Category Archives: Region

Regional classification to track the progress of Digital Money

How people pay in the USA – Fed Reserve Payments study 2016

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The Federal Reserve has just reported their estimates of the total number and value of all noncash payments made in 2015 in the United States, both by consumers and businesses. The study provides insights on adoption trends for new payment methods. Main findings of the study may be considered under 3 key areas:

(1) Differences between consumer and business payment choices in 2015 and changes over the 15-year period since 2000

No surprise, check payments are being replaced with card payments and ACH transfers. In number, check payments dropped from  57.8% of non cash payments to 13.4%. By value the drop was from 66.7% to 15.4%. However this still remains high in comparison to leading European economies that have considered altogether doing away with checks.

Total noncash payments by households increased by around 94.7% over the 15 year period, again no surprise as this period from 2000 to 2015 precisely marks the growth period for electronic payments worldwide.

New methods studied included payments initiated via a mobile device (for instance mobile wallet), payments through specialized services for person-to-person payments, and the use of online or Ecommerce payment authentication services to help verify the payer and secure payment information.

(2) Adoption and intensity of use of different types of general-purpose payment cards in 2015, along with more recent changes since 2012

Consumer and Business payments differed in terms of popularity of payment type. Top four consumer payment types were non-prepaid debit cards, general-purpose credit cards, checks, and ACH debit transfers, with the first two categories substantially in the lead. The top four business payment types were ACH credit transfers, checks, general purpose credit cards, and non-prepaid debit cards. The number of checks written is still alarmingly high as compared to that in many Western economies such as the UK, that have made the transition to instant electronic payments.

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The figure above, drawn from the Federal Reserve report illustrates the way in which US consumers and businesses pay and how this differs in terms of payment type.

(3) Growth in selected alternative payment initiation methods and services

Over the 15 year period there was strong growth in the number of mobile wallet payments, but online bill payment through banks increased only marginally as payments can now be made directly to billers. The figure below, extracted from the report shows the change from 2012 to 2015.

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Although P2P and money transfer payments increased over the period, they remain very low by number. Online payment authentication methods on the other hand grew from 1.8 billion in 2012 to 3.4 billion in 2015.

The full study report from the Federal Reserve may be downloaded at The Federal Reserve Payments Study 2016: Recent Developments in Consumer and Business Payment Choices, June 2017.

The Florin Awards Europe 2017

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I am just back from chairing the Florin Award Jury at The European Payment Summit 2017.

 

We were pleased to see some highly innovative products and services from the finalists.

ThreatMetrix was the winner of the Florin Award in the category “Architecture for Secure Transactions”.

ThreatMetrix eCommerce protection provides real-time fraud prevention tools to online merchants worldwide, while also offering the potential for a less-intrusive consumer experience. The jury was impressed with the innovation demonstrated by the ThreatMetrix Digital Identity Network, claimed to be the world first Digital Identity Graph. This maps associations between people and their devices, locations, account credentials and behaviour. Such a mapping of anonymized user identities could play a key role in fighting cybercrime while also respecting consumer privacy. The strong European orientation is helpful for the roll-out of PSD2. Their Cybercrime Threat map provides a live stream of fraud attempts that was also something the jury found credit-worthy.

Iredeto was the winner of the Florin Award in the category “Omni-channel Payments Security“.

The jury was impressed by the way that Irdeto has transformed itself over the years with the visionary leadership of founder Pieter den Tooner who established the company back in 1969. Today the company continues to play an important role in Europe while boasting a client base that includes customers worldwide. The jury especially valued the breadth of security solutions that spanned multiple industries including media & entertainment, automotive and payments. Their solutions in the area of cloakware and whitebox cryptography have a key role to play thanks to the importance of protecting Open APIs and the critical need for security across multiple devices.

 

Photo-Winners

 

Do read more about it, and check out all the finalists at http://europeanpaymentsummit.com/florin-awards/.

The conference, held at the historic Louwman Museum was very interesting.

I shall share highlights from the conference as well as our latest research on Cyber Security and Payments over the next month.

 

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Financial Inclusion at the Bottom of the Pyramid–Add your voice

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In this interview Carol Realini, co-author of 'Financial Inclusion at the Bottom of the Pyramid’ tells how they use an innovative crowd-sourced solution to provide a deeper understanding of innovative financial services that are emerging to address the needs of unbanked and under-banked people around the world.

Q: Carol, could you let us know a bit about your new book – what’s it about?

fipKarl and I are fortunate to have been involved in financial inclusion projects around the world. We wanted to share how we see things changing, new models emerging and most importantly how this is happening differently in different places.

We thought it important that we provide a global view rather than focusing one market or one aspect – such as just Square or just Mobile POS, or just the USA.

We’re show-casing the best examples of tech-enabled financial inclusion from around the world.

Q: I’m interested in the way you are sourcing material – in a manner that is still pretty unique

Yes, although we have ourselves been in many of the countries where the new services are rapidly growing, we did not want to be limited in our thinking. By throwing the book open to contributions from around the world we expect to cover more ground and discover some of the breaking stories that will help create a good understanding of the state of play.

Q: Carol, how do you and Karl expect to make a difference with this book?

We believe the next 5 years will be a period of unprecedented change. Another 3 billion or more people will have access to the internet via mobile. Financial services will reach 1-2 billion more people in a similar timeframe. We want this book to help inspire people to understand more. We want the book to help people share about what they’ve achieved so we jointly celebrate their success and contemplate potential pitfalls together.

Q: How do people contribute to this initiative?

We have a campaign on for nominations for Global Financial Inclusion Pioneers. We would love to have more Europe and Africa nominations – we have extended the deadline to Dec 31, 2013. Full details are available at the Financial Inclusion at the Bottom of the Pyramid website. We’d like people to visit and nominate as well as submit their stories. This will help us showcase the best examples from across the world.

