The complexity of the gold ecosystem presents quandaries for regulators

 

With us since times immemorial, Gold has proved to be one currency that has remained relatively stable despite turmoil in global financial markets. Universally accepted, and prized as a medium of exchange from ancient times, today it offers renewed appeal in the face of conditions and requirements from customer segments of different kinds. Yet new challenges that the world faces may pose new requirements in the way regulators look at the gold market.

 

The many and varying uses and facets of gold present a quandary for governments around the world when it comes to dealing with the opportunities and threats it presents. On the one hand, safeguards are essential to detect and prevent the use of gold as a tool for money laundering and terrorist financing. On the other hand, all around the world gold is intricately woven into culture and tradition in a way that transcends the value of the metal itself.

A delicate balance must be maintained to recognise the complex requirements presented due to the highly differing users and use cases. A wrong move could prove detrimental to a country, while wise management could present new opportunities at multiple levels of the ecosystem.

Instinctively governments realise that appropriate management could be a game-changer. Yet how does one go about it? Recent efforts of the Modi government in India to get the gold of the population into government approved schemes face insurmountable issues when it comes to requiring gold to be melted down first. The associations and value a woman may place for instance, on a much-loved heirloom make certain trinkets priceless – so what approach would work?

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While it is imperative to respect the cultural use of gold, there are however potential links between the gold market and terrorist financing. As gold can be traded anonymously and transactions are difficult to trace and verify, cases have been uncovered that show how it is being used to place, layer and integrate illegitimate funds into the formal financial sector. Loopholes are present and may be exploited in a number of markets due to the differences in the way the gold market is regulated, for instance in terms of how cash-for-gold businesses are licensed and overseen.

Gold is covered by the Financial Action Task Force (FATF) under Recommendation 23, treating the gold sector as DNFBPs (Designated Non-Financial Businesses and Professions), but national policies must work together to create the global network that allows people to continue to enjoy the benefits while weeding out the unsavoury aspects of the gold market.

Over the coming months I will share more about my research into this fascinating topic – approaches that are being taken in different parts of the world, the changing position of gold as a currency and how it relates to money going digital, both in traditional ways as well as in terms of virtual currencies such as bitcoin.

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Payments and Remittances Industries meld further into Digital Money as PayPal acquires Xoom

 

When I first entered the remittances industry the separation of these two industries was seen to be one of the laws of the universe, just as mobile was seen to be a desirable channel for which new silos were being built.

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I wrote The Digital Money Game to address the issues I foresaw with the convergence of industries and services into a multi-trillion dollar space we at Shift Thought continue to map out as Digital Money through our research in each country, as it transforms industries we have so far taken for granted.

 

While the remittances industry is alone worth over $580billion, when you consider the melding of industries into Digital Money the prize increases exponentially as I prove in my book. Why would a consumer care to sign up  to a new service (with perceived security, identity and operational inconveniences) for executing what is likely to be at most a single transaction a month? Would the consumers who choose to stay with cash as an economy goes digital really be the segment the brand wishes to deepen relationships with?

 

So it is no surprise that PayPal announced a few hours ago that it acquired Xoom for $890 million, as it prepares to leave eBay. As I see it, there was no option. When viewed from the Western perspective PayPal seems like a market leader, but as I studied each Asian country in depth, many challengers came to light as far back as 2011, when we announced that Alipay was claiming to have way more digital wallet users than PayPal. Since then Alibaba has grown substantially and Ant Financial Services has become a comprehensive digital money brand, as we report in our China analysis.

 

In our recent analysis of PayPal versus Alibaba’s ANT Financial Group we discovered that while PayPal, Paydiant and Venmo together form a strong capability this leaves a big gap to fill. To what extent will Xoom help fill this gap? This will depend on how soundly it goes international with PayPal’s help.

Xoom founded in 2001 today operates only to send money from the US, with 1.3 million active customers who send $7 billion to 37 countries, and this will have to change rapidly. Xoom has been recently entering emerging markets such as Mexico, India, Philippines, China and Brazil, but this has been in terms of receiving money electronically. What Xoom has capitalised on is the real-time payment infrastructure beginning to be established around the world, and this is how it entered India for instance. What is has yet to do is to establish Send operations from other markets.

 

So for me the success of this venture hinges on the question of whether with Xoom, PayPal has better success in the last mile in India and China, and other key emerging markets. To achieve the ubiquity of Western Union and MoneyGram PayPal will need to address remittance corridors in 200+ countries and territories, and do this rapidly.

