[Dave Birch] Having observed the mobile money market develop and noted the various types of bank and operator service that have been experimented with around the world, it seems to me that it is the regulatory environment that is the main obstacle to further development. The idea that payments, particularly low-value person-to-person payments, are necessarily part of the banking system and that they must be regulated by banking regulators and they must be regulated as tightly as banking and therefore must be provided by banks has done nothing to help the market to develop and therefore benefit people in a great many countries.

Why is regulation the major obstacle? Well, of the more than 100 mobile money services in action around the globe, still only a handful have scale. Is M-PESA a “black swan” that is a product of a unique combination of cultural, business and technology factors? There are many people who think so, arguing that there Kenyan environment had some very special characteristics, primarily a dominant operator and a large unbanked population with little access to conventional financial services provided through banks. But these characteristics are, frankly, common. They may be necessary, but they simply cannot be sufficient conditions for scale provision of a mobile alternative. Which is why I wonder if regulatory issues aren’t really the dominant factors. Without the right regulatory environment, it doesn’t matter what the business opportunities are or what new technologies can be exploited. Nothing will happen. This seems to be true in markets where there is a desperate consumer and business demand for these services.

Central Bank of Nigeria is working together with the Nigerian Communications Commission to look at areas where mobile network operators (MNO) come in. But officials of the NCC are intimating that the mobile money operators would still need to come for registration with the telecom regulator. The NCC which is expected to design the regulatory framework on the technology and mode of interoperability to be adopted by the operators for seamless operations, is yet to come out with the guidelines.

[From Obstacles On Mobile Money Implementation In Nigeria | Leadership Newspapers]

Nigeria, like India, should be a vigorous and exciting mobile payments marketplace, with innovative and enterprising people creating fantastic new products and services. Nokia is known for innovation, understanding the carriers, global reach, brand recognition and all the good stuff. That’s why many people were excited by the Nokia Money launch in India.

Registered Nokia stores will act as banking correspondents to Union Bank of India and facilitate service registration, money transfer and cash withdrawal. Nokia will pre-install the Union Bank Money application in its handsets, in addition to offering it as a download to existing handset owners. Customers who sign up for the service will be able to transfer money, withdraw cash from Nokia outlets as well as from UBI ATMs and pay for utility bills and mobile recharges via their mobile phones.

[From Updated: Nokia & Union Bank Of India Launch Mobile Payments – MediaNama]

Yet Nigeria, India and many other countries are seeing very slow progress. And a key reason for this is that payments are regulated, generally speaking, as part of the banking system.

Most of the operators we know in this situation would prefer to be directly regulated by their central bank as an e-money issuer or payment services provider. Doing so gives regulators better visibility into and oversight over mobile money services, and makes it more likely that customers will have more services from which to choose in the financial services space. It’s a win for everyone involved.

[From Regulating non-bank mobile money service providers | Mobile Money for the Unbanked(MMU)]

Now this would have an impact on shape of the market and the structure of the value network evolving within it. Telcos are in many ways being forced into partnerships with banks because of regulation, not because it makes sound business sense. Or they are forced to obtain banking licences (like Rogers in Canada). Better regulation would make for a wider spectrum of alternatives. Telcos could obtain payment services or electronic money licences themselves, or they could partner with specialist organisations or (as should happen) bank subsidiaries that operate under the new licences but with a lower cost base and more flexibility than they could inside a bank. Although I have to say that it is by no means obvious that banks would respond to the innovation challenge (in this area).

Half of banks will still lack a formal innovation programme and budget in three years time, severely restricting their growth potential, according to research from Gartner.

[From Finextra: Cost-cutting banks wide open to disruptive IT innovation – Gartner ]

I was thinking about this when reflecting on the discussion panel that I chaired at Management World Americas last year, noting that we are still in the very early days of this new mobile money world and the partnership discussions underway right now are really only exploring the “shallows”. The idea of digital money as an element of “smart pipe” infrastructure (I’ll write more about this tomorrow) that is delivered to customers through banks, specialist electronic money services, payment institutions, retailers, transit companies and, yes, mobile operators is key to setting the right regulatory framework and I hope the regulators will do more in 2012 to remove this significant obstacle to a vibrant, and socially-beneficial, ecosystem than they have been prepared to do up to now.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers

1 comment

  1. Nokia Money is a free service that aims at reducing the problems and risks involved with carrying cash with one self. The customer need not carry any cash but he can carry as much money (up to Rs. 50,000/-) in his mobile phone. For further information on Nokia Money service, please get in touch with your nearest Nokia Retailer.

    Thank you.

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