LIRNEasia hasn’t worked extensively on the topic since our 2008-20010 research cycle, when our Research Fellow, Eriwin Alampay explored mMoney applications in the Philippines as well as the overall issues with respect to regulation (Financial and Telco) of such services. We even did some rapid response work, when Sri Lanka’s Central Bank expressed  their intentions to come up with new rules regarding financial transactions using mobiles. Chanuka subsequently critiqued the less-than-ideal regulations that eventually came out.

Two years on, what I saw at the event was that the breadth and depth of applications for financial transactions through mobiles had increased, yet the regulations that have come up still leave much to be desired by way of financial inclusion for the unbanked. The same arguments that took place then about whether it should be a bank led or mobile led model still seem to be in play. Disappointing indeed. But there is hope. Pakistan seems to have come up with collaborative model, using a third party switch(es) that would connect multiple telecos and multiple banks. Since this happend only last month, I still don’t have all the details, but what I appreciated was the apparent lean regulatory approach with clearly bifurcated responsibilities for the State Bank (Pakistan’s Central Bank) and PTA (the regulator) in terms of oversight and dispute resolution. One hopes our Central Bank is keeping an eye on the developments there.

The other issue that goes to the heart of the financial inclusion debate vis-a-vie mobiles, i.e. KYC [Know You Customer] requirements, still seems to be an issue, with different countries taking different approaches. I hope they can converge on a multi-pronged approach to KYC, with different levels of KYC for different transaction limits, so that the poor who will transact with lesser amounts don’t have the same burden of paperwork that prevents them from having bank accounts in the first place.

UNP MP Dr. Harsha de Silva who was speaking during the private member’s motion moved by UNP MP Ravi Karunanayake to extend banking hours from 9 am to 4pm said expanded banking services should be made available to the rural people. “These people have banking too in their pockets in the form of the mobile phones and this should be made use of,” he said.

Read the full article here.

Many challenges face financial institutions looking to develop mobile money management capabilities. These include security concerns, inadequate technology and business ecosystems, and an uncertain regulatory environment.  But most of all, cost is an issue. In today’s uncertain economic environment, finding investment money for new initiatives is more difficult than ever. Accenture is addressing these challenges while GSMA has announced seven new projects as part of its Mobile Money for the Unbanked (MMU) Fund.

Bus tickets:

The use of mobile phone to buy tickets has shown promising results for the public transport system in Sri Lanka. Currently, Government buses use both ticket books and manual ticket machines to issue tickets on payment of cash. Private buses mainly use digital ticketing machines that print out the tickets, said Harsha de Silva of LIRNEasia.

The major problems in this system include a 25 per cent revenue leakage for the bus operator, a process that is time-consuming and the bother of carrying exact change, for the commuter. The challenge is to reduce revenue leakage and speed up the transaction.

With 10 million passengers daily using 10,000 private and 5,500 Government buses, and 13 million of the 20 million Sri Lankan population having access to mobile phones, there is a fit case for mobile-based ticket vending, de Silva said.

…NFC is a standards-based, short-distance, wireless connectivity technology which enables two-way conversation between electronic gadgets. The user can authorise the payment requested by the NFC reader. While Nokia had introduced the NFC technology in 2005, in recent times an NFC SIM has also been introduced by China Telecom, Nokia and Japan’s NTT DoComo. Mobile-based bus and rail ticket systems are operational in developed nations, and it is time to try them out in South Asian countries with appropriate innovations, de Silva added.

Pakistan: Experiencing Easy Paisa

In Pakistan, Telenor has in collaboration with the State Bank of Pakistan launched ‘Easy Paisa’, whereby the mobile phone can be used for payment of utility bills and money transfer through banks. The service was launched last year with the help of the Pakistan Telecom Authority (PTA).

Kenya: Embarking on M-PESA

This African country with 75 per cent of its 39 million people living in rural areas has an interesting story on M-PESA ( pesa is Swahili for money). In five years, the mobile-based initiative has virtually killed all informal and some formal modes of money remittances in this country. It has indeed nearly killed the post office, said Muriuki Mureitha of Summit Strategies.

India: Agri value-addition

About eight services have been launched in India since 2007 targeting the agricultural sector, said Sriganesh Lokanathan of LIRNEasia in his presentation.

Of these, the Reuters Market Light (RML) is a subscription-based model while IFFCO Kisan Sanchar Ltd (IKSL) is free. Technologies such as IVR, SMS, WAP and so on are being deployed to provide the services in at least nine languages at present, Sriganesh told Business Line.

Read the full article here.