 

As I’ve said before, brands are being built and broken by the trend towards Digital Money and we’ve entered the age of mega-groups, but it will not be easy to get this right. There are substantial differences between the market segments, as I’ve learnt through numerous studies, focus groups, interviews and research we carry out in each part of the world. However it is well worth attempting, and indeed as I repeat, I see no other option.

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The Future for Direct Carrier Billing – Views from the world leader

 

In this exclusive interview with Jon Prideaux, CEO of Boku, we explore the potential impact of recent highly important mobile payments announcements on Direct Carrier Billing (DCB), which has so far been one of the most successful means of mobile payments, putting the charges through the mobile operator bill.

I posed key questions on how we may see DCB evolve, to obtain Jon’s insights, from the perspective of a FinTech disruptor that is today a world leader in DCB. Jon reflects on key trends and shares insights and expectations on how the market might evolve over the next few years.

 

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Jon, I recently heard you speak of “payments moving into the background”. For me Boku has been one of the first to achieve this, having since 2009 offered a great way to do this, but how might this change going forward, with all the new mobile payments services recently announced?

The basic philosophy is if you are trying to promote a new method of payment, it needs to do something additional both for consumers and merchants. I believe Payments to be in the category “If it ain’t broke don’t fix it”.

Here’s why what we do works - as more people have phones than bank accounts, and it’s easier for you to remember your mobile number than other details, we remove friction in payment and allow more sales. As merchants sell more, although Boku may not be the cheapest acquiring method, we justify our role by facilitating outreach to new customers and helping customers check out more easily.

 

But with the impact of lower interchange rates in Europe making card payments cheaper and availability of new bank based payment solutions, are merchants going to think “It is broke”, and they can find cheaper new ways to pay?

Ours may not be the first payment option, but certainly Facebook, Spotify, Sony and our other merchants find that by adding Boku to their suite they sell more. Our merchants could see conversion rate increase by as much as 20%, and that’s the advantage we strive for, to keep ourselves relevant. If a disruptor tries to compete just on price, this fails as incumbents have scale. A disruptor must compete on “sale”.

 

I see Boku as a ubiquitous single convenient acquiring payment gateway or hub between merchants and mobile operators. But is Boku looking to be more than this, has this changed?

No, this has not changed. An essential part of our value is we connect into mobile operators. While Visa and MasterCard are networks that connect merchants to banks to help them sell, our job is similar, but we connect merchants to mobile operators, to help them sell.

As customers of mobile operators are different and more numerous and geographically distributed, we provide a unique value to merchants.

 

Where do you see this moving over the next 2 years?

Perhaps the best way to consider how things are likely to evolve is to reflect on the recent past, where I believe there have been three main areas of change.

Firstly, it’s about the technology. Telcos do not have systems as accurate as banks. What we now have in place is a system that is important in terms of creating an enabler for merchants. This facilitates charging precise amounts, authorising, reserving amounts, reconciliation, refunding and this opens up a mature enabler for new merchants.

Secondly, mobile operators differ in each market in terms of pricing expectations, Brazil, Indonesia, France, UK, Japan all differ - but in all of those markets pay-out levels to merchants are going up, allowing more merchants with lower gross margins to participate.

Lastly, it is to do with regulatory change. With our E-Money license we already have services live in 5 European markets, and this will see further expansion.

So we started with digital content where there was no distribution cost, but the pay-outs were initially not good enough for services such as music. With subsequent changes, we can now sell content from Spotify and other merchants.

As the three trends continue to further play out, in addition to digital you will see charges for real world transactions such as parking, coffee and bus tickets. This will become one of the ways to pay for ANYTHING you are purchasing – one will be card, second will be PayPal and third will be some kind of carrier billing, normally provided by Boku.

Charging to mobile phone bills will become normal in transportation, ticketing, coffee and fast foods.

 

With regards to the new Airbnb, Uber type FinTech entrants, what are your thoughts on your ability to support them as Braintree and others do today?

At one level we ourselves are a FinTech company. There is a limit in terms of the amount people are prepared to put on their phone bill. Our ambition is not to be the dominant payment method for all purposes.

Braintree will continue to embrace a growing suite of payment services including cards and banking. I would like to think companies like Braintree and Stripe will add carrier billing to their portfolio. We’re not far away from being a desirable addition to their ways of charging customers.

 

That sounds very interesting. So the whole FinTech and API trend could work in your favour!

Sure, we are offering a single API and are connected to all mobile operators. Although we make it look as if it’s the same, under the hood it works differently. In the next generation with digital technology enhancements we are trying to offer a single card like API that removes friction for merchants, and attracts more categories of merchants.

 

You can charge for physical goods too?

