Mobile Money Africa

Nancy Sudheer

Etisalat has received approval to offer mobile money transfer services in the UAE from the Central Bank and the Telecommunications Regulatory Authority (TRA).

The telecom operator will now be able to roll out its previously announced mobile wallet account platform. The system lets customers use their mobile phones to make payments at outlets that accept such transactions. The user simply uploads digital cash to the mobile and swipes the phone at payment counters or ticketing machines.

Customers will use the system to pay utility bills and buy goods, and it will eventually become possible to transfer money abroad from a mobile phone.

“One of the challenges is the regulatory framework, as there are no regulations that govern mobile money,” Rashed Majed Al Abbar, Director of Etisalat Mobile Commerce, told Emirates Business.

“Despite this, the Central Bank and the TRA have given their approval to etisalat. As a telecom company we abide by the TRA’s regulations, but as a financial services provider it is essential to have approval from the Central Bank. Etisalat is the first telecom operator to receive this kind of approval in the region,” he added.

The approval covers etisalat’s banking partner in the scheme, which Al Abbar declined to name, though he said it was an international group.

“As of now we have partnered with one bank, but this doesn’t stop us partnering with other banking partners as our platform is suitable for such an upgrade. We were looking for a bank that could meet our timelines and priorities, and most of all, be flexible. We have been talking to a few banks for a long time but there was no synergy.

“For etisalat it does not make sense to work as a financial house, as its not our core competency and, therefore, it is better to work with a bank.”

Etisalat already offers a mobile payment scheme for parking fees through its Value SMS system. And it has a pilot scheme that enables customers make payments via mobiles using credit cards.

“Value SMS is being used for parking fees, buying digital content and Wasel credit. But it becomes prohibitive to offer a payment facility for physical goods and utility payments over Value SMS. The new service will start with payments for physical goods and the transfer facility will be added later.”

Former Intuit executive Dilip Nagraja has joined mobile money transfer provider Obopay as the EVP for global engineering.

Based out of Obopay’s operations center in Bangalore, Nagraja will be responsible for optimizing the global engineering organization across all Obopay offices.
Carol Realini, CEO of Obopay, said, “We are pleased to have Dilip on board as he brings deep rooted experience in overseeing engineering and technology organizations across multiple geographies. His established leadership experience spans across key vertical markets, including financial services and mobile, that make Dilip ideally suited for this role. Dilip will strategically guide the company’s technical direction as we continue to develop state-of-the-art mobile payment products and drive our business to newer heights in the developed and emerging markets.”

Nagraja brings more than 20 years of experience in the engineering and technology space. Prior to Obopay, Nagraja led the global product engineering efforts for Intuit’s accountant products division. In addition, he held senior leadership positions in engineering organizations such as Pivotal Corporation, i2 Technologies, Stonebridge Technologies, Fidelity Investments, and AT&T across multiple geographies.

Nagraja received his BS from College of Engineering, J.N.T. University, Hyderabad and his MS from Arizona State University.

Juniper Research recently forecast that NFC (Near Field Communication) Payment transactions will significantly grow from values of $8bn in 2009 to $30bn within three years. Such offerings are set to reach the UK commercial market later this year.

The Government recently announced new safety guidelines, which include disabling the payment functionality of a mobile as soon as a fraudulent payment occurs and verifying any transaction above the maximum contactless payment threshold – currently £10 – by additional security measures such as a PIN code. If a large number of smaller payments are noted in quick succession, these will also require verification in a bid to prevent criminals abusing contactless mobile payments. But are they really going to stop mobile payment fraud?

Ori Eisen, Founder and Chief Innovations Officer at 41st Parameter, highlights some of the risks, as well as anti-fraud solutions, associated with mobile payments:

“With any new payment form, the threat of fraud lingers. The increased use of mobile devices as alternatives to cards, offers an additional layer of protection to merchants and added convenience to consumers, making it appear as a win-win in the fight against fraud. But beneath the surface, concerns lurk that could potentially expose consumers to an old breed of fraud designed to exploit this new technology.

