Mobile money has helped provide banking services to those that previously had no access to them, for ten years

The mobile financial services community is celebrating the tenth anniversary of mobile money. The first ever mobile financial service was launched in Zambia in 2002. It was launched by Celpay, and powered by Visa-owned Fundamo. The service was the first in a movement that has fundamentally transformed the way unbanked and under-banked people in developing nations use financial services.

The service was launched in partnership with six major banks to provide a secure and convenient method to transfer money. Celpay enabled instantaneous payments via the mobile phone, and in doing so, removed the risks associated with cash and cheque payments in Zambia.

“The launch of the Celpay service ten years ago was the beginning of a community that has had a profound social, economic and technological impact in Africa and beyond,” said Hannes van Rensburg, CEO at Fundamo.

“Implementations such as the one we started in Zambia have ignited the imagination of our community and the wider world. As we look to the future, we are certain that mobile will continue to play a critical role as a driver of financial inclusion worldwide”.

Celpay Zambia was instrumental in the growth of mobile money, processing funds equal to 10 per cent of the Zambian GDP between 2005 and 2010. Today, Celpay Zambia partners with 15 banks, has extended into new geographical markets and has processed in excess of $2bn in mobile payments, with global brands such as SABMiller, Total and BP joining as customers.

“When we launched Celpay in Zambia, we had no idea that we were pioneers. We just found a solution to a business problem using mobile technology,” added Lazarus Muchenje, chief executive of Celpay International. “The Zambian deployment was a runaway success and gave a glimpse of the potential mobile financial services had to offer.”

In ten years, 100 million people have been newly ‘banked’ using mobile technology, although mobile financial services are far from reaching their potential. According to the GSMA, 2.5 billion adults still lack access to formal financial services, such as savings, payments, loans and insurance. Juniper Research has forecast that the number of newly ‘banked’ people will double to 200 million by 2013.

Barclays launches contactless payment service

Financial services provider Barclaycard has introduced a sticker-based contactless payments offering  to support mobile money transfer service Pingit in the UK.

The PayTag sticker allows Barclaycard customers to make payments with any mobile phone (or object they put the sticker on) by tapping the device to a reader at the point of sale. PayTag can be used to make payments of £15 and under, which will rise to £20 in June. It is available at no cost, exclusively to Barclaycard Visa cardholders.

“More than half of us say that the item we’re most lost without is our mobile phone, so we’re giving people the option of using them to make easy, convenient, everyday payments without the need to upgrade their current handset,” said  David Chan, CEO of Barclaycard Consumer Europe.

Visa recently predicted that the number of contactless point-of-sale terminals in the UK will rise by 50 per cent to 150,000 this year, stimulated by major retailer such as McDonalds, WH Smith and Tesco investing in contactless PoS terminals.

By the end of 2012, London buses will also accept contactless payments, followed by the Tube and the rest of the transport network in the Capital in 2013.

Barclays also announced a joint initiative with Orange last week, allowing credit or debit card holders from all UK banks to load money onto the Barclaycard mobile payments application, the Quick Tap wallet. The initiative will open up contactless payments to more Orange customers. Orange also confirmed that it would be making Quick Tap available on a range of Android smartphones.

Barclays made its entrance in the mobile money space in February this year with Pingit; a person-to-person service for sending and receiving money using mobile phone numbers but has long been a champion of contactless payment services. Although the PayTag is a one trick pony, it may well help embed the concept in the minds of consumers.

Mobile money to be worth $1tn by 2015

The global value of mobile payments is set to reach close to $1tn (£591bn) worldwide by 2015. The driver will be consumer demand for devices with NFC technology, which are expected to instigate a 97 per cent growth per year, over the next three years, according to a report by KPMG.

Demand will also be driven by consumers’ growing desire to shop in environments that are ‘always on, always fast and always accessible’, the report added.

“Growth in the m-payments marketplace will be driven by customers’ increasing need for convenience and the development of a raft of new applications enabling commerce in the palm of our hands,” said David Hodgkinson, senior manager in KPMG’s customer and channel consulting team.

“Today premium SMS dominates mobile payments, but by tomorrow contactless and cloud-based services will dominate, with an expected market share for contactless of 37 percent by 2015.”

The firm’s data also shows that 21 per cent of retailers already view m-payment capability as important enough to be their ‘main activity or, at least, a key enabler’.  Just two per cent see m-payments as unimportant, believing it will have no bearing on their organisation.

“There is certainly scope for collaboration between smart-phone manufacturers, telecom companies and retailers but the big, unanswered question revolves around who the customer will trust with their data and their m-cash,” said  Gerry Penfold, partner within KPMG Risk Consulting.

“Battle lines will be drawn around issues such as security, infrastructure and interoperability of devices. For consumers, speed and security of payment will be the mark of success, but for technology and telecoms companies, speed to market will be critical and how quickly they can respond will depend on the impact of regulation.  Clearly, though the winners will be the companies that can provide the richest consumer experience with the greatest convenience.”

Look out for our special focus on mobile financial services this month, on Telecoms.com and in Mobile Communications International (MCI).

Mobile money is helping workers in developing nations receive their full wage

Mobile salary dispersal is being used to fight corruption and ensure workers receive their full wage in emerging markets, according to the head of a mobile commerce and financial services solution provider.

