About Charmaine Oak

Charmaine Oak is the practice lead for Digital Money at Shift Thought. She has over 27 years of experience of creating and delivering solutions to market. Her skills and experience are at the intersection of mobile, banking and payments. She brings a unique perspective, having contributed to significant ventures at leading global companies: Western Union - one of the world’s largest financial brands, France Telecom/Orange – a leading mobile operator, Royal Bank of Scotland – a leading bank, LogicaCMG – the Pioneer in SMS and Wipro – one of the world's largest IT service providers.

Payments systems in the US – A sleeping giant awakes

Posted on July 4, 2015 by Charmaine Oak

This weekend as we joined in wishing our American friends and family around the world a wonderful Independence Day, my thoughts turned to how Payment Systems are changing in historic ways in America, in many ways setting off a chain reaction that will transform the way we transfer value, not just in the US but world-wide.

The danger was that the land that introduced the first universal credit card back in 1950 had done such a good job of meeting consumer needs that it would be hard to get people to adopt new methods. It took a number of different initiatives of a decade or more to finally get this to happen.

Mobile Payments starts to take off at last

Did you know that mobile payments in America are expected to grow from $3.5b spent by 16 m shoppers in 2014 to a massive $27.5b by next year? Even then this will still be just a fraction of the $4.3t retail store payments made in the US. The common man or woman in America is seeing changes in the way they pay for tolls on the roads and how they pay each other, as well as pay bills and shop online.

Digital wallets – not there yet, but on the move

For the longest time it seemed as if this would not happen, especially after the strong push towards digital wallets in 2011 seemed to fizzle out. However now it seems this was simply the calm before the storm. Each side has reinforced itself as major battle commences to win hearts, minds and mobile wallets, but this time I believe what happens in America will not stay in America.

The US market becomes NFC-ready

Finally this year we have seen important moves towards new forms of mobile payments vi a NFC, QR Codes, MST, BLE and more, with a reported 70% increase in mobile commerce in the US since 2012.

On the one hand US POS is finally beginning to support EMV, as the October 2015 deadline looms. As the difference between the cost of contactless and non-contactless terminals is not vast, retail outlets are increasingly becoming NFC-ready.

Retailers look for online and mobile innovation

On the other hand top US Retailers have finally realised that the future of their brands depends on a golden braid of inextricably woven marketing and payments campaigns that rely on ever deeper market understanding to help get, keep and grow their customer base.

As in other countries, transport is becoming one of the first applications for consumer adoption of digital payments, as existing methods for paying get removed and replaced by new ones. Online payments are now widespread, but fear of loss of identity and security breaches still leaves a gap to be filled, causing a lot of focus on biometrics, authentication and fraud prevention. However for adoption to deepen across America the real driver will be offers and marketing campaigns.

Marketing and Payments: Perfect Partners

Here is where mobile payments comes into it’s own, with a unique appeal with respect to marketing. By 2016 over 196 million smartphone users become accessible to persuasion to buy in new ways. When Amazon was founded on July 5, 21 years ago (Happy Anniversary Amazon!), Jeff Bezos and team showed that deep understanding of what we want can actually be used to help us in finding what we’re looking for without proving overly offensive. Now we are at the cusp of a new revolution, as every possible route is being explored in pursuit of a new American Dream. The subtlety with which the new marketing capabilities are used will largely decide how quickly people adopt new payment methods.

Loyalty provides an incentive for change

Today store-issued credit cards and store rewards are being added to Apple Pay, Google Android Pay. Soon Walgreens hopes their 80 million members of Balance Rewards program will be able to use loyalty points with Apple Pay, and all eagerly anticipate smartphone, device and watch payments to increase. The new mobile payments methods will allow consumers to save on their shopping, by directly saving with the use of loyalty rewards.

American providers look for world markets

But this time American providers have a much larger canvas. If they get the digital loyalty-payments nexus right, there are other markets in a high state of readiness across the Atlantic that can help their brands grow. Apparently I am not the only one to leave my loyalty card behind, on the day when I find a retailer has one of their nicest sales on - in the UK unused loyalty cards reportedly cost us shoppers an estimated £5.2 billion.

The future – real time payments

But as I have said before, the real value comes when channels are made to properly work together, and this is what is starting to happen in the US. On my recent visit a short while ago I found payments really getting embedded into very interesting user experiences thanks to growing investment in FinTech.

Consumers and merchants are likely to see a lot of value-add over the coming months and years as Americans increasingly declare independence from cash payments, especially if payments can become real-time, something that has proven elusive until now. Importantly, it will not be long before the ecosystems grow beyond the US, and partnerships that are under formation now are likely to be important at least in the first phase of expansion.

Happy Independence Week America!

Payments and Remittances Industries meld further into Digital Money as PayPal acquires Xoom

Posted on July 2, 2015 by Charmaine Oak

When I first entered the remittances industry the separation of these two industries was seen to be one of the laws of the universe, just as mobile was seen to be a desirable channel for which new silos were being built.

I wrote The Digital Money Game to address the issues I foresaw with the convergence of industries and services into a multi-trillion dollar space we at Shift Thought continue to map out as Digital Money through our research in each country, as it transforms industries we have so far taken for granted.

While the remittances industry is alone worth over $580billion, when you consider the melding of industries into Digital Money the prize increases exponentially as I prove in my book. Why would a consumer care to sign up to a new service (with perceived security, identity and operational inconveniences) for executing what is likely to be at most a single transaction a month? Would the consumers who choose to stay with cash as an economy goes digital really be the segment the brand wishes to deepen relationships with?

So it is no surprise that PayPal announced a few hours ago that it acquired Xoom for $890 million, as it prepares to leave eBay. As I see it, there was no option. When viewed from the Western perspective PayPal seems like a market leader, but as I studied each Asian country in depth, many challengers came to light as far back as 2011, when we announced that Alipay was claiming to have way more digital wallet users than PayPal. Since then Alibaba has grown substantially and Ant Financial Services has become a comprehensive digital money brand, as we report in our China analysis.

In our recent analysis of PayPal versus Alibaba’s ANT Financial Group we discovered that while PayPal, Paydiant and Venmo together form a strong capability this leaves a big gap to fill. To what extent will Xoom help fill this gap? This will depend on how soundly it goes international with PayPal’s help.

Xoom founded in 2001 today operates only to send money from the US, with 1.3 million active customers who send $7 billion to 37 countries, and this will have to change rapidly. Xoom has been recently entering emerging markets such as Mexico, India, Philippines, China and Brazil, but this has been in terms of receiving money electronically. What Xoom has capitalised on is the real-time payment infrastructure beginning to be established around the world, and this is how it entered India for instance. What is has yet to do is to establish Send operations from other markets.

So for me the success of this venture hinges on the question of whether with Xoom, PayPal has better success in the last mile in India and China, and other key emerging markets. To achieve the ubiquity of Western Union and MoneyGram PayPal will need to address remittance corridors in 200+ countries and territories, and do this rapidly.

