Published on February 11, 2014
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Solving for Personal Commerce: Interoperability as the Key to Scale Gavin Krugel Tuesday, November 12, 2013 Visa Confidential
Mobile Money is replacing cash in many countries Percentage of GDP processed by mobile money services is significant: KENYA BANGLADESH UGANDA PAKISTAN TANZANIA 31%1 3.6%2 20%3 1.5%4 44%5 of Kenya’s GDP of Bangladesh’s GDP of Uganda’s GDP of Pakistan’s GDP of Tanzania’s GDP Market leader Market leader Market leader Market leader Market players Note: All brand names and logos are the property of their respective owners, are used for identification purposes only, and do not imply product endorsement or affiliation with Visa. Each company logo represents the mobile money market leader by registered wallet value. Amount of value moved over mobile money platforms annually (see references below): 1. 2. 3. 2 GSMA Mobile Money for the Unbanked: The Kenyan Journey to Digital Financial Inclusion (July 2013) Based on $1.03bn transactions in Q1 2013 (CGAP, June 2013) cf. $115.6bn GDP (World Bank, 2013) GSMA Mobile Money for the Unbanked: Global Mobile Money Adoption Survey, 2012 (February 2013) | Digital Solutions, Emerging Markets | November 14, 2013 4. 5. Visa Confidential Based on $0.88bn transactions in Q4 2012 (CGAP, June 2013) cf. $231.2bn GDP (World Bank, 2013) Based on $1.06bn per month (Bank of Tanzania, Dec 2012) cf. $28.2bn GDP (World Bank 2013 stats).
Transaction types differ significantly from traditional retail payments Mobile Money Transactions (2012) 0.90% 0.60% 5.30% 2.70% 0.00% 8.30% P2P Micro Payment Airtime Bill Payment International Remittances Bulk Payments Merchant Payments 82.20% Source: GSMA Mobile money for the underbanked, 2012 Global Mobile Money Adoption Survey 3 | Digital Solutions, Emerging Markets | November 14, 2013 Visa Confidential
Barriers to adoption 34% lack of interoperability as the primary barriers to adoption Security concerns do not appear to be a barrier to adoption Source: Visa Mobile Money Survey 2012 4 | Digital Solutions, Emerging Markets | November 14, 2013 Visa Confidential
Regulators are responding Kenya proposes National Payment Systems Regulation ‘Electronic retail payment service providers shall utilize open systems capable of becoming interoperable with other payment systems in the country and internationally’ ‘Electronic retail payment service providers are encouraged to enter into interoperable arrangements’ Movements toward interoperability begin in Nigeria, Pakistan, Indonesia, Tanzania, Uganda, Rwanda… 5 | Digital Solutions, Emerging Markets | November 14, 2013 Visa Confidential
What does a closed loop mobile money service look like? Mobile network operators and banks who have implemented mobile money platforms have developed closed-loop systems to serve their consumers, but do not operate beyond their networks as yet There are over 325 closed-loop mobile payment systems planned or in market1 Mobile Money Implementation A C1 C2 A1 Wallet Platform C3 Mobile Money Implementation B A3 A1 A2 A2 C1 Wallet Platform A3 C2 C3 Primary Transactions: Cash-in, Cash-out, P2P Transfers, Airtime Top-up and Bill Payment 1Source: C = Consumers A = Agents GSMA November 2013 Deployment Tracker 6
Mobile Money ecosystem’s are complex Bank / Financial Institutions Government Remittance Partners Bill Payment Service Provider VisaNet / Other Regional Switches Mobile Money Service Business Agent Network Managers (ANM) Other Mobile Money Platforms Merchants Enterprise Platforms (CRM) Mobile Network Operators Interoperating them more so…. 7
Defining interoperability • Ability for consumers to send money to each other irrespective of Mobile Money service • Ability for consumers to cash-in or cash-out at competing mobile money agents • Ability for consumers to use retail payments at all retailers irrespective of who signed the retailer up • Ability for consumers to use existing payment system infrastructure such as ATM, POS, eCommerce and international remittances 8
Considering interoperability • Technical interoperability – how will the messages flow or be defined or standardized? • Consumer awareness – how does the consumer know the retailer/ATM/agent or mobile money service is interoperable? • Where does the consumer go to query or dispute an interoperable transaction? • What are the rules governing such disputes? • What are the mechanisms for compensating mobile money service owners for facilitating your customers transactions? • What are the entry standards or conditions to be a part of an interoperable service? • Can you be sure that you will be settled for the transactions you process on behalf of other service providers? 9
U.S. Credit Card Market Programs 1958-1969 Financial Accounts Acceptance Only BofA and 10 more 30 closed-loop programs added other closed-loop programs launched 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 Sources: Electronic Value Exchange – Origins of the Visa Electronic Payment System by David L. Stearns; The Power of an Idea by Paul Chutkow Visa / Telenor Partnership Overview 10
U.S. Credit Card Market Programs 1958-1969 1,207 Programs added Financial Accounts Acceptance VisaNet 481 Programs added Only BofA and 30 closed-loop programs added other closed-loop programs launched 1958 1959 Bof A begins licensing banks nationally and internationally 10 more 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 Sources: Electronic Value Exchange – Origins of the Visa Electronic Payment System by David L. Stearns; The Power of an Idea by Paul Chutkow Visa / Telenor Partnership Overview 11
Visa’s Solution: Organizing Complexity Visa eliminated the need for individual acceptance agreements. Visa’s open-loop alternative connected merchants, banks, accountholders worldwide through one payments network. Financial Account Acceptance Visa 12
Déjà Vu? 2003-2012 Mobile Money Accounts Acceptance 208 Over deployments in over 35 countries 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sources: GSMA Mobile Money Tracker, 2013 Visa / Telenor Partnership Overview 13
What Visa brings to Mobile Money Operators Mobile Money Programs Predictability and Security Remote Payment Remote Payment Person to person Agents + Mobile Money Account Expanded Payment Ecosystem Person to person Agents = ATMs Mobile Money Account Merchants eCommerce Traditional Visa Payment Transactions Visa Personal Payment Transactions New Transactions based on Agents 14
Evolving Mobile Money Emergence of low-cost, ubiquitous mobile technology now allows mobile network operators (MNOs) to provide financial services to subscribers via mobile money platforms Visa will connect mobile money platforms to the worldwide Visa Network through Visa Mobile Prepaid, expanding payment and purchase offerings to subscribers and increasing revenue for MNOs Visa Mobile Prepaid enables interoperability between mobile money platforms + 15
A Simple Question… “If anything in the world were possible, what would be an ideal organization to create the world’s premier system for the exchange of value?” - Dee Hock, founder of Visa With a Visionary Answer An open-loop infrastructure and network that moves money (value) Trusted and guaranteed payment for all parties Security, reliability, convenience Global reach, multiple markets In other words, “what is the best way to pay and be paid?” Scalability to handle sudden and large variations in volume The answer to the original question became our vision and Visa was born. 16
Gavin Krugel firstname.lastname@example.org
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