How Apple Play affects The Digital Money Game

Posted on September 12, 2014 by Charmaine Oak

Apple has made their play: iPhone 6, iPhone6 Plus, Apple Pay and a wearable Apple Watch. Now that Apple Pay is here, how does this potentially affect retail transactions, e-commerce in general, and the projects in your pipeline.

We are at the cusp of the creation of a new ecosystem. But will Apple Pay fare better than Google Wallet did when it first launched in May 2011? There is a feeling of Déjà vu and Let’s Wait and See but also a sense of optimism and expectation of improved retail experience. In the near term iPhone 6 and iPhone6 Plus will be the real winners for Apple revenue, but in the long term Apple Pay will play an increasingly important role in generating revenue from previously untapped sources. As far as the role of Apple Watch itself is concerned, it’s revenue impact in the near term is uncertain but could become more significant as developers bring out apps and its role evolves.

Let us take a look at Apple Pay, as a prerequisite for starting to answer the myriad questions - Is this going to ignite mobile payments? Will it make digital payments more secure? How do the opportunities now stack up? How are the mobile operators likely to react? We all know Verizon, AT&T and T-Mobile were not cheer leaders for the Google Wallet. Softcard (rebranded from ISIS) is readying its own offer. What is PayPal thinking and how does this fit with the Braintree One-Tap announcements? How will Walmart react, and where does this fit with respect to MCX?

So why is this important?

The major factor for any new payment service is adoption. Offline retail payments have been sought to be addressed through a variety of methods from PayPal, Google and others, and so far by Apple using iBeacon functionality, BLE and other technologies. So far adoption of NFC has been a 10-year war between the banks and the mobile operators and has struggled to gain traction. It was important for the industry to know Apple’s position with respect to NFC as a standard for mobile payments.

We would all agree that in the current retail and e-commerce arenas one of the most pressing needs is security. The Apple announcement certainly seems to go a long way in addressing this need. For example the combination of its biometric sensors in its devices with the contactless transmission of one-time card number combined with the fact that Apple creates a device-only account number that they store in the secure element, provides a basic foundation for enhanced security. Furthermore as far as customer perspective is concerned, the fact that one can find the phone more easily and take action if it is lost goes a long way towards addressing concerns.

Back in 2011 we had the entry of the Google wallet, and each of the card schemes announced their own wallets as well. Still consumers and merchants failed to adopt. While contactless cards gradually crept into use, paying at retail POS by phone continued to prove elusive, for a variety of reasons. For the longest time, one of the main reasons was claimed to be lack of handsets. However, customer security concerns and more importantly business model were arguably even greater challenges.

And what about adoption?

One of the major challenges in creating a successful service is the ability to bring a large customer base on board rapidly. At the retail level this translates to satisfying consumers both on convenience and trust. In this respect Apple has 800 million customers from their iTune stores as ‘card on file’. However there is a separate step involved to get consumers to start to use Apple Pay for contactless payments as it launches shortly in the US.

This is where the convenience and trust come into play and is something for which we’ll need to wait and watch.

Additionally the Apple API will be available to developers and this is an exciting space to watch. We saw how millions of apps became available for the iPad and iPhone – now Apple Watch is here, and although tethered to the iPhones for the present, it presents a new frontier of innovation. For the present the watch offers an opportunity to integrate a variety of health and fitness related services – something I think we will hear a lot more about shortly.

Merchant support has already been announced: McDonalds, Integration with Uber, a food app from Panera, Major League Baseball's app to order tickets from your phone, and Open Table to pay your bill from your iPhone 6 or iPhone 6 Plus. Apple API is to be offered in iOS 8 to allow app developers to integrate Apple Pay into their applications.

So how will mobile operators react?

Apple has a following, and is not overly dependent on mobile operators to push their phones, however operator subsidies that could be as high as $500 considerably help make them affordable. The rapid adoption of smartphones across the world has changed the balance of power. Certainly in the US, Apple is Top Dog as a smartphone manufacturer, with 42.1% OEM market share as of June 2014 according to comScore reports.

Some news is in already as to how mobile operators view this. Softcard (formerly ISIS) have made a statement that they see Apple’s support to NFC as a significant step that sets the stage for rapid scale adoption of mobile commerce.

However while in the US and Europe Samsung and Apple dominate, the share of both providers has been dropping in emerging markets where we see an emerging fragmentation. In urban China, Xiaomi with its affordable RedMi model continues to go from strength to strength, securing a 27% share of smartphone sales in the important China market in the second quarter of 2014, compared with 21.1% for Samsung. And payments by watch + iPhone cannot be a top priority for the masses in emerging markets, although urban, higher income Chinese consumers do seem to be quite interested.

