centric and tailor a money transfer service that delivers speed, convenience, and low-cost to the sender and receiver.

In an era of declining brand attributes for the traditional money transfer business, WorldRemit continues to garner great positive feedback on our service and a high level of customer retention.

What are some of the main challenges for the remittances industry?

The evolution of the international remittance market is fragmented and multi-dimensional – a real challenge in creating a consistent norm for a global scale business which is disrupting the traditional MTOs. In some markets the remittance ecosystem is dominated by financial institutions. In other markets, the ecosystem is driven more by retailers and mobile operators as traditional financial players have not touched the majority of consumers with their services. This fragmentation has led to a number of externalities which influence the evolving ecosystem country by country (e.g. regulatory bodies, mobile operating systems, retail point of sale infrastructure, etc.).

Another challenge in the evolution of the business are new regulations. Especially of interest at the moment are APMs (alternative payment methods) like BitCoin and the influence this will have on the industry.

Digitization is another huge challenge in this industry. How do the traditional MTOs modernize their agent-based model when digital money transfer platforms are cannibalizing the trade (especially with multi-channel offers)? And, what roles will digital consumer services (e.g. social & messaging) play in the consumer to consumer money transfer space?

What are some of the key changes you have observed in the money transfer industry over 2014?

In line with increased regulation in the industry, particularly around the KYC (know your customer) and KYA (know your agent) element of the business, many traditional firms have incurred high compliance costs to try to modernize antiquated offline procedures.

With the added costs of doing business in the offline world, margin compression remains a constant concern for some players. With more consumer choice in money transfer providers (both online and offline), customer acquisition and retention costs are a big marketing concern as brand alone might not be enough these days. I expect to see these concerns continue to play out into 2015.

What are some of the trends you expect to see over 2015 and beyond?

The most exciting trend I anticipate in 2015 (hopefully or in the years to come) is some “reverse innovation” in the payments and remittance space.

The media seems to have bias on the way that consumers would embrace a Western mobile payments ecosystem (e.g. ApplePay) as a global standard. However, with a head-start, many emerging or developing markets in Asia and Africa have robust mobile payment ecosystems already.

While there are some inherent development reasons behind these, I am excited to see what influence these ecosystems in Africa or Asia might have on the evolving consumer mobile payments space in the US and Europe.


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Jeffrey Alan Pietras - Vice President, International Product Development at WorldRemit

Responsible for all business development, partnerships, and new market opportunities for WorldRemit. Jeff has extensive knowledge of strategic product & partnership development with a particular focus on consumer mobile & online services within the emerging markets.

Jeff holds an MBA from London Business School and a BS in Finance from the McIntire School of Commerce at the University of Virginia. He has lived in several European countries, North America, and Middle East and speaks several languages including French and Spanish.

 


Charmaine Oak is Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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http://www.linkedin.com/in/charmaineoak

Join us on Twitter @ShiftThoughtDM and The Digital Money Group on LinkedIn


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Mobile Money in Zimbabwe– freely transfer money, in minutes not weeks!

 

As mobile penetration reached 106% , and effectively 60% of people in Zimbabwe now have access to mobile services, mobile operators have gone a step further. They now offer people safe and convenient ways to transfer money, pay for electricity and basic services and last but not least, add much needed top-up to their own mobile phones, or those of friends and family. Having helped people communicate, they’re now helping them transact and receive money from abroad, helping the country recover from the hyper inflation of 2008 and the loss of their currency.

 

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When the Zimbabwe dollar failed to recover in spite of multiple rebirths: ZWD in 1980, ZWN in 2006, ZWR in 2008, and it’s fourth incarnation of ZWL in 2009, foreign currency finally got legalised in January 2009 and the Zimbabwean dollar was abandoned by April 2009. It is difficult to imagine how a country of 14 million people quietly went about with “business as usual”, as less than 2 million had access to any kind of formal banking services.

In a country where every individual is an entrepreneur there was a gap for how they pay and get paid locally, regionally and internationally. Now new services are starting to fill the needs, but success for all the entrants can by no means be taken for granted.

 

Mobile money brings new hope

Now though, a transformation is under way as over 5 million people have found new ways to carry out daily transactions through a 10,000+ agent and merchant network of small stores that function as points for people to open accounts, deposit and withdraw cash and pay bills.