As I’ve said before, brands are being built and broken by the trend towards Digital Money and we’ve entered the age of mega-groups, but it will not be easy to get this right. There are substantial differences between the market segments, as I’ve learnt through numerous studies, focus groups, interviews and research we carry out in each part of the world. However it is well worth attempting, and indeed as I repeat, I see no other option.

Mobile wallets – helping consumers enjoy life more in Canada

Posted on July 1, 2015 by Charmaine Oak

In honour of Canada Day today, I fell to thinking about how mobile payments may be able to help folk lead happier lives, for instance by providing more opportunities to enjoy things exactly the way we like them, through the great things technology can now do for us.

Chances are if you live in Canada you will probably already be waving you card to pay today, as I do here in the UK. Thanks to debit payment network Interac having set a 2012 deadline for adoption of Chip-and-PIN for merchant liability shift, Canada pulled way ahead of the US. By February 2014 over 75% of major retailers already accepted contactless payments, with just 2% of retailers doing so in the US, leading Ben Myers to argue Why Apple Pay Should Have Launched in Canada First.

You are probably less likely to pay using your mobile phone though from what I hear consumers already do so at McDonalds, Loblaws, Starbucks and others. Now with the re-launch of Suretap mobile wallet a few days ago, use will hopefully broaden, as the ecosystem includes 5 mobile operators, 38 credit cards and 30 gift cards, with support to NFC as well as barcodes. Recently Humza Teherany wrote an interesting post on the status of mobile payments in Canada.

So the question is will Canadians be tempted to pay with their mobile phones at last? I believe this depends on how the services are positioned to help the merchants and consumers. Being a foodie, here is an example that appeals to me, to speculate same time next year how things might look, if all goes well.

As we all want what we can’t have, it caught my eye that Burger’s Priest has a special, succulent offer just for Canada Day today. It is a surf & turf Confederation burger, with all the good things I associate with Canada: topped with Ontario-farmed bacon, Nova Scotia lobster tail, and Quebec maple syrup.

But what if you preferred just the surf or just the turf? Or more importantly, what if you’d love a burger but are on a low salt, low fat or gluten free diet? One of the huge problems the food industry has is catering to the different preferences. Sure we can state a few preferences when we drive by, but to save embarrassment of holding up a queue of cars I expect many consumers may prefer to simply stay away.

Here is where mobile wallets such as the TD Bank/PC Financial Ugo or Suretap, now preloaded on Rogers devices could come into their own, hopefully before Apple Pay captures market in Canada. Once you’ve ordered and paid with a mobile wallet, it should be quite easy to say “Same again”, order ahead, pay as you please and get your burger where you please, when you please and how you please. The new processes could do so much more. And if it is your birthday, you may even be surprised with a little something special – picture that!

So perhaps come July the 1st, 2016 more people may be enjoying more of what they like, while still staying healthy and fit. Anyway, all this wishful thinking was just a prelude to wishing Happy Canada Day to all our friends north of the world’s longest land border. I may not be able to share that burger with you (yet), but we can raise a glass of bubbly together!

Mobile Payments in Europe: State of Play and Future Outlook

Posted on June 26, 2015 by Charmaine Oak

In this interview Christian von Hammel-Bonten shares insights on how he sees mobile payments develop across Europe, from his key position as EVP at Wirecard AG, a technology and financial services payments company that is a leader in both acquiring and issuing business across the region and world-wide.

Christian thanks very much for your time today. Could you please give us some context of Wirecard and what you do?

Simply said, Wirecard is a global technology group that supports companies in accepting and issuing means of electronic payments. We offer services in all roles of the payment value chain: issuing, issuing processing, payment service provider, acquiring and acquiring processing. Group operating activities in our core business are structured into key target industries: Consumer Goods, Digital Products, Travel & Mobility and Telecommunications. The idea of these verticals is to understand needs of our clients and deliver focussed solutions. In my current role, I am in charge of the Telecommunications sector that includes all products & services related to mobile payments.

Europe has historically had the longest history with pursuit of mobile payments. From your experience over the years how has 2014-2015 differed?

In past years, NFC was always a topic that was discussed but had not seen solutions being commercially rolled out. This changed in 2014-2015. We’ve seen launches in mobile payments, with Wirecard involved as well. Bank activities have increased with cloud based payments involving Visa and MasterCard. On top of this, the launch of Apple Pay in the US and now announced for UK, has increased awareness and interest on the merchant and consumer side.

Would you say that mobile payments is converging or diverging?

I believe we are at the early stage of Mobile Payment and as I look at the early activities in Fintech we’re at the beginning of a disruptive era. When we started Wirecard 16 years ago e-commerce was below 1% of retail sales, no one would have predicted the size of retail sales online today. Looking back I compare it with the trend relating to digital cards.

The activities and discussions focussed too much on the term mobile payment. It is digital payment that may be delivered through the mobile but other device types such as wearables may be equally promising. One thing that is clear is that the physical element, namely the plastic card, increasingly disappears – it will be transformed into another form factor, digitized credit credentials.

But how would we extract cash in that case?

In a number of European countries we observe initiatives that are resulting in cash fading out. Take Sweden, Denmark and UK for instance. In my opinion, cash will not ever disappear in the near future but the majority of payments you receive will increasingly be digital payments going forward.

What are some peculiarities you observe in Europe versus your other activities in other regions such as APAC, UAE and South Africa?

Developments in E-commerce across all these regions differ, and even within Europe, countries are at different levels of maturity. E-commerce in Europe as a whole is highly developed, as we enjoy high levels of mobile coverage of good quality. Infrastructure is essential, of course, for the success of digital payments. Communications infrastructure becomes the highway for retail stores and effective communication networks are a pre-requisite.

Another factor is payment culture in various countries. The use cases and consumer needs differ. If you look at Africa it’s not NFC mobile payments that is needed, rather it is mobile money because of the lack of banking infrastructure. Across APAC again it differs widely. In Singapore there is a high penetration of cards and terminals, but in nearby Philippines this may be completely different. Similarly you can compare Germany and UK on these parameters. In Germany ELV solves merchant problems and consumers still prefer cash.

Success in payments comes from understanding the needs of players in all parts of the ecosystem. Paying with a mobile device may not be needed as a tool for financial inclusion where we have well-developed banking infrastructure, but in Western countries and world-wide, crowd funding, P2P lending and other services are rising up to meet unique consumer and business needs.

M-Pesa recently launched in Romania possibly as they identified a larger proportion of under banked, largely based on cash. This may be a viable solution in the Romanian market but not suitable for UK or Germany. Although there is a short distance geographically between European countries, there can be big difference in payments.

Could you share some insights from your work on mobile wallets such as with the BASE Wallet, Deutsche Telekom MyWallet, Orange Cash and Vodafone SmartPass?