 

Carol Full AvatarCarol Realini is a successful serial entrepreneur who  dedicates her time to working with global pioneers in mobile banking & payments. Carol was a World Economic Forum 2010 Technology Pioneer.  Carol passionately supports entrepreneurship, banking for all, and women in technology. She is the author of the 5-Star-on-Amazon BankRUPT, a book about banking innovation in the US, and co-author of Financial Inclusion at the Bottom of the Pyramid.

 

Governance and Audit Scope of Mobile Banking in Bangladesh

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As the number of registered mobile banking users in Bangladesh approach 10 million, Raihan Alhusain, Head of mCommerce Operations in Airtel Bangladesh offers his expert practitioner insight into how the mobile financial services guidelines issued two years ago support the remarkable growth in the country. He reflects on areas in which regulations could benefit from extension to support new scenarios stemming from this rapid growth.

Views specified are solely Raihan’s personal views as an expert in the mobile banking sector. This interview is part of the research Shift Thought conducted in the release of our “Digital Money in Bangladesh 2014” Viewport.

Background

In September 2011 Bangladesh Bank published the Mobile Financial Services (MFS) Guidelines allowing commercial banks in Bangladesh to start bank-led mobile financial services. The guidelines describes the services that may be offered, including a broad range that are required to promote financial inclusion. Only the bank-led model is permitted. The guidelines prescribe essential governance processes including licensing, agent management, AML/KYC, education of customers and agents, building awareness of customer services, security and controls related to technology, data retention policy and reporting and more.

Q: Why is this a good time to discuss 2-year old regulations?

image_thumb2Today the number of people in Bangladesh using financial services delivered through their mobile phones is fast approaching 10 million. Since the start of these services in 2011 when DBBL started without distributors, the systems have grown more sophisticated and with greater coverage so that now all the usage scenarios and implications are of great importance across the country. The guidelines issued by Bangladesh Bank as Central Bank and main regulator of financial services underpin the delivery of services. However along with the guidelines I thought it important to discuss the practical checks and balances these new systems imply in greater detail at this juncture.

Currently banks and mobile network operators (MNOs) execute agreements to ensure network coverage and agents reach for the service. The audit and governance scope of mobile banking in Bangladesh mainly focus on adherence to the policy established by the guidelines. Additionally as practitioners we continue to learn about governance and audit and determine the best ways for responsibilities to work across partners. By reflecting on these there may be useful points for others in Bangladesh as well as for other bank-based branchless banking developments in India, Nigeria and elsewhere around the world.

Q: What is the concept of a trust account in mobile banking and why is it important?

In the bank-led model adopted in Bangladesh, banks are the custodians of funds deposited against each mobile wallet. Even though the guidelines do not include the trust account mechanism, in order to be aligned with the guidelines, funds kept in the bank must to be treated as a liability and may not be used for operational purposes. This applies to Telco-led models as well. The accounting book should clearly mention the accumulated amount through a specific general ledger code, following IFRS (International Financial reporting standards) principles. The audit scope in this aspect should include a complete checking of the trust account mechanism.

Q: What is the concept of a book balance mechanism and why is it important?

At any point of time, the relevant balance in the bank book shall be equal to the virtual balance of all registered mobile accounts shown in the system. This means at any point in time, reconciliation processes must be in place to allow the following to be checked:

Bank Balance = Channel Balance (Agent Wallet Balance+ Distributor Wallet Balance) + Bank Branch Wallet Balance (If Banks deploy their own Branch to work as channel for Mobile Banking) + ATM Wallet Balance (If Banks deploy their own ATM channel to work as channel for Mobile Banking) + Registered Customer Wallet Balance + Merchant Point Wallet Balance + Commission Wallet Balance.

If a Bank disburses commission related to mobile banking through the mobile banking platform, it must keep an equal amount of funds in the account.

All virtual points created in the economy must be backed by the balance kept in the Bank. This mechanism is very important and should be adhered by so that virtual money is not created in the economy without being backed up by physical cash in the Bank.

The audit scope of this section should involve the matching of general ledger virtual wallet balances against the bank account balances.

Q: What are some of the compliance processes and issues relating to agent and partner management?

The Cash Points/ Agents are to be selected by the bank and a list with their names and addresses must be submitted to the Department of Currency Management and Payment System (DCMPS), Bangladesh Bank. This list must be updated on a monthly basis. Banks may need to develop their own Agent Accreditation Policy for this purpose. This policy should include assessment of competence to implement and support the proposed activity, financial soundness, ability to meet commitments under adverse conditions, business reputation, security and internal control, audit coverage, reporting and monitoring environment.

Banks have to follow the full KYC policy issued by Anti Money Laundering Department (AMLD) of Bangladesh Bank for the cash points/agents/partners. Banks bear all the liabilities that arise from improper action on the part of their subsidiaries/cash points/agents/partners. Banks need to perform periodic audits of the agent locations in order to ensure proper processes are being carried out by them. Strict action should be taken by the banks against the agents for not following the processes.

The audit scope in this section should include a complete checking on the modus operandi between the banks and the agents/ partners.

Q: What are your thoughts on audit relating to transaction management?

Clear guidelines have been issued by Bangladesh Bank relating to the transaction limits as well as overall caps including limits per customer, per agent and per month. Service charges have been fixed for each transaction. Banks need to ensure that these limits and caps are built into the mobile banking platform and service charge rules are set up as per the policy. Periodic audit is needed to ensure that this continues to be properly applied.

Q: What are some of the processes that must be followed regarding KYC management?

Banks have to use the prescribed ‘Know Your Customer (KYC)' format as given in the MFS guidelines. The Bank will be responsible to ensure that KYC processes implement guidelines issued by Anti Money Laundering Department of Bangladesh Bank (AMLD) for all customers and across all agents and partners. Banks need to ensure that the agents are properly trained in KYC management and also ensure that agent KYC has been checked and maintained properly while registering the agent.