 

ecocashThe largest operator in the country, Econet Wireless, now has 3.5 million of their subscriber base using their EcoCash Mobile Money service, since it launched in September 2011. At the time, the other two operators had already launched similar services that failed to capture the market, so it was not clear whether they would succeed. Today though, they already handle over $4.5 billion worth of transactions, and a vibrant ecosystem of merchants and services has built up in a remarkably short time.

 

telecashThe second largest operator, Telecel (Orascom) had entered the market in December 2011 without much success, but just as Telecel closed down their service Skwama, Econet made a break through with their Ecocash service. So while it may have seemed like Telecel had an option, the reality is that mobile money is now a part of the core package subscribers expect in Zimbabwe. Early this year Telecel launched Telecash, and four months ago they launched a mobile money Android app for Telecash. This time with a promise of free transfers, free cash in and cash out have had the desired effect, with 600,000 users taking up the service and reported transaction levels of $17 million.

 

imageThe third operator Netone is also seeing better traction with their mobile money service One Wallet now supported through a 1,100 strong network, though active subscribers are still nearer to 200,000 than to their 750,000 target.

 

 

nettcashMobile operators are not the only active players. In May 2014 a service call NettCash launched with a unique contactless technology called Near Sound Data Transfer (NSDT), an additional API and promise of online payment. As of today it claims to have over 200,000 customers supported by 1052+ agents and merchants. Our Shift Thought knowledge base registers over 18 services from a variety of players, as the market grows to meet the needs of the people.

 

The banks awaken

Now that the people have voted with their feet and regularly visit conveniently located agents, banks are anxious to get a slice of the newly established market. Econet owned Steward Bank supports Telecash, but a few days back launched their own new AllSave Bank Account that is supported at some of the Telecash agents. This low cost account is expected to help to deepen the customer relationship, with loans and other services. As seen in Pakistan, I expect this could result in the other mobile operators looking around for a suitable bank to acquire, to match the business models that Econet can now aspire to.

 

Agent networks: To share or not to share?

The new battleground is the agent network. As the pressure mounts to enrol customers, there has been a reluctance to share agents. This recently resulted in a directive from the Reserve Bank of Zimbabwe to discourage exclusivity of agents. However an interoperable agent network may raise as many questions as it solves and I see a need for new processes and compliance structures that are likely to gain focus in 2015.

 

Remittances made easy

Now that domestic money transfer has been conquered, the providers are turning their attention to the $1.9 billion formal remittances (equal amount of informal?) that are sent into the country. There has been concern as this declined markedly by 15% from $2.1 billion in 2012 to $1.8 billion in 2013. The main send countries include South Africa, UK, Canada, Australia and the United States.

If these transfers can be used to fund mobile money wallets and use digital money for daily transactions, that would help the fledgling services to thrive and grow. UK-based WorldRemit  offers an internet-based money transfer service from UK, from where an estimated 600,000 diaspora send money home to Zimbabwe. Telecel has partnered with UK based Mukuru.com for remittances from South Africa, from where an estimated 2 million migrants send money home. And certainly, Econet is well placed to address the opportunity for regional remittances, thanks to their presence across neighbouring countries in Africa.

 

Online payments – at last!

The vibrant mobile money market is injecting life into other parts of the economy.  In June 2014 card based transactions increased in value by a whopping 21% over the previous month, to reach $361 million. MasterCard recently announced a partnership with EcoNet to offer debit cards for EcoCash Accounts. Mobile and Internet transactions together have risen to $388 million, with electronic payments bringing in a new era of accountability and hope for the country.

 

The future of mobile money in Zimbabwe – will it mature into digital money in 2015?

What happens next depends on whether the Zimbabwe ecosystem is able to make that difficult transition to non-cash payments, merchant payments and retail payments. As the agent network grows, the small stores must fully embrace the services and find their businesses succeeding due to this. The country must go a long way to strengthen the building blocks and weaken the real enemy, cash and this means that all will need to pull in the same direction.

But underlying all this progress is one building block that must not be forgotten. Zimswitch provides the rails that allow for instant funds transfer and also supports mobile and online payment services. These underlying enablers need to be strengthened and connected into the vast developing digital economy – regional and global.

