In broad terms, interoperability is the interconnection of mobile money services with external parties, with the aim to create value for both customers and commercial players. Viewed as a “silver bullet” for greater financial inclusion, it is increasingly cited as a solution to increase transaction volumes and extend the range of financial products offered through the mobile phone.
Opportunities for interoperability arise where interconnections with external parties can create greater value for customers and service providers than a single mobile money service provider can create alone. Once an opportunity for interoperability has been identified, it needs to be strategically or financially compelling for all parties involved to jointly pursue it.
To assess the opportunity, it is important to define what services fall within and adjacent to this category. The universe of these services is expanding rapidly with the growing desire to connect a pure mobile money network with other money transfer networks as boundaries blur between payments. For mobile money transfer, it is important to view interoperability in two ways:
Domestic interoperability – The ability to transfer money between two different mobile money services. For example, in Tanzania, Mahindra Comviva enables Airtel Money customers to send money directly to Tigo Pesa customers.
International remittance or International money transfer (IMT) – The remittance services should not be limited to domestic money transfer and need to move beyond boundaries so that migrants and expats can send money back to their relatives in their native country. To enable international remittance, mobile money service providers can partner and integrate seamlessly with major MTO’s such Western Union, WorldRemit and Moneygram.
Another aspect of IMT is direct account-to-account money transfer between mobile money services in neighbouring countries or countries within the same region. For example, Orange facilitates money transfer between Orange Money customers in Cote d’Ivoire, Mali, and Senegal. MTN Mobile Money customers in Cote d’Ivoire can transfer money to Airtel Money customers in Burkina Faso.
Another upcoming trend in mobile money interoperability is switches.
Mobile money service providers are investing in switch-like infrastructure that will interlink various mobile money services and third-party payment networks. For example, a multi-country operator in Africa has implemented a switch that enables direct money transfer between mobile money accounts of its customers in different countries.
There is also investment to interconnect with card networks to provide seamless interoperability with heterogeneous systems and services, bringing in convenient and integrated solutions to the consumers.
For merchants to capitalise on an uptake in payments and revenues, it is imperative to devise solutions that enable the acceptance of payments from mobile money accounts. In turn this puts emphasis on compelling consumers use mobile money for everyday payments.
However, the merchant network of current mobile money services is limited. Customers can pay only via mobile money to merchants who are registered with the mobile money service provider. We have to move beyond the closed loop systems and embrace an open-loop merchant payment approach. To enable open-loop payments mobile money providers are integrating with global card networks like MasterCard and Visa to issue companion cards (linked to mobile money account) which can be used for payment at any MasterCard and Visa powered POS machine both nationally and internationally.
The open-loop approach exponentially increases the merchant acceptance network for mobile money. Even virtual cards linked to mobile money account can be issued for making online transactions.