“Social engineering by unscrupulous shopkeepers can easily break the pin layer protection required for purchases over £10. Examples include; asking a customer for their pin due to “technical problems” at the point of sale (POS), and “keyvsdropping” – filming or eyeballing the pin key during the checkout process for later use.

But without the physical device one might ask “what good is having only a PIN?” Mobile phone cloning has been around since the early 1990s. Cloning involves modifying or replacing the EPROM in the phone with a new chip which allows you to configure an ESN (Electronic Serial Number) via software. You also must change the MIN (Mobile Identification Number). When you have successfully changed the ESN/MIN pair, your new phone is an effective clone of another phone. Mobile users must be vigilant with their phones – so as not to allow this new payment form to become the same card skimming/cloning game simply replayed with new pieces.

“A secure approach to Mobile Payments would be to utilise device intelligence gathered at the POS. Much like the way online Card-Not-Present transactions can use device fingerprints to validate the likelihood a device belongs to – or more importantly, doesn’t belong to – a legitimate account holder, merchants collaborating could vet out known bad or risky mobile devices. Furthermore, using a combination of the many signals sent from mobile devices – an outbound call, SMS, Bluetooth, GPS, etc – provides an additional source for authentication.

“Looking forward, a consortium of merchants working with credit issuers would allow for instantaneous recognition of a pin attempting to transact with mismatched devices, protecting the merchants from merchandise loss and issuers from chargeback loss. As for petty theft, there will surely be instances of stolen phones used for small purchases, then discarded. The real challenge is stopping professional thieves from exploiting the mobile payment channel, including the proliferation of dedicated m-commerce sites or dotMobis.

“The key to supporting the continued adoption and acceptance of mobile devices as forms of payment and for transacting online is to treat them like any other portal to the business. Layers include user name and password, pin numbers, device intelligence and behavioral analysis to protect both online and offline assets. The lines are blurring between personal computers and mobile devices.

“As with cash, credit cards/debit and gift cards, it is now as important to treat your mobile device in the same manner – keep track of it at all times.”

ONCE the toys of rich yuppies, mobile phones have evolved in a few short years to become tools of economic empowerment for the world’s poorest people. These phones compensate for inadequate infrastructure, such as bad roads and slow postal services, allowing information to move more freely, making markets more efficient and unleashing entrepreneurship. All this has a direct impact on economic growth: an extra ten phones per 100 people in a typical developing country boosts GDP growth by 0.8 percentage points, according to the World Bank. More than 4 billion handsets are now in use worldwide, three-quarters of them in the developing world (see our special report). Even in Africa, four in ten people now have a mobile phone.

With such phones now so commonplace, a new opportunity beckons: mobile money, which allows cash to travel as quickly as a text message. Across the developing world, corner shops are where people buy vouchers to top up their calling credit. Mobile-money services allow these small retailers to act rather like bank branches. They can take your cash, and (by sending a special kind of text message) credit it to your mobile-money account. You can then transfer money (again, via text message) to other registered users, who can withdraw it by visiting their own local corner shops. You can even send money to people who are not registered users; they receive a text message with a code that can be redeemed for cash.

By far the most successful example of mobile money is M-PESA, launched in 2007 by Safaricom of Kenya. It now has nearly 7m users—not bad for a country of 38m people, 18.3m of whom have mobile phones. M-PESA first became popular as a way for young, male urban migrants to send money back to their families in the countryside. It is now used to pay for everything from school fees (no need to queue up at the bank every month to hand over a wad of bills) to taxis (drivers like it because they are carrying around less cash). Similar schemes are popular in the Philippines and South Africa.
Banking on it

Extending mobile money to other poor countries, particularly in Africa and Asia, would have a huge impact. It is a faster, cheaper and safer way to transfer money than the alternatives, such as slow, costly transfers via banks and post offices, or handing an envelope of cash to a bus driver. Rather than spend a day travelling by bus to the nearest bank, recipients in rural areas can spend their time doing more productive things. The incomes of Kenyan households using M-PESA have increased by 5-30% since they started mobile banking, according to a recent study.