Pankaj Gulati, CEO and chairman at More Magic, said that as an example, in Afghanistan, the introduction of mobile money services has served to expose the extent of corruption within the police force.

“Previously, the superintendent of the police force used to receive a bundle of cash each month and distribute salaries from that,” Gulati said.

“He would keep some of that cash to himself. Now, he’s the most reluctant person to embrace mobile money, because he gets cut out of the loop. Whenever we look to begin offer salary dispersal services to police forces, the superintendents and supervisors are always the last ones to join hands with us. That’s why you’re seeing a lot of impetus and a lot of successful use cases around mobile money.”

He added that there are also opportunities in India to give construction workers their full wage. In some instances workers are currently receiving less than a third of their wages, Gulati said, but the introduction of mobile salary dispersion services is helping to improve that.

“Whenever the Indian government has construction projects, where they are carrying out road works or building bridges, the worker typically sees just 30 per cent of what the government is supposed to be paying him. That means 70 Cents per dollar disappears to corrupt middle men,” Gulati said.

“There are no formal means of sending money home, I’ve seen it with my own eyes in Haiti. A man works for his money, he goes to the bus driver, who drives the bus from the capital city, Port au Prince, to his village. The worker says to the driver: ‘You know my father, here is the money’ – and he gives him an envelope with the money.”

“It’s informal, it’s insecure, it’s just based on trust – and 90 per cent of the time it works, but the father on the other side is never really sure that the amount is what the son really sent him.”

He added that More Magic has been working in Haiti before, during and after the earthquake hit in 2010. At the time of the earthquake, NGOs went to the country, and hired a lot of aid workers, who they paid on a daily or weekly basis. There were two US aid projects and no infrastructure to disperse money.

“We came with a mobile money service and within the second month after the earthquake 70,000 people were receiving money on their mobile phones, and places were set up where they could go to collect their cash.”

Gulati added that by offering mobile money services, workers in developing countries are also changing their saving habits and are now better able to save.

“People save cash by storing it under their mattress in these countries. So the worker goes out, earns their money and at the end of the day, spends it – and then tomorrow is another day. The concept of saving, in these markets, just does not kick in, because of the inherent nature of dealing with cash. Mobile banking services are changing that now.”

He added that the reason workers in developing nations are able to see the benefits from mobile money services is because of a lack of banking infrastructure in such nations, and explained that this is due to the modest opportunities on offer to the world’s banks in such markets.

“Banks are in this business to make money. When the per capita income in these countries is $700 per year, it’s very hard for a bank to say: ‘I’m going to have a traditional brick and mortar branch with ATM machines, full-time staff and call centres’. Banks are just as aggressive when it comes to building their business as any other entity, but there has to be a business case for it, and in some of these poor countries, there is just no business case for it.”

Monitise plans to acquire US counterpart Clairmail

UK mobile payment technology and services provider Monitise has announced plans to acquire US based counterpart Clairmail, in a bid to create the “world’s largest pure-play mobile money company”.

Monitise will pay $173m for the acquisition, which is conditional upon US regulatory and shareholder approvals, and the firm expects the deal to be completed before the end of the financial year 2012.

Between them, the two firms currently provide mobile money services to 13 million registered consumers via financial institutions such as the Royal Bank of Scotland Group, Lloyds TSB, PNC Bank, US Bank and Fifth Third Bank, among others.

One third of the top 50 North American financial institutions, including eight of the top 13, are using either Monitise or Clairmail’s services, as well as hundreds of smaller and medium sized financial institutions, the firm said. It added that the deal will provide the ability to offer enhanced product functionality to US financial institutions and a far broader product roadmap.

Clairmail’s management team and employees are expected to remain with the enlarged firm, with Pete Daffern, CEO at Clairmail, working closely with Frank D’Angelo, executive chairman at Monitise to focuse on accelerating growth opportunities in the US. Following the acquisition, Monitise will have 600 staff across North America, Europe, the UK, Asia-Pacific, Africa and India.

Clairmail’s revenues grew by 90 per cent in calendar 2011 to $18m and combined pro forma revenues for calendar 2012 are expected to be close to $100m. Before the end of calendar 2013, Monitise expects the acquisition to break even in terms of earnings beforee interest and tax, with gross margins in excess of 70 per cent by June 2013.

“Combining Monitise and Clairmail substantially accelerates our already strong position in one of the world’s leading banking and payments market, namely the US,” said Alastair Lukies, group chief executive at Monitise.

“With a population of 314 million and over a 100 per cent mobile phone penetration, it is anticipated that 111 million US consumers will be using mobile banking by 2016 while mobile commerce revenues are forecast to hit $31bn in 2016.  The future of payments, the internet, retail and social networking is all mobile.”

Last year, financial services provider Visa Europe invested $39m in Monitise, and earlier this month said that it intends to take a 15 per cent stake in the Mobile Money Network (MMN) – a joint venture between Monitise, Best Buy Europe and Carphone Warehouse, and telecoms entrepreneur Charles Dunstone.

Look out for our special focus on mobile financial services in April, on Telecoms.com and in Mobile Communications International.

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.