How mobile money is increasingly interoperable

Achieving fully interoperable mobile money services that fulfil the needs of customers remains a goal for both the industry and the financial inclusion community. Despite the complexity of the concept, let alone that the pronunciation of the term can be a tongue twister, interoperability is quite common. In emerging markets, interoperability is taking place every day, sometimes in more pronounced ways than in developed economies.

Emerging evidence from six markets sheds light on why this is the case, and these findings are captured in our report published today. As more countries consider and implement a mobile money interoperability solution, we undertook a study to further substantiate GSMA’s research to-date. Our latest report builds the evidence base on lessons learned on the ground to ultimately broaden our collective understanding of the prerequisites necessary for success. The study captured undertook a mixed-method analysis including desk research, in-country assessments and 32 key informant interviews.

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In the payments landscape, interoperability refers to the ability to make an electronic money transfer between two accounts held at different institutions. In the specific context of mobile money, interoperability implies the transfer of mobile financial services between providers, many of whom are mobile network operators (MNOs), and between these providers and banks. This is known as account-to-account interoperability.

Much like the early days of voice and SMS, mobile money has shifted away from a previously “closed-loop” environment where it was confined to the remits of a single network operator. Today, the widespread use of mobile money in 95 countries across the world is transforming legacy payment infrastructures, most of which are high-value transactions specific to the banking sector that generate revenue through interest. Meanwhile, the mobile money business model relies on fees from high volumes of low-value transactions. MNOs are diversifying their revenue stream as they shift to a platform approach.

Mobile money services are now integrated with banks in 48 countries across the world. In 19 of these markets, mobile money providers are integrated with each other to enable P2P transfers across networks. Beyond domestic interoperability, mobile money is also becoming more integrated with international financial system players. In 2019, $7.3 billion in international remittances were processed through mobile money platforms.

When mobile money interoperability is commercially viable, it has the potential to significantly reduce an economy’s reliance on cash, which in turn introduces a range of benefits for consumers, businesses and governments alike. In many emerging markets where cash remains “king”, and where mobile money represents a core pathway to accessing a formal financial account, successful interoperability ensures that more values remain in digital form. Against the uncertain backdrop of COVID-19, reliable and integrated digital payment channels become paramount in limiting the further spread of the virus.

The report provides an updated and aggregated account of the interoperability journeys of six markets. It highlights how industry leaders in markets such as Tanzania and Madagascar proactively pursued mobile money interoperability amongst themselves to identify mutually beneficial arrangements, and how this can positively impact consumers. It spotlights a renewed approach in Jordan, one of the few markets in the Levant to deliberately pursue mobile money interoperability. It sheds light on how Pakistan, a country with relatively mature roots in branchless banking, is adapting its approach to interoperability. It also shows how in Ghana and Uganda, the industry implemented different technical approaches to interoperability, including private aggregators.

In doing so, the report validates the importance of a set of mutually reinforcing factors that help to determine success, which is largely measured by a growth in the uptake of interoperable transactions. The findings emphasise the following areas as essential to an effective framework: the role of decision-making by mobile money providers; enabling regulation; commercially viable solutions; favourable consumer pricing, and; user experience that is seamless and familiar to use cases on the same mobile network.

In outlining our findings from six markets, the report also revisits key discussion topics surrounding mobile money interoperability as the concept gains salience. It connects the dots between how mobile money interoperability is correlated with financial inclusion and competition between mobile money providers. We also unpack an increasingly common discussion surrounding agent interoperability to draw attention to what is actually feasible for the mobile money business model in the long term.

Finally, as reaching a successful mobile money interoperability framework is also predicated on a technical infrastructure that lays the groundwork for the nuts and bolts of implementation, a selection framework to guide industry and regulators through this process is offered in an in-depth companion GSMA report.

Read the report