What about the others?

As we describe in great detail in our book, payments has become a hotly contested space. Another fairly late entrant is Amazon. Just take a look at the Amazon Fire Phone, the first smartphone designed by Amazon. Amazon has vowed to create a whole new shopping experience and until December 31, 2014 the fire phone comes with 800 Amazon Coins to spend on apps, games and more as well as 10% discounted purchase for more Coins. They also offer other benefits including a year of Prime Benefits (Video, Delivery, Books and more).

Such bundles of value are what the customer is increasingly coming to expect, and the whole Apple offer will need to evolve to meet the competition.

Too little, too late?

Without doubt, Apple is a late starter where contactless payments are concerned. Like a swan, the movement seemed to be more ‘under-water’, as news of patents obtained for motion based payments got out back in January 2013. For instance, Apple obtained a US Patent for a digital wallet and virtual currency. It described a system of managing credits via a mobile device. Mobile users would be able to receive credits or coupons stored in their accounts. Check out Patently Apple for the background on Apple patents for payments.

Yet, little happened until now.

Back in June 2013 Apple released its first mobile commerce platform, called the iCloud Keychain: consumers could store passwords and financial details for use across several Apple devices and they could log into websites or make purchases online. But the platform did not support NFC and existed as an application rather than a physical device.
Earlier in June 2012, the Apple bar-code-based Passbook mobile wallet was launched, as a basic mobile wallet without payment functions, using barcodes to store and represent multiple boarding passes, store cards, and movie tickets. It had location-enabled alerts, and real-time updates and it displayed passes based on a specific time or location. When consumers walk into a participating shop the loyalty card appears and can be scanned to pay or check balance. It was expected that this could evolve into a mobile payment service by linking the Passbook to customer credit cards and iTunes accounts.

Effect of Apple Play on the Digital Money Game

The contactless payments that Apple Pay now propose to offer come as a reinforcement to the Digital Money Game of some players, but a threat to others.

And it is no longer enough to offer just mobile payments. To gain adoption, Apple must be able to offer a range of ways to pay, across the web and other channels including TV, now being hotly talked about in emerging markets. And they must get the interoperability story right, and rapidly prove the concept beyond the US market.

Read all about this, and work out your own strategy with our recently published, highly acclaimed book, The Digital Money Game. Also, if you would like to discuss immediate ramifications on your projects just drop me a line at coak@shiftthought.com.

Why don’t we let our youth manage bank accounts?

Posted on September 11, 2014 by Charmaine Oak

In my recent interview of Brian Richardson, co-founder of WIZZIT in South Africa, he asked a question: Why should a 16 year old be expected to look after a family, but not have access to a bank account?

I have been unable to forget that question – hence this post. I thought I should check with you – is it that we are underestimating both the capabilities and the needs of our youth, who must cope with the tremendous fallout of the world financial crisis (not of their making, I should add), and who are the architects of the world’s future.

Take what is happening in India, Indonesia, Vietnam and elsewhere in Asia. I was recently in some Asian countries to conduct research on the way people pay and was pretty amazed at what I saw. It is the youth who are leading trends in paying online. Who orders on Flipkart in India, to cover the needs of the whole family – for their grandparents and parents alike? Who buys pizzas from Domino Pizzas using their iPads? In fact, I found it was often the teenager in the household who was actually in charge of the families new payments card and trusted to buy on behalf of everyone. As they also manage the families Wi-Fi and are the most computer literate, little wonder this is the case.

This got me thinking. Was this just an emerging country phenomenon? Is it confined to urban areas? I’m concluding it is not. I see similar behaviour in households here in the UK. Across the world, and across income groups, there is a section of trusted young people who need access to financial services of all kinds, indeed it is fairly critical to consider their needs, not as exceptions but as well-designed, mainstream services.

Remember, a 50 year-old saw the Internet invented in their lifetime, as also mobile phones. Our kids on the other hand grow up taking these things for granted. As money goes digital, digital wallets and mobile phones offer new capabilities to design in checks and balances, while more effectively supporting what young people need.

So what would happen if we ignore this issue? Could we be driving the youth into the fast growing informal digital economy and could this create problems for the future? Unregulated digital financial services have little or no restrictions – surely using these would be worse, not better.

