What do we mean by mobile money interoperability?

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[Susie Lonie]Intuitively, interoperable mobile money schemes sound like a good thing.  Telecoms services interoperate; bank accounts (mostly) interoperate; and many case studies have demonstrated that interoperability caused these markets to grow, to the benefit of all.  So why not mandate interconnected platforms for mobile money?  It’s a “no-brainer”.  Or is it?

The MM market is currently afflicted by a lack of agreed terminology – as is normal for any new market – so first we must define exactly what we mean by MM interoperability.  If we put international remittances to one side for now, there are two distinct high level domestic candidates:

  1. The ability for customers of any mobile money operator (MMO) to connect with a range of other types of financial service provider, such as banks and payment services providers (PSPs)
  2. The ability for customers to send e-money between MM accounts provided by different MMOs on different platforms

Type one, more accurately termed interconnection really is a no-brainer as discussed in my previous blog post [http://www.chyp.com/mobile-money-practice/blog-entry/time-for-mobile-money-to-start-playing-with-the-big-boys]  .  Indeed it can be argued that in many markets, especially those where domestic remittances are less common, this interconnection is needed in order to create successful MM services.  It will certainly result in growth of the whole MM market, particularly in “dual economies” with a more developed financial service infrastructure as well as a high unbanked population.   It could theoretically be achieved by multiple bilateral agreements between MMOs and the various financial institutions.  In practice this is likely to be limited to interconnection between MMOs with large customer bases and the friendlier financial institutions and thus be slow and self-limiting as a mechanism to grow the MM market overall.

The more likely recipe for success will involve one or more interconnection services which plug MM transactions on one side of their switch (or other suitable infrastructure) and conventional financial service providers on the other.  These interconnections will allow much faster development of an integrated market with more participants than are possible from multiple bilateral negotiations and technical integrations.  The organisations successfully providing this connectivity are yet to emerge although there are already a few contenders lining up.

There may also be a third way to interconnect for specific use cases such as the WinguPay service concept for in store payments [http://www.chyp.com/media/library].

The second type of interoperability, between MM systems, has fewer advantages at this early stage of the industry’s development.  There are two levels of interoperability:

1.    Customers with MMO1 can send funds directly to the account of MMO2 and vice versa

2.    Customers of MMO1 can use the agent or merchant recruited by MMO2

Sending funds directly to an off-net customer account is certainly more convenient than the current norm of sending an “unregistered user voucher” which can be cashed at an agent, and it should encourage people to keep e-money in their account to use for other digital transactions.  But it is not clear that it will dramatically change customers’ use of e-money, particularly as it is not uncommon for them to have accounts (and SIMs) with multiple MMOs.  Undoubtedly MM account to account integration will happen over time but it does not have the same priority as interconnection.Again it may be achieved, when the time is right, bilaterally or via an intermediary.

Agent and merchant sharing is a potential issue for commercial as well as technical reasons.  Companies acting as MMOs are mainly doing so to differentiate themselves from competitors in their core business, and the winners tend to be the services with the biggest and most efficient agent networks.  Agent sharing removes their competitive advantage.  Worse, companies that invest in their agent network will see it given away to their less committed competitors for free.  They are unlikely to regard this kind of interoperability as motivation to invest in their agent network. Further, interoperability tends to imply a version of a four-party banking model, for which there are no scheme rules, technical standards or common user experience.  Suddenly the simple closed loop system becomes much more complex with increased administration and additional entities levying charges.  Few mobile money services can yet sustain a drop in revenue, so they will need to increase the cost to consumers who are unlikely to view higher transaction fees as enhancing economic empowerment.

Interoperability is certainly coming, and done properly will certainly move the MM industry forward.  However the various types of interoperability need to be clearly understood, prioritised, and introduced when the markets are ready, or they may have the opposite effect.

 

 

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

Don’t you know who I am?

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With one or two of our clients, a year or two ago, we began to use the word “recognition” to mean a combination of fit-for-purpose identification technology with fit-for-purpose authentication technology. For commercial organisations, customer recognition is a strategic goal and developing a pathway of tactics to get there by exploiting various waystations on the technology roadmap is an immediate need, because recognition is essential for delivering value-added services. In some retail relationships, it is absolutely crucial. Here’s what I mean.

The London Times recounts a true American horror story: Mindy Kaling, writer and actress first on The Office and later on her own show, The Mindy Project, in addition to author of a successful memoir, walked into a Los Angeles boutique. And she was not recognized. This is a worst-case scenario for any Los Angeles boutique owner.

[From� Facial Recognition Alerts Stores When A Celeb Walks In | Popular Science]

Embarrassing it may be (don’t worry, I haven’t the slightest idea who she is either), I don’t think it can be correctly labelled as the absolute worst case for any boutique. That happened in Zurich recently, when the pretty much the richest woman in the world walked into a shop to buy pretty much the most expensive handbag in the world and the saleswomen not only blew a substantial commission but…

US talk show host Oprah Winfrey says she was the victim of racism during a recent visit to Switzerland. She said an assistant refused to serve her in an upmarket handbag shop in Zurich. Winfrey, one of the world’s richest women, was apparently told one of the bags was “too expensive” for her.