The Audit Scope for KYC management should include the modus operandi of registering agents by Banks, checking of the authenticity of the documents provided while registering customers and agents and also record keeping of the documents related to KYC.

Q: How is AML compliance assured for the new branchless banking transactions?

All transactions should be monitored through an IT-based system developed by the banks. Banks shall ensure that suspected transactions can be isolated for subsequent investigation. Banks shall develop an IT based automated system to identify suspicious activity/transactions (STR/SAR) before introducing the services. Banks are expected to immediately report to Anti‐Money Laundering Department of Bangladesh Bank regarding any suspicious, unusual or doubtful transactions likely to be related to money laundering or terrorist financing activities.

A periodic audit is needed to ensure the mechanism of reporting of suspicious transactions. The audit scope in this sector includes checking of rules set in the system based reporting mechanism which should be in in line with the AML act of Bangladesh.

Q: What are some of the processes and issues expected to be followed relating to security?

Banks must follow the Guidelines on ICT Security for Scheduled Banks and Financial Institutions, 2010 issued by the Bangladesh Bank and ICT Act, 2006 to address the security issues of Mobile Financial Services which will address issues of confidentiality, integrity, authorization and non-repudiation for each transaction through the portal. Apart from the PIN, a second factor of authentication should be built‐in for additional security as chosen by the bank. A periodic audit must take place to ensure the implementation of security policy as mentioned in the guidelines.

Q: How is the customer required to be protected by the guidelines?

As per the MFS guidelines banks are held responsible for protecting consumer rights and for dispute resolution. Banks may address dispute resolution with the assistance of selected partners and agents. The Audit scope in this sector may include the checking of bank policy and turn-around time (TAT) for dispute resolution. It may also look into the proactive approach banks have taken to ensure better customer services to the customers and agents.

Q: Please share your final thoughts on governance and audit of processes relating to mobile banking

Bangladesh Mobile Banking has seen a tremendous growth in the last few months and is expected to achieve more than 15 million mobile banking accounts at the end of 2014 by reaching over 110 million cell phone users, where 60% are unbanked out of the population of 160 million.

Considering this success, growth, and expectation, in my opinion some of the gray areas that were not covered by the MFS guidelines need to be revisited. For example, both Banks and MNOs need to work together with the policy makers to set policies in regards to Branding, Platform Management and Marketing. This will set clear guidelines for everyone on the Do’s and Don’ts of each sector. MNOs, who have the greatest reach and expertise on Branding and Marketing need to be able to help banks to reach the expected number of mobile banking accounts through innovative marketing strategies, branding concepts and campaigns.

Apart from this, another area which needs to be taken care of is the modus operandi related to Payment Services. Through separate permissions granted by Bangladesh Bank, most of the MNOs provide various payment services such as BillPay, Railway Ticketing using their own platform. They have also integrated their platforms with those of the banks to offer various financial services. A common guideline needs to be issued and added to the MFS guidelines to clearly mention the modus operandi and policy with regards to these kinds of services.

In conclusion, I must say that for MFS in Bangladesh the sky is the limit. I am sure Bangladesh will be an example for the whole world in the setting up successful mobile financial services and also in establishing our main objective of banking the unbanked through mobile financial services. Just imagine what we can already do today in Bangladesh using mobile banking. We can pay our electricity, gas and water bills, buy railway tickets, send money to loved ones, receive salary, cash-out through ATMs and designated outlets, top up mobiles and more. Kudos to the banks, MNOs and the policy makers, Great achievement indeed!!!!

About the Author

raihan_thumb5Ruhullah Raihan Alhusain is a professional with over 9 years of experience in Mobile Banking. He graduated from the University of Texas at Arlington with an Honors Bachelor in Business Administration. He started his career in mCommerce in Bangladesh with Grameenphone Ltd., a Telenor ASA. As Head of mCommerce Operations at Airtel Bangladesh Raihan continues to passionately build and launch specialised products in co-operation with DBBL. Recent projects include micro credit disbursement through mobile banking, airtime sales proceeds collection, mobile banking through modern trade such as ACI Swapno and mobile top-up with bKash.

What must happen for Branchless Banking in Indonesia to move beyond pilots?

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Rakhi Sahay, Shift Thought distributor in Indonesia shares her thoughts on the payments scene in Indonesia as the regulators seek to encourage financial inclusion through branchless banking. What are some of the sticking points and how can Indonesia join the ranks of other countries where these services have already entered into mainstream use?

Impressions of an Indian in Indonesia

We moved to Indonesia in June 2012 and it’s been wonderful living here since. Yet a few things came as a surprise, for instance the way people pay. Coming from India where people now increasingly use card payments, having to pay with cash took me back a bit. We had heard about the widespread use of cash for transactions in Indonesia but I had not imagined it to be at such a high level. While doing provision shopping even in big departmental stores, I was taken aback when cashiers did not accept local bank debit cards that I was using  – “sorry we only accept X bank debit card or cash”. Generally the small shops and stores that do business along the street only transact in cash in spite of having customers from middle income groups who have bank accounts and can make payment by card.

My interest in branchless banking and payments was further triggered by an informal  cimageonversation I had with my help, Fatimah. Every month she sends money to her mother who lives in a village. For this she goes to the nearby bank to deposit cash into her mother’s account. I got talking to her to learn about how people from her village who work outside send money home or pay their utilities. Do they use mobile technology for purchase and payment? Do they know about some of the new services being launched by banks, mobile operators and other providers in Indonesia?

Fatima knew about mobile banking and in fact had the m-banking application of Indosat on her mobile. However although she knew about the functionality it provides, she does not use it or plan to use it. She does not have a bank account which she believes is needed for mobile payments and transfers and also does not regard transferring through bank as a reliable and secure mode of transfer. Come to think of it, I too have not felt comfortable with using my mobile for payments. My interest was piqued and I chatted with others close to me and both banked and unbanked people tended to have some reason for not yet investigating the new methods available.

