Wednesday, June 30, 2010

Mobile Payments & Standards - the Real Value of Mobile

Discussion follows below in answer to this article posted by SWIFT last year:

Mobile payback
(The full version of this article originally appeared in Dialogue, Issue 21, Q3 2009. To download a copy, visit the documents section of the Dialogue community. To subscribe to the print edition of Dialogue, please email your contact details to:

The adoption of mobile payments in developing markets, particularly Kenya, India and China, is becoming more widespread, even commonplace, in rural areas where no other banking or payment infrastructure exists. A recent report from consultancy firm Arthur D. Little predicted that mobile payments are poised to rocket in developing economies over the next few years, with total transaction volumes expected to reach USD 250 billion by 2012.

Consumers can use these services for bill payments, person-to-person payments and remittances, with transactions typically completed via a basic SMS message. This form of payment provides advantages to customers because of its convenience as an access channel – most people have a phone that is usually turned on – the ease with which transactions can be executed and the potential for completing payments in real-time.

In more developed markets, where the majority of the population has access to a wide range of bank facilities, there is still NFC (near field communication), or contactless payments, via mobile phones for small transactions such as paying for taxis or pizza delivery.

“Mobile payment schemes in emerging markets – such as M-PESA in Kenya – have been hugely successful and are currently bigger than any other payments means in the country, except cash,” says Perrine Fiorina, analyst, Celent. “Pilot schemes have started in Europe, but this form of payment hasn’t been adopted by the masses as of yet.”

Remittances are also big business and are a key area of focus for mobile payments operators in developing economies. In December, M-PESA signed a deal with Western Union to allow Kenyans working in England to transfer money home by SMS in a matter of seconds.

But potential problems still lie with cross-border implementation and establishing a set of guidelines and regulations, as thus far, most countries have developed their m-payments infrastructure independently.

“Although Western Union has made some progress in facilitating cross-border payments in developing markets, there needs to be an update of regulation so that this kind of payment can be widely accepted,” saysFiorina.

Read the whole article in Dialogue, Issue 21, Q3 2009.

How far can mobile payments leverage existing market infrastructures?

How can mobile payments, involving two distinct industries, be coherently regulated?

Have your say. Leave a comment:

This comment is posted in the SWIFT Workers' Remittance User Community at

The reality is that regulations for the mobile industry are already in place with respect to communications and alternatively the financial industry already has regulations with respect to payments.

We need to reclassify mobile payments as electronic account to account payments that are independent of international borders.

Once this is done, mobile's role is simply as a new channel for the payment initiator complementing the web, the ATM (ABM), Call Centre and branch.

The real value of mobile is in the
identification and communication with the intended beneficiary. To achieve this value:
1. By using the country code in front of the phone number, the mobile phone number becomes a global User ID
2. Anyone with a mobile phone can be communicated with via SMS

In the developed world, the mobile phone as a channel will be (already is) very popular with the smart phone users and a P2P payment service will merely become a menu choice. These countries tend to be the source of most international remittances whereas the developing countries, which are characterized by many unbanked individuals who currently own a mobile phone.

P2P payments both domestically and internationally present a substantial customer acquisition opportunity for established banks nationally and on both sides of a remittance corridor.


To be border independent, it is very important that standards be set surrounding both local and international P2P payments. In my opinion, this has already been done through the SWIFT
Workers' Remittance message set.

The real value, and this is where SWIFT can provide significant value for all participating financial institutions (and potentially mobile carriers masquerading as banks), is in maintaining a global directory of mobile phone numbers with routing instructions to the financial institution of the intended recipient.

The challenge is that, should SWIFT maintain this directory physically, it would prove unwieldy. But what if it was new kind of directory... a directory that is dynamically maintained by the mobile user by virtue of their registration with their financial institution (or account holder)?

Not only would the growth of such a directory be viral, it need not contain any personal information of either the sender or the recipient.

SWIFT - potential for advanced value and role in P2P Payments

Should SWIFT be the trustee of such a directory, all core assets could be leveraged. Similarly, it provides an opportunity to add value locally as well as internationally.

Many nations are developing mobile payment initiatives in isolation whereas SWIFT playing the role as standards body could tie these local initiatives into a cohesive, global whole.

Adding local P2P payments will dramatically grow the Core of the Core for SWIFT and will enable the enforcement of market practice and leverage the Partner ecosystem to scale the initiative globally.

I wonder if SWIFT will seize this incredible opportunity... it is a game changer and maybe the most significant innovation in history?!

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