Mobile Banking Needs ?Standardized Innovation?
Thursday, May 15, 2008
By Jim Rosenberg
“Standardized innovation” is the phrase used by Dialog Telekom’s (Sri Lanka) Dr. Hans Wijayasuriya at the Mobile Money Summit in Cairo today. In a phrase I think is quite useful, he was summarizing the need to have mobile banking standards, interoperability, worldwide. Right now we are observing many proprietary systems taking shape – most notably, M-PESA in Kenya, Smart Communications, and as they move further into the m-banking space, Western Union. Imagine having hundreds of transaction networks – Visas, Mastercards – that don’t talk to each other. Hopefully, that’s not the direction in which mobile banking is headed. Proprietary is fine, interoperable is essential.
That said, who will pay for interoperability? If I am a service provider, why should I subsidize/pay for the infrastructure that could benefit my competition? Visa/Mastercard and the like were not interoperable at first, and we might well expect the same in the mobile banking space. So initially, it makes sense that the field of mobile banking is developing the way it is.
This week our team has been in Cairo for the first ever Mobile Money Summit. Organized by CGAP, DFID, IFC and the GSM Association, 429 delegates from 67 countries gathered to hear from telecom CEOs, banks, microfinance organizations, solution providers, and regulators. GSMA tells us that delegates were more or less evenly comprised of these four groups: telecoms, financial service providers, vendors, and the NGO/government/donor community.
In between powerpoints and conversations in the exhibition hall, some common threads have emerged:
-an awareness of the need for developing domestic financial services and systems, not just international remittances;
-a real emphasis on the vital role played by banking agents, who conduct the cash-in and cash-out function on behalf of a service provider;
-seeing poorer customers as a big opportunity.
As noted in a recent CGAP Focus Note, mobile banking won’t automatically benefit poorer people. There’s a need for the development of interoperable payments platforms, practical and risk-based approaches to regulation, as well as shared networks of cash-handling agents. There is also a need for product development that overcomes the lack of human interaction and reliability concerns that may hinder customer adoption today.
Those challenges are evident in places such as Kenya. Andy Chung of Vodafone spoke about M-PESA, which today boasts 2.3 million customers and is expanding in Afghanistan and would like to expand into even more markets. But are those customers poor people? Would M-PESA automatically reach poor people?
“Any new product penetrates from the top-down. This is the early adopter model that we see with all technologies,” said Chung. Only with active engagement and perhaps subsidy from development organizations would the people making less than $2 a day begin to take on such services.