Business-savvy youngsters are not a new phenomenon, but the technology revolution of the past years has greatly empowered their ambitions. The recent BBC show Million Dollar Intern, which I much enjoyed, had Rich Martell, Gary Martin, Ross Bailey, Juliette Brindak, Suleman Sacranie and Fraser Doherty who run million dollar enterprises to go in and give some pointers to established, struggling businesses. Fraser Doherty started age 14 and made a million before the age of 20. Each of the others has a similarly inspiring story. Do we really feel that at age 16 these entrepreneurs were incapable of managing their own bank account?

You might argue that the million dollar interns are the exception and not the norm. Left to themselves youth may have less control over themselves than adults do. Or they may earn small amounts that are unprofitable for banks to support. Or they are not accountable for their actions. However many trends are creating valuable market segments: international students studying abroad, music and gaming users and more.

Today however, in the new branchless banking and mobile money scenarios there are ways to address each one of these concerns. Yet the new services invariably continue to have the same restrictions: You must be 18 and over to be entitled to use them.

In the absence of mainstream financial services a variety of prepaid cards are offered. However the cost and inconvenience (limits, difficulty of topping up), restrict their use as a way to manage business or household needs.

I believe this may be an idea whose time has come. Why don’t we investigate the great new features digital money services offer - Double sign off to protect youth from using illegal substances or falling for scams (though I may add, some adults may need to have a similar sign-off from a youngster as well!).

Similarly the retail industry needs to consider some changes. Secure certification systems and better universal and global standards for classification for products online can restrict purchase of certain products rather than remove capability to buy.

Just as there is a fortune at the bottom of the pyramid, there is a goldmine of the architects of tomorrow, waiting to climb the banking ladder – or a non-banking ladder. Our decisions and actions will determine which it will be.

The Digital Money Game as affected by the newly launched Twitter payments

Posted on September 9, 2014 by Charmaine Oak

As the world waits with bated breath to hear from Apple, I thought we should take a moment to consider Twitter today. With so much in their favour, and so much already clear about what to do and what not to do, will they get payments right this time?

This morning, while contemplating what the Apple mobile payment announcement holds for us today (will it change mobile payments forever?), I found a Twitter policy update in my inbox. So I thought we could pass the time until we learn the REAL TRUTH about Apple by contemplating what Twitter Payments may mean to mobile operator PSMS revenues and indeed to other providers in the vibrant new digital money ecosystem as described in my recently published book, The Digital Money Game.

Back in the early 2000s I worked with the company that invented SMS. later, as product manager at one of the leading mobile operator groups in the world, I had a lot to do with generating revenue from premium SMS. This remained our “Killer App” for many years, despite the best efforts to generate revenue from so many other payments initiatives.

Naturally therefore Twitter’s email this morning piqued my interest, to say the least:

“We've updated our Terms of Service and Privacy Policy to reflect new features we're testing (starting in the U.S.) to allow you to buy merchandise from some of the most popular names on Twitter, without leaving the Twitter experience.”

Twitter’s new policy covers the use of their commerce offering, that they are currently rolling out in the US. As people will now provide payment details, shipping address and more, the privacy policy has changed as well.

The privacy policies are also affected as they relate to personal data regarding location and individual and aggregate data that we share on twitter.

Over the next few blogs I will investigate what this may mean and how it relates to other newly launched initiatives from around the world. Will it fizzle out, like some services launched by Facebook and Twitter have done in the past? Or this time, is it a real threat that can take a bite out of providers revenue and steal your partners away.

Will Twitter payments deliver a blow to the payments revenue generated by mobile operators?
How does Twitter’s strategy fit in to The Digital Money Game?
Where does it leave the other players in the ecosystem
How does it affect projects you have on the boil – should you abandon them or invest more?

The Digital Money Game is growing more complex and exciting by the day, and with the Apple announcement expected today, by the hour I would add. If you’ve bought our books you may notice they are packed with very recent analysis and references, literally to the day they were published. Additionally we have a splendid ability to roll out updates to our books. And with so much changing I expect we will have plenty to discuss. Do join us to explore ideas at The Digital Money Group on LinkedIn.

f you’d like to be notified of updates and additional resources specially created for readers of our books, please drop us a note at contact@shiftthought.com mentioning the book title, date of purchase and country of purchase.

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

Want to read our books but cannot get a copy? Let us know and we will do our best to help.

If Bitcoin becomes “too big to fail”, who will be at the rescue table?