Mobile payments should not be seen as a turf war between the financial and telecommunication sectors but as a complement to existing financial services. Banks have a long history of managing money and enjoy the confidence of depositors and businesses. However, the mobile companies have in a very short span of time reached all parts of the countries they operate in, established strong nationwide distribution systems and excelled in handling micro-payments worth millions on a daily basis in the form of top-ups. Mobile operators act as payment agents for content providers so seamlessly that most of the time customers don’t even know that they are dealing with a third party. In mobile payments, the question is not who is keeping the money but who is dealing with the customer. If the customer is dealing with the bank, the mobile operator becomes a mere conduit. If mobile operators deal with the customer, banks still have the important role of managing money. So the choice is between taking the customer to the bank at high street or taking the bank counter to the customer, wherever he is.

Computing: In future, most new internet users will be in developing countries and will use mobile phones. Expect a wave of innovation

THE World Wide Web Consortium (W3C), the body that leads the development of technical standards for the web, usually concerns itself with nerdy matters such as extensible mark-up languages and cascading style sheets. So the new interest group it launched in May is rather unusual. It will focus on the use of the mobile web for social development—the sort of vague concept that techie types tend to avoid, because it is more than simply a technical matter of codes and protocols. Why is the W3C interested in it?

The simple answer is that the number of mobile phones that can access the internet is growing at a phenomenal rate, especially in the developing world. In China, for example, over 73m people, or 29% of all internet users in the country, use mobile phones to get online. And the number of people doing so grew by 45% in the six months to June—far higher than the rate of access growth using laptops, according to the China Internet Network Information Centre.

 This year China overtook America as the country with the largest number of internet users—currently over 250m. And China also has some 600m mobile-phone subscribers, more than any other country, so the potential for the mobile internet is enormous. Companies that stake their reputations on being at the technological forefront understand this. Last year Lee Kai-fu, Google’s president in China, announced that Google was redesigning its products for a market where “most Chinese users who touch the mobile internet will have no PC at all.”

It is not just China. Opera Software, a firm that makes web-browser software for mobile phones, reports rapid growth in mobile-web browsing in developing countries. The number of web pages viewed in June by the 14m users of its software was over 3 billion, a 300% increase on a year earlier. The fastest growth was in developing countries including Russia, Indonesia, India and South Africa.

Behind these statistics lies a more profound social change. A couple of years ago, a favourite example of mobile phones’ impact in the developing world was that of an Indian fisherman calling different ports from his boat to get a better price for his catch. But mobile phones are increasingly being used to access more elaborate data services.

A case in point is M-PESA, a mobile-payment service introduced by Safaricom Kenya, a mobile operator, in 2007. It allows subscribers to deposit and withdraw money via Safaricom’s airtime-sales agents, and send funds to each other by text message. The service is now used by around a quarter of Safaricom’s 10m customers. Casual workers can be paid quickly by phone; taxi drivers can accept payment without having to carry cash around; money can be sent to friends and family in emergencies. Safaricom’s parent company, Vodafone, has launched M-PESA in Tanzania and Afghanistan, and plans to introduce it in India.

Similar services have also proved popular in South Africa and the Philippines. Mobile banking is now being introduced into the Maldives, a group of islands in the Indian Ocean where many people lost their life savings, held in cash, in the tsunami of December 2004.

For the W3C, M-PESA and its ilk are harbingers of far more sophisticated services to come. If mobile banking is possible using a simple system of text messages, imagine what might be possible with full web access. But it will require standards to ensure that services and devices are compatible. Stéphane Boyera, co-chair of the new W3C interest group, says its aim is to track the social impact of the mobile web in the developing world, to ensure that the web’s technical standards evolve to serve this rapidly emerging constituency.

The right approach, Mr Boyera argues, is not to create “walled gardens” of specially adapted protocols for mobile devices, but to make sure that as much as possible of the information on the web can be accessed easily on mobile phones. That is a worthy goal. But Ken Banks, the other co-chair of the W3C’s new interest group and the founder of kiwanja.net, which helps non-profit organisations exploit mobile technologies in the developing world, points out that simple services based on text messages are likely to predominate for some time to come, for several reasons. All mobile phones, however cheap, can send text messages. Mobile-web access requires more sophisticated handsets and is not always supported by operators. And users know what it costs to send a text message.

As countries work their way up the development ladder, however, the situation changes in favour of full mobile-web access. Jim Lee, a manager at Nokia’s Beijing office, says he was surprised to find that university students in remote regions of China were buying Nokia Nseries smart-phones, costing several months of their disposable income. Such handsets are status symbols, but there are also pragmatic reasons to buy them. With up to eight students in each dorm room, phones are often the only practical way for students to access the web for their studies. And smart-phones are expensive, but operators often provide great deals on data tariffs to attract new customers.