Though this is hard at first, Shift Thought research in markets around the world show that if everyone in the ecosystem starts to believe from their hearts that the success of one money service does not mean the failure of another, more people start to embrace the services and the whole market grows. I believe we have much to look forward to with the march of digital money in Zimbabwe, not just for Zimbabweans or even Africans, but for the future of payments around the world.

 


Charmaine Oak

Practice Lead, Digital Money

Email   : contact@shiftthought.com

 

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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http://www.linkedin.com/in/charmaineoak

Join me on Twitter @ShiftThoughtDM and The Digital Money Group on LinkedIn

 


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SMART unlocks mobile operator revenues in the Philippines with multiple World firsts

 

For the Philippines, remittances is a game-changer, showing healthy growth over the last 5 years and a highly competitive set of services from players across a wide range of industries. Philippines became the first country to introduce mobile money in 2000 and is a pioneering example for many different digital money services today. It is therefore highly instructive to hear from the experiences of Smart (PLDT), the largest mobile network operator in Philippines, and one of the very first to launch Smart Money as a mobile operator-based solution.

 

UN ban ki-moon2Today I am delighted to share with you some brilliant examples that use the concepts of digital money to unlock revenue streams.

I have with me Lito Villanueva, Vice President and Head, e-Money Innovation, Digital Ecosystem Build & Global Engagements at Smart Communications, Inc. Lito shares how 14 years down the line, SMART is launching innovative services to create new revenue streams.

 

 

Mobile Operators in Financial Services

Financial services were once seen as a certain business model for new revenue streams for mobile operators. However this has proved to be harder than expected. This year Host Card Emulation (HCE) has sharply focussed on the fact that mobile operators are no longer the sole gate keepers to Mobile Payment NFC revenues. The GSMA has this year promoted Interoperability initiatives that hold a promise of better mobile money adoption, but this is not an easy solution as mobile operators do need to make the business model work through better churn reduction.

 

The Filipino Context

Although 12th in terms of population, The Republic of the Philippines is the third largest receiver of remittances in the world, with $22.7b for 2013, forecasted to rise to $28 million in 2014. Remittances touched a new monthly high of $2.286 b in Nov 2013, 7.5% higher than previous year due to Typhoon Haiyan (Yolanda), giving a boost to the new aid-oriented services.

 

Makati_skyline_j_0_n philippines

 

SMART Money evolves into a “surround” experience

 

At Shift Thought we have for some years described how mobile phones are the magic sauce, but not the sole ingredient in a mobile operator’s toolkit for succeeding in financial services. It is important to create rich customer experiences across multiple channels and services, that I have termed a “surround” experience.

I think one of the markets in which we see good examples of a diverse set of services is in the Philippines. On a visit to the country to trial the service I found it delightfully simple to use my SMART Money card to pay for provisions at a department store as well as transfer money to other users.

I was interested to see the new Smart Postpaid app that was launched a few days ago as a one-stop portal to manage postpaid accounts. For use on Android and iOS devices, this makes it easy to access a range of features through one number *121#. It is products like this that can create consumer experiences that put the customer in charge.

Now this month SMART launches something revolutionary: A unique solution branded as  LockByMobile. I was delighted to hear all about it from Lito.

My interview with Mr. Lito Villanueva follows. Enjoy!

 

It is great to have you here today Lito. Could we begin with a bit of background about yourself and the unique expertise you bring to the industry?

I currently lead initiatives at SMART to unlock the potential of e-money, extending beyond mobile money. Naturally we seek to leverage our unique capabilities with respect to mobile services.

Our mission is simple – to keep pioneering world-first solutions and unlock digital finance services to meet the unique needs of Filipinos including those in high growth and emerging markets.

Take for instance our world first anti-fraud and security solution. This month we are rolling out this solution to allow our customers in the Philippines to lock and unlock ANY ATM or credit card using its patented and proprietary LockByMobile.

We all know how important it is to control card security especially as online card-not-present use cases become more prevalent. Using our service people can finely tune what their card is allowed to do and lock down services themselves to prevent fraud.