Yes, in many European countries we operate an e-money product and can do so, although the consumer experience remains similar to carrier billing. Under the hood the consumer is buying e-money and using it to buy things via their phone bill.

 

Is the limit that can be charged based on regulations or is it more of a policy decision?

Under the extended regulatory structure, in the e-money world it is the decision of the carrier. Mobile operators have limits in place for risk protection reasons. Also people would not want large amounts taken from their bill so this is typically a low amount. In practical terms the limits are the same whether under our e-money license or not, and are currently set to £30 in the UK.

 

Could you share more on your partnerships and new services?

We currently work on behalf of a number of important merchants including Spotify, Sony PlayStation across key markets in Europe, Facebook and a number of games related clients.

In terms of our plans, we’re currently working towards bring on-board a number of important and ground-breaking merchants and a number of different projects are expected to launch in the second half of this year.

 

In 2014 your whitepaper projected a potential market of $6b for DCB by 2017. Do you see this changing in the light of recent developments in contactless payments and mobile payments?

If anything I think the market is likely to be higher. We’re seeing increased interest from new merchants due to trends in technology, regulatory and pricing to take this to new levels.

 

What changes are likely over the near future, in the light the evolving role or mobile operators in payments?

There is a lot of change. Mobile operators previously launched billing to support ringtones and downloads and then Premium SMS. Both those markets are in terminal decline and so a big chunk of their revenues is shrinking. On the other hand, the direct carrier billing side is growing and we can bill without sending SMS around.

 

What about services such as Samsung Pay, Apple Pay, Android Pay and others? We also see the various new Checkout services. I can visualise each catering to a sphere of their interest – so for instance Samsung could turn their focus to TV-related payments. Is this a concern for you?

Is it of concern - No, although I agree this is a particularly historic period of change, and these are all significant developments. In the UK context, and indeed across Europe there is a lot of interest in innovation and contactless payments is exploding across the region. These services are however largely reliant on bank-based initiatives and banked customers. Our service is meant for those who do not have a bank account, or who want to buy and charge to a bill. Who will co-operate, who will compete remains to be seen. We could be a source of funds across a number of the emerging services, to sell more stuff through this charging mechanism.

 

I expect that in the face of rapidly increasing fragmentation, you could represent a source of stability for consumers and merchants?

Sure, we certainly hope so. Most of the time it may not be a Boku logo but a picture of a phone, and it’s so easy for people to visualise how the payment works.

 

We spoke about some of the opportunities, but how about the risks for mobile operator initiatives, as a number of ambitions towards payments have failed?

Yes, it’s hard to find a mobile operator joint venture that’s worked. The fact is banks are well entrenched and it’s been hard for MNOs to compete. Mobile operators have certain core assets in terms of the infrastructure, but they have a bigger massive advantage in terms of customer base. Enabling existing customers to pay using the bill is something that really works for our mobile operator partners.

In terms of risks, a key concern could be in terms of regulation. Mobile operators don’t want further regulation as there is already a great deal from telecom regulators. Voluntarily assuming new forms of regulation is tough and that’s where we come in, to help monetise existing customer relationships to help to manage that area for them.

 

What do you think about proposed API access to bank accounts, new digital banks?

This is about opening up to more competition and I see this to be a welcome move from the regulator. However as far as Boku is concerned we are here to provide merchants access new customers, not really banked adults, so we stick to our task and make what we uniquely do successful.

 

How is the UK market different to the rest of Europe, especially in the light of recent moves towards mobile payments and also the focus on FinTech?

UK is an interesting and highly competitive market. There are more enlightened, progressive mobile network operators. Merchants have more options than they could want, comparative to rest of Europe. Germans prefer debit cards, French may use cheques a lot, and each European market has its own characteristics.

 

Jon, this has been very interesting. Thanks very much for your time today and wish you the very best for the future.


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Jon Prideaux is CEO of Boku, a company that has since 2009 created the standard for online payments using your mobile phone, making it easy to pay for digital goods and social experiences across the web.

Jon Prideaux has a wealth of knowledge of how we pay, having held key roles at Visa and helped in the migration to Chip and PIN, when on the Executive Committee of EMVCo.

 


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

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

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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).

201504RemittanceCost

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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Citi’s view on being a global digital bank

 

Today I am delighted to share highlights of my interview with Aditya Menon, Managing Director, Digital Strategy at Citi. Citi is one of the largest banks in the world and has long been at the forefront of innovation.

Aditya Menon explains why the bank, already known as the world’s leading digital bank is focusing now on simply being the best bank, backed by the power of technology. We learn of the journey over 2014 and how this is likely to further play out over 2015.

