This blog was co-written by Lara Gilman and Gunnar Camner.
As an industry, we regularly discuss and debate the barriers that operators and banks must overcome to finally transform cash-based societies to digital economies. Many of these discussions focus on operational barriers such as implementing effective distribution and driving customer adoption. However, as the industry continues to mature and the number of success stories increases, the conversation has inevitably evolved to the next opportunity: on-boarding companies. In this discussion of ecosystem-building, it does not take long for someone to pose the question, “why don’t mobile money providers just develop ’open APIs’?”
Application Programming Interfaces, APIs, are a means for different software applications to integrate. In this case, a developer could use the API to incorporate features of a mobile money service into the service or product they’re building. With an API, a business could do this without needing to create a bilateral agreement or require dedicated resources from the operator. This evolution would enable new and existing businesses to ride the rails of mobile money and accept and disburse payments via electronic currency. This capacity would not only facilitate the payment processes for businesses, it would also create additional use cases for the customer, and put the mobile wallet at the centre of a digital ecosystem. The benefits of developing APIs for mobile money are clear, and yet even Safaricom will only be sharing their APIs by the end of 2014. Why is this taking so long?
The technical complexities around API documentation, middleware, access gateways, and existing platform functionality only partly address some of the challenges that are holding back API implementations. There are other more fundamental barriers that operators need to negotiate before launching into this space, including timing, security and strategy.
(1) Timing considerations
While every year we see an additional number of operators crack the model and reach scale, those who have done so are still in the minority.  Thus, most operators remain focused on implementing operational excellence and driving customer adoption. Although APIs are likely to increase customer stickiness and potentially be a differentiator in a competitive market, they do not replace the need to build a strong agent network and on-board active customers. Moreover, APIs require technical capacity, investment and expertise to build. Shared APIs on a platform with no customers would be putting the cart before the horse in many markets. In a world of limited resources, operators need to prioritize strong foundations before expanding toward an ecosystem play.
(2) Security considerations
The nascent context of APIs for mobile money means that operators are in new territory and need to ensure they are adequately protecting their customers and their business to any new security risks. Accessibility is one of the key benefits for developing APIs as it would allow companies to integrate without additional resource or investment from the operator. The downside of accessibility is that operators will have limited oversight and therefore require an easily verifiable control that protects customers from fraudulent companies. Currently, there are no direct precedents in mobile money and therefore, in additional to the technical configuration, operators need to invest in developing robust security requirements for potential ecosystem players.
(3) Strategic considerations
More than anything, APIs to the mobile money platform is only the technical piece of a larger conscious strategy to on-board companies onto the mobile money service. Before sharing APIs, operators need to segment the market, identify specific needs of different company types, create a business case and, most importantly, find a means to efficiently on-board them. Developing APIs is not instantaneous so before committing valuable resources for the technical solution, operators must have clarity around how APIs will fit into their overall strategy and how they should be designed.
None of these challenges are insurmountable and we expect to see more operators explore the opportunity of APIs as it allows for scalable growth by getting more players on board. Moreover, APIs will encourage greater innovation and increase the usefulness of mobile money and in turn, will edge the industry closer toward the digital economy. However, much like mobile money in the early stages, APIs require significant up-front resource and investment and operators need to be confident that the ecosystem they create is secure for their customers and sustainable for their business.
 According to the 2013 State of the Industry report, 13 operators have more than 1 million active customers against 225 launched deployments.