Xuehui Zhao, a recent graduate of the Anyang Institute of Technology in Henan province, explains that a typical monthly package for five yuan ($0.73) includes 10 megabytes of data transfer—more than enough to allow her to spend a couple of hours each day surfing the web and instant-messaging with friends. It is also much cheaper than paying 200 yuan per month for a fixed-broadband connection.

As this young generation of sophisticated mobile-web users grows up, what sort of new services will they want? Many NGOs and local governments are trying things out. Several examples were discussed at a workshop in June organised by the W3C in São Paolo, Brazil. The government of the Brazilian state of Paraná, for instance, is using text messages and voice-menu systems to notify the unemployed about job opportunities and farmers about agricultural prices.

But the workshop also highlighted the limits of what such efforts can achieve. It quickly became apparent that more or less identical services are being developed from scratch repeatedly in different parts of the world. There is clearly room for more co-ordination of such efforts, which is exactly what the W3C has in mind.

Furthermore, many clever systems are being developed by NGOs with no apparent interest in setting up commercial services. As Mr Boyera points out, this raises the issue of sustainability. What happens when the NGO’s funding runs out? One conclusion from the workshop was that promoting social development through the mobile web will mean engaging with businesses. Regulators can also help by fostering cheap mobile access.

The developing world missed out on much of the excitement of the initial web revolution, the dotcom boom and Web 2.0, largely because it did not have an internet infrastructure. But developing countries may now be poised to leapfrog the industrialised world in the era of the mobile web.

Serving the needs of tech-savvy customers will be crucial for banks to stay competitive as the collective income of baby boomers’ children is expected to surge over the next 10 years and exceed that of their parents.

So far, though most major banks offer mobile banking, 89% of consumers don’t use their cellphones to conduct banking transactions, according to the study by IBM’s retail banking consulting practice.

The study found that 21% of consumers ages 18-34 use their cellphones for banking transactions, compared with about 10% of the general population. These numbers, particularly for younger consumers, are expected to grow significantly.

Read the full story in USA Today here.

The objective of the conference was to convene Indian and American business leaders, government policy-makers, leading academics, and other experts to discuss government and business approaches to mobile commerce, mobile banking and m-governance that will have a positive effect on India’s economic and social development.

The agreement could have a big impact on global cross-border remittances, worth an estimated $500bn a year, and provide a springboard for mobile carriers and Western Union to offer other mobile banking services using “mobile wallet” technology. Cross-border money transfers valued at up to $100 in countries such as India, the Philippines, Mexico and China – which have large volumes of remittances from migrant workers – will be an early priority of the deal.

Thirty-five mobile operators with 800m customers in more than 100 countries have signed up to take part in the GSMA Mobile Money Transfer pilot scheme led by Sunil Mittal, managing director of Bharti Airtel. Other participants include MTN, Orange, Orascom, Smart, Telenor and VimpelCom.

Read full story here

SAN MIGUEL, Philippines–It’s Thursday, so 18-year-old Dennis Tiangco is off to a bank to collect his weekly allowance, zapped by his mother–who’s working in Hong Kong–to his electronic wallet: his cell phone.

Sauntering into a branch of GM Bank in the town of San Miguel, Dennis fills out a form, sends a text message via his phone to a bank line dedicated to the service.

In a matter of seconds, the transaction is approved and the teller gives him P2,500 (US$54), minus a 1-percent fee. He doesn’t need a bank account to retrieve the money.

More than 5.5 million Filipinos now use their cell phones as virtual wallets, making the Philippines a leader among developing nations in providing financial transactions over mobile networks.

Mobile banking services, which are also catching on in Kenya and South Africa, enable people who don’t have bank accounts to transfer money easily, quickly and safely. It’s spreading in the developing world because mobile phones are much more common than bank accounts.

The system is particularly useful for the 8 million Filipinos–10 percent of the country’s citizens–who work overseas and send money home, like Dennis’ mother, Anna Tiangco. Previously, she sent money via a bank wire transfer, which costs HK$20 (US$2.50, â‚1.83) and takes two days to clear. The cell phone method costs only HK$1 (13 U.S. cents, 9 euro cents) and is nearly instantaneous.

“The good thing here is, wherever my children are, they can text me and I can send money immediately,” she said by telephone from Hong Kong.

Consumers also can store limited amounts of money on their cell phones to buy things at stores that participate in the network–although this practice isn’t yet widespread in the Philippines.

Many more Filipinos use their phones to send airtime values called “loads” to prepaid subscribers. A parent, for example, can send a 60-peso load to replenish a child’s cell phone, charged to the parent’s account.

While Japanese and South Korean consumers have been using cell phones as virtual wallets for several years, those systems use a computer chip implanted in handset that allows people to buy things by waving the phone in front of a sensor. The Philippine system relies on simple text messages, which cost just 1 peso (2 US cents) to send.

