Visa has launched an 'open loop' mobile money product

Payment processor Visa has launched a mobile banking product to serve consumers in developing nations. The company said that its Prepaid Mobile offering will provide an open platform for existing mobile money systems.

The product development was led by South African mobile money platform provider Fundamo, which Visa acquired in June 2011. It provides a platform for “closed loop” mobile money services provided by financial institutions and mobile operators, which are confined to their local markets.

“Visa is the largest payment processor in the world, so it’s got a vast global network that connects the financial systems of the world together, and that allows financial firms to process payment transactions across that network seamlessly,” said Aletha Ling, COO at Fundamo.

“Similarly, Visa Prepaid Mobile is an “open loop” system. This product provides a connection between local mobile money services into the Visa network, in order to bring global interoperability and new features into play, and that makes it fundamentally unique to what is being offered locally in these markets.”

She added that the product is aimed at banks and mobile operators that currently work with Fundamo, financial institutions that work with Visa, and other mobile money service providers that want to join the open loop system. Consumers of existing mobile money services will be able to use more features if their mobile money providers sign up to the product, such as withdrawing money from a Visa ATM, transferring funds internationally and performing e-commerce transactions over the web.

African and Middle East mobile operator MTN plans to offer the new Visa product to MTN Mobile Money customers across its markets. As part of the launch, the new product will be available to customers in Nigeria and Uganda.

The product aims to bring financial services to the 2.5 billion people in the world today who are underbanked or unbanked.

“This is the next generation of openness when it comes to mobile money systems,” said Ling. “Mobile money is the one way that we can see that we will be able to serve all of the unbanked and underbanked people in the world.”

South Africa's MTN has now begun its LTE pilot program

A new MVNO has launched in the UK, targeted exclusively at the African migrant community, claiming to be the first player to launch prepaid mobile credit transfer over SMS between the UK and Africa. The service effectively allows African callers to reverse charge calls to the UK.

Vizz Africa will provide a dedicated mobile SIM card to allow the African community living, working and travelling to the UK, to communicate with their friends and relatives in Africa at discounted rates.

The company claims to have agreements with all of the African operators, and the service allows users to transfer pre-paid mobile credits to loved ones back in Africa safely.

“We wanted to launch MVNOs targeted towards specific communities,” Pat Nabhan, CEO of parent company QiComm, told Telecoms.com. “The first one was with Dialog Vizz for the Sri Lankan community. We wanted to see how successful that could be and we’re now at 10,000 activations per month,” he added.

He added that the firm has plans to launch international mobile money transfer services in addition to airtime credit transfer, but that a number of banking regulatory hurdles remain to be negotiated.

“There are plans, but we’re taking things one step at a time,” he said.

Yet, the only thing really “mobile” about the cash cards is the fact that they will be offered by a mobile operator and that users will receive a text alert after every transaction. There’s nothing groundbreaking about such alerts.

The cards will essentially be plastic chip-and-PIN cards just like any others, which users will be able to use in stores, ATMs and for remote payments. They are not a mobile-wallet or mobile-payment service as such.

Marketed under the O2 Money brand, the Load & Go card is aimed at youngsters, users age 13 and older who are not old enough to own a credit or debit card, and the Cash Manager card is aimed at older people who want to better manage their finances.

The latter is accompanied by an online budgeting tool that enables users to work out how much “discretionary spend” they have a month after deducting fixed expenses. The idea is that users will then transfer any spare cash to the Cash Manager card for spending. This is an innovative concept but, again, from a mobile services perspective, it is not, since the budgeting tool will be accessible only via PC, not mobile.

Part of the thinking behind the Load & Go card is to make youngsters less reliant on having to borrow their parents’ credit or debit card every time they want to pay for something online. Interestingly, though, there is already a more mobile-centric alternative to Load & Go or relying on parental help in such instances.

A lot of web sites on the fixed internet, such as social networks, are giving users the option of making micropayments via mobile. Users under 18 might not be able to obtain credit or debit cards in most countries, but many have prepaid mobile accounts. And they can spend the spare airtime credit they have in their account on other things, such as avatar accessories, virtual gifts and other digital goods sold in online communities.