Mobile money also provides a stepping stone to formal financial services for the billions of people who lack access to savings accounts, credit and insurance. Although for regulatory reasons M-PESA accounts do not pay interest, the service is used by some people as a savings account. Having even a small cushion of savings to fall back on allows people to deal with unexpected expenses, such as medical treatment, without having to sell a cow or take a child out of school. Mobile banking is safer than storing wealth in the form of cattle (which can become diseased and die), gold (which can be stolen), in neighbourhood savings schemes (which may be fraudulent) or by stuffing banknotes into a mattress. In the Maldives many people lost their savings in the tsunami of 2004; it hopes to introduce universal mobile banking next year.

Financial innovation has a bad reputation at the moment, because exotic derivatives were one of the causes of the credit crunch. But mobile money and other new ideas that could help the poor (see article) provide a useful reminder that financial innovation in itself is not always a bad thing.

Given all of its benefits, why is mobile money not more widespread? Its progress has been impeded by banks, which fear that mobile operators will eat their lunch, and by regulators, who worry that mobile-money schemes will be abused by fraudsters and money-launderers. In many countries mobile money has been blocked because operators do not have banking licences and their networks of corner-shop retailers do not meet the strict criteria for formal bank branches. And some mobile-money schemes that have been launched, such as one in Tanzania, failed to catch on. As recently as a year ago people wondered whether M-PESA’s success was a fluke.
Out of Africa, always something new

But in recent months there have been some more hopeful signs. Kenya’s success story has demonstrated mobile money’s potential, and its benefits are starting to be more widely appreciated. More enlightened regulators are no longer insisting that these services meet the rigid rules for formal banking. Some banks, meanwhile, have come to see mobile money not as a threat but as an opportunity, and are teaming up with operators. And phone companies have studied Kenya closely to learn how to establish and market a successful mobile-money scheme. MTN, Africa’s biggest operator, has launched a mobile-money service in Uganda in conjunction with Standard Bank; it appears to be doing well. MTN is fine-tuning its service in Uganda before rolling it out across Africa.

Banks and regulators elsewhere should take note. Instead of lobbying against mobile money, banks should see it as an exciting chance to exploit telecoms firms’ vast retail networks and powerful brands to reach new customers. Tie-ups between banks and operators will help reassure regulators. But they, too, need to be prepared to be more flexible. People who want to sign up for mobile-money services should not, for example, have to jump through all the hoops required to open a bank account. Concerns about money-laundering can be dealt with by imposing limits (typically $100) on the size of mobile-money transactions, and on the maximum balance. And inflexible rules governing the types of establishments where cash can be paid in and taken out ought to be relaxed.

Mobile money presents a shining opportunity to start a second wave of mobile-led development across the poor world. Operators, banks and regulators should seize it.

THE ECONOMIST.

Joshua Goldstein

Profiteering by carriers is hurting developers and stopping the wave of mass consumer adoption of innovative services.

It would be easy to conclude that Africa is entering the golden age of mobile innovation. In Kenya, M-Pesa, a Safaricom service, allows users to send money anywhere in the country via mobile phone at very low rates.

Next door in Uganda, rural users out of reach of the Internet can now use a new SMS-based service from MTN, Grameen Foundation, and Google to trade goods, search the Internet, and query local reproductive health and agriculture information.

These services, however, represent a trickle of innovation where there should be a downpour. The source of this sluggishness is the “non-generative” structure of mobile phone networks.

In The Future of the Internet and How To Stop It, Harvard Law Professor Jonathan Zittrain defines generativity as the ability for entrepreneurs anywhere, driven by any social or economic motivation, to quickly and cheaply create, test and deploy applications.

Zittrain says that generativity is the key to the Internet’s rapid growth, and he worries that new web-based appliances, such as the iPhone, that can only be modified with the manufacturer’s consent, threaten this fundamental character.

In other words, Zittrain fears that the Internet as a network is becoming more like the mobile phone: costly and closed.

Mobile networks are costly because the price of sending an SMS is kept high by a combination of high taxes, interconnection fees, and network provider choice; mobile networks are closed because no one can deploy a new application without the network operator expressly adding it to a consumer package.

Rare to grant a discountIn Uganda, for example, the cost of a user-to-user message is five US cents and a premium message (any message not sent from a single user to another) is 10 US cents, despite high levels of competition and low cost.