 

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Aditya, I am excited at this opportunity to benefit from your deep knowledge on trends in global digital banking and especially delve deeper into developments in the US and India markets. Could we please start with a bit of background about your remit and the deep experience you have in payments?

 

As Managing Director, Global Digital Strategy at Citi I work on Citi’s global digital strategy for stakeholders in our consumer bank including card and Citi retail services in the US.

We do 3 things for our internal stakeholders. Firstly we assist them to formulate their digital strategy, particularly on payments, commerce, capability and technology. Secondly, an area in which I am most involved in is informing on the digital capability we need to grow and compete with banks and non-banks. Thirdly, we define and drive alignment around key strategic initiatives including key digital metrics and KPIs – both internally and against competitors.

 

Citi plays so many different roles around the world in Corporate Finance, Retail Banking, Investment Banking and more. How does your digital strategy support all these areas?

 

There are three key strategic imperatives for us to deliver on:

  • Firstly we must be Customer Centric and from a digital perspective this requires that we track metrics such as net promoter score, to recognise and reward the segments we want to serve with valuable personalized services.
  • Secondly this must be Globally Common. Globally, we serve approximately 200 million client accounts and operate in more than 100 countries. The challenge we address is to deliver globally common services across all these markets. For instance, taking the example of high net worth individuals, they do have certain globally common needs that we identify and help address.
  • Thirdly, it is about being Digitally Connected and creating digital partnerships. We see financial flows are digitising and we need to be in the middle of those flows, to drive greater access to our core products through digital channels and strategic partnerships.

For each of the three areas we have launched initiatives that help us to further enable our core business, go beyond the core and finally, drive innovation by creating disruption.

 

What led you to select this digital strategy for Citi?

 

At Citi we studied how digital disruptions eroded value across multiple industries including news, travel, video, music and advertising. Across these industries we found that over 10 years there could be a substantial market share shift. If we take year zero as being peak of physical manifestation of an industry, we saw a typical trend play out for each. An initial gradual decline was followed by an inflection point between year 2 to 4 and then a rapid transition from physical to digital.

In most of these industries the disruptor was not one of the incumbents. In most cases the total revenue of the entire industry declined over time due to disruption and commoditisation and revenues never really returned to the earlier peaks. This is interesting as it means that fewer players at end of year ten have to share a smaller pie and a number of incumbents make a loss.

Extrapolation to US retail banking made it clear to us what strategy we had to adopt.

We then extrapolated to see what this could mean for the US retail banking industry. We expect to see a substantial share shift over 10 years. Looking at payment and retail banking industries separately we expect retail banking to see even more disruption than payments in terms of value.

Our conclusion is that over 10 years the laggards could lose a major share of their revenues and profits, while leaders will gain moderately. So clearly it pays to be a leader, and as a laggard one could get into a vicious cycle which takes you down a point of no return.

We concluded that Citi must therefore rapidly enact a strategy that would help to best position our bank with respect to the digital disruption trends across the world.

 

What are some of the important ways this strategy was enabled by Citi in 2014?

 

Our strategy of globally common enablers has led to the launch of our award-winning retail banking mobile app that we deploy globally. In the area of corporate banking our Citi Velocity digital platform is the world leading FX trading app in terms of volume and value. We also have CitiDirect BE Mobile, which allows our corporate treasurers to use our payments infrastructure to complete payments anywhere.

With respect to driving disruptive innovation, we have brought out the Citi Wallet in partnership with MasterCard. We were also one of the first banks to launch with Apple Pay. The strategy played out in many ways across the world. For instance we launched a contextual offer and wallet platform in Hong Kong that went beyond the ordinary, to create contextual experience using location based services.

 

I am curious, considering Citi’s size and global footprint, how do you still manage to achieve high levels of innovation?

 

We place a lot of importance on innovation through a number of initiatives, of which one example is our Citi mobile challenge initiative.

Our US challenge in December was a great success and we just kicked off the same challenge in EMEA.

We have already got innovation labs set up around the world and the work there feeds into our business of crafting new services for the future. For instance our innovative work with our API opens up transformative potential through third party development.

 

Over 2014 what were some factors blocking the progress of money going digital?

 

This has continued to be a time when financial institutions must transform themselves in line with the demands of the economy and to support evolving consumer needs. This involves considerable rebalancing within the business.

Regulatory pressures and the need to balance AML requirements and security against innovation and superior consumer experience continues to make this process challenging.

 

From Shift Thought’s recent work in India we identify it as one of the most complex, yet promising markets for digital money. Please could you share your thoughts on this?

