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The Mobile World Congress (MWC), GSMA’s marquee annual event, was bigger and better than last year, with a record number of 101,000 attendees from 204 countries. The theme “Mobile is everything”, was quite comprehensive in covering every major trend emerging in the mobility landscape, right from 5G to virtual reality. Like last year, ‘Payments’ continued to trend at the event, with bigwigs like MasterCard, Visa and PayPal showcasing leading innovations like Selfie Pay and Connected Car Payments. While there was a lot of action around payments, I have handpicked some trends emerging from MWC that are likely to have far-reaching effects.

Ecosystem is paramount.

Today, there’s consensus in the mobile financial industry that an open ecosystem is key to a successful mobile financial service. Key players including banks, mobile operators, tech companies and payment processors, in both the developed and emerging markets, are focusing on creating intra-industry and cross-industry partnerships in order to accelerate the pace of service innovation and meet changing customer expectations. This is quite evident from the slew of partnership announcements at the MWC. MasterCard announced a number of partnerships, which included Orange Romania for MasterPass, WISeKey for wearables, CU Wallet for customized digital wallets, and Children’s Miracle Network Hospitals for online micro-donation platform. Similarly, Visa is collaborating with Honda and ParkWhiz for car-based commerce. Online payments giant, PayPal has joined hands with Vodafone Wallet in Europe and with M-Pesa Kenya for international remittance via Xoom. In addition, Mahindra Comviva, a global mobile financial solutions provider partnered with Wincor Nixdorf, a European provider of IT solutions for retail banks. This partnership will enable consumers using the former’s mobiquity® Wallet solution to withdraw cash and top up their mobile wallets at the ATM by simply scanning or presenting a QR code or through their NFC enabled mobile device. This solution is a good example of how electronic and cash payment transactions can combine perfectly with each other and extend the benefits of HCE beyond the retail POS.

We also saw digital identity take centre stage with ‘Mobile Connect’. User authentication via Mobile Connect for HCE deployments highlights its potential of becoming one of the factors of authentication for mobile payments and commerce. The simplicity of establishing the user’s identity through the MNOs with standardized APIs will open up options for financial institutions and lead to a seamless user experience.

From ‘Internet of Things’ to ‘Internet of Payments’

The Internet of Things is catching momentum and payments are becoming important part of it. In a few years, machines will analyze our needs and preferences and make automatic purchases on the basis of our requirements.  In the future, we will see intelligent fridges order and pay for weekly supplies and groceries and cars that direct us to the nearest fuel station when they detect that the fuel tank is empty.  This is going to be a reality much sooner than you think with VISA demonstrating its “connected car experience” at the MWC. Visa, in partnership with Honda is making car-based commerce transactions a reality. Honda cars, fitted with chips talk to gas pumps and parking meters. Cars automatically detect the need to refuel, calculate cost and pay automatically, without the driver having to leave the car. Similarly, in the parking, the car will automatically detect the parking time and enable consumer to pay the exact amount via mobile phone.

The changing face of MWC

MWC used to be a MNO-centric event, especially in the context of trends. However, in the last couple of years, we have witnessed a change with MWC expanding itself to a mobility centric event. This is quite evident from this year’s keynote address, which drew participation from the likes of Royal Caribbean Cruises, Ford Motor Company, Starcom Mediavest, Turtle entertainment and Facebook.

In a way, this is a reflection on how the mobile financial solutions industry will evolve from merely being confined to banks and MNOs to a wider spectrum of industries, including auto manufacturers, retailers, social media majors, etc.

There is little doubt that MWC 2016 witnessed tremendous on-ground action. Expect 2017 to be equally busy. Stay tuned!

March 29, 2016 0 comment
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The Kenya Bankers Association (KBA) is launching a platform it calls the Real-Time Interbank Switch which it says “will create an interbank mechanism to enable interoperability across KBA members for all retail payment streams,” according to KBA chief executive Habil Olaka.

This is essentially a bank to bank P2P transfer mechanism that aims to try and capture the losses in the domestic remittances market estimated at KES 2.3 billion that the banking industry had ceded to mobile money operators.

The switch is being facilitated partly by the Financial Sector Deepening Kenya (FSD), a donor funded agency that has the UK’s DFID, Sweden’s SIDA and the Bill and Melinda Gates Foundation as its partners with the aim of deepening financial inclusion in Africa.

Problem Switch Seeks to Solve

Kenyan banks launch blog1

Currently, the only electronic real-time bank payment transactions are those that occur between two accounts in the same bank, and hence the fastest way for a consumer to make a payment to another bank was to withdraw cash from his bank account, travel to the nearest branch of the beneficiaries’ bank and make a cash deposit for it to reflect immediately.

Before, bank to bank transactions initiated electronically say using internet banking would have to go through the end of day inter-bank settlement process that could take one to three days and denies the consumer the benefits of real-time or near real-time transactions that they currently enjoy with mobile money transactions.

How the switch works

Kenyan banks launch blog2

The switch will create a real-time interbank mechanism for all bank account holders in Kenya to be able to transfer money directly to one another.

Consumers will be required to register an MSISDN with their banks indicating a nominated account to be linked to that one mobile number, which will be used for transactions initiation and notifications purposes, hence the mobile number becomes the unique identifier.

Consumers will then be able to send their funds to a mobile number, which has a linked account or card on the back end.

Beneficiaries without a bank account will be able to get a one time code to transact from licensed agents.

Business model

The KBA intend to launch the service using an operating company to which the banks will fund at a equity:debt ratio of 1:4, being KES 140M in equity to KES 540 Million in debt.

This operating company is projected to handle 400 million transactions in the first year and grow to 1.6 billion transactions by the fourth year of operations. This will be a huge increment on the 29.68 million transactions the banking industry currently does annually.

This is in comparison to the 911 million transactions currently being done on mobile money annually in the country.

Unique benefits the switch offers over mobile money

First, the banks seek to take advantage of their licences to transact larger sums of money and hence would enable consumers to make remittances of a larger value than they presently can on mobile money. Currently mobile money operators have transaction caps of KES 70,000 (~$700) whereas the interbank switch is projected to have a cap of KES 500,000 (~$5,000) per payment transaction.

Second, the switch aims to undercut industry leader M-Pesa by for example making the cost of sending KES 2,700 (~$27) to be KES 20 (~$O.20) which is compared to the current cost of KES 55 for a P2P send of the same amount not to mention a KES 49 withdrawal charge. Bank withdrawal charges for the recipient range from free to around KES 30 flat fee for the beneficiary as long as they are withdrawing from their own banks’ ATMs, and beneficiaries will have access to the global EMV card payment and ATM withdrawal network for received funds.

This will have the effect of widening and deepening the meaning of financial inclusion for Kenyan consumers by increasing the banked rate, connecting them to the global banking infrastructure and all the associated structured financing services that they can obtain from banks that they have prior been unable to obtain from mobile money services.

It remains to be seen how the mobile money sector in Kenya will react to this but for now, the head of Safaricoms’ Corporate Affairs, Stephen Chege says that they do not feel that M-Pesa will be threatened and that there is still a lot of room for growth in Kenya’s burgeoning payments industry.

September 11, 2015 0 comment
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