Since it’s rare for a mobile network to grant a discount to a premium service provider, entrepreneurs must attempt to scale in an environment where, according to ResearchICTAfrica, the average Kenyan already spends over 50 per cent of her disposable income on communication.

This is not a promising environment for innovation. This non-generativity means that many new innovations will never reach the market, not because of engineering challenges, but because of the underlying cost structure of SMS.

What are we missing out on? In Kenya, txteagle, an application developed by MIT researcher Nathan Eagle, allows companies to crowd source translation tasks to users via SMS.

In Uganda, Appfrica Labs, a local software company, is creating status.ug, a mobile social network to connect the six million Ugandans using mobile phones (full disclosure: I am currently an Appfrica Labs Fellow).

The high price, coupled with the fact that entrepreneurs must spend time lobbying mobile providers for partnerships, means that applications like these face difficulty scaling.

Reason for hopeEntrepreneurs, mercifully, have reason for hope. Mobile companies and regulators around the developing world are recognising the “economics of abundance”– that more users at lower prices will result in more revenue.
In the Philippines, for example, according to telecom expert Steve Song, mobile providers charge less than one US cent per SMS on average. What is striking about this is that they manage to generate three times the revenue per capita from SMS traffic as compared with South Africa where the average SMS costs over nine US cents.

Also, in Uganda, for the first time in the telecom industry’s history, MTN agreed to lower the price of a premium SMS to 5 US cents for Farmers Friend, one of the newly launched Grameen and Google services, aimed at poor farmers.

Whether this is the exception or the new rule is difficult to tell, but what is clear is that network providers must choose whether they want to benefit from a downpour of mobile innovation, or will be satisfied with only a trickle.

The writer is a technology consultant and writer living in New York City.

Lawrence Njenga

Central Bank governor Professor Njuguna Ndung’u has assured investors in the country of CBK’s support to enable them provide financial services to the unbanked masses.

Prof Ndungu was speaking during the re-launch of KCB’s mobile banking service where customers will be allowed to open bank accounts using their mobile phones.

The “KCB Connect” mobile banking service will also allow credit card and account holders with the bank to transfer funds from one KCB account to another, from KCB accounts to M-Pesa and from KCB accounts to any phone account of the customer’s choice and pay bills among other services using their mobile phones.

Prof Ndung’u said the launch was timely as the global attention shifts to initiatives geared towards enhancing financial inclusion.

He challenged the banking sector to embrace innovations that will facilitate delivery of financial services to the unbanked Kenyans.

KCB deputy chief executive officer Peter Munyiri said the new service was meant to enhance interaction between customers and the bank.

“KCB connect is now able to provide full banking services on the mobile handset including inquiries, banking instructions, fund transfers and utility bill payments,” he said.

Zain has expanded its mobile banking service to allow customers in three east African countries to receive money from any bank account in the world, in a tie-up with Citibank and Standard Chartered Bank.

Zap customers will also be able send money to any bank account in Kenya, Tanzania and Uganda.

According to Zain, which has mobile networks in the Middle East and across Africa, this is the first time in the world any mobile bank account has been configured so that its users can receive funds from anywhere in the world directly to their mobile handset as well as send funds directly to their accounts.

Zain, which has almost 70 million active customers in 24 countries, says that customers in the three countries will be able to pay for goods and services using Zap as well as manage their bank accounts and transfer money.

Saad Al Barrak, Zain’s group CEO, commented: “Ability to send money from the mobile phone to any bank account in east Africa will enable businesses to perform more efficiently.”

Zain has been running Zap — before the latest enhancement — in Kenya, Tanzania and Uganda for six months, and plans to roll it out across all operations, the company said.

The company will work with Citigroup and Standard Chartered to ensure that national and international banking regulations are met.

Kariuki Ngari, the head of consumer banking for east Africa at Standard Chartered, said: “This service will enable families and businesses to access funds from around the world very swiftly and very securely. It has the potential to transform banking in Africa.”
Sridhar Srinivasan, Citbank’s global transaction services head for sub-Saharan Africa, said the project “will transform the banking environment in east Africa, allowing people to access financial services in all the villages and towns across the country”.