20131207_100534This conversation made me wonder - what needs to happen for myself and Fatimah, along with millions of other Indonesians to benefit from innovations to enjoy more convenient payments? If I feel restricted in making transfers and payments, how would people from remote islands and lower economic segments manage their daily needs? Do we need to change the mind-set of people? How can we increase accessibility to gain confidence? Surely branchless banking can add much value for people who have limited access to banking facilities.

 

20131207_100626Regulations play an integral role in providing a favourable ecosystem for any new banking initiative to flourish. Bank Indonesia, the regulator, has been treading the path carefully and its first pilot which ran from April 2013 just ended in November 2013. The regulators are now consolidating results and by early 2014 intend to roll out the full regulations on branchless banking. Many providers await this in order to obtain the certainty required for investing in the new technology and marketing efforts required to successfully launch the services for all sections of society.

The Market

The country is one of the early entrants in offering financial services through microfinance activities. Although there are a range of service providers to cater to different socio-economic groups, only 19.6% of the population has formal accounts (2011 Global Financial Index). It is estimated that around 100 million Indonesians do not or cannot access formal financial services in a population base of 250 million.

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The vast geographical expanse and remote terrain creates hurdles in the provision of financial services. This creates a potential opportunity for alternative channels such as branchless banking and mobile money. Branchless banking is the delivery of financial services outside conventional bank branches through the use of retail agents and information and communications technologies to transmit transaction details (as defined by CGAP).

In 2012 there were 260 million mobile subscribers with 143 million unique subscribers. Only half the numbers of people possess bank accounts as compared to unique subscribers. The opportunity has been spotted, but scope for adoption remains immense. Branchless banking with the use of mobile technology and agent networks is rapidly improving financial inclusion in countries around the world. Mature microfinance markets of Bangladesh, Pakistan and Kenya have been able to achieve rapid adoption rates. Can Indonesia too leverage the penetration of its mobile technology to foster financial service? The large base of mobile users makes it easy for service providers who do not need to educate the masses on mobile usage.

Regulatory Environment

The regulators have been moving cautiously towards creating the regulatory environment required for this. A new regulation of December 2012 allows full encashment for person to person transfers using mobile wallets at agents. Then in April 2013 regulator Bank Indonesia (BI) released guidelines on branchless banking for banks and MNOs. The move caused MNOs to refocus on strengthening agent networks. As a pilot initiative, BI mandated five banks – Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Sinar Harapan Bali, Bank Tabungan Pensiunan Nasional (BTPN) and CIMB Niaga to offer branchless banking across the country, to cover rural and remote areas as well. The initiative is looking at bank-led, telco-led and hybrid models, to be tested under this program. The banks are also mandated to include provision store owners, gas stations and business outlets as agents in order to extend financial services to the excluded.

Progress of Branchless Banking Pilots

Reports on the progress of pilots suggest that the participating banks are able to see positive results in implementing branchless banking. Customers, in particular local business, homemakers and students benefit from more convenient access.

Banks have gained an increase in the number of new customers as well as agents. Bank Sinar Harapan Bali, a subsidiary of Bank Mandiri, reported an increase in new customers and agents and aims to double the number of agents. Similar information is reported by BRI, another state-owned bank, who is has reported around 200 transactions per day which is equivalent to daily work of one teller.

Going beyond pilots

The pilot has got many other banks and MNOs interested in branchless banking. But they are waiting for the regulator to open-up and also look at results from the pilot phase. The regulators are also considering inclusion of BDPs (regional development banks) to increase accessibility at regional levels. Bank Indonesia now plans to review the pilot phase and look at pan-country roll-out of branchless banking.

The power of mobile technology in expanding the reach of financial services is immense. It is encouraging to see regulators in Indonesia taking informed decisions in formulating regulations in this space. Indonesia has the advantage of being able to learn from other countries that now have mature branchless banking markets. Pre and post roll-out, it might be useful to take a closer look at such successful markets in terms of product offerings, agent selection, processes and platforms. Over 2014 much can be achieved through proper training of agents, pricing and commission strategies and marketing and communications.

clip_image002Rakhi Sahay, Shift Thought distributor in Indonesia, is a development professional with a deep interest in innovative channels that drive inclusive development. Rakhi’s interest in branchless banking is a result of long experience of working with institutions and consulting agencies in India.

Mobile Banking in Bangladesh – striding across regulatory divides through savvy Marketing

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In this guest post Raihan Alhusain, Head of mCommerce Operations, Airtel Bangladesh provides unique insights and practitioner experiences of the tremendous work in progress in Bangladesh. What strikes me from my interview with Raihan and the experiences he has shared is that the consumer is truly placed at the centre when mobile operators and banks come together in an earnest attempt to leverage the best strengths of each partner.

 

The early days of BillPay

imageThe story of Mobile Banking in Bangladesh starts in December 2006 with the launch of BillPay by a Mobile Network Operator (MNO). I was a part of the team that launched the service. We started everything from scratch, designing the financial operation process, the product, reconciliation and payment process. When BillPay became available across the country I felt that I was blessed, I felt that I was doing something good for my country and for the people. Until now, whenever I see the BillPay sign I feel the pride of launching the service in Bangladesh.

In the early days, customer education and customer trust were the biggest challenges for my team. The service was launched in Chittagong and soon started to create interest amongst the customers. Customers were most attracted by the convenience. At one point in time, people in the Chittagong region were able to pay water, electricity and gas bills through the BillPay platform.

imageBillPay used two models, one with 100% validation of data and the other with zero validation of data. The utility company, having automated billing and payment data mainly used the validated system of BillPay. This means whenever customer paid a bill of a specific month, the billing data used to get verified through the utility company billing server and after the payment was made, the payment data was also verified and posted automatically.

What didn’t go well though was the need for manual posting of BillPay data. For some of the utility companies, posting of payment data was totally manual and MNOs had to send paper based payment data to the decentralized offices of the utility company. This process required manual intervention and extensive man-hours to post data.