Posted on August 20, 2014 by Charmaine Oak

As we continue to experience regular occurrences of Bitcoin volatility, I wonder if and when Bitcoin might become too big too fail. As it continues to go mainstream if its Achilles Heel of Volatility gets further exposed, and the worst happens, who will care? If we visualise the rescue meeting, who is likely to accept a seat at the table?

Bitcoin, together with Altcoins and alternative currencies continues to excite interest across multiple segments around the world. In spite of warnings from CFPB, FATF, EBA and other regulators, news of Bitcoin related conquests continue to come thick and fast.

One thing that experts seem to agree about is that this is not going away any time soon. But as the movement gathers momentum and becomes increasingly entwined with mainstream ecosystems, a lot more businesses and consumers could potentially stand to lose if the services were to fail.

Reportedly Bitcoin is making strides in Australia. Living Room of Satoshi reports that Australian residents have paid $150,000 toward BPAY-enabled utility bills, electricity bills, school fees and tax payments through their service. BPAY is an important bill-payment system in Australia and supports innovative ways to pay through digital banking, QR Codes and more.

Bitcoin bill payments is also happening in Canada, and elsewhere in the world too, Bitcoin is becoming a part of everyday life. Overstock plans to launch International Bitcoin Payments on September 1st. Yet, more bill payment and more retail payment may not necessarily translate to Happy Days. Retailers need fiat currency, and the more the mainstream services, the more the potential exposure to currency quirks.

As prices declined this week, and Bitcoin experienced one of the most volatile periods this year, reportedly going into a 38% free fall in some areas yesterday, I wonder whether the industry is already showing signs of age. Still in the first flush of growth, the industry must nevertheless go through all the growth phases of its predecessors, however different they may seem. But when teenage angst gives way to middle age worries, who will take care of Bitcoin?

Studying trends in Digital Money as we do, it seems as if each wave of new entrants and services seems indomitable at first, but may be brought down by some of the very factors that at first made it successful. Mobile money services can find it hard to support the very high volume low value transactions that are their reason for being. Money transfer operators feel the heavy burden of compliance due to the highly specialised nature of their business and their sprawling agent networks that made them successful for so long. And we all know what happens when banks become too big to fail: every one gets roped in to take care of them. But more importantly processes exist for detection and correction in these industries, and remedial action can proceed along well understood lines.

As the Cryptocurrency industry enters it’s sixth year, some of the processes have already been streamlined for efficiency. However this very maturity is exposing its Achilles heel of Volatility in new ways. The fact that it is possible to attack a pool more easily than the same number of independent miners, for instance, raises new possibilities for attacks as we saw recently. At the start of the month one hacker was revealed to have stolen $83,000 over four months by targeting a mining pool and using a vulnerability in the border gateway protocol.

A number of incidents, such as Mt. Gox have brought home the vulnerabilities of doing business involving Bitcoin. When traditional businesses fail, there are fall backs typically at the country or economic zone level. If the industry is to grow out of adolescence is it possible to put trusted guardians and a protection mechanism in place?

Cui Bono? Although it is clear that everyone stands to benefit from their being such a mechanism, it is not clear who stands to benefit from being such a mechanism.

Yet this will be vital for when cryptocentric systemically critical services such as Bitcoin need to be stabilised or bailed out. Otherwise the knock-on effect to other parts of the ecosystem will increasingly translate the shock onward, not just to Litecoin, Darkcoin and other cryptocurrencies as recently happened, but even to external entities that may seem totally disconnected at present.

A word about the format of The Digital Money Game

Posted on July 31, 2014 by Charmaine Oak

Thanks very much for your kind support and interest in The Digital Money Game. I am deeply touched.

A number of you have asked whether you could have a printed copy. I wanted to explain why we chose to publish an e-book, how to get it no matter where you are worldwide, and how to use it and get updates.

First of all I do strongly empathize with your sentiments. I myself love to have a physical book to hand. But…

I could hardly write a book that advocates the ‘7C’s of digital money and then ignore those when publishing the book. That would be inconsistent.
I want the book to be available at a price point that is accessible to everyone across the world as I want this to be a resource that people pick up when they are making life choices about their career.
I want to be able to update it frequently as this is such a fast changing space, and have the new version made available to existing customers. So don’t be surprised when you get an e-mail from Amazon notifying you that an update is available. It is FREE and all you will need to do is enable updates on your reader.
And most important of all, I had to get it out fast to every part of the world. That is where Amazon Kindle really comes into its own. You should be able to download it in minutes, no matter where you are.