 

In the Indian market the regulator helped to create clear and transparent regulations for mobile banking, prepaid and agent banking. To my mind we have the clearest set of regulations that exist for digital payments and money anywhere in the world.

Although early services did not take off as the initial players in this space found it hard to sustain repeat usage as customers had no way to cash out But more recently, after giving banks and nonbanks a chance, what has lifted off well is the NPCI IMPS project. There has been steady growth in mobile-to-mobile payments.

 

What has worked well for India and what are some things the market may not have anticipated?

 

Perhaps one thing unique to implementation in the Indian market that was a unique requirement, but turned out to be a bit of a sticking point for adoption, is the centricity and early introduction of MMID. To my mind this could be the biggest barrier to adoption, a point I’ve raised in public forums recently.

Regarding unintended consequences, one interesting trend we’re observing is the use of the services for cash to bank account transfer. Consumers are starting to give cash to the banking agents who help to deposit this into their accounts. This use case is seeing a huge volume and value traction over NPCI rails.

 

What is the key development you expect in India over 2015?

 

Earlier in 2014, regulators asked for a new kind of institution to be created, that of a payment bank.

Alternate networks did not really work so this new type is expected to greatly help in getting subsidy programs and other important initiatives off the ground. This requires the creation of a massive number of bank accounts through a business model that works with lean 1% commissions to offer services to people who may be on or below the poverty line.

Half a dozen payment banks could be created in the near future and a number of telcos have applied for this. Under this new scheme payment banks will be permitted to operate savings and current accounts but will not be allowed to lend, thereby opening up the possibility of partnerships with scheduled commercial banks.

 

Aditya thanks so much for taking the time to so generously share with us your thoughts and findings. I have personally benefited so much from these discussions with you over the years and I take this opportunity to wish you every success in your plans in 2015 and beyond.

 


imageAditya Menon is Managing Director, Global Digital Strategy at Citi.

A pioneer in the field of payments and a true entrepreneur, Aditya has helped to shape mobile payments through his work at Obopay and Yes Bank Ltd. Aditya is hailed as a visionary leader who can inspire teams to deliver their best.

 

 

 


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Passwordless Experience – The FIDO Standards behind this

As security breaches continued to grab headlines over 2014, I was intrigued by new claims that not only could online security be improved for consumers, but it could actually become a more delightful user experience. The launch of Apple Pay has proven to us that this is possible.

With over 150 FIDO members, the Board of Directors alone reads like a Who’s Who List: Alibaba/Alipay, ARM, Bank of America, CrucialTec, Discover Financial Services, Google, Identity X, Lenovo, MasterCard, Microsoft, Nok Nok Labs, NXP semiconductors, Oberthur Technologies, PayPal, Qualcomm, RSA Security, Samsung, Synaptics, Visa, and Yubico.

Keen to understand what attracted so many key players, I was delighted to have an opportunity to interview Executive Director of the FIDO Alliance, Brett McDowell, to understand more about how all this works and what changes we are likely to see in the world of payments because of this.

 

Brett, I’ve heard so much about FIDO as the standard behind high profile launches of 2014, and am keen to understand more. Could you share a bit about yourself and your mission at FIDO?

 

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I am currently the Executive Director of the FIDO (Fast IDentity Online) Alliance which I helped to found in July 2012, when I was the Head of Ecosystem Security at PayPal, to address the lack of interoperability among strong authentication devices as well as the problems users face with creating and remembering multiple usernames and passwords. At the FIDO Alliance, we are changing the nature of online authentication by developing specifications that define an open, scalable, interoperable set of mechanisms that supplant reliance on passwords to securely authenticate users of online and mobile services.

Previously I spent several years at PayPal where, as Head of Ecosystem Security, I was tasked with developing strategies and leading initiatives to make the Internet a safer environment for PayPal and its customers. I spearheaded authentication strategy, including working with global policy makers to evolve best practices in strong authentication regulation. Prior to joining PayPal I spent several years as Executive Director of industry standards organizations, including Liberty Alliance and Kantara Initiative, which produced standards and accreditation programs in the field of digital identity.

At the FIDO Alliance, our mission is tightly scoped to producing open standards and industry adoption programs that enable implementers to change the nature of online authentication by improving user experience while simultaneously providing better security in a very privacy-respecting manner. We just released the final FIDO 1.0 specifications at the end of 2014.

 

Why did you feel standards were needed relating to strong authentication, and how does this differ from traditional authentication?