Then came Railway Ticketing. The same MNO launched the service under a new name. This created another option for BillPay wallet customers. They were able to not only pay electricity, gas and water bills but also to pay for their railway ticketing. This removed the hassle of manual processing of railway ticket payments and added another milestone to the automated payment system in Bangladesh. However, mobile banking through the BillPay platform offered the payment services and fund deposit (Cash in) only. Cash Out was not available.

MFS Guidelines arrive

In 2011 the MFS Guidelines took complete shape and were published by the Bangladesh Bank – a bank-led Branchless Banking model was introduced. One of the major local banks first launched the complete mobile banking facility allowing customers to withdraw cash from the authorized outlets of the bank and also through ATM.

This model was agent initiated. That means most of the revenue generating transactions were initiated through the agent wallet. DBBL signed an agreement with several telcos to ensure the availability of mobile banking at their networks. Since this model was agent initiated, the agreements with telcos also ensured Telco Agent networks could be used for Mobile Banking.

What went well in this model was the Trust Factor. Mobile banking with a bank added more trust in the mind of customers. What did not go well was the channel/ distribution model they used. Initially all the agents belonging to them were directly connected to their Bank Branches. This means an agent had to go all the way to branches for mobile banking (Cash in and Out from agent wallets).

The learning continues

imageShortly after this a subsidiary of another SME based local bank launched their service. Their model was completely customer initiated. All they needed to do, was to sign up with the MNO for access through USSD. They did not depend on the Telco agent to expand their channel reach.

They came up with a distribution channel structure similar to that of the MNO. What went well for them was their expertise in running an effective channel and their strategy towards establishment of their Brand. Their brand achieved more prominence than the other brands in the country. They also signed an agreement with several telcos that ensures the availability of their services across networks.

Both the players ensured the availability of the mobile banking services through the USSD network. The success of this partnership depended on several initiatives taken by both bank and telco partners. Initiatives such as B2B (Channel Payment), P2B (Merchant Solution), B2P (Salary Disbursement, Micro Credit Disbursement), G2P (Government Allowance Payment) brought ease in the life of customers, increased revenue for the Banking Partners as well as ensured stickiness to the MNO SIMs.

Mobile banking goes mainstream

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According to Bangladesh Bank sources, 17 banks now offer mobile financial services (MFS) within just three years. Mainstream PCBs (private commercial banks) now provide services. For instance, we have Brac Bank's bKash, DBBL mobile banking, IBBL MCash, the Prime Bank Easy Cash and more. The number of mobile banking accounts is about 7.21 million with about 0.108 million agents countrywide. The volume of transaction was $1,030 million in the first quarter of 2013. Significant achievements indeed!

Personally this has been an exciting journey for me as I look back and compare what our services could do for customers with just BillPay, and what we can now do for unbanked customers. This makes every experience precious, and justifies all the hard work from our regulators and people across all the different industries.

About the Author

raihanRuhullah Raihan Alhusain is a professional with over 9 years of experience in Mobile Banking. He graduated from the University of Texas at Arlington with an Honors Bachelor in Business Administration. He started his career in mCommerce in Bangladesh with Grameenphone Ltd., a Telenor ASA. Today as Head of mCommerce Operations at Airtel Bangladesh Raihan continues to passionately build and launch specialised products in co-operation with DBBL. Recent projects include micro credit disbursement through mobile banking, airtime sales proceeds collection, mobile banking through modern trade such as ACI Swapno and mobile top-up with bKash.

Q&A from our “Disruptions in Digital Payments in China” webinar

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Thanks very much to all of you who helped us to make this live webinar (our first!) a great success. With representation from over 20 countries, we received a number of questions and were not able to answer all of them in the time available. The post below addresses these and we hope you will find this useful. There is never just one point of view, and we would love to hear your comments and your unique ways of approaching the questions. If you missed it, catch the free replay here.

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Q1: Is it advisable to partner with a Chinese company when seeking to enter this market?

A1: In general you may not have a choice in this. The question is with whom to partner and how to set it up so as to remain in control. An example is Yahoo China and Alipay. In Jack Ma’s speech at Stanford on May 14, 2013 he mentioned that Alipay digested Yahoo – they simply ate Yahoo and would not have been able to do their P-2-P advertisement platform without that.

This is a great question and to do full justice would probably need a session in itself. As a guideline, it depends on your industry, your ambitions and the roadmap you plan. Suffice it to say that I have seen careers made and broken largely due to the manner of handling this issue.

Q2: In your experience what is the biggest threat to successfully entering the Chinese market?

Timing and partnerships. Possibly in no other market could I say more strongly that a 360 degree understanding and a watching brief is critical. You cannot afford to walk into this blindfolded without opening yourself and your company to high risks, neither can you afford to do nothing. Understanding, anticipating and planning is highly important. It is equally important to understand Chinese culture and history as much as you deeply absorbing knowledge on the payments ecosystem and timeline.

Products and services must be made fit for the unique expectation of the market. For instance the clean streamlined experience of Amazon is not what is preferred – online shoppers want a busy, “happening” website. Similarly, there is a very different online-offline-CSR engagement in the consumer journey that one needs to learn.

There is a window of opportunity that must be well understood. We have found that players who act too soon have faced problems. On the other hand due to the need for domestic partners, it is advisable to act before all the “good partners” are taken.

Q3: How stable is the regulatory landscape in China? Is it prone to sudden changes?

In general it has taken many years so far for changes expected and talked about to actually happen. For instance I recall I first studied proposed regulations for licensing third party payment providers way back in 2006. They actually came out in 2010.

Similarly it is not uncommon to have a mass rollout, big commitments and plans in a specific direction only to see it overturned (example RF-SIM). For players who have built these products specifically for the Chinese market this can represent a serious setback.

Q4: Who are the companies to watch in this space?