We see huge differences in European markets that cause different states of readiness. In UK we have markets ready for digital payments, but Germany is somewhat behind in this respect as payment culture is different.

A good way to understand this is to study the number of terminals and the number of cards in each European market, and trace the growth of contactless in POS. Apart from UK, Switzerland is also heavily contactless. In Spain too consumers have embraced contactless payments. In other countries we have to be patient until the necessary relevance is established on the consumer side.

So we have to be somewhat patient but no one contradicts that in a few years the majority of payments will be made digitally – with a smartphone, wearable or other digital form factor.

Is it digital natives who are installing these apps or others interested as well?

It is really both. The ones who adopt are generally people who have an affinity to the service, but also towards technology. If you use your mobile phone today only to make phone calls you’re not perhaps someone who would adopt mobile banking and mobile payments.

Generation Y use smartphones heavily and rely on mobile banking for managing family finances. We also see that males are more predominantly early adopters of the new services.

Would you say there is a growing importance of the mobile number in all of this?

Yes, Certainly. Like the email address is already more important today for your communication than your postal address is, the mobile number is already a personal identifier for many activities.

The mobile number has the potential to act as a proxy for many underlying financial services. Take for example P2P transfers. It is challenging to remember bank details, more so with IBAN, so the mobile number becomes a link to your bank details in successful solutions such as Pingit, Paym or MobilePay. Also, you don’t have to remember phone numbers as the phone book does this.

Do you see SEPA as an instrument for achieving more consistency in payments across Europe?

At first people took some time to be convinced but today SEPA Credit Transfer and SEPA Direct Debit simplifies things for people making payments across Europe. It is a future enabler for a number of bank services and if banks want to stay competitive they need this form of interoperability.

The only thing missing is instant payments, and I hope this will come, European-wide. However banks are finding it difficult to set something like this up on their own. Really it should already have been made available across Europe, as UK already has Faster Payments. There are a number of banking innovations in the UK such as Pingit, Paym and Zapp (expected) and these are greatly facilitated by real time instant payments.

A good financial and payment infrastructure is crucial for supporting businesses and consumers. It is as important as a good road infrastructure and it is the prerequisite for innovative digital services.

Yes, I see how this could help to address some of the disruption to banks from FinTech, but also enable innovative new services from new entrants that compete with the banks. Speaking of this, Wirecard launched the Wirecard Smart Band based on HCE – could you please share a bit about your experience with HCE?

HCE or Cloud based payments has greatly increased the possibilities for banks, telecommunication companies and others to offer mobile payment services. In the past, almost all such projects depended on hardware-based elements such as the SIM and embedded secure elements (eSE). However, something that is hardware based has an owner who seeks control and finding collaborative models between all stakeholders delayed or prevented the launches of mobile payment solutions.

With HCE/Cloud-based payments however, such collaboration is less essential, which is its best advantage. Financial Services groups across Europe are looking closely at this technology. No solution I’ve seen is as convenient in being able to enrol users and deliver digital cards to them. Why should we buy gift cards in supermarkets, when we can just send them digitally and use gifted money through apps?

I believe the distribution of cards is about to change, and plastic cards will increasingly disappear as we have digital cards, and not just one each!

What does Wirecard do to help companies, say a UK-based retailer wanting to move on this opportunity?

Wirecard offers two different approaches. Firstly we help our partners to build up new card portfolios by issuing cards, irrelevant of the form factor as an issuing bank with licences for the SEPA region.

Secondly, we enable our partners to digitise their existing cards and it does not matter which NFC approach – SIM, eSE or HCE – clients prefer, we are technology-agnostic and support them all. So with respect to retailers, we enable them to issue digitized cards to their customers as part of their loyalty solution. This allows retailers to offer their customers a convenient and fast option for paying, in order to simplify overall checkout and at the same time leverage additional opportunities to engage with customers.

Do you also provide an app if clients don’t have one?

Yes, we have built a flexible, agile platform to cater to different environments. We offer to integrate through Software Development Kits (SDKs) with existing apps or we can provide a customized app.

All apps of our live solutions including Orange Cash and Vodafone SmartPass have been customized to meet the client’s branding and functional requirements.

What is the best path to interoperable mobile payments across the EU, for instance for a UK customer using a smartphone to pay in Spain, and what’s the outlook for 2015 and beyond?

Right now existing solutions are based on Visa and MasterCard specifications and may be used not just across Europe but also world-wide.

Your example is an interesting one, as travel is one of the biggest drivers for prepaid in the UK market. If you are going to Spain, instead of buying a card you can just go online, register and get your digital / virtual card, top-up and start to spend.

This is a good example of how we see the future of cards. Digitization started and progresses in many areas of our life and payment cards will be clearly affected as well. Short term we will see the first big success of a mobile payment solution with the launch of Apple Pay in UK in 2015. This will spur all activities around mobile payments in Europe and bring us closer to a world of digital cards and a cash-less society.

Thanks very much Christian, it has been very useful to gain your insights on mobile payments in Europe and I take this opportunity to wish you the very best for the future.

Christian von Hammel-Bonten is Executive Vice President Telecommunications at Wirecard AG. Christian has almost a decade of experience in the online payment industry. From 2002 until 2009 he was responsible for Project Management at Wirecard. Before returning to Wirecard in October 2011 Christian worked as Senior VP of Product Management for Clickandbuy, a company of Deutsche Telekom. In his current role Christian is responsible for the Telecommunications sector at Wirecard.

Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

The Future for Direct Carrier Billing – Views from the world leader

Posted on June 18, 2015 by Charmaine Oak

In this exclusive interview with Jon Prideaux, CEO of Boku, we explore the potential impact of recent highly important mobile payments announcements on Direct Carrier Billing (DCB), which has so far been one of the most successful means of mobile payments, putting the charges through the mobile operator bill.

I posed key questions on how we may see DCB evolve, to obtain Jon’s insights, from the perspective of a FinTech disruptor that is today a world leader in DCB. Jon reflects on key trends and shares insights and expectations on how the market might evolve over the next few years.

Jon, I recently heard you speak of “payments moving into the background”. For me Boku has been one of the first to achieve this, having since 2009 offered a great way to do this, but how might this change going forward, with all the new mobile payments services recently announced?

The basic philosophy is if you are trying to promote a new method of payment, it needs to do something additional both for consumers and merchants. I believe Payments to be in the category “If it ain’t broke don’t fix it”.

Here’s why what we do works - as more people have phones than bank accounts, and it’s easier for you to remember your mobile number than other details, we remove friction in payment and allow more sales. As merchants sell more, although Boku may not be the cheapest acquiring method, we justify our role by facilitating outreach to new customers and helping customers check out more easily.

But with the impact of lower interchange rates in Europe making card payments cheaper and availability of new bank based payment solutions, are merchants going to think “It is broke”, and they can find cheaper new ways to pay?