 

You have been at SMART in the early days, back in 2007 – how has your strategy regarding financial services changed since then?

Well, for one thing, we did not have smartphones back then. Today over 10 million of our 70 million user base access our services via smartphones.

The Philippines is very much an Android market, and as the cost of handsets gets lowered we’re able to enhance the user experience of our services.

 

Yes, I’ve just been analysing implications of the launch of Android One, shortly planned for the Philippines. But what of the recent Apple Pay announcement?

Apple Pay is expected Q1 2015, but our NFC service will be launched ahead of that.

In November, we plan the first wave of a contactless payments rollout to our 2.5 million post-paid subscriber base. This is in partnership with Visa and Citi and will let people pay at Starbucks, McDonalds and other retail stores for face-to-face or via Paywave POS including our massive online merchant base such as Zalora, Easy Taxi, and a lot more in partnership with Rocket Internet for online commerce.

Remember that our parent company PLDT invested Euro333 Million into Rocket Internet representing approximately 10% equity share.

 

I understand you are also innovating with mobile loans services?

Yes, we offer salary loans via mobile to over 120,000 employees at 260 government agencies in Phase I.

This will extend in Phase II to include up to 20 million employees of private companies. They get access to what we believe is one of the lowest interest rates, at just 0.83%. This is touted to be the world’s first mobile-based paperless and fully electronic credit, savings and insurance in one.

 

What about money transfer and international remittance services?

At present domestic money transfer is big – it represents 70% of the volume, with international remittances accounting for 30%.

We’ve not so far made a big dent in this huge opportunity. One reason for this is the Philippines is a key market on which banks and money transfer operators in the key send corridors remain sharply focussed.

 

What are the differences that SMART Money has brought about in the Philippines?

Over 8 million of our 70 million subscribers use our services today. SMART is cited for being proactive and dynamically focussed on financial inclusion initiatives.

 

help.PH gsma2

 

Three innovations launched by wireless services leader Smart Communications, Inc. (Smart) and its subsidiary Smart e-Money, Inc. (SMI) were recently ranked among the world’s best by Telecoms.com.

Smart Money Padala was nominated this year as Best Mobile Payment Solution. It serves the domestic and international money remittance requirements of Filipinos. With this service, Pinoys can transfer funds to tens of millions of Smart subscribers at the speed of a text message.

Smart Money Padala boasts of a large remittance network, with 95,000 international and 27,000 local remittance partners.

 

What are the biggest challenges faced?

Since our last conversation, we continue to be very focussed on customer education, and increasing the number of value added services.

Customer education is very important in order to lift the percentage of active subscribers from the current level of around 20%. It is a steep learning curve for customers to change the way they pay and we continue to create campaigns to address this.

 

What is your vision for 2015?

Our vision is to harness digital commerce to support every customer’s digital lifestyle. The time is right – the time is now. Things have come together to let us move from mobile phone payments to a much broader spectrum and support across an entire set of use cases.

No less than our chairman Mr Manuel V. Pangilinan is a firm believer of democratizing data by making free and available across our prepaid base of over 66 million. This is a strategy to shift our customers to the digital marketplace!

 

Thanks very much for sharing your thoughts with us Lito. We wish you the very best for 2015 and beyond!

 

imageLito Villanueva is Vice President & Head for Payments Innovation, Digital Ecosystem & Global Engagements at Smart Communications, Inc.

Lito has unique expertise that crosses multiple segments and services from his work at SMART, IFC-World Bank and Visa. He is one of the few mobile money global practitioners to have a mix of experience in both banking and MNO sectors with a great deal of exposure in multi-market interventions and global best practices with established relationships with key stakeholders including international funding agencies.

 


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Shift Thought has recently published “Digital Money in Philippines 2014”, a detailed study on the complex Philippines market. We have also created a unique research document focussing in depth on the remittances opportunity with respect to the Philippines.

Contact us today at contact@shiftthought.com  to get access to this and other recent research on the Philippines and each of the emerging markets around the world. Each reports uses our proprietary Viewport format to create a highly interactive experience connected into our unique portal.