You do not need to have a Kindle device. Just download the free Kindle reading app. The Kindle for PC supports you in reading the book on your computer.

Some of you felt that they were unable to buy on Amazon. I have received an assurance from the Amazon team that customers living in countries without a localized Amazon website can order it on www.amazon.com. No matter where you are it should be accessible to you.

When you get to Amazon, if it says “Pricing information not available” , please look to the right of the page. You should see a box similar to the one below. This will direct you to the appropriate website for you.

We are not ruling out the possibility of offering printed copies. Once we have a few more books in the series out, if there is sufficient demand and we can find a way of making it affordable we shall certainly consider this.

Meanwhile thanks again, and please don’t hesitate to write to me or drop us an email at contact@shiftthought.com in case you have any questions. I hope you enjoy the book and greatly look forward to your feedback.

We will discuss your questions and feedback at The Digital Money Group on LinkedIn and you are all very welcome to join us there.

For background on this post please see Why I wrote The Digital Money Game.

Why I wrote The Digital Money Game

Posted on July 28, 2014 by Charmaine Oak

Thanks for the outpouring of support to me, on the publishing of my first book, The Digital Money Game, now available on Amazon sites around the world. After I last shared about it, A number of you asked me what made me want to write this book, so I’d like to say a bit about this today.

When I strayed into the world of payments, after being in Telecoms for many years, it opened my eyes to so many new possibilities. This was around 2005 and it seemed to be a no-brainer for a telecoms operator to build new revenue streams from payments.

This proved elusive though. Firstly it was a personal challenge to try to understand so many new areas all at once, and then be able to position the business case to top management in a way that communicated both opportunities and risks. All of us had spent our lives in Telecoms, IT and non-Payments functions, and we had to rapidly understand Payments, E-Money, Regulations, Prepaid, Cash Networks and all this across multiple geographies.

Regulations did not help. At the time I blamed myself, thinking there was something more I could do. Ten years later, having worked with a world leading bank and the largest money transfer operator in the world, I got to understand regulations so much better. Now I KNOW there was little else I could do: One depends on regulators, who themselves have such a difficult time coping with the large number of changes, with a heavy burden of responsibility on their shoulders.

The truth is, this is all new. We are all learning. But that doesn’t take away the stress of not knowing, as so many of you across the world would agree! I wish I had had someone to tell me what was happening, how it would affect me and what I needed to know to stay ahead. I wanted practical cases I could learn from, and reassurance that this was an exciting space to build a new career.

This is my chance to make that wish a reality for others, by sharing the lessons I learnt and offering some tips from over 10 years I have spent launching services of the different kinds discussed in this book. I hope it will help you in some small way, to reinforce decisions you have to make, to help you to put your case forward to management and most of all to feel good about yourself and what you are achieving in this highly competitive and changing space.

I would love to hear your feedback. Did this book help you? What further questions did it raise?

Click here to go to the Amazon site. To your right you will see a green panel suggesting the most convenient online store for you. Do let me know if you face any difficulty getting access.

The Digital Money Game– a multi-trillion dollar industry emerges

Posted on July 25, 2014 by Charmaine Oak

I have great pleasure in announcing the launch of my new book, The Digital Money Game. I describe the multi-trillion dollar emerging industry I term “Digital Money” from the perspective of very many different industries. It is not just meant for payment experts in large organisations, but for anyone who wants to understand how people pay, and how this is changing in each part of the world.

The penetration of mobile phones and smartphones is transforming the way in which consumers interact with brands and greatly facilitates a move towards non-cash payments around the world. To play the game properly though, one needs to understand the changes in a much wider set of fundamentals - identity, security, authentication, regulations, technologies and more, so as to create appropriate vision that goes across channels, services and market segments. That way you have a more effective roadmap with respect to new entrants, and a better chance that what you plan now will still be relevant when your projects go live. I share more about why I wrote The Digital Money Game here.

The book is based on Shift Thought research in markets around the world, and my interviews with experts from all the different industries that now participate in payments and financial services. I did my first set of interviews in July 2011. Four years later, the wisdom that they, and countless others shared with me has helped to shape this book. This is the first book in The Digital Money Series and we are currently working on others in the series.

Since then I have learnt so much from so many conversations that unfortunately it is impossible to thank each one of you by name – I hope you will recognize your contributions when you read the book!