Ours may not be the first payment option, but certainly Facebook, Spotify, Sony and our other merchants find that by adding Boku to their suite they sell more. Our merchants could see conversion rate increase by as much as 20%, and that’s the advantage we strive for, to keep ourselves relevant. If a disruptor tries to compete just on price, this fails as incumbents have scale. A disruptor must compete on “sale”.

I see Boku as a ubiquitous single convenient acquiring payment gateway or hub between merchants and mobile operators. But is Boku looking to be more than this, has this changed?

No, this has not changed. An essential part of our value is we connect into mobile operators. While Visa and MasterCard are networks that connect merchants to banks to help them sell, our job is similar, but we connect merchants to mobile operators, to help them sell.

As customers of mobile operators are different and more numerous and geographically distributed, we provide a unique value to merchants.

Where do you see this moving over the next 2 years?

Perhaps the best way to consider how things are likely to evolve is to reflect on the recent past, where I believe there have been three main areas of change.

Firstly, it’s about the technology. Telcos do not have systems as accurate as banks. What we now have in place is a system that is important in terms of creating an enabler for merchants. This facilitates charging precise amounts, authorising, reserving amounts, reconciliation, refunding and this opens up a mature enabler for new merchants.

Secondly, mobile operators differ in each market in terms of pricing expectations, Brazil, Indonesia, France, UK, Japan all differ - but in all of those markets pay-out levels to merchants are going up, allowing more merchants with lower gross margins to participate.

Lastly, it is to do with regulatory change. With our E-Money license we already have services live in 5 European markets, and this will see further expansion.

So we started with digital content where there was no distribution cost, but the pay-outs were initially not good enough for services such as music. With subsequent changes, we can now sell content from Spotify and other merchants.

As the three trends continue to further play out, in addition to digital you will see charges for real world transactions such as parking, coffee and bus tickets. This will become one of the ways to pay for ANYTHING you are purchasing – one will be card, second will be PayPal and third will be some kind of carrier billing, normally provided by Boku.

Charging to mobile phone bills will become normal in transportation, ticketing, coffee and fast foods.

With regards to the new Airbnb, Uber type FinTech entrants, what are your thoughts on your ability to support them as Braintree and others do today?

At one level we ourselves are a FinTech company. There is a limit in terms of the amount people are prepared to put on their phone bill. Our ambition is not to be the dominant payment method for all purposes.

Braintree will continue to embrace a growing suite of payment services including cards and banking. I would like to think companies like Braintree and Stripe will add carrier billing to their portfolio. We’re not far away from being a desirable addition to their ways of charging customers.

That sounds very interesting. So the whole FinTech and API trend could work in your favour!

Sure, we are offering a single API and are connected to all mobile operators. Although we make it look as if it’s the same, under the hood it works differently. In the next generation with digital technology enhancements we are trying to offer a single card like API that removes friction for merchants, and attracts more categories of merchants.

You can charge for physical goods too?

Yes, in many European countries we operate an e-money product and can do so, although the consumer experience remains similar to carrier billing. Under the hood the consumer is buying e-money and using it to buy things via their phone bill.

Is the limit that can be charged based on regulations or is it more of a policy decision?

Under the extended regulatory structure, in the e-money world it is the decision of the carrier. Mobile operators have limits in place for risk protection reasons. Also people would not want large amounts taken from their bill so this is typically a low amount. In practical terms the limits are the same whether under our e-money license or not, and are currently set to £30 in the UK.

Could you share more on your partnerships and new services?

We currently work on behalf of a number of important merchants including Spotify, Sony PlayStation across key markets in Europe, Facebook and a number of games related clients.

In terms of our plans, we’re currently working towards bring on-board a number of important and ground-breaking merchants and a number of different projects are expected to launch in the second half of this year.

In 2014 your whitepaper projected a potential market of $6b for DCB by 2017. Do you see this changing in the light of recent developments in contactless payments and mobile payments?

If anything I think the market is likely to be higher. We’re seeing increased interest from new merchants due to trends in technology, regulatory and pricing to take this to new levels.

What changes are likely over the near future, in the light the evolving role or mobile operators in payments?

There is a lot of change. Mobile operators previously launched billing to support ringtones and downloads and then Premium SMS. Both those markets are in terminal decline and so a big chunk of their revenues is shrinking. On the other hand, the direct carrier billing side is growing and we can bill without sending SMS around.

What about services such as Samsung Pay, Apple Pay, Android Pay and others? We also see the various new Checkout services. I can visualise each catering to a sphere of their interest – so for instance Samsung could turn their focus to TV-related payments. Is this a concern for you?

Is it of concern - No, although I agree this is a particularly historic period of change, and these are all significant developments. In the UK context, and indeed across Europe there is a lot of interest in innovation and contactless payments is exploding across the region. These services are however largely reliant on bank-based initiatives and banked customers. Our service is meant for those who do not have a bank account, or who want to buy and charge to a bill. Who will co-operate, who will compete remains to be seen. We could be a source of funds across a number of the emerging services, to sell more stuff through this charging mechanism.

I expect that in the face of rapidly increasing fragmentation, you could represent a source of stability for consumers and merchants?

Sure, we certainly hope so. Most of the time it may not be a Boku logo but a picture of a phone, and it’s so easy for people to visualise how the payment works.

We spoke about some of the opportunities, but how about the risks for mobile operator initiatives, as a number of ambitions towards payments have failed?

Yes, it’s hard to find a mobile operator joint venture that’s worked. The fact is banks are well entrenched and it’s been hard for MNOs to compete. Mobile operators have certain core assets in terms of the infrastructure, but they have a bigger massive advantage in terms of customer base. Enabling existing customers to pay using the bill is something that really works for our mobile operator partners.

In terms of risks, a key concern could be in terms of regulation. Mobile operators don’t want further regulation as there is already a great deal from telecom regulators. Voluntarily assuming new forms of regulation is tough and that’s where we come in, to help monetise existing customer relationships to help to manage that area for them.

What do you think about proposed API access to bank accounts, new digital banks?

This is about opening up to more competition and I see this to be a welcome move from the regulator. However as far as Boku is concerned we are here to provide merchants access new customers, not really banked adults, so we stick to our task and make what we uniquely do successful.

How is the UK market different to the rest of Europe, especially in the light of recent moves towards mobile payments and also the focus on FinTech?

UK is an interesting and highly competitive market. There are more enlightened, progressive mobile network operators. Merchants have more options than they could want, comparative to rest of Europe. Germans prefer debit cards, French may use cheques a lot, and each European market has its own characteristics.

Jon, this has been very interesting. Thanks very much for your time today and wish you the very best for the future.

Jon Prideaux is CEO of Boku, a company that has since 2009 created the standard for online payments using your mobile phone, making it easy to pay for digital goods and social experiences across the web.

Jon Prideaux has a wealth of knowledge of how we pay, having held key roles at Visa and helped in the migration to Chip and PIN, when on the Executive Committee of EMVCo.