 

 

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Insights on how to succeed in Mobile Money from Gemalto, a world leader in digital security

 

Today I have great pleasure in speaking with Naomi Lurie, Director of Marketing for Mobile Financial Services (MFS) at Gemalto. From this key position at the world’s leader in digital security, Naomi is very well placed to share with us about GMPP (Gemalto’s mobile payments platform) and the work Gemalto is doing around the world in the extremely fast moving payments arena, both in developed and developing countries. Naomi shares with us some of the key initiatives in which Gemalto has been involved, and explains the importance of perseverance in achieving mobile money adoption goals.

 

Naomi could you kindly set the context for us, with a bit background on Gemalto and your leadership position in mobile financial services?

Gemalto OfficeGemalto is a leader in digital security, and a technology enabler for mobile network operators, banks, governments, enterprises and retailers. We work behind the scenes to ensure that each time their customers, employees and citizens want to transact, connect or identify themselves, they can do it safely and easily. You may not realise it, but if you put your hand in your pocket and take out your wallet or mobile phone, chances are it has a Gemalto security component – in your SIM card, your bank card, your driver’s license or your government ID.

One of our important growth areas is mobile payment services, and I look after Marketing for these solutions. Specifically I’m responsible for our Mobile Money and Cloud Based Payments offers. In our Mobile Financial Services marketing team we also offer Trusted Services solutions, including TSM and a Trusted Services Hub business service, and we are NFC experts. It’s exciting work in exciting times, especially as we are a global player with 44 sites and customers in 190 countries.

And with the coming of tokenisation there is yet more work for you?

Yes, certainly. As the leading TSM provider, we’ve been provisioning credit cards onto the mobile device for the largest mobile payments initiatives in the world. Emerging standards for cloud-based payments and tokenization require secure provisioning services for cards, tokens and keys. So, our assets and expertise in provisioning, mobile security, and authentication all come into play.

We’ve recently announced our Trusted Services Hub, a turnkey business service that enables issuers, enterprises, transport operators and digital service providers to easily deploy their value-added and mobile payment services across smartphones and mobile networks around the world. So with one connection to the Hub they gain access to over 1.5 billion mobile users worldwide already covered by our solutions.

Please give us some background on the Gemalto Mobile Payment Platform (GMPP)

GMPP is our comprehensive, field-proven, secure, flexible platform for issuers, mobile operators, retailers and banks that wish to launch mobile payment services. It supports emerging market use cases including stored value accounts, agent networks, P2P transfers, bill payment, airtime top-up, merchant payments, government payments and more. GMPP also powers developed and semi-developed market use cases relating to payments, usually from smartphone devices, such as in-store and online payments, loyalty and couponing.

We work across many different channels: USSD, STK, mobile apps, web and more, and we offer strong security across all these. We authenticate customers and manage risks relating to repudiation, fraud and more. We integrate into mobile operator, issuer and retailer environments and manage diverse requirements based on the nature of the ecosystem, which ranges from simple to very complex.

How has GMPP been used around the world?

Our platform is deployed around the globe. In Europe we work with Telefonica Spain and Telecom Italia.

India Post

India PostThe Gemalto Mobile Payment Platform is running in India with India Post for domestic remittance, since November 2012. India Post’s domestic money transfer service was a traditional paper-based service that took around 5 days to arrive at the destination. India Post wanted to modernise the service, to compete with the new mobile money systems coming from new entrants such as mobile operators. Since India Post has close to 90% of their branches in rural areas, they decided to modernize their money transfer service using mobile. It’s an interesting over-the-counter service. The agents at the post office are equipped with a mobile device that runs an app that collects information about the sender and recipient, amount and pickup location. Immediately both sender and receiver get SMS notifications about the transfer and how to pick it up. And the transfer happens in minutes!

 

Transfer in Mexico

Transfer1In Mexico, the GMPP is at the heart of the Transfer Service, which is brought to market by Banamex (Citi’s Mexican subsidiary), Telcel (America Movil’s Mexican mobile phone subsidiary) and Banco Inbursa. Telcel provides the channels: SMS, USSD and CRM. The banks hold the accounts and create the use cases, as well as manage network integration with Point of Sale and ATM networks. In Transfer users can get a companion card as well, to access the balance in the prepaid stored value account for POS payments. GMPP hosts all transactions and the customer wallet. The service went live in April 2012.