 

clip_image004So, “traditional” is an interesting word in the context of strong authentication, as the concept has not gotten a tremendous amount of adoption, especially not from consumers. Before FIDO authentication, if you were an online service provider, in order to authenticate your users, you would typically use username and password. If you wanted more security you had to add another authentication factor from a set of options that were not necessarily designed for ease-of-use. The “historic” approach to multi-factor authentication, or “strong authentication” as it is often called, combines “something you know” (like a password or other form of “shared secret”) with another factor, such as “something you are” (a biometric for instance) or “something you have” (such as a token or physical device). The industry norm in 2011-2012, before FIDO authentication was announced, was username and password as the ubiquitous first-factor, and the second factor, if there was one, was typically a 6-digit one-time-use passcode. You’d get the second factor through an SMS to your mobile device or create it on a specialised hardware device or copy it from a code-generating mobile app on your smartphone. This 6 digit number- the one-time password (OTP) - is called a security token.

The first problem with OTP -- and one of the many issues that FIDO authentication inherently addresses -- is usability. The first word in FIDO is fast, and it helps to explain why FIDO technologies became so disruptive so quickly. We are not about bolting on extra security that puts the burden on the user. We are about delivering an end-to-end innovative approach to authentication through a new, open, online cryptographic protocol that enables best-of-breed device-centric authentication to be used for online access.

 

How does the FIDO UAF Architecture enable online services and websites to leverage native security features of devices and what problem does this address?

 

From the payments perspective our standards enable a better user experience – faster, more secure, privacy respecting and easier-to-use. An example is, Samsung has enabled a number of payments applications using FIDO to allow a user to simply swipe a finger across a sensor on their smartphone or tablet. This is arguably easier than everything else in the market, certainly easier than passwords.

Although the concept of strong authentication has been around for a while and pretty well adopted by pockets of the enterprise market, it has not achieved widespread adoption beyond the enterprise because it has lacked the means to achieve interoperability among systems and devices; FIDO authentication standards enable any strong authentication method, what we call “authenticators”, to interoperate with any online service, independent of solution vendor or device.

Without interoperable strong authentication, you are left with the classic “token necklace” problem; wearing specialized security tokens, often around your neck with your security badge at work, for each online service that requires strong authentication because you cannot use any one of them to authentication into the other online applications. This is because “traditional” strong authentication relied on proprietary centralized servers (closed systems) connecting authenticators in the hands of users to proprietary server side functionality. Limited in both reach and function, strong authentication solutions have been neither open nor interoperable, until FIDO UAF and U2F 1.0 standards , which have opened the door for ubiquitous strong authentication through “net effects” that only emerge from an open ecosystem.

 

Is this interoperability issue something you address through UAF and U2F?

 

Yes, both UAF and U2F protocols, applied to devices, client software and online servers, produce entirely interoperable strong authentication. What the FIDO Alliance founders introduced first was the Universal Authentication Framework (UAF) protocol. This solves pain points around first-factor authentication because it is designed to replace the password, usually (but not exclusively) with a biometric factor that is retained only locally on the user device, never shared centrally or in the cloud. FIDO UAF is a strong authentication framework that enables online services and websites, whether on the open Internet or within enterprises, to transparently leverage native security features of end-user computing devices. In a FIDO ecosystem online service providers can easily achieve strong user authentication, and free users from creating and remembering more online credentials, simply by leveraging existing FIDO devices to authenticate at their sites and to use their services, such as mobile payments where UAF has seen early industry adoption.

If you are going to offer a replacement for passwords, you need a robust mechanism that isn’t based on the same “what you know” shared secret security design that has been the bane of password systems of late. We decided upon asymmetric public key cryptography, which uses a private key paired with a public key for each authenticator registration. However, we knew that putting the private key in the server could create vulnerability and undesired externalities in the case of a breach. We wanted to get to a model that would have no secrets on the server side. With FIDO authentication, the server holds a public key, but the private key is held only by the individual’s personal device, such as a mobile phone, and is never shared outside of that device. We saw the opportunity to make 1st factor authentication both easy & more secure by relying upon existing device-specific user verification methods being embedded in smartphones, tablets and PC’s. FIDO UAF then enables those local device authentication methods to be used securely online.

We found that before FIDO authentication, existing strong authentication options had very low user acceptance rates, sometimes less than 3% of users choosing to register for strong authentication when it was available as an option. The user acceptance of natural authentication methods that don’t tax the user’s memory or require extra steps in the process have been far more successful as seen by the increased number of people opting to lock their phone with gesture locks, 4 digit pin codes, and now biometric sensors like fingerprint sensors. However, under FIDO UAF, fingerprints are just one of many biometric options supported by the protocol- iris scanning, voice recognition, and behavioural sensors from wearable devices, are all supported in FIDO UAF.