Charmaine Oak is Author of The Digital Money Game and co-author of Virtual Currencies – From Secrecy to Safety

Join me on Twitter @ShiftThoughtDM and The Digital Money Group on LinkedIn

As Health meets Wealth, can Wisdom be far behind?

Posted on June 18, 2015 by Charmaine Oak

Today as fitbit prepares to float on the New York Stock exchange, after which it could reportedly be worth an estimated $4.1bn, I thought I’d reflect on the further convergence happening between the health and wealth markets and the need for greater wisdom that these trends entail.

I first started monitoring the convergence of Health and Wealth back in 2010, when we added Mobile Health to our Digital Money knowledge fabric, as the two industries showed important signs of pulling together. This year an estimated 500 million people could be using smartphone apps that are health related.

Of course health-related functionality need not be delivered on a smartphone alone. As fitbit goes public, the wearables market has grown by 200% from last year and is currently an area that connects people of all ages and income groups. The recent darling of this industry is of course the Apple Watch, which brings together health and wealth applications with a potential and scale that I don’t recall seeing ever before. Convergence is the name of the game, as it has been for the last decade and more, as multiple functionalities converge around connected and increasingly mobile devices and the Internet of Things becomes a reality.

As regards Wealth, another thing that connects all of us is the need to save and spend, an area we at Shift Thought have scoped out at great depth under the term “Digital Money”, a tapestry that connects up digital banking, digital wallets, digital networks, digital payments, digital services and digital technologies. As 15 billion connected devices grow to 50 billion over the next 5 years this brings a host of new opportunities, but also risks. The cyber security potential data loss could jump from $113 billion to $3 trillion by 2019, according to a report just out.

However making sense of transactions from different areas relating to Health and Wealth works only when it is possible to link it all in Big Data and create profiles, to piece together data points so as to put knowledge to use in marketing and offer creation. In 2011, the Google Wallet launched with a radically new business model that leveraged customer data to create appropriate offers that could be delivered to our mobile devices in real time, rather than relying on charges to customers or even fees to merchants. As the Great Recession continues to bite, trading of data for goods and services has seemed to be an increasingly acceptable thing to do for consumers, especially Millenials.

I start to wonder about all the implications this could have. Can we be complacent about giving out our mobile numbers and email addresses as we’ve done in the past? A mobile number is a well-respected “handle” for communication today, and both the joys and consequences of this are generally speaking properly appreciated by people of all ages. However there could be unintended consequences that could rise from the use of our mobile number as a handle to financial services, although I hasten to add that this in no way detracts from the important role I appreciate it must continue to play in this.

Our mobile number continues to become increasingly important in our lives today, and also starts to become a surrogate for use with regards to financial services. It seems to me that this piece of information about us could become as precious, if not more, than our bank account number. Should we then get more concerned about who knows this commonly shared detail about each of us? And of course, our email addresses are also highly important “hooks” to us that raise similar questions.

Both these forms of identification have captured the imagination when it comes to reducing friction in payments. A payments expert I was recently speaking to mentioned that after the introduction of IBAN, it’s even harder to remember our bank account, so people greatly welcome sending money to a mobile number. This ultimately boils down to sending money to a name in the phone book, that we believe is associated with the person or company associated with the money transfer or digital payment.

This for me raises the question of assumptions we make regarding data that needs to be kept secure and currently regarded as candidates for the “secure element”, whether on SIM or embedded Secure Element (eSE) or on the cloud with HCE (Host Card Emulation). When we divide up “secure and inaccessible” areas on our smartphone from “accessible” areas, and design our mobile apps and functionality, we need to build in and test for additional security in all stages of the life cycle of connected bits of data. For instance, could someone substitute the mobile number of the person I know as “Mum” for that belonging to a criminal at some stage between my device and the cloud, in one of the myriads of incarnations of our now highly backed-up, transferred and accessible phone book?

The convergence that technology is making possible has wide implications and potential for Retail and Marketing, to grow more mature in their use of data about us. However this may need to be matched by greater sophistication and wisdom in the design and testing in the growing FinTech area, as well as a more integrated approach from regulators and a heightened consumer awareness that guides what we share about ourselves, at each stage and in different areas of our lives.

Charmaine Oak, Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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How Android Pay changes Mobile Payments–and why you should care

Posted on May 29, 2015 by Charmaine Oak

Now that details regarding Android Pay have emerged, I thought it would be interesting to contemplate on how key mobile payments “ecosystem builders” as I term them, stand with respect to the on-going mobile payments game. Here is the State of Play in the Mobile Payments Game, post Android Pay

The latest move is Google’s announcement of Android Pay at the Google I/O conference today. This allows customers to pay at retail stores by simply unlocking their phone, without the need to open an app, in a “Tap and go” experience. Loyalty programs and offers can be applied at checkout. Also the contactless terminal receives not just the payment details but also loyalty points and offers.

Assuming things go to plan as per announcements, here are my thoughts on where players are positioned.

The Prize

Over 2014 to 2016, the mobile commerce market is set to grow by a factor of five. This is 10 times faster than the E-commerce market. But by 2016, with less than 500 million mobile payments users, and a market worth $600 billion there is ample scope for further growth. PayPal recently announced that while online and mobile shopping accounts for $2.5 trillion in annual retail sales, with the convergence of the online and physical world, a unified world of commerce could be worth $25 trillion, resonating arguments I made in my book “The Digital Money Game”.

Key Players

The current scene of the battle is playing out in the US with heavy-weights placing large bets on paying by mobile phone. Big players currently making investments include Apple, Google, PayPal, Samsung, Facebook, Visa, MasterCard, MCX and others. Also there are several mobile payments providers who have obtained some traction in the market and may now be up for grabs.

Some have folded their hands – Softcard (formerly ISIS) was recently acquired by Google, as an important precursor to their current play, as now handsets from AT&T, Verizon and T-Mobile can come pre-loaded with Android Pay.

Key Enablers

Once an area dominated by mobile operator SIM-SE standards, the dam has burst and we have a number of possible technologies emerging. Samsung’s embedded approach recently announced is similar to eSE introduced by Apple for ApplePay and both work with tokenization services of card schemes. HCE and tokenisation hybrid models first introduced by Google for Android Kitkat (4.4) have since resulted in the launch of a number of pilots around the world. Meanwhile QR Codes have seen good traction, being behind some of the best adopted services, such as the Starbucks Wallet.

Now Android Pay says their service is secure as they won’t send your actual credit or debit card number with each payment. Instead a virtual account number represents the account information. Android Device Manager is to allow consumers to instantly lock their device from anywhere, secure it with a new password or even wipe it clean of personal information.

Country Positioning

Apple Pay is still largely US only, although reports have emerged from Singapore of people successfully using their Apple Watch to make payments there. Android Pay has a huge potential in terms of reach but for now nothing much seems to be clear in terms of when it will launch outside of the US. While Apple benefits from premium user status, in terms of sheer numbers , once the gameplay extends out of the US, Android is better placed in terms of penetration.

