Mobile Payments and Banking: The Collaborative Approach

In order to support the evolution of mobile solutions and widespread adoption via collaborative approaches, banking technology vendors continuously generate innovative ideas and solutions. We’ve already witnessed the evolution of cheques and of clearing systems, the development of Point-of-Sale (PoS) devices, Interactive Voice Response (IVR) systems, automated billing and presentation techniques, and numerous other technological aids to help financial institutions. 

As mobile technology evolves, banks have started to embed mobiles in their front-end solutions offering ease-of-use, flexibility and accessibility to their retail bank consumer customers and to corporate banking clients. Through mobile m-banking services users can review their balance, transfer money between accounts, and perform some sort of utility payments, along with many other services that enable interaction between the account owner, bank back office systems, and other participants in the financial supply chain. 

Mobile technology vendors have started to offer services for mobile users and introduced the mobile m-payments revolution, which is gaining increasing acceptance. The contributors towards this new era include mobile network operators (MNOs) and payment gateway providers. Both financial ecosystem and mobile ecosystems play a major and significant role in the development and dissemination of these new services. M-payment solutions offer different services to subscribers such as utility payments, mobile top-ups, airtime transfer, billing, authorization, and many other services. 

For its basic functionality, m-payments normally depend on using the established card scheme infrastructure; surrounding credit, debit, loyalty, merchant, acquiring and business and other card ‘rails’. M-payments can also use the mobile m-wallet option, which is not necessarily tied into the usual ecosystem but will piggyback on existing infrastructures in some instances. Whereas with m-banking the transactions and reporting typically depends on a banking customer’s accounts details and the infrastructure surrounding this, making it a more bank-centric offering. 

Despite the fact that banks are not in the forefront of providing mobile financial services, especially in the context of m-payments where mobile network operators and others are forging ahead, banks do still have the opportunity to conquer this market if they want, taking advantage of their legacy systems and customer base on the banking infrastructure / accounts side. Treasuries could gain considerable efficiency benefits in the payments and supply chain if an integrated offering was developed. 

The question that might rise here, is there an on-going dispute and debate between banks and other service providers to win the market? The answer, in my opinion, is absolutely no because collaboration is required to gain widespread adoption – regardless of any fears about disintermediation.

Nowadays business models encourage partnership and collaboration rather than competition between companies that may offer joined services. In this approach, you could see partnership among different ecosystems, at the same time, providing a unique and unified new ecosystem that consists of the financial ecosystem (banks / treasuries), mobile ecosystem (MNOs) and utility service providers. 

Money Transfer Future: Domestic and Cross-Borders

One major function that has a wide impact in the global financial system and where increased mobility could help treasuries is in money transfers, which vary in amount and flows from and to different directions. 

Transfers are performed at different levels in terms of technology sophistication and user education. Partnerships between financial institutions or departments, represented by the banks and treasuries, and m-payments providers, such as MNOs, will expand the capabilities of the ecosystem for everyone. In the remittance consumer area, or the small corporate payments arena, such cooperation could add huge amounts of money to the cash flows that travels from one continent to another.

Moreover, software and technology vendors are offering and promoting the concept of the cardless automated teller machine (ATM) where bank accounts or m-wallets are linked to a mobile number, which is managed by MNOs, enabling a wider range of money transfer beneficiaries to receive money. The idea has been proven to work in Kenya where the M-Pesa service has gained widespread acceptance among consumers and businesses that do not possess ATM cards or traditional bank accounts. This is a significant feature and an added value to all stakeholders in the money transfer cycle. 

The Technology Question

The collaborative approach will enable different technologies in the marketplace to provide services for both classic and newly begun end uses, such as mobile money transfer services. The new ecosystem will benefit from old and new technologies, where old ‘banking rails’ are deployed. The technologies that can be harnessed include:  

  • SMS text services. 
  • Unstructured Supplementary Services Delivery (USSD). 
  • Mobile applications. 
  • Mobile web.
  • Near Field Communication (NFC) technology.

Each of these technologies has its own advantages and disadvantages, although this is not the appropriate forum to address this issue. However, it is worth mentioning that the majority of stakeholders prefer investing in mobile applications and NFC due to its ability to provide accessibility and usability for customers.

Challenges

Security: Newly launched services will lack the trust and confidence in the market until there is a success story and some real proof of credibility. This is especially important because card holders and corporates are apprehensive to provide card information without a guarantee that their information is secure. But who said that we shouldn’t trust mobile transactions to perform money transfer or utility payments using our own mobile devices? I would say it is more secure as most of these mobile applications are secured with digital certificates and use different mechanisms of data encryption. In addition, most m-payment solutions should comply with PCI standard to secure the transactions. 

Fraudulent Transactions: Banks and service providers should address all issues that might fall under the fraud category. Central banks and regulators are publishing rules and regulations to govern and manage fraud transactions. It is not difficult for service providers to adhere to such rules, follow regulations, and accordingly protect their consumers and their revenues from fraud. Also, it will be a good idea to use shared services in which huge databases are in place, monitoring tools are implemented and the rules followed by these shared services are enhanced and maintained frequently. 

Know Your Customer (KYC): With Anti Money Laundering (AML) regulations and laws imposed worldwide, the identity of people involved in the money transfer process becomes a major issue that service providers have to address and provide solutions for in order to eliminate this potential risk. 

Collaboration between MNOs, payment gateways, banks (issuing and acquiring) and businesses’ provides a larger scale of databases and information about the people involved, aiding efficiency and adoption. 

In order to provide quality services and eliminate the risk, partnership and collaboration are the keys to success; the future of mobile financial services will tell its own success stories.

 

 

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