The 41 million cell phone users in the Philippines are avid texters. The electronic connections have fostered a culture of quick greetings and forwarded jokes. Text messages also played a key role in mobilizing crowds that fueled the 2001 “people power” revolt that ousted President Joseph Estrada.

The Philippines’ two biggest mobile service providers, Globe Telecom and Smart Communications, have harnessed this penchant for text messaging to enable consumers to enter the world of e-commerce.

Tapping into the cash flow from overseas Filipinos–who sent home US$12.7 billion last year–Globe and Smart forged partnerships with foreign mobile providers and banks, as well as with local banks and merchants, to create a network that allows users to send and receive cash internationally.

When Anna Tiangco wants to send cash home, for example, she goes to a branch of her local provider, Hong Kong CSL Ltd., where a clerk credits her cell phone with the amount she has brought with her. She then transfers the money to family members via text messages–in essence instructing her providers to deduct money from her balance to the recipients she indicates.

If a cell phone loaded with cash values is lost or stolen, the money can’t be tapped as long as the personal identification number isn’t revealed. Control over the funds can be restored with a replacement SIM card from either mobile provider.

The system was “built for remote payments and for the unbanked markets,” said Rizza Maniego Eala, president of G-Xchange, Globe’s subsidiary in charge of its G-Cash money transfer service.

Eala said her company’s 500,000 G-Cash users transfer about US$100 million monthly (â‚73 million), but she declined to say how many transactions involve remittances from overseas.

Smart offers a slightly different money transfer system, used by about 5 million Filipinos, that links cash or a debit card to a cell phone.

Users load up their phones with money via text messages. The card–which costs P200 but does not require a bank account–can then be used to purchase goods in establishments that accept MasterCard, or to withdraw cash from an ATM machine.

Smart Communications spokesman Ramon Isberto said each time the recipient spends the money, the sender receives a transaction message. That allows the sender to see how the funds are used.”The added value there now is that Filipinos overseas have greater control over their funds. Believe me, that is important to them,” he said.

Smart and UAE’s leading telecommunications operator, Etisalat, have agreed to provide money transfer service to hundreds of thousands of Filipinos in the Middle East. Smart also will soon launch a remittance system in Bahrain in partnership with MTC-Vodafone and Ahli United Bank there, and Banco de Oro in the Philippines, Isberto said.

“The bank products remain clearly bank products. We positioned ourselves as an enabler for banks and other financial institutions to provide products and services to their customers in ways they would otherwise not have been able to,” he said.

Aside from transferring cash and making purchases, both Globe and Smart also allow their users to pay bills with their phones. Anna Tiangco said she pays her family’s electric bills in San Miguel from Hong Kong via text messages, just like she sends money.

“Even if we are far apart, it’s like we are still together,” she said. “This is like my wallet now.”

Mobile banking services, which are also catching on in Kenya and South Africa, enable people who don’t have bank accounts to transfer money easily, quickly and safely. It’s spreading in the developing world because mobile phones are much more common than bank accounts.

The system is particularly useful for the 8 million Filipinos — 10 percent of the country’s citizens — who work overseas and send money home, like Dennis’ mother, Anna Tiangco. Previously, she sent money via a bank wire transfer, which costs $2.50 and takes two days to clear. The cell phone method costs only 13 cents and is nearly instantaneous.

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Mobile banking is already quite widespread in Africa and also in the Philippines. In the Philippines, Smart Padala service also allows international money transfers which is a great boon to migrant workers to remit money to their families at a much lower cost than Western Union and with much less hassle. Considering the number of migrant workers within India and expatriate workers of Indian origin around the world who could benefit from such a service getting the regulatory approvals quickly will be desirable.
Mobile money transfer await Govt nod:

Hindu Businessline Feb 27, 2007

Regulation awaited [Extract]

Many of them have already developed and tested their money remittance applications, and now only need regulatory clearance for it.

“Banking regulations currently do not allow cash for exchange of another `unit’ such as `airtime’ in the case of mobiles,” said Mr Mahesh Prasad, President, Applications & Solutions Group, Reliance Communications; his company, he says, has readied and tested the application. “Only the banks and Indian Post (through money orders) are currently allowed such transfers.”

“We could do it by partnering a bank. But then the customer would have to have a bank account and go to that bank to get money. There is a multitude of issues,” said Mr Prasad. RCom is also looking at international remittance, as its Reliance India Call card has a network of distributors overseas.

In true mobile remittance, the receiver need not go to the bank but only to prepaid outlets or distributors of the mobile service provider for the cash.

Bharti Airtel recently tied up with State Bank of India for mobile remittance, and is pilot testing it at a few villages in India. “We need regulatory approvals, this is going to take some time,” said a spokesperson for the company.