The GSMA Mobile Money programme is a strong advocate for mobile money interoperability, particularly when it is industry-led. We believe there is a compelling case for account-to-account (A2A) interoperability from the perspective of the provider, consumers, and the market at large. There are many paths by which to achieve interoperability; the viability and desirability of each must be carefully assessed and evaluated on a market-specific basis.
In some cases, existing national payments infrastructure may evolve to facilitate mobile money interoperability. We are beginning to see this in Mexico, where the central bank (Banco de México – Banxico) has established its inter-bank payments system (SPEI, or Sistema de Pagos Electrónicos Interbancarios) as the de facto clearing and settlement mechanism for low-value transactions, including mobile money. SPEI can process transactions starting from one cent, and can reportedly handle at least five times current payments volumes. As national payments infrastructure is traditionally optimised for high-value transfers, this shift is no small feat. [1]
Core milestones of this evolution include:
- New pricing to encourage low-value payments. Transaction fees that SPEI participants incur today are equivalent to the marginal cost of moving money, which is zero. This is down from four US cents in 2006. Banxico expects this lower transactional cost for banks will translate in lower associated tariffs for end-users.
- Longer operating hours with (near) real-time authorisation. SPEI makes funds available to the payee in near-real time. The goal is to operate 24 hours a day, 7 days a week, as opposed to the banking business hours the system had initially been limited to. Additionally, SPEI compensation cycles now occur every five seconds, resulting in near-immediate processing for users. These frequent settlement intervals allow for relatively low pre-funding requirements at the central bank.
- Broader range of participants. Banxico has joined a special club of central banks that have opened their payment systems to non-traditional banks. In the case of SPEI, this includes cooperatives, niche payments banks, switches, and the Mexican national telegraph company (Telecomm), among others. These entities are allowed direct participation in the scheme. Today, 52 out of 107 participants are non-banks.
- Linkage of mobile numbers to bank accounts. In late 2013, Banxico issued rules for mobile-payment clearinghouses, which include the linkage of mobile phone numbers to banks accounts. SPEI must be used to settle payments among mobile payments providers, whether directly or through a connected clearing house.
Banco de México seeks to take advantage of economies of scale and scope to achieve lower average costs and stimulate greater usage of electronic payments to the extent possible. As Lorenza Martinez Trigueros, Director General of Payment Systems and Corporate Services, Banco de México, explains, “The challenge is to achieve efficiency in electronic payments such that they can be made anywhere, anytime and of any size.” In parallel, the private sector should continue to invest to nurture these alternative payments schemes and extend their reach to unbanked consumers.
CGAP and Glenbrook provide additional details on SPEI’s history and expansion, noting the critical role of the central bank in modernising the nation’s core payments systems. In addition to its key functions as a rule-maker and processor, Banco de México has supported the growth of the system through campaigns to increase public awareness, and by encouraging the government’s use of SPEI for payments. Industry stakeholders applaud the success of this system to date. [2]
The evolution of SPEI and the interventions of Banco de México are highly context-specific, and not an approach suited for all markets. However, a closer look at this case could yield lessons for the broader industry. There’s no reason why mobile money providers should be excluded from accessing national payments infrastructure when available, relevant and useful. This is especially true in markets where mobile money is becoming an important instrument of payment, with significant contributions to total national payments throughput value.
The GSMA Mobile Money programme will continue to explore the role of public and private switches for mobile money interoperability over the coming months. We aim to release a white paper on the topic, reviewing the global experience to date, and welcome your feedback in the process.
The author wishes to thank Javier Perez Estrada at Banco de México for his valuable contributions and insights.
Photo: Screenshot taken from SPEI’s promotional video
Notes
[2] Carol Boyle Benson & Scott Loftesness, “Interoperability in Electronic Payments: Lessons and Opportunities,” CGAP 2012: http://www.cgap.org/sites/default/files/Interoperability_in_Electronic_Payments.pdf