We wanted a standard that could support any future authentication method, and support the industry in its drive to continuously innovate. Proprietary innovation happens between the device and user; this is where the industry can compete with differentiating solutions. FIDO standards come into play in the implementation between the device and the online service.

Another question is how online Payment Service Providers (PSPs) would know that the technique between device and user is trustworthy? FIDO standards incorporate the ability for online services like PSPs to set their own security policy defining the devices or device characteristics they want to trust. The members of the FIDO Alliance wanted a solution set that enabled trust between all devices and all services, but didn’t mandate it. They want a solution to be flexible enough to leave the trust decision in the hands of the online service provider who is in the position of making the risk decision related to any authenticated transaction.

 

We have discussed UAF in some detail. What then is U2F and where does it fit in the FIDO ecosystem?

 

FIDO U2F authentication addresses a totally different use case. FIDO UAF provides a simpler, stronger 1st factor authenticator where U2F provides a simpler, stronger 2nd factor authenticator. FIDO U2F does not replace the password but instead replaces the second factor and enables a simpler form of password, like a short PIN number, because the security burden can now be placed on the FIDO U2F authenticator and not the password. FIDO U2F has already been deployed by Google Accounts and now ships in all Google Chrome browsers.

So far the implementations of FIDO U2F authenticators are in the form of external specialized devices, but these capabilities could be embedded directly in handsets or other form factors in the future. What separates FIDO U2F security tokens from the OTP tokens discussed previously is that one device will work with any FIDO U2F server, regardless of vendor solution or device manufacturer. Another key differentiator is the phishing resistance inherent in the FIDO U2F standard. A FIDO U2F user cannot be tricked into giving a secret to a fraudster the way they can in a OTP use case.

Yubico and Plug-up are the two primary providers of U2F-enabled devices today, which work by being inserted into a USB slot. NFC and BLE support for U2F tokens is coming soon and will accommodate U2F devices for use with devices that don’t have USB slots.

To learn more about all the UAF and U2F FIDO Ready™ implementations please visit our website where they are all listed along with the profiles they support.

 

This is very interesting and thanks for helping to make our online experiences easier as well as more secure. Do you have any final message for us?

 

One thing I’d like to emphasize is the relationship between authentication and payments. Payments is just another application that requires strong user authentication. FIDO standards can be used for a whole variety of use cases that require strong online authentication… for healthcare applications, airline bookings, gaming, banking, enterprise use cases and anything that requires a user to authenticate online. The reason we saw the first adoption in mobile payments is because that industry segment had the greatest amount of pent-up demand for faster, easier strong authentication from mobile devices where typing passwords was the least convenient option.

The second topic I would like to emphasize is the relationship between FIDO standards and government regulation around strong authentication. Sticking with the payments example, you recently asked me about how FIDO UAF could be used to meet the criteria developed by regulatory regimes such as the EBA Guidelines. Though an analysis of exactly how a FIDO UAF implementation could meet the requirements of this specific regulation is beyond the scope of this interview, most multi-factor regulatory regimes are looking for two or more of a “what you know”, “what you are”, or “what you have” authentication factors. In just the example we see in the market already on Samsung Galaxy® devices, it may appear there is only a single “what you are” factor being offered by the fingerprint sensor, but there is also a “what you have” factor due to the secure protection of the private keys on the device, resulting in a multi-factor authentication event from a single user gesture. The Privacy and Public Policy Working Group in FIDO Alliance is going to make a concerted effort to educate regulators across various industries and geographical regions in 2015 to help them understand how to apply FIDO authentication to the markets they oversee.

 

Thanks Brett and I wish you the very best for all the further innovation that you plan in this very important space!


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Brett McDowell currently serves as Executive Director of the Fast IDentity Online (FIDO) Alliance, the organization Brett helped establish in 2012 to remove the world's dependency on passwords through open standards for strong authentication. Brett is also an advisor to Agari and the Bitcoin Foundation.

Previously, Brett spent several years at PayPal where, as Head of Ecosystem Security, he was tasked with developing strategies and leading initiatives to make the Internet a safer environment for PayPal and their customers.

 


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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Why markets tumbled today on Global Economic Prospects report

 

According to the Global Economic Prospects annual report from World Bank just released, growth in 2014 was lower than expected. Global growth is expected to rise moderately to 3% in 2015, while high-income countries will see a smaller growth of 2.2%. Developing countries fare better with a 4.8% increase.