I touched on the main players in the China payments ecosystem during the webinar, so for those who have not heard it, it could be useful at this point to listen to the free replay here. Of course our 295 page “Digital Money in China 2013” viewport offers you the whole list of players, partnerships and initiatives with our best understanding of their importance and traction. There is so much happening in parallel and there is a high degree of cross-over. What we tend to do is to note how the payments gatekeepers are proceeding – CUP, CM, The big 4, the big 3 large PSPs and more.

Q5: What are the best partners to work with?

This depends on who you are and what is required by the regulatory environment. If you are to apply for a license there is a lead time involved.

A good example is Western Union’s recent thrust into China in partnership with ICBC and CUP.

Q6: How should we interpret Digital Payments in Hong Kong? How does the Chinese government and market incorporate the progress and regulation of that market?

The webinar only dealt with Mainland China. We plan a separate webinar that will address Hong Kong, China as also other countries in the region. In general the approach is One Country- Two Systems. This is why Hong Kong, China has a critical role to play in digital payments relating to Mainland China. More when we tackle this topic. Please register to our website (registration is free, takes seconds, only requires email address and provides you a much greater access to the overall content on our portal) so we can send on an invite to you once plans are in place.

Q7: Would you clarify your definitions for "digital wallet" and "digital money", thanks!

The Digital Money domain has been described by Shift Thought™ as a way to understand the ecosystem, products, services and infrastructure involved in the digitisation and transfer of value. We use this term to refer to a host of financial services that use innovative alternative channels, technologies, providers and payment instruments.

For a full definition and understanding of our approach please see Blog #3: What is digital money?

The Digital Wallet domain has been described by Shift Thought™ as a means of understanding the whole range of stored value products aimed at digitising value and enabling the owner to utilise it in a way that offers a superior experience as compared to traditional payment methods. Services utilise an account and stored value or e-money that may be utilised across various channels and services. This includes prepaid cards, vouchers, mobile wallets, e-wallets and more.

Q8: Is there any real digital money in China (I mean digital money that is not dependent on bank account or credit card)? All mobile payments solution are NOT based on digital money.

This is a good point. Please look at my response to Q7 on what is Digital Money earlier. We track an extended set of initiatives to do justice to our definition. However, specifically to answer yours, there is E-money that has been around for a while now. Prepaid cards, both open and close loop exist as discussed in our Webinar and covered in detail in our Viewport. More importantly, digital wallets and mobile wallets are very much in use.

You are right that all mobile payments are NOT based on e-money and a number of them require a connection to a bank account or card account. In the way we cover each of the 50 key initiatives on our portal, you’ll see our icon and descriptions that exactly show what payment instruments are supported for Senders and Receivers of each kind of service.

I hope this answers your question. Please feel free to reach out for a quick chat to discuss further. Also, this is not set in stone. We found an absence of accurate definitions in the marketplace and in those cases provided our own. Where possible we comply with the way in which CGAP, GSMA, Mobey Forum, NFC Forum and other key bodies and thought leaders already use these terms.

Q9: After utilising your China 2013 viewport, I also obtained your comprehensive Indonesia 2013 report. I noticed how in each country, both APAC members have approached and regulated differently - How would Shift Thought help a potential customer navigate these different markets?

That is a great question and thank you for the compliments on our viewports. Shift Thought is fortunate to have compared 19 different APAC countries in terms of regulatory approach as well as the predictor framework we use to project the growth of each of the 32 services we class as Digital Money.

We maintain a highly comprehensive knowledge base of regulations that impact on all these services, and understand how they may apply from each perspective. This, along with our deep understanding of player competencies puts us in a great place when we consult with large mobile operator, banking and money transfer groups in search of the right partners.

We’ll talk more on this in the Indonesia webinar. If you pop me an email on which countries you want to know about first I’ll consider this as we prioritise the webinars scheduled.

Q10: Charmaine - do you see an opportunity for mobile point-of-sale devices targeting Merchants in China much the same way that Square has addressed small Merchant needs in the United States?

Absolutely, and as is always the case in China, one of these providers currently cutting their teeth in the highest populated country in the world could well become a challenger to the Square, iZettle and huge number of mPOS providers currently starting of from the East. But it’s not just China. We’ve seen very interesting and innovative approaches elsewhere in APAC. This blog is getting too large, maybe a separate post later?

Q11: Sub Saharan Africa population is forecasted to reach China's in 20 years. What similarities if any do you see between these 2 markets and what learnings can Africa derive from China now to foster further successes in the contribution of digital money to more financial inclusion of unbanked populations.

Wow, this is a biggie. Thanks for this great question and sincere apologies that I can’t do justice to all of this today. However, I put it the other way, what can China learn from Africa including sub-Saharan Africa? – That is the real question. As the access that people have differs, I’d like to do fuller justice to this in a later post.

Q12: Hi - how pervasive are contactless payments in PRC? Thank you

For all the years I’ve worked with China there has always been something planned – most were trials, pilots. The real progress is in terms of installation of POS that supports contactless payments and cards. Once that is in place and China has elected to support the NFC standard, the people who currently use smart cards for travel all across China could very quickly change their behaviour to use of a mobile device instead. So to answer your question, contactless payments by card are already surprisingly pervasive!

I hope you have found this post useful. Again, this is just my perspective and I would love to hear from you as that is when the learning process really gets enriched. Thanks for the wonderful outpouring of support to me and thanks for being a valued member of our little fledgling Shift Thought community. Together we can make things better.

A new resource for safety in online payment, as scams straddle online-offline domains

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As money goes digital, new threats and challenges arise as scam-artists seek new ways to profit at the cost of innocent victims. Charmaine Oak (CO) was curious to understand about the so-called “Ukash Virus” and interviewed David Cox (DC) of Ukash to find out about the origin of this term, the newly launched “AvoidOnlineScams” site and the investment that Ukash is making towards the safety of their customers.