The interest is there, but…

But this is not to say that O2 is not interested in mobile-payment and mobile-banking services. It very much is. Its goal is to eventually integrate Load & Go, Cash Manager and other plastic money into handsets, turning phones into “mobile wallets,” and it has been involved in several trials to test the near-field communications (NFC) technology on which such handsets will rely. Many other carriers are working toward the same goal.

But putting all the pieces together to enable mobile wallet services is a hugely complex task. Although the technology to make it work on phones exists and has already been tried and tested, there are many other hurdles that still need to be cleared. There’s the question of how exactly the technology should be integrated into phones. There’s also the messy business of agreeing on how money will be made from the service and divided among the different value-chain members. And, perhaps the biggest barrier of all, there’s the question of how the readers that enable NFC payments will be deployed at all points of sale.

It took 10 years to get chip-and-PIN payments fully up and running – and it was just banks that were driving that project. With mobile wallet payments, both banks and operators are at the helm, involving two sets of companies from two different industries with different mindsets and agendas. So it could well take another 10 years – or longer even – to get mobile wallet payments off the ground, beyond just public transportation systems, where NFC readers are already in place.

The two biggest bones of contention among value-chain members have to do with where the so-called secure element for mobile-wallet payments should go in the phone and, predictably, revenue sharing. But there is growing consensus on these issues.

It looks as if operators might get their demand to have the secure element embedded in the SIM card and not in the phone, as some manufacturers are pushing for. But at the same time, it looks as if operators are giving up on their demand to get a fee for every mobile wallet payment made. The banks and credit-card issuers dug in their heels on that one, and it seems that, as an alternative, operators will be offered a fee for every mobile wallet account that is activated. The question now is whether operators will receive this fee as a one-time payment or on a recurring basis. No doubt they would prefer the latter.

It took the banks a lot of time and money to roll out chip-and-PIN. Beyond agreeing on standards for the card and reader technologies and then rolling them out, they also had to agree on the regulations that would govern the new payments system. The same will have to be done for mobile wallet payments, but in a much more fragmented ecosystem.

With all these barriers in mind, it’s hardly surprising that mobile has little to do with the new services announced by O2 this week. O2 is one of the operators that is most committed to offering mobile financial services. That’s why it has come up with the O2 Money brand. But it can’t press ahead with these services without first getting a long chain of other companies to join forces and stop dragging their feet.

O2 breaks into financial services market

Telefonica’s UK mobile operation, O2, has pushed into the financial services space, teaming up with bank NatWest to launch a prepaid debit card.

The first fee free, prepaid Visa cards will be available to O2 contract and prepay users by mid-August, and are designed to help people manage their spending money by doing away with overdrafts and providing real time balance updates to the mobile.

The card can be used almost anywhere that accepts Visa within the UK and abroad, as well as online. The card can also be used to withdraw cash from an ATM. A version of the service for kids aged 13 and over also means the card cannot be used at various web locations, such as online gambling sites.

Ronan Dunne, O2 UK’s chief executive, said the move fits in with the company’s strategy of the ‘mobile wallet’. “We believe that we are at the start of a journey towards the coming together of phone and wallet and we intend, through O2 Money, to be at the forefront of this trend. This launch represents an important step towards O2 becoming a leading service provider with mobile at its core.”

Last year, O2 carried out a six month study focusing on consumer acceptance of near field communications (NFC), which came out strongly in favour of the contactless technology.

The O2 Wallet trial took place over six months between November 2007 and May 2008 and involved 500 triallists. It tested consumer demand for having cards you would normally carry in a wallet, such as Oyster and credit cards, available on a Nokia 6131 NFC mobile phone.

To travel on London’s transport system or make purchases in retail stores, the user touched the phone against a reader. The trial involved a range of firms including O2, Transport for London, Barclaycard, Visa Europe, TranSys, Nokia and AEG.

Nine out of ten triallists were happy using NFC technology on a mobile phone says O2 and 78 per cent said they would be interested in using contactless services if available. Convenience, ease-of-use and the status of having such an innovative device were seen as the main benefits.

According to the study interest in having Oyster on their mobile phones was particularly strong with 89 per cent of triallists saying they were interested in taking this up. Over two-thirds of triallists also said that they would be interested in having the Barclaycard Visa payWave feature on their mobile in the future.