Partnerships between financial institutions and other firms such as telcos offer a chance to bring new services such as mobile banking and payments to millions of customers. But innovators should be prepared for the long haul, according a panel of senior industry representatives speaking this week.
“Way back in 2006 in Barcelona, it was announced that an Indian mobile payment system would be in place within a year,” said A.P. Hota, chief executive at the National Payments Corporation of India. “In fact, it took six years to realise that idea. That wasn’t because of resistance from the regulator – the rules to allow it have been in place since 2008. The truth is it’s not an easy job. Mobile banking requires far more than just technology.”
The classic example of banking innovation is M-Pesa, a mobile payments service that has some 15 million users in Kenya. Established by Vodafone subsidiary Safaricom, the service allows users to send and receive payments on their mobile handsets.
Drawing on the relatively high rate of mobile penetration in Kenya, coupled with the low uptake of traditional banking services and undeveloped infrastructure, the service gained success, effectively banking millions of ‘unbanked’ customers who had previously dealt solely with cash.
Financial services firms have been seeking to find ways of expanding similar services around the world in the past five years. However, Alice Zanza, senior payment systems specialist at the World Bank, suggested that many innovative technologies, including mobile payment services, do not make a profit in the first three to four years of operations. Instead, they succeed due to long-term planning.
“You need to be aware that you’re not going to make any money if you’re going for a quick buck,” she said. “M-Pesa was sustainable because someone was funding it. The Kenyan Government also invested in making the project work. That story needs to be put into perspective – yes it is a success, but it didn’t happen overnight.”
In India, several banks offer mobile banking services. In addition, independent services such as My Mobile Payments offer customers the ability to use a mobile wallet, in which the handset can be used to make retail payments using NFC contactless technology. But according to Hota, any new service must be simple, widely available and easy to use if it is to succeed globally.
“Almost everyone in India has a mobile, but not everyone who can open a mobile account actually does so,” he said. “If the application has to be downloaded, that’s too cumbersome. Customers should be able to dial star-nine-nine-hash on their mobile handsets to access their mobile accounts. That’s the kind of solution we need.”
Other observers agreed with Hota, but also cited factors behind adoption of new financial services. For Gil Gadot, president at electronic payments provider Fundtech, simplicity of use should also be combined with ubiquity and availability for an innovation to achieve mainstream success.
“You need to be able to go anywhere and within three or four clicks complete a payment,” he said. “SMEs need to send money, view their payments and understand their balance. If you don’t have services available over the weekend, the customer will go elsewhere to transact.”