The book is designed to help you to spot opportunities and gain confidence and insights to channel your work in a way that benefits you, and the markets you serve. It addresses multiple functional areas and levels: Chief Executives, Technologists, Business Development, Market Development and Product Development executives from Banking, Cards, Money Transfer, Telecoms, Payments, Technology, Retail, and Venture Financing Industries.

The digital money approach described in this book can help you create products and services that are secure, convenient and empowering to a whole range of consumers and merchants, across a variety of channels. The goal is to create a shift in thinking – from merely addressing the new opportunity provided by mobile phones, to launching holistic services that build solid brands.

My book is available on Amazon stores around the world, priced in local currency and immediately accessible as an Amazon Kindle download that works across Kindle for PC and a host of commonly used devices. In case it says “Pricing information not available” just look to the right of the screen to select the Amazon site in your country.

In the first 2 days that the book has been available I am delighted to say that it has already been bought from many countries around the world. Thank you so very much for your support and kind words.

Have you bought my book? I would love to have your feedback and can direct you to further resources that may be of interest. Do drop me a line at contact@shiftthought.com.

In search of the magic formula for adoption of mobile banking in Sri Lanka

Posted on June 15, 2014 by Charmaine Oak

This blog is part of our series on the development of branchless banking in emerging countries in Asia Pacific. Charmaine Oak (CO) caught up with Thilaksha Kudithuwakku (TK), Mobile Banking Specialist, to discuss his vision on how mobile banking could be adopted by the masses in Sri Lanka, from his experience in carrying out research in such services and segments in the market since 2003.

Thilaksha Kudithuwakku is a marketing/advertising and mobile banking professional with over 15 years experience in marketing and advertising retail financial products. He has researched the reach of formal financial institutions into agricultural and under-privileged communities in Sri Lanka.He introduced the first ‘One-to-Many’ phone based mobile operator independent transformational branchless banking model in 2008 and was formally commended by the Central bank of Sri Lanka in 2009 for his endeavour to promote wider financial access in Sri Lanka.

The Context

Since 2008 the Central Bank of Sri Lanka (CBSL) has keenly researched the possibilities to determine the most appropriate regulations that could open the door to better financial services through the use of mobile phones. This culminated in the issue of mobile payments guidelines in 2011, for both bank-led and custodian account based mobile payments services. We met up with Thilaksha to understand the progress made so far and get a view on future outlook.

CO: Thilaksha, what originally got you interested in mobile payments?

TK: I first got interested when I saw the use of calling cards in 2003. Since then I have been keenly interested in putting together that unique combination of factors that I believe are essential for adoption in this unique country of ours.

My first opportunity to launch a service came when I was working at Seylan bank and we launched eCash as an early 1-to-many service back in 2008. Since then I have had an opportunity to discuss the potential with the Central Bank of Sri Lanka who have been most interested in creating a supportive regulatory framework.

CO. What are these very unique characteristics of Sri Lanka that must be considered in order to create the perfect mobile banking service?

TK: Sri Lanka differs from Kenya and the Philippines in that the potential comes from a large under banked rather than unbanked population. People do have bank accounts and are in fact very savvy about managing their money. For instance, they would certainly care if their money is not earning them interest.

What they need is more convenience. Also farmers require a “package of services” that includes for instance the ability to determine the prices of seeds and fertilisers, so as that make the offer irresistible.

The youth are the segment that are most likely to adopt first, and then persuade their elders to have a go. They already use their mobile phones to top-up their friends phones.

Another key segment consists of receivers of remittances from the over 1.7 million migrant workers abroad. The SME segment is another one that could strongly benefit from these services.

A unique characteristic of Sri Lanka compared to other emerging countries is that we still have only 14% of our population in urban areas – so we must go to the villages with our services. Only 12% currently use Internet (though this is growing fast), hence the importance of mobile phones.

CO. Are there challenges in establishing identity and AML/KYC?

TK: The great thing is there is a high level of education and children have already got ID cards prior to taking the GCE O-Level examination. Over 98% of the population have ID cards, and there are also credit bureaus in use.

There is really a relatively very low problem of AML/KYC as compared to other emerging countries.

Since 2011 the Central bank has already issued 3 types of guidelines, basic, standard and extended banking through agents. Unfortunately no bank has yet done full justice to the agent banking model.

CO: What do you consider to be some of the key requirements to be met by an “ideal” service that can quickly gain adoption in Sri Lanka?