 

CO: David, could you please tell us a bit about Ukash, and the origin of the term “Ukash Virus” ?

DC: Ukash was created to provide a safe and secure payment method for consumers to spend their cash online and we want to maintain this. However, to rip-off innocent consumers, criminals have begun to request payment by Ukash and other online payment methods, in their scams.

David Cox Ukash

David Cox is Head of Customer Experience, Ukash.  Helping customers to use their cash online, safely and securely, has been David’s primary objective since joining Ukash in 2006. This extends to providing practical advice and assistance to avoid online scams. David works closely with the Ukash security team, and liaises with law enforcement and consumer protection agencies, to promote online payments best practice.

One of the most common and quickly spreading scams we are seeing, using Ukash as a payment method, is malware demanding payment of a fine, seemingly sent from the local police authority. Ukash is widely available and is the brand leader in e-money, so unfortunately some have referred to this ‘Reveton’ ransomware strain as the ‘Ukash Virus’.

Malware scams generally take the form of a Trojan, typically picked up from malicious online adverts or from file-sharing sites, which locks the infected computer and then demands a fine or ‘ransom’ for unlocking - this is known as ‘ransomware’. This malware often displays a message that claims to be from the police, saying the computer has been targeted for legal reasons.

Payment by online cash is then requested, and even if payment is made the computer remains infected. Ransomware will use alarming messages and scare tactics to frighten internet users into paying the fine, something that we see as a growing problem. Of course no genuine law enforcement agency operates online fines without evidence or a right to appeal, and the on-screen messages are very badly written, so unlikely to be genuine.

CO: I recall similar “offline scam” cases (not virus associated) under which victims receive requests to pay, using Western Union for example ..

DC: Yes, criminals target consumers via ‘offline’ methods and often use traditional methods of communication to do so. For instance the prominence of the miss-sold payment protection insurance scandal in the UK has led some criminals to create a new telephone scam, targeting vulnerable groups such as the elderly. These victims are asked to pay an advance fee, via Ukash or another payment method perceived as being untraceable, in return for a much bigger pay-out, even if they have never had a product with PPI.

Other scams have involved individuals handing over Ukash codes as advance fees for loans and job applications. Every Ukash receipt has clear warnings printed against never giving codes to anyone and only using Ukash online and at genuine merchants, but unfortunately not everyone heeds the advice.

CO: Has this changed in recent times causing scams to be online as well as offline?

DC: With the advances in technology and the increased use of the internet, these traditional ‘confidence tricks’ have gone from offline to online. The ease of the technology also means that more people, of all ages and abilities are using the internet and can ultimately put their details online and become a target for fraudsters.

But the criminals are exploiting their victims in imaginative ways, such as encouraging non-internet users to use an online-only payment scheme such as Ukash, as in the PPI scam. Despite the warnings to only use Ukash online, the majority of victims do not perform any research or ask advice before handing over the Ukash code, as the criminal has created a level of trust where their instructions are followed without question.

The developers of the Reveton Trojan use the internet to distribute the malware as if it was a legitimate software product and even provide technical support! It is attractive to low-level criminals as they can buy at low cost the code to infect the sites where large numbers of internet users will visit, and then receive payment from those that fall for the scam, making it scalable and profitable.

CO: How have producers of viruses sought to monetise through the development of new payment services? How are they seeking to “Get credibility” by using trusted brands (Metro police & yourselves)?

DC: The original malware developers are running a business distributing the trojan code. They’ve designed the malware to use popular payment brands, such as Ukash and Moneypak, to make getting payments as easy as possible. The wide availability and consistent branding of the payment options is intended to make the ‘lock screen’ appear genuine.

CO: Could you tell us a bit more about Ukash, what it is used for, and in which countries and partnerships?

DC: Ukash is the global online cash payments provider and internationally recognised e-commerce cash payment method that enables consumers around the world to use cash to shop, pay and play online safely, securely and conveniently. This secure payment method was developed to protect personal identity and financial information when making online transactions, reducing the threat of credit and debit card fraud for consumers and repudiations and charge-backs for retailers.

At the heart of the Ukash vision is creating a truly global solution that holds no barriers or boundaries for consumers to access the burgeoning ecommerce marketplace. Since launch in 2005 Ukash has expanded into countries on every continent. Significant investment in back-end technology and front-end customer service has enabled Ukash to achieve a 65% growth year on year, with 91% of global customers saying they would recommend Ukash to friends or family.

Ukash codes are purchased with cash in retail outlets such as shops, petrol stations and kiosks. The unique 19 digit code can then be used to pay directly on any of the thousands of websites that accept Ukash transactions worldwide, or loaded onto prepaid cards and e-wallets.

Ukash is regulated by the UK Financial Conduct Authority (FCA). The maximum single value allowed is £200/€250 or equivalent in other currencies, and the maximum amount that can be held by an individual customer is £1,000/€1,250 or equivalent in other currencies.

CO: I was interested to see your recently launched website. Why did Ukash take this initiative and how do you hope to help?

DC: Ukash joined forces with leading police authorities and anti-malware partners to create Avoidonlinescams.net, an online resource to offer internet users up-to-date news, tips and advice on the latest online scams. This includes links to instructions and free software to remove ransomware.

imageWe want to remind consumers that Ukash must only be used to pay online and at genuine websites, never to pay fines or advance fees. One of the reasons we launched Avoidonlinescams.net was to protect consumers from these fraudsters and stop criminals in their tracks. Individuals can protect themselves online if they have access to knowledge and advice.

Most of the individuals falling victim to these scams are in vulnerable groups and not previously familiar with Ukash. We are therefore working to educate these groups in order to help them protect themselves and beat the fraudsters, including clear warnings on the Ukash receipts and initiatives with the retailers that issue Ukash.

CO: David, so what is your main advice to your customers?

DC: We advise consumers to visit Avoidonlinescams.net to learn how to remove the malware and keep themselves safe online.