US is pulling ahead, but China, India will not be far behind as they develop apps to meet the requirements of the US and then seek to bring out cheaper and more appropriate services for Asian and emerging markets. Europe though risks being left behind in all this, pity, with it (arguably) being the birth-place of e-money.

Customer Adoption

Recent reports claim $2 out of every $3 spent using contactless payments across Visa, Mastercard, and American Express were being made with Apple Pay.

PayPal now with Paydiant seeks to challenge this thanks to Paydiant’s earlier work with MCX. This month PayPal reports it processes nearly 12.5 million payments for customers every single day.

Now Android Pay promises to offer better ease of use than Google Wallet, benefiting from support for fingerprint authentication in Android M. Also with pre-loaded handsets the only challenge that remains is having led the horse to the water, to actually get it to drink: as several steps will still be needed before customers actually make their first mobile payments transaction.

Samsung Pay though claims potential acceptance at 30 million merchant locations worldwide, with near universal acceptance thanks to Magnetic Secure Transmission (MST) magstripe emulation platform, LoopPay.

Reactions from the rest of the ecosystem

Merchants are signing up to many of the new services, whilst also engaged in MCX and so far tending to favour the QR Code approach.

Schemes are not taking sides. Visa, MasterCard, American Express and Discover have announced support to Android Pay, as also with other services. In general schemes are keen to support all options, something that brings joy to their investors.

Mobile operators are on a back foot, but regrouping – more co-operation, greater focus on transport (such as Mi-FARE) where they still hold an advantage, and a continued emphasis on security – though biometrics, tokenisation and the passage of time will leave this argument somewhat weakened.

For now banks can play with the different providers, but where will they invest and how long will it take them? The banks in the US are moving quickly – USAA and US Bank have already declared their support for Android Pay. Citibank had been quick to provide the support needed by Google Wallet.

Regarding processors, for Android Pay Google is partnering with Braintree, CyberSource, First Data, Stripe and Vantiv to make integration easier. There is a huge opportunity from tokenisation which is up for grabs and processors need to also back every horse, while continuing to build the required infrastructure.

Outlook for Mobile Payments

This further confirms the growing fragmentation, with potentially myriad implementations as service providers seek to navigate a murky minefield of patents relating to mobile payments, and still bring out something that helps maintain some control over large, desirable customer segments.

What is quite clear though is that massive disruption to existing business models is now well and truly on the cards. Current retail, banking and payment systems must consider their roadmaps as payments becomes invisible, embedded, transparent and often free. The future of payments is in the cloud, but could this result in massive “honey pots”?

When will Android Pay, Apple Pay, Samsung Pay and PayPal’s newest services launch across Europe, UK, Canada, Australia, Poland Germany, Singapore and other countries ripe for these services? And where does Android Pay leave Google Wallet? A lot of important, yet unanswered questions that will become clearer in the next few months perhaps.

Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

I'm speaking on “Role of mobile in omni-channel payments”

June 10 at 13:30 at PayExpo 2015 Mobile Money Europe, London.

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Apple isn’t interested in payments

Posted on May 19, 2015 by Charmaine Oak

Shift Thought recently completed a set of interviews where we spoke to experts from a range of industries and parts of the world to get their gut reactions on the state of the payments industry and what to expect next.

In this post I share highlights of my discussion with Roy Vella, Digital Services Evangelist and Entrepreneur with a rich experience across a wide range of organizations in EMEA and the U.S. Roy reflects on what for him were some highlights of 2014 and shares his thoughts on what to expect this year.

Roy, thanks for your time today. I would like to start by asking what, for you has been the most innovative service you’ve seen over the last year, at the intersection of mobile/ online and financial services?

For me, Apple Pay has been the most significant. Once again, they did what they do so well. They take something messy and refine it. Just as they did with iPods/iTunes and the iPhone, they’ve created a great customer experience by making a few key changes. Apple tends to be able to take things off the shelf but then simplify and get the experience right.

When they launched the first iPhone, arguably they did it with what could already be bought off the rack in China. It’s not what they deliver but rather how they put it all together, to make it simple, intuitive and delightful. That is the innovation! It is not making something radically new but it’s making something truly simple.

But in order to make it simple, they’ve managed to bring together a lot of different technologies for the first time, to allow a simple “press the button” experience.

True, they had to bring together Passbook, Touch ID, NFC capabilities, encryption, tokenisation and more. Apple is probably going to kill the business proposition of a lot of providers accidentally, even though they don’t actually care about payments. All they care about is bringing together those three things that you, I and everyone need before we leave home: your keys, your wallet and your phone.

Apple simply wants to put it all together. They want to get rid of your wallet. And they’re making progress on this with Apply Pay, the Apple Watch, with their work on access to hotel rooms and security. I’m sure they’re talking to major hotel groups, luxury car manufacturers and others, to make big changes in how people gain access to all sorts of places and things.

What are the pain points that providers encounter when they try to bring out Payments Innovations?

What they find difficult is what Apple does so well. It’s essentially the battle of getting people to adopt something new. That is what Apple is good at – changing consumer behaviour, getting people to change the normal way that they do things.

For any infrastructure play the most difficult thing is that most people don’t want change. And innovation is hard because key stakeholders, regulators and others also often don’t like change.

Actually people often talk about achieving “mainstream adoption” but that’s not what concerns Apple. They want those premium customers. That is their segment. The top 15-20% max really.

But if Apple is solving for the 15-20% premium customers, who is solving for the rest?

Before Apple Pay we had similar solutions on the Android, 9 months to a year earlier! Google, Samsung, PayPal and others offered quite similar services as Apple Pay. But did anyone take notice? We did not see them move the needle – then Apple announces and boom, consumers sit up and we have change.

Who for you are the winners of 2014? Which categories of players impressed the most?

I don’t think mobile operators as an industry were able to do that much. Sure, we’ve heard of various partnerships between banks and operators or other categories. However it was not ground breaking innovations. I believe that both banks and mobile operators have taken a back seat to the big tech services, GAFA, at this point. And they’re all innovating rapidly.

The other group that’s made significant progress over 2014 is the regulators. They’re no longer spending all their time protecting the incumbents. They want more competition, entrepreneurs and a better deal for consumers. This is playing out across the US and Europe, and also worldwide.

Talking about regulations, what’s your opinion of Bitcoin?

I feel that Bitcoin tends to be misunderstood. It is a currency of sorts but more importantly a protocol, the blockchain, but often people are fixated on the first and don’t quite get the second. Reliably moving value between parties, without a middleman, is a brilliant innovation. It is not all about money. It could be any object of value or ownership – it could be a birth certificate or a lease, for example.

No matter what anyone may think, cryptocurrencies are here to stay. It’s impossible to stop them. Saying that you don’t like bitcoin or the blockchain and it should be stopped is like saying your don’t like SMTP or HTTP… it’s merely a technical protocol for value transfer that now exists and won’t simply evaporate as such, even if regulators attempt to quash it.