GMPP is also installed with NetOne in Zimbabwe, for their OneWallet mobile money service. This is your classic service, with P2P, cash in, cash out, airtime top-up and bill payment.

Gemalto provides the SIM Toolkit (STK) and Secure Access Gateway for MTN Group in Africa, Vodafone Qatar and elsewhere.

GMPP obviously solves some key needs for the unbanked. Could you please tell us what makes your implementation uniquely compelling?

I think what’s unique is the way we can address a very broad spectrum of use cases in a highly secure manner.

If we rewind to 5 years ago we thought we knew the recipe for mobile money. Just provide the standard set of expected services, follow the formula and deploy. However services have gotten more diverse. There are specific needs and requirements when we deploy in semi-developed markets. And emerging markets also have diverse customers – some with smartphones and others with very basic phones. Take Mexico for instance, the aspiration is to bank the unbanked and offer a new kind of account to the masses, but they must also appeal to urban users. There is a need for a combination of scenarios. We therefore feel well placed as we can offer the limitless combinations, while maintaining security across all the channels. That’s the strength Gemalto has.

Also we build our platforms to scale. We see mobile money as mission-critical services and can affordably scale up and ramp up as the usage grows.

What do you see as some of the challenges faced in bringing services to market?

There is no magic. You can’t just deploy technology and expect the service to be a success. It has to have all the right elements – in go-to-market, organization, and budget. You really must do your homework and take care of buyer personas, marketing strategy and back office support. You need a lot of CXO attention and need to continuously attract investment and management attention.

I think it is really important to be able to correct yourself. Of the over two hundred mobile money deployments, only a few have reached scale. If you give up and just let the offer die down, that is a waste. As in case of any product launch, it’s important to be able to correct yourself.

Another challenge can be regulation, meaning what type of services the regulator allows and what kind of limiting factors will the regulator impose. Often you need a strong lobby on both aspects.

When you look at mobile driven and bank driven initiatives which of these have a better chance of succeeding?

It seems that mobile operators (MNOs) have been more successful, but this is quite dependant on the region. MNOs seem to have the lion’s share of deployments quantitatively, but we do observe a trend for more issuer-led services.

MNOs seem to have an advantage on the marketing side; they know how to market to the unbanked masses, while banks are more comfortable marketing to their traditional clients. To launch a service for the unbanked requires a real transformation for the banks. However, in semi-developed and developed markets where most of the population is banked, the banks are at an advantage.

What are the major changes you’ve seen in the last year?

One change in the emerging market space is the launch of more consortium-led initiatives, and also Central Bank led initiatives. There are some new models coming up along these lines, with an attempt to put the entire set of domestic transactions on a single platform. Within that setup, individual service providers can offer branded services and compete with each other. These types of initiatives aim to address the question of interoperability from day one.

We also observe a much higher interest in enabling payments – in-store and POS payments in addition to mobile P2P between buyer and seller.

What major goals do you look forward to in terms of 2015?

Our goal is to continue to be the trusted partner of our clients and to help them operate successful mobile payment services. We aim to help our clients bring their mobile business strategy to life, while providing all parties confidence in the robustness and security of the service. It promises to be quite an exciting year with the advent of emerging tokenization standards, the new Gemalto Trusted Services Hub, the launch of major new initiatives, and the evolution of existing services.

Naomi thanks for sharing the very interesting work you do around the world and I wish you and Gemalto the very best of success for the future!

 

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Naomi has a proven record of driving product and market excellence for products in the mobile, financial, retail and enterprise sectors.

Naomi joined Gemalto in 2010, where she drives marketing and strategy for the company’s mobile payment and mobile wallet solutions. She is an expert on the mobile money use cases emerging across the globe and is involved in some of the most ambitious and large-scale mCommerce services in both developed and developing markets.

Previously, Naomi was a product manager at Verint, which specializes in enterprise and security intelligence. Naomi was responsible for the global introduction of analytic software solutions for workforce-enterprise optimization, as well as the execution of product launch and rollout plans to sales, support and professional services.