TK: I am deeply convinced that we need to think differently to succeed in using the mobile channel in a truly transformational manner. It is a matter of choosing the right combination of technology, marketing messages, channels, visibility and testability to properly make this happen. We need to go to the village societies (samithis) and communicate through “slice of life”, examples and the use of dramas and highly appropriate media.

I also believe that banks have a better opportunity to deliver the best service to customers, but before this can happen they will need to let go of many of the old ways of thinking that are no longer appropriate for taking the new services to the masses.

Each of the target segments has unique requirements based on their lifestyle, access to specific mobile device and service requirements. It is very important to have a multi-channel approach as opposed to a single channel, and to match channel strategy to needs of the market segments.

CO: How has the market responded to the launch of eZCash?

TK: The eZCash service that launched in mid-2012 did obtain a good sign-up of around a million subscribers. However the issue faced is of how to get people to regularly use the service.

At present there is not yet a way to directly transfer money between the wallet and bank accounts – once that is in place it could certainly help.

CO: What are some of the biggest challenges you see that can hinder adoption?

TK: I believe it is very important that the services are not just designed by system providers but rather carefully brought out as a complete solution to address precise needs of our unique marketplace.

It is important to guarantee interoperability of access across all mobile operators, as there are 5 main mobile operators servicing the market.

Customer education is crucial. Unless people know what is available and feel comfortable in using the service it will be hard to raise the level of active users.

Use of appropriate technology is very important. For example, while mobile apps may be the future, what works immediately is USSD. People even find menus difficult to locate and access.

Another big factor is the establishment of the agent network and creating a commensurate business model and commission structure.

CO: Could you please offer some advice to companies seeking to launch services in the Sri Lanka market?

Firstly, An important element is vendor selection, in terms of the platform and their business model. Most of the mobile banking systems currently available around the world have been designed specifically to support the markets of unbanked and banked.

I strongly recommend having a vendor who can carry out the customization required to their existing systems as Sri Lanka needs a unique solution. Market conditions are not as the same as in the countries which have low bank density and high percentage of unbanked population. The banks may look at ways of converting their vendor into a strategic business partner rather than using them just as platform providers.

Secondly, it is crucial to have Senior Management Involvement. Without this it is very difficult for mobile banking services to succeed. Senior Management needs to understand the importance of launching mobile banking in terms of its unique capabilities for providing convenience, outreach of basic banking services and more importantly the capabilities of making payments remotely. Access to payment facilities is a major enabler as once the customer has the capability to easily pay and receive money to and from anyone, the range of financial possibilities expands.

CO: How do you suggest an existing bank structure itself for mobile banking?

I think it is very important to have a dedicated unit with specialized staff members to handle this.

In the current Banking context, although Mobile Banking has become the fifth channel to provide Banking services, it is very difficult to achieve mass adoption without the appropriate model and the marketing/ advertising approach which requires specialized skills and knowledge.

I recently read a report from CGAP that 172 branchless banking implementations have launched around the world since 2007, but CGAP estimates that less than 20 of those have reached 200,000 active users. I believe a root cause for this is that most of the players have launched their services without properly matching the requirements and attributes of the relevant market to their choice of technology platforms and marketing strategy.

Many banks which carry out mobile banking operations in the region already have identified the issue and have established separate units to handle the operation with specialized staff. I strongly believe that it is time for Sri Lankan Banks also to think of having a separate unit under e-Banking to handle the operations of m-Banking. Banks might see this as a costly operation, but it’s not. I see this as a strategic investment as in the future most of the business transactions and payments will be done via mobile communication channels (Mobile Phones,Tablet Computers, Smart watches, Smart TV and new gadgets to come) and therefore banks should be able to go with the trends as they arise, by having appropriate products and processes in place, so as to gain the competitive advantage which could be achieved via the specialized staff.

This will help the bank achieve mass adoption for m-banking while cutting down the advertising costs and more importantly it will create paths to offer innovative mass banking products based on the mobile phone and internet, including Face Book and other social media sites.

CO: What role do you see for the government of Sri Lanka, in facilitating the spread of mobile banking?

The government can play a major role in creating a positive environment for mobile banking and all the related products and services. I strongly believe the government should introduce mobile banking to their projects such as pension scheme, Samurdhi program and Divineguma program. These are programs introduced to uplift the lifestyle of the poor people of the country. The government should encourage the use of mobile financial services in Microfinance projects, train and bus ticketing, tax payment schemes and more, in order to build trust among all segments of society and thus increase usage.

CO: Thilaksha, what are your thoughts and hopes for the future outlook of mobile financial services in Sri Lanka?

