Today, there are 246 mobile money services live in 88 markets. Of these live services, at least 147 are being led by MNOs which equates to approximately 60% of all mobile money services worldwide. In 57 markets there are two or more mobile money deployments, and in 33 markets there are at least three services. In those markets the natural next step is to assess their readiness for interoperability as has happened in Indonesia and Tanzania, primarily because of the opportunities and value it brings to both operators and their customers.
But – the road to becoming interoperable is not easy and is filled with pitfalls and challenges presented both commercially to operators and to regulators as this new form of payment grows and scales in the different markets. Becoming interoperable is a complicated step with the risks presented with getting it wrong having far reaching implications on the mobile money industry for both operators and regulators, and could jeopardise the achievements made on financial inclusion.
Some of the common challenges operators face when considering interoperability are:
- Lack of a common definition of what becoming interoperable is resulting in confusion within the industry as different operators have different ideas about what it is.
- The benefits associated with interoperability are not always immediately clear with the expected benefits of interoperability not always being fully understood or quantified, with the true impact of interoperability being proven as the first cases are deployed.
- Mistrust amongst competitors can make it difficult for operators to collaborate even when the benefits of interoperability have been understood.
- Understanding and agreeing to a technical and commercial model, agreeing commercial arrangements and standards to govern the interoperable process
- Conflicting organisational priorities can result in the desire to becoming interoperable being set aside for a time
- The imposition of unfavourable regulatory regimes for mobile money and interoperability
The above list is not exhaustive and only serves to demonstrate some of the challenges to be overcome before operators will commit to discussing the topic and putting resources behind making this work.
I would like to focus on only one of these elements – a necessary process that moves in parallel with the negotiation of the commercial agreements, that of the development of a common set of rules to govern how the legal, technical and operational elements will work. This common set of rules is necessary to ensure that all parties interoperating are following the same standards. This helps create a consistent customer experience, and gives clarity to the operators as to their rights and obligations in the interoperable relationship.
Where operators choose to connect to an existing centralised processor then they are likely adopt the rules that the processor has developed to manage participation, technical and operational elements. Should the operators choose to develop their own switch or create a bilateral relationship then at a minimum the following three documents are required:
- Operational rules to standardise processes including, clearing and settlement, risk management, dispute resolution etc.
- Technical rules standardising the technical integration and messaging systems e.g. use of SDK, SOAP, ISO etc.
- Legal Agreements i.e. LOI/MOU, commercial arrangements, etc.
The development of these documents and agreement of the rules is a time consuming process. It involves detailed discussions to obtain consensus from the parties for each operational and technical rule.
In Tanzania, for example, where some of the operators are now interoperable, the development of these documents and setting the standards took more than three months to reach the stage where they were considered by the operators to be suited for purpose and that occurred with the support of the GSMA and other donor organisations. In other payment sectors, it can take between six months to a year to get business units to agree specific standards for new products and services.
The challenge of developing an effective common set of rules is one that can be easily overcome with the right tools and support, such as that provided by the GSMA. One need only look around the wider payments industry to see the impact that a robust yet versatile set of operational and technical rules can have on a payment system and the industry as a whole. Without robust scheme rules, many of the traditional payment schemes would never have managed to build the trust between the participants and the consumers or have developed the reach that they have today.
Having a strong set of rules that all operators agree to will most certainly have an impact on the ability to build trust within the mobile payment network. Developing this trust will have the knock-on effect of helping to expand the reach of mobile money through interoperability and ultimately deliver the benefits that interoperability brings to all those who form part of the payment cycle: consumers, mobile money providers and regulators who seek to achieve their financial inclusion objectives.