Anyone who has used Ukash to pay a fine, or for any other suspicious payment, should contact Ukash immediately on 00800 247 85274, and we will attempt to block the Ukash code before it is used. It’s also vital that they report the crime to Action Fraud UK on 0300 123 2040.

We have a dedicated team working to provide intelligence, to the law enforcement agencies, on any reported crimes that use Ukash as a method of payment. This has resulted in several high-profile arrests of international criminal gangs suspected of involvement in ransomware and advance fee fraud.

Ukash is the safe way to pay, when used online at genuine merchants. But we advise that anyone unfamiliar with a payment scheme finds out how it works before they use their own money.

CO: Thanks very much David, I learnt a lot and am glad to hear about this initiative. Sounds like very useful advice.

Disruptions in Digital Payments in China 2013 – what does this mean for you?

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China, the world’s fastest growing major economy, is seeing high adoption rates of new technologies amongst the rising middle class and other key segments. Local and foreign companies across a wide spectrum of industries stand to be affected as this rapidly shapes digital payments locally, regionally and globally. If you missed this, you can catch the free webinar replay here. Also check out the Q&A from the event.

 

imageJack Ma of Alipay threw down a challenge in his recent visit to the USA – Alipay plans to enter USA. Boosted by the largest markets in the world, Chinese providers are starting to set their sights on even larger and more distant prizes. At Shift Thought we have obtained many actionable insights from our recent in-depth studies across 19 key Asia Pacific emerging economies and truly believe that what we have found out could have far reaching impacts on businesses around the world. As part of our business of tracking the evolution of mobile payments and digital commerce around the world, we have spotted genuine opportunities beginning to present themselves in China for those who have ambitions of entering this lucrative market.

Shift Thought brings you a strategically important Webinar to share highlights of our latest report “Digital Money in China 2013”.

China, one of the largest and fastest-growing payments markets in the world, is undergoing rapid transformation. Renowned as a particularly difficult market to enter, recent developments make it a hard to ignore opportunity....

  • 250 new third party non bank providers in place are offering mobile payment services
  • Mobile payment standards are being finalised
  • High speed mobile networks are more widely available than before
  • Low cost smartphones are common and ready for mobile payments
  • Regulators are now issuing payment licences which even include foreign companies

So how do you take advantage of this opportune time?

Having attempted to enter this market on behalf of large mobile operator groups, global banks and money transfer operators, we at Shift Thought recognised the need for a navigational tool to steer entrants in their ambitions relating to entry into the China payments market.

In this free webinar we will explore the Chinese payments ecosystem and digital money initiatives. We will offer some of the analysis and learning from our recently completed  report “Digital Money in China 2013”. Additionally this webinar provides a valuable insight and robust intelligence into a complex and previously perilous market to enter, in order to help you identify, develop or refine your strategy.

  When?   Instant replay now available of our live webinar
  Tuesday 24th  September at 2.00pm GMT (1.00pm CET, 9.00am EST).
  20 minutes live presentation with 10 minutes Q&A to follow
  Where?   To view the replay click here.
  Presenter   Charmaine Oak, Payments and Remittances Expert,
  Digital Money Practice Lead, Shift Thought

We look forward to speaking to you then!

Paying the price: A new regulatory framework for Cards, Internet and Mobile Payments in Europe

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An extensive legislative and regulatory package has been recently announced by the European Union. In this guest blog, Jean-Stéphane Gourévitch shares his thoughts on the  potential impact to the payments industry in the EU/ EEA and, possible new threats and risks for incumbents and opportunities for innovation and new entrants.

 

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Jean-Stéphane Gourévitch has over 20 years of International and European experience at senior management levels. For more details see the full article on his website.

 

 

In July this year Commissioners Barnier (Internal Market and Services) and Almunia (Competition) joined forces to present an extensive Legislative and Regulatory package that will impact the payments industry in the European Economic Area, creating new threats and risks for incumbents and hopefully open competitive opportunities for new entrants and innovators.

The package is organised around two key policy initiatives:

  • Firstly, a draft new Payments Services Directive (or PSD 2) reviewing the original PSD from 2007, to be adopted by the Council and the European Parliament.
  • Secondly, a draft regulation to be adopted by the Council and the European Parliament on interchange fees for card-based payments transactions that also contains a number of important provisions and changes relating to separation of activities of card schemes, consumer rights, and rules relating to card payments.

1. The New Payments Services Directive (PSD 2)

The revised Payment Services Directive brings a number of new substantial and important elements to the 2007 Directive but also retains key measures such as “passporting”.

It aligns the provisions, including those relating to security, fraud prevention and consumer rights applicable to all types of Payments Services Providers (PSPs), whether digital or non-digital.

It also reviews the definition of payments services to adapt these to new digital and mobile payments, opening new areas for competition. The Commission hopes the new Directive will promote the emergence of new players and the development of innovative mobile and internet payment services and solutions in Europe. They further hope this will improve the overall EU global competitiveness in these sectors. Member States will have two years after adoption of the Directive to comply with it.

2. The proposed regulation from the European Parliament and the Council on interchange fees and other fundamental changes

The Regulation creates a regulated area and a non-regulated area for debit and credit cards. The Regulation caps Multilateral Interchange Fees in the regulated area, as regards both Credit and Debit cards. It seeks to hold these to a very low level, first for cross border transactions and after 2 years for all transactions, including domestic ones.

Furthermore, the proposed Regulation introduces some major changes in the rules governing card schemes. It mandates structural separation between the different functions traditionally integrated. For instance scheme management, payments authentication and processing would be separated. This aims at injecting more competition by increasing transparency, protecting consumer rights and supporting innovative payments.

The European Commission hopes this package will be adopted by the European Parliament and the Council of Ministers and implemented before end of March 2014. It is an ambitious programme with potentially far-reaching consequences as part of an ambitious political agenda.