Yes, banks have not made it easier, with their massive FX scandals and other issues. Do you see this pushing people further toward P2P and innovative new entrants?

Absolutely! Take the example of Transferwise. I think they’ve done a brilliant job shining a light on fees and making things more transparent. Ultimately consumers care about how much they pay and what their receivers get in terms of currency. Transferwise states that in terms of what you put in and how much you get out it’s hard to get a comparable rate. Significantly, Transferwise has gotten their marketing and message right… it resonates with people.

Roy, from your experience at PayPal, it would be good to hear what you think about the PayPal/eBay separation – how’s that going to work out?

We were talking about this way back in 2004. It is something that had to happen, but back then they needed each other tremendously. However staying together is holding them both back now. I know they will be better apart. It’s going to be good for PayPal, sure, but it’s also going to benefit eBay. I think individually they could each have the same valuation as they have together.

You talk about the digital wave and how that is subsuming things - What really changed over 2014 thanks to mobile?

I think 2014 has been all about smartphones achieving deep, mass penetration. This is not just in developed countries but also in the high-growth emerging ones.

What do you foresee for 2015? What’s most exciting?

I think the chip is going into everything. Having all these devices become smart, there is an early adopter phase that is quite exciting. It is not all about payments. Payments must be transparent, just an enabler and it must make everything simpler for consumers and merchants.

Thanks Roy, it’s been a pleasure speaking with you. Wish you the best for 2015 and beyond!

Roy Vella is Managing Director of Vella Ventures Ltd where he offers strategic advice as an expert in the Fintech industry.

Roy is special Advisor to MEF and on the board of several companies. Notable clients include Visa, Vodafone and Lloyds.

Previously Roy was Group Executive, Director of Mobile Financial Services for the Royal Bank of Scotland Group. Roy also has rich experience from his work at PayPal Europe as Director, Mobile Payments for Europe and in Business Development for PayPal Inc. See more at linkedin.com/in/royvella.

Bill payments in India: Set to transform with the advent of NPCI BBPS

Posted on May 15, 2015 by Charmaine Oak

As a country of 1.2 billion people undergoes massive transformation in the way people pay, an organization central to this change is The National Payments Corporation (NPCI) . NPCI is a body promoted by RBI to play a pioneer role in creating the infrastructure and platforms to enable retail payments in India, and manages core payment systems including the instant 24*7 interbank funds transfer service IMPS, the Aadhaar Enabled Payment System (AEPS) and RuPay India’s important new card payment scheme.

I caught up with Sumeet Kohli of the NPCI to discuss some of the recent changes. In this interview we discuss a bit about the payments scene in India and in particular how people are changing the way they pay bills, as this is a very important area that is set to transform in the near future.

Sumeet, thanks for your time today. Could we start with a bit of background about NPCI and your role there?

At NPCI, we manage multiple aspects of payments in digital format. The vision of NPCI is to provide anytime, anywhere payment services which are simple, easy to use, safe, and secure, fast and also cost effective. We have multiple payments products.

To begin with RuPay is a new card payment scheme launched to fulfil RBI’s vision to offer a domestic, open-loop, multilateral system. It will allow all Indian banks and financial institutions in India to participate in electronic payments.

Secondly Immediate Payment Service (IMPS) offers an instant, 24X7, interbank electronic fund service through the internet.

Also, the ACH is launched in India under the name National Automated Clearing House for banks, financial institutions, corporates and the government. It is a web based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature.

Inter-bank ATM transactions are managed through our National Financial switch (NFS) and we have host of other products such as the Cheque Truncation system, Aadhaar Payment bridge system and Aadhaar enabled payment system.

My role is in the business development department. I am in charge of national accounts and I engage with our customers which include corporate clients, government institutions, banks spread across India. We assist them to get on-boarded on the NPCI platform, so as to avail of our products and services.

Today the majority of banks in India are already on our platform and this helps them to reach out to end customers with a variety of payment offerings, helping them transact affordably & easily.

Could you please share about some of the opportunities and challenges you see, from your ringside view of developments in the important Indian market?

Regarding the Indian payments landscape, the buzzword is “pro-digital”.

There is a paradigm shift in how people are transacting. Interesting with over 900+ million mobile phone subscribers in the country and the advent of new age technology such as 3G and now 4G, mobile internet has reached the nooks and corners of the country.

It is a powerful tool that helps to generate traffic online and move offline payments online. Regarding utility payments that form the majority of retail payments today, over 80% are still cash, COD or cheque based. Ecommerce merchants and corporates are promoting online payment services in order to get consumers to adopt. They are offered monetary benefits, schemes and loyalty benefits to get them to make payments online. So this is creating a pull and a monetary incentive, apart from the convenience it offers.

The reason providers can pass on benefits is that offline collection is expensive in countries like India and it also delays the entire settlement cycle.

Promotions do get people online, no doubt about that. However there is a long way to go until we become completely cashless. These initiatives and the approach adopted by the government with the direct benefit transfer scheme and RBI’s vision and efforts are definitely driving India towards a less-cash society.

I saw final guidelines have recently been released by RBI for Bharat Bill Payment System (BBPS). Could you tell us a bit about this?

Yes, as per the RBI guidelines NPCI will function as the authorized Bharat Bill Payment Central Unit (BBPCU) to set the standards for BBPS processes which need to be adhered to by all operating units under the system. NPCI, as the BBPCU, will also undertake clearing and settlement activities related to the BBPS as outlined in the RBI guidelines therefore, a need for an integrated bill payment system in the country that offers interoperable and accessible bill payment services to customers through a network of agents, allows multiple payment modes, and provides instant confirmation of payment. The bill payment system should also serve as an efficient, cost effective alternative to the existing systems, thus, setting the standards for bill payments in the country, and enhance consumer confidence and experience.

The BBPS will consist of two types of entities carrying out distinct functions:

(i) Bharat Bill Payment Central Unit (BBPCU) will be the single authorized entity operating the BBPS. The BBPCU will set necessary operational, technical and business standards for the entire system and its participants, and also undertake clearing and settlement activities.

(ii) Bharat Bill Payment Operating Units (BBPOUs) will be the authorised operational units, working in adherence to the standards set by the BBPCU. The tiered structure could be further strengthened through an effective agent network/s of the BBPOUs.

While there will be a single BBPCU, there could be multiple BBPOUs operating under the BBPS.

What do you see as the biggest challenge to overcome to get this off the ground?

This is a vast ocean, with the involvement of multiple players such as the NPCI, banks, aggregators, technology vendors, service providers and billers. This is across locations and various channels which must support online bill payments as well as offline. Also there are on-us and off-us use cases and it will require huge efforts to integrate and operationalize everything. It will also require focussed marketing efforts so as to make the public aware of what’s available and the benefits of using the new services.

As more mobile phones get linked to bank accounts I expect services such as this will grow increasingly popular?