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How Apple play affects The Digital Money Game

Now that Apple Pay is here, how does it affect the projects in your pipeline? Which should you drop, where should you invest more and who should you look to partner next? We are at the cusp of the creation of a new ecosystem. But will Apple Pay fare better than Google Wallet did when it first launched in May 2011? There is a feeling of Déjà vu and Let’s Wait and See. For Apple as well, Apple Watch was No. 1 – payments was No. 2.

So is this going to ignite NFC payments? How will things change? The short answer is I don’t think anyone knows yet. We’ll what are the mobile operators thinking now – we all know Verizon was not a cheer leader for the Google Wallet. What is PayPal thinking? What if Walmart does not come around?

Why is this important?

applepay

The major factor for any new payment service is adoption. So far adoption of NFC has been a 10-year war between the banks and the mobile operators and has struggled to gain traction.

Then in 2011 we had the entry of the Google wallet, and each of the card schemes with their own wallets. Still consumers and merchants failed to adopt. While contactless cards have gradually crept into use, paying by phone continues to prove elusive, for a variety of reasons, with one of the main ones claimed to be lack of handsets, customer security concerns and business model.

Apple has 800 million customers as “card on file”. Additionally the API will be available to developers. Merchant support has already been announced: Integration with Uber, a food app from Panera, Major League Baseball's app to order tickets from your phone, and Open Table to pay your bill from your iPhone 6 or iPhone 6 Plus. Apple API to be offered in iOS 8 to allow app developers to integrate Apple Pay into their applications.

Apple has a following, so is not dependant on mobile operators to push their phones, however operator subsidies that could be as high as $500 help make them affordable. The rapid adoption of smartphones across the world has changed the balance of power. Certainly in the US, Apple is Top Dog as a smartphone manufacturer, with 42.1% OEM market share as of June 2014 according to comScore reports.

However while in the US and Europe Samsung and Apple dominate, the share of both providers has been dropping in emerging markets where we see a fragmentation emerging. In urban China, Xiaomi with its affordable RedMi model continues to go from strength to strength, securing a 27% share of smartphone sales in the second quarter of 2014, compared with 21.1% for Samsung. And payments by watch + iPhone cannot be a top priority for the masses in emerging markets.

Too little too late?

So far Apple was a late starter where contactless payments are concerned. Like a swan, the movement seemed to be more “under-water”, as news of patents obtained for motion based payments got out in January 2013. Apple obtained a US Patent for a digital wallet and virtual currency. It described a system of managing credits via mobile device. Mobile users would be able to receive credits or coupons stored in their account. Check out Patently Apple for the whole background.

Back in June 2013 Apple released its first mobile commerce platform, called the iCloud Keychain: consumers could an store a variety of information, such as passwords and financial details for use across several Apple devices (Mac, iPhone or iPad) to log into websites or make purchases online. The platform did not support NFC and existed as an application rather than a physical device.

Earlier in June 2012, the Apple bar-code-based Passbook mobile wallet was launched, as a basic mobile wallet without payment functions, using barcodes to store and represent multiple boarding passes, store cards, and movie tickets. It had location-enabled alerts, and real-time updates and it displayed passes based on a specific time or location. When consumers walk into a participating shop the loyalty card appears and can be scanned to pay or check balance. It was expected that this could evolve into a mobile payment service by linking the Passbook to customer credit cards and iTunes accounts.

Effect on the Digital Money Game

Contactless payments that Apple Pay now propose to offer comes as a reinforcement

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Online payments and ecommerce in India

India’s ecommerce market is set to soar to USD 20 billion by 2020 (1), with growth generated, mainly, by the use of smartphones.

 

The USD 4 billion ecommerce is being driven by cheap handsets and mobile data plans that allow consumers to buy from their mobile devices. As we say at Shift Thought, India’s payments market is 'Born Digital Money', and this demands convergent payment services of the variety we describe in our Digital Money in India 2014 Viewport, which reflects our recent market studies in India, and from which this analysis is taken.

I had the opportunity to share my opinion on the direction of the e-commerce market with The Paypers, the Netherlands-based leading independent source of news and intelligence for professionals in the global payment community.

Click here to read the whole Expert Opinion published on 19th September 2014.

 

 

Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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http://www.linkedin.com/in/charmaineoak

Join us to explore ideas at The Digital Money Group on LinkedIn

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