MobiCash may conveniently be described as the next generation of mobile payment system. When it comes to mobile payment options, nothing is more convenient than MobiCash cell phone payment! MobiCash is changing the rules in the contactless electronic transaction business and generates very large opportunities!

Patrick Ngabonziza Gordon, Founder / CEO, stated: “Think about it: No more Wallet! No more Check! No more Plastic Cards! No more POS Terminals! No more Wired Networks! No more handle of any Paper Money! All you have to do is to make a call and your mobile phone signs for you!”

Mr. Gordon went on to say: “With just a mobile phone number and a digit PIN and a free MobiCash account, MobiCash customers can make secure cashless transactions. All phones can make payments using MobiCash no matter what phone model or network operator. You do not need to modify your phone in order to use MobiCash. Due to its simplicity MobiCash mobile payment has wide appeal, is easy to deploy and open to everyone – there are no complicated software downloads necessary and no restrictions to enrolment.”

MobiCash is a complete mobile payment platform that works immediately on every phone. Transactions are securely signed with NSDT™ (Near Sound Data Transfer), a technology that sends “cryptosounds” through the phone’s audio channel to enable contact-less mobile payment.

If carrying cash makes you uncomfortable, MobiCash comes to the rescue. Simply top up your MobiCash account with cash and you can enjoy all the benefits today, online, mobile-commerce and at participating merchants. At MobiCash, we decided to leverage the ubiquity and power of the standard mobile phone as a payment platform, delivering more customer convenience. MobiCash is able to offer anyone with a cell phone a convenient, simple to use mobile payment and banking at low transaction fees regardless of the device and the mobile network operator you are on.

“In banking the poor”, says Roger Munya, Vice-President Business Operations, “MobiCash go beyond the basic payment service by explicitly seeking to add other financial services which meet the needs of poor families such as basic bank accounts, savings and micro-credits. MobiCash services provide the first real opportunity for many poorer people to get on to a formal “banking ladder” with benefits including reduced threat of crime, time saving and secure savings opportunities.”

“Rather than simply being paid out in full each time, the recipient can decide when and how much withdraws in cash, and how much to leave on his MobiCash account. As a result of having the account, she or he is more likely to be offered other financial services, since the installments for these services can be collected cost effectively from the account in electronic format; and since the electronic record of cash flows through the bank account could be the basis of assessing credit worthiness.”

The security of MobiCash also rests on the security of the phone’s SIM card, which is presently incorruptible. Access to the client space on the MobiCash website is equally protected using NSDT technology and access is only granted if the phone is present.

Financial firms are incurring huge losses from the use and overuse of credit cards, along with outright fraud and abuse (*The FBI’s Financial Report to the Public for 2007 states that credit and debit cards incur annual losses more than $50 billion involving over 10 million Americans.)

If you lose your phone, your funds are still safe and accessible. MobiCash account information is not kept on your mobile phone or SIM card—it is stored on secure servers just like your money in your bank’s checking account. You will never lose your MobiCash funds or account information no matter what happens to your phone.

You can add money to your MobiCash account on the web using your credit card or directly through the merchant using any accepted payment method.

There is no more need for expensive point of sale telephone lines or any type of network to accept on line transactions on NSDT™ terminals: The customer’s cellphone is used as the POS terminal modem.

MobiCash turns any cellphone into a Merchant Point of Sale (PoS), giving the merchant the ability to do both Merchant-to-Customer and Customer-to Merchant transactions opening up business opportunities for a multitude of small businesses and operators. The merchant can sell goods and services as well as take deposits and provide cash back services.

Merchants equipped with MobiCash’s Payment Terminal (MobiPad) can accept payments with MobiPad at their point of sale. To receive a payment, the merchant enters the amount and the client enters their phone number and their PIN on the terminal keypad.

MobiPad calls this number and the transaction is signed by dipping the phone into the MobiPad payment terminal—the signature is instant (~2 sec.) and each account is credited and debited accordingly. Transactions are confirmed by SMS, vocal-message, email, or printed receipt. Merchants can even accept transactions without a Payment Terminal, they could just use ….their phone !