Sure. In India we have over 900 million mobile phones and thanks to the PMJDY scheme (the Government’s push for financial inclusion), bank account penetration in India increased from 35% to 53% between 2011 and 2014. NPCI sees a possibility to get many more people to link their phones to bank accounts. It will take some time but we are definitely seeing volumes going up. As the mobile phone network grows in each corner of the country this is penetrating into remote areas and into rural India.

One of NPCI’s product IMPS has now become channel agnostic and hence has been renamed to “Immediate Payment Service” instead of “Interbank Mobile Payment Service”.

That is the fundamental reason we set Shift Though up as “Digital Money” rather than “Mobile Money”, and it is how you have grown, leveraging mobile, but not just stopping at mobile phones.

Exactly, today banks offer IMPS as an instant mode for fund transfer. There is no need for customers to check if the time of transaction is within banking hours to pay for their bills or make purchases or simple transfer money. In the manual process, if the bank settlement cycle is complete you may have to wait for next cycle or may be try alternative offline payment mode. With IMPS being available 24*7*365 one doesn’t have to wait. You can go right ahead and complete your bill payment in real time, from the comfort of your home.

How do you see it going forward? In our report on India we classify it as one of the most complex markets in the world. Do you see India to be at an inflection point, about to take off?

Absolutely, both India & the Indian economy are at an inflection point of sorts, both in terms of moving to a higher growth trajectory and with respect to the shift to a sustained low inflation phase.

The main driver for any new innovation in payments is customer needs and customer behaviour which drives service offerings. Today Indian customers are set to have so many different options to support how they may want to pay.

Some customers prefer to do only mobile shopping or some do POS transactions at merchant terminals or in malls. Others do online window shopping yet make payments offline and vice versa. These are interesting dynamics.

It is the right time to be here, as customers are adapting their behaviour to new, easy and convenient options. Even in offline mode, there are so many VAS options provided like door-to-door services. For payment of bills there would be service providers whose agents will come to your door to swipe your card, collect cash/cheque and enable your payments. So we realise we must take all this into account as our payment systems evolve!

Sumeet, thanks for sharing your thoughts at this exciting time of huge change and all the best for your important work at NPCI where you play a critical role in making this happen!

Sumeet Kohli is Manager, Business Development at NPCI, India. Sumeet handles Business Development & its strategic roles for enabling Payments for National Key Accounts across Industry verticals like Banks, Insurance & Mutual Fund companies, NBFCs, Utility Companies, Telecom, Trust, NGOs, E-commerce merchants and Corporates.

His overall experience covers various payment modes including NACH, ECS, Online Payment Gateway, Direct debit, IMPS, Mobile Payments, IVRS, CTS, EBPP, NEFT/RTGS, Cheque & Cash Management.

Shift Thought’s recent 400 page report, “Digital Money in India 2014” covers all this and more. To learn more about our report just drop us a line at contact@shiftthought.com.

Mobile Money and Branchless Banking in Nepal

Posted on May 13, 2015 by Charmaine Oak

As authorities and developers work hard to help families somehow struggle through the devastating results of the 7.8 magnitude earthquake of April 25 and the second major earthquake of May 12, my thoughts turn to the longer term benefit to be had, in promoting the development of financial services that will help recovery over the next 5 years.

Mobile money clearly has a key role to play in this breathtakingly beautiful country, to help to empower the population in a variety of different ways. Thanks for joining me in reflecting on this, as I share some of our findings from our recent report “Digital Money in Nepal 2014”.

A clear need

The biggest driver of digital money in Nepal is the need for financial inclusion. Of the population of 28.9 million, only around 33.5% are banked, but there are over 18m mobile subscriptions. Mobile phones are therefore a good way to reach people with financial services, with Internet penetration only an estimated 28.9%.

Moving from cash to non-cash, appropriate electronic payments can reduce the cost whilst allowing outreach to poor and remote people in a manner never possible before. But the rate of adoption greatly depends on the actions of government, commercial and development entities in moving payments to the new instruments.

While the Kathmandu area is a hotspot for banking, the concern has been to reach areas outside the valley. While Nepal Rastra Bank (NRB) has set up branch opening policies to promote this (1 branch in Kathmandu after 3 outside the valley), the challenge is to create economically viable, alternate and appropriate services.

Regulations and the challenge of Shadow Banking

In December 2012 NRB issued a circular to allow branchless banking agents and direct how internet- and mobile-based services like branchless banking, mobile banking, internet banking and card services offered by banks and financial institutions (BFIs) must obtain approval.

Where there are needs, services rise up to meet them. NRB is concerned about the rise of shadow banking in the form of unlicensed and unregulated cooperatives and Dhukuti and Hundi services, but in the absence of alternatives, these informal activities play a key role in servicing needs.

Card services are still relatively new, and branches and ATMs are simply not sufficient to reach into the remote areas of the country. Banks in Nepal began to offer online banking and mobile banking for over 10 years now. However while the Class A banks (around 30 in Nepal) were first to launch services, the Development banks (around 90, with an additional 21 Micro Finance banks) and NGOs (around 40) will play a critical role in taking the services in the appropriate manner to where they are needed most.

New mobile wallet and mobile money services are being launched and their success will depend on the partnerships forged, and the extent to which this results in new value-added services.

Why Branchless Banking?

Given the historical and geographical challenges, the share of the population living below the poverty line is still as high as 31.5%, though this has fallen recently driven by the flow of remittances into the country.

Branchless Banking can play a vital role in building a country asset from the vibrant informal economy. Remittance income from the 2 million Nepalese diaspora is crucial for the country, and constitutes an estimated 17.3% of gross domestic product. As money goes digital, more of the informal economy gets reflected on the balance sheet of the country. With an annual remittance inflow of over $14 billion from the 2 million diaspora, it is expected that as much as 90% of remittances may well be informal.

If formal remittances increase, it is a win-win for consumers who get the safety and convenience of receiving money directly into their BB accounts, and the government who see more of the money on the books. Again, as Government disbursements turn digital, much of the spending gets accounted for, driving investments as providers see the hope of viable markets.

The story so far

In June 2012 Laxmi Bank launched Hello Paisa in Kavre and Sindhupalchowk. Hello Paisa provided by Finaccess, is a shared and interoperable managed service provided to BFIs. It uses IVR and SMS to allow money transactions using smartphones. The Hello Paisa network has over seven BFI partners. In 2013 the Prabhu Group network, consisting of more than 3,500 money transfer agents and 1,500 cooperatives nationwide entered an agreement with them to provide end-to-end mobile financial services (MFS) offered by the Hello Paisa Network.

Digital networks indeed play a key role in disbursements, as do the various mobile banking and mobile wallet services, including 14 key services that had launched by the time of our study.

Where next?

Today as people around the world are in solidarity with folks in Nepal, this is an inflection point for the country.

I believe change of the right kind can and should happen, and decisions taken in the next months will critically contribution to this.