TK: I believe there is a huge potential here, as compared to other countries, but only through taking the right approach. As mentioned earlier, the entire marketing and advertising of the service must be precisely targeted to reach the message to the masses. I myself continue to be passionately interested in working to make this happen!

Digital Money in Retail –3 years on, where are the digital wallets now?–Blog 1

Posted on June 6, 2014 by Charmaine Oak

In mid 2011 we saw the launch/announcements regarding digital wallets from Google, Visa, MasterCard, American Express and many more. Would this mean the end of PayPal’s 10 year domination of this space? 3 years down the line let’s take a look at how these digital wallets fared.

In Mid-2011, led by Google Wallet, digital wallets became the new kid on the block. Shift Thought defines these as customer accounts that can hold stored value and allow users to make electronic commerce transactions.

It was recently reported that Google has no intention of giving up on its slow-growing wallet service or mobile payments, and amusingly it was reported “We have been doing this for a while ..And we’ll continue to keep doing this for a long while.”. By “this” I am sure they do not mean growing the wallet slowly. This piqued my curiosity. Where are the digital wallets now? What are the gains and losses?

In March 2014 Eat24, a restaurant delivery app which integrated with Google end November 2013, reported customers spend an average of 11% more when paying with Google Wallet. Subway was one of the first to accept the Google Wallet, offering the option in 5 markets since 2011. Jack in the Box also started testing Google Wallet in 35 of its restaurants in the Los Angeles and San Francisco markets in November 2011.

Now Google is reportedly changing the way they support contactless payments on the newest versions of Androids. This seems a good time to share our research on how each of the different digital wallets announced in mid-2011 have fared since then.

I’d like to share a bit about the landscape at the time when they launched, as a backdrop for discussing how this has changed, and the main initiatives we see today. In 2011, I created the figure below to explain in one page what the Digital Money ecosystem looked like then.

There were 7 billion consumers making payments in the world at the time, which included payments between each other (P2P), to and from governments (P2G/G2P) and corporates (P2B/B2P). The figure shows the main industries and players that supported such payments.

In that year banks and money transfer operators were joined by new entrants to create a vastly different competitive market for payments. Alipay and Paypal led the world at the time, but expectations were high for the new Google wallet which offered a business model based on ‘Google Offers’, a targeted sales mechanism that sent promotions to smartphones. This was a scheme by which consumers and merchants benefited, but it raised concerns about personal data.

In the next blog posts I will look in more detail at each of the industries in this figure to see how they have moved on since 2011.

Cryptocurrency – Building a new business model based on safety rather than secrecy

Posted on June 1, 2014 by Charmaine Oak

As global financial centres such as Switzerland grapple with the need to reinvent their business model, Shift Thought recommends a way forward that will enhance rather than challenge reputational branding.

A Big Thank You from the team at Shift Thought

A big thank-you for the huge interest and support for our webinar Digital Money: a new business model for Switzerland. We also take this opportunity to thank the UK Trade & Investment for this opportunity, and in particular Anna Faber, Commercial Officer - Technology & Innovation, who was a source of inspiration and support, and without whom this would not have been possible.

The recording is now available at this link

On the webinar we reveal our thoughts on an architecture that could form the basis of a new business model to innovate in the context of cryptocurrencies. Some of the questions we addressed within this recording are:

Do we see similar challenges in implementing Bitcoin, as encountered for the Euro?
Which type of digital money has the greatest potential for the future?
Do you think digital money should be regulated? Is this possible? How?
What do you view as the biggest problems with Bitcoin: technical such as the ability to scale, regulatory such as government reactions or business model fit?
Would you agree that ultimately only one cryptocurrency will exist?
Are some banks more ahead of the game than others when it comes to digital money?
Do you see a service like PayPal as being threatened by Bitcoin or enhanced by it?
What would be the first step for a "traditional" Swiss private bank to take an interest in Bitcoin & cryptocurrencies?
Are some banks ahead of the game more than others when it comes to digital money ?

Our next blog offers further answers to some of the questions covered on the webinar. We also received a number of follow-up questions and these will be answered in depth by Dr. Neeraj Oak. We invite you to participate with us as we explore the development of this critically important topic. It would be great to make this a dialogue in which people from around the world can join.

We have therefore created the Digital Money group on LinkedIn

Please join this group today, to add your unique perspective to the body of knowledge being created. This group brings together news and views on how digital money is changing the way people pay around the world.

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Category Archives: Digital Money