To reduce the costs of financial infrastructure, it is necessary to piggy back on other cash handling businesses, such as local merchants who already have cash in their tills. The point of sale technology necessary to enable financial transactions such as withdrawals from bank accounts is much cheaper to deploy than, say, ATM technology but the result is similar: the merchant becomes a manned ATM.

MobiCash is creating a fully meshed African Payment Network with points of presence (POP’s) in all major African cities. A fully operational Pan African Payment Network will allow African nations to link directly with each other, rather than having to switch through one of the major US or European hubs.

MobiCash has already established a firm foothold in Africa and has or is finalizing licenses, joint venture agreements with in country partners in Africa and the rest of the world with operational points of presence (PoP’s) in the following locations: South Africa, Namibia, Angola, Botswana, Zimbabwe, Swaziland, Mozambique, Tanzania and Rwanda.

About Mobicash

Headquartered in Johannesburg, South Africa, MobiCash is an international mobile banking and payments solution provider working with telcos, banks and transaction processors in Africa.

MobiCash and Tagattitude, announced their technology partnership in November 2008. Tagattitude has packaged a number of applications that are included in the service platform called TagXess™, all of them using a patented proprietary NSDT™ Technology.

TagXess from Tagattitude leverages the MobiCash payment platform to provide financial institutions with a complete mobile banking and payments solution that supports consumers on all three mobile access modes, offers online and offline enrollment capabilities and integrates with core banking, online banking and electronic payments systems.

Botswana’s telecoms regulator has warned that the vast majority of prepay SIM cards have yet to register their ownership details before a cut-off deadline at the end of this year. According to the Botswana Telecommunications Authority’s Public Relations Officer, Twoba Koontse, just 267,113 subscribers have registered their details.

This represents around ­13 percent of the customer base in the country.

“I am obviously not happy as the numbers of those who have registered now are by far below what we have expected to have registered by now,” Koontse.

He has urged the operators to publicize the need to register their details lest their SIM cards are disconnected in the new year.

“We are also doing our part by running adverts in the media and holding road shows around the country,” he added.

“Our deadline stands. All those who will not have registered on 31 December will be cut off,” he promised.

He also indicated that the registration was required due to laws from an organisation called the International Telecommunications Federation – which if a reference to the ITU, might surprise the UN body as it hasn’t made any policy on the matter, let alone been able to pass laws about it.

Ghana News Agency

Mr Nvalaye Kouroma, Chief Executive Officer Afric Xpress Ghana, an electronic payment solution provider focused on mobile payments, has said the company is taking steps to increase the number of agents across the country to ensure that many more people benefit from its payment and transfer services.

The company in April signed a deal with the Ghana National Chemical Sellers Association under which members will transact businesses with customers using the txtNpay mobile phone electronic platform.

Under the partnership agreement concluded in Accra the over 10,000 members of the association nationwide would act as agents for Afric Xpress in the various communities in which they operate.

“It is the desire of the company to reach as many Ghanaians with its services once they are hooked to a mobile network,” Mr Kouroma told customers and agents at a reception at the weekend ahead of a Board meeting in Accra.

“Our expectation is to see people in the remotest part of the country turning up at an agent’s shop and getting money sent to them by their children in the city,” he added.

The company hit the Ghanaian market in 2008 announcing its mission of introducing a fast, reliable and convenient electronic-based payment system to transform lifestyles through its txtNpay secured mobile phone-based payment system.

The system allows users to send money to any other person with a mobile phone, pay utility bills, purchase goods and services, buy pre-paid phone credits, check their bank account balance and engage in many more transactions with their phones.

The “txtNpay” technology uses an application which is SMS-based and essentially consists of an electronic platform that is directly accessed from the customer’s mobile handset.

Mr Kouroma said the product had made it easier for clients to use their mobile phones to make payment or transfer money to local banks, utility companies, internet service providers, hospitality institutions and tertiary institutions, among others.

“Our company’s mission is to bring transformational and innovative mobile phone-based payment solutions to the Ghanaian market and subsequently the rest of West Africa in order to build an electronic payment network which will virtually turn every mobile phone into a payment device,” he said.

Mr Keith Keenam, a board member, said the meeting would be used to give strategic direction to enhancing operations in the country through improved quality and efficient services delivery.