[From� BBC News - Oprah Winfrey 'was victim of racism' in Switzerland]

If it was me, I would have bought the shop and fired the assistant, but I suppose real billionaires are more sensitive and caring. One can only imagine the shock and trauma that Ms. Winfrey suffered when she realised that the Swiss shop assistant had absolutely no idea who she was. I’d love to think she said “do you know who I am” only to be told “no”. In our post-modern celebrity-obsessed culture, not being recognised is a fate worse than death, a problem that our emerging identity and authentication infrastructure really ought to be able to tackle.

This lack of recognition is precisely what the VIP-identification technology designed by is supposed to prevent. The U.K.-based company already supplies similar software to security services to help identify terrorists and criminals. The ID technology works by analyzing footage of people’s faces as they walk through a door, taking measurements to create a numerical code known as a “face template,” and checking it against a database.

[From� High-End Stores Use Facial Recognition Tools To Spot VIPs : All Tech Considered : NPR]

In the Swiss case, this same software could also be used to stop asylum seekers from entering the shop at all, so I imagine it will be pretty popular over there. (I’ve been invited to give in a talk in Zurich by our good friends at SIX, so I will ask around when I get there.) But is it a good thing over here? I’m looking forward to the first case of this database getting hacked for use in a mafia hit. Imagine the manpower they would save! Instead of staking you out and tailing you, they just put your picture into the shopping mall database and wait for the bell to ring.

This isn’t all about celebrities and mafia hits. We all want to be recognised, in the right context. I want BA to know that I have a Gold Card as soon as I walk in through the door because I expect to get better service. I don’t get upset when I don’t get that kind of service on United. I understand the game. I like getting a free cup of very nice coffee when I go shopping in our local Waitrose because I have a “My Waitrose” card. And there’s nothing sinister about retailers wanting to know who you are so that they can deliver a better service to you. Being recognised can be good.

Recycling bins in the City of London are monitoring the phones of passers-by, so advertisers can target messages at people whom the bins recognize… The bins record a unique identification number, known as a MAC address, for any nearby phones and other devices that have Wi-Fi turned on. That allows Renew to identify if the person walking by is the same one from yesterday, even her specific route down the street and how fast she is walking.

[From� This recycling bin is following you - Quartz]

If I was going to put a bomb in a rubbish bin in order to assassinate a top bankster, just as an example, I would want to be sure that the bomb detonated just as the target was walking past, so this sort of technology would be invaluable and it’s a shame that the City of London spoilsports banned it. But you can see why they were upset. This sort of passive recognition is different, even though it is inevitable. If we’re going to have recognition, then it needs to be secure (you can’t have privacy without security, remember) and it needs to be controlled, preferably in an explicit bargain between the customer and the retailer. I’m happy with my My Waitrose card in Waitrose, but I might be quite unhappy if I discovered that Waitrose were using it to track me elsewhere.

Now, as we discovered through our work on the Technology Strategy Board’s VOME project a couple of years ago, making that kind of bargain explicit is actually rather difficult, since a great many people don’t understand what is being traded off and it was hard work to find mechanisms to explain it to them so that they could make informed choices. (One that we explored was a� privacy card game, which was pretty fun actually.) But let’s put that to one side for a moment and assume that we can. Then, within the bounds of Data Protection laws, I think it is possible to envisage a plausible “privacy settlement” that works for the retailers, customers and regulators. That settlement means sharing some personal information, of course. This was always the business school case study around junk mail. Where there were strict privacy controls, people got more junk mail, because the senders couldn’t work out who might or might not be interested in a golfing holiday so they sent the golfing holiday brochures to everyone. As� David Cushman told me a few years ago, if you target information accurately enough, it ceases to be junk, or even and advertisement, and becomes part of a conversation and people like engaging in conversations. So people want recognition, and they want to share, but again it must be under their control and as part of a bargain they can understand and give proper consent to.

There’s another general case where recognition is evolving though. I remember seeing an excellent presentation on this last year from our friends at Sense Networks. They are currently collecting some four billion location� data points per day from smartphones in order to deliver targeted advertising. They know everything about you—where you live, where you work, where you shop, where you went yesterday—except who you are. We’re all carrying tracking devices that mean we can be individually recognised.

[Verizon's] new marketing program, Precision Market Insights, collects data information from iOS and Android users, based on geographic location gleaned from apps and sites being accessed. Verizon plans to continue to share that information with potential advertisers. Verizon emphasizes that the program is legal and doesn’t violate any federal wiretapping or other privacy laws because they keep user identities anonymous.

[From� Verizon's 'Precision Market Insights' Data Mining Policy Raising Privacy Concerns]

Setting aside the technicalities of how the data is anonymised and whether the technology used is “strong” enough, this sort of “big data” use strikes me as being reasonable. I don’t mind being tracked in that anonymous way, as part of a group, if it leads to better services for me. I don’t always want to be recognised as an individual. But then I’m not a sleb.

By the way, this sort of innovative use of new identification and verification technology is the sort of thing I might ask Mary Portas about at� Europe’s Customer Festival in London on 16th-17th September 2013 where we are both in the keynote track. Thanks to the wonderful people at Total Payments, we have a delegate place at this event to award as a prize on this blog. So if you are going to be in Islington on 16th and 17th and fancy coming along to hear about the future of loyalty, omnichannel retailing, big data and payments in the retail world, all you have to do is reply to this post with the name of the “Portas Town” famed for the short queues and excellent customer service associated with the issuing of UK identification documentation and your name will go into a draw that will be made under independent scrutiny on Friday 6th September. Look forward to seeing you there.

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These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.