 

Having just studied the report I thought I should share highlights to help explain why today Asian markets sank in early trading, copper prices fell and shares plummeted across Europe. Markets reacted to the World Bank’s decision to cut its economic forecasts for this year and next, in the Global Economic Prospects report just out.

Global trade has been weak in post-crisis years, growing less than 4% a year during 2012-2014, well below pre-crisis average annual growth of around 7%.  Major forces driving global outlook include:

  • Soft commodity prices
  • Persistently low interest rates and divergent monetary policies across major economies
  • Weak world trade

Recovery in 2014 in high-income economies was uneven. As many high-income grapple with fallout of global financial crisis, USA and UK have exceeded pre-crisis output peaks. The Euro Area and Middle-income economies face structural slowdown but low income economies are expected to enjoy a more robust growth.

Since mid-2014 the sharp decline in oil prices helps oil importing developing economies but dampens growth prospects for oil-exporting countries.

 

In the graph below I show last year’s forecasts in the dotted lines and this years (just released today) in solid lines. It is clear from this why markets reacted badly to the latest forecasts that show lower than expected figures across both high income and developing countries. Global growth is expected to rise moderately to 3 % in 2015. However high-income countries are likely to have a smaller growth of 2.2%. Developing countries will fare better i 2015 with a 4.8% increase.

 

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The slowdown in global trade has been driven by cyclical factors such as persistently weak import demand in high-income countries and structural factors such as the changing relationship between trade and income.

 

Countries show divergent growth rates

But how does this potentially impact on your market selection plans and strategy for this year? In the chart below I’ve shown the projections for key countries, with estimates for 2014-2016 annual percentage change in GDP.

 

To my mind this further calls into question the BRIC categorisation we use to describe emerging markets. Jim O’Neill of Goldman Sachs first used this term in 2001 to describe a group of countries that expanded rapidly in the 1990s. Today though, these countries increasingly show very different growth trajectories noted by some experts recently, and as I see exhibited in their recent economic profiles.

While in 2016 both India and China are likely to have a 7% percentage change in Real GDP, China arrives here on a decline, while India works up to this. India is expected to show a steady increase while a  “disorderly slowdown” is expected in China. Brazil faced a steep decline in growth due to declines in commodity prices, weak growth in major trading partners, severe droughts in agricultural areas, election uncertainty, and contracting investment. Recession in Russia further distances this country from the BRIC group. Activity slowed to 0.7% in 2014 with on-going tensions with Ukraine, sanctions, falling crude oil prices and structural slowdown.

 

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Growth in Europe and Central Asia slowed to a lower-than-expected 2.4 % in 2014 due to slow recovery in the Euro Area and stagnation in the Russian Federation. In contrast, growth in Turkey exceeded expectations despite slowing to around 3.1 %.

Geopolitical tensions, currently concentrated in Eastern Europe, the Middle East, and, to a lesser extent, South East
Asia, could rise in the short- and medium-term. In low-income countries, growth remained robust at about 6 % in 2014 attributed to rising public investment, robust capital inflows, good harvests (Ethiopia, Rwanda), and improving security in a few conflict countries such as Myanmar, Central African Republic and Mali.

 

Remittance flows still resilient

The good news is that remittance flows are expected to continue to exhibit a much welcome upward trend. As the risk to private capital flows to developing countries increases, the relative importance of remittances continues to grow. World Bank notes that during past sudden stops, when capital flows to developing countries fell on average by 25%, remittances increased by 7 %.

The forces driving the global outlook and the foreseen risks pose complex policy challenges according to the World Bank.  Developing countries face major challenges. For one thing monetary and exchange rate policies will need to adapt as conditions return to normal. They also need to implement structural reforms to promote job creation. This is expected to help mitigate long-term adverse effects from less favourable demographics and weak global trade.

 

More detailed analysis of the latest economic prospects for each country and region is available in our “Digital Money in 2015” country reports. Drop me a line at contact@shiftthought.com if you’d like more information. The full Global Economic Prospects report and other resources are available at the World Bank website.

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The Digital Money Game – a Journey Most Enjoyable, and the best is yet to come!

 

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The world of financial services gets ever more interesting as money goes digital. Shift Thought has just conducted interviews with over 50 of the leading payments experts around the world. We are delighted with all we have to share with you from this exercise. Stay tuned for our upcoming blog series on how The Digital Money Game is changing differently in each part of the world – and how to position yourself in the winning camp.

Warm wishes for New Year 2015!

From The Shift Thought Team - Making the right connections to help money go digital

Authors of The Digital Money Game, Virtual Currencies – From Secrecy to Safety

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Read our books? We’d love to hear from you at contact@shiftthought.com

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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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