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September 2014


    Being a relatively nascent industry hasn’t stopped the mobile money space from making headlines. And why shouldn’t it? The technology being used is advancing daily, as are the number of subscribers signing up for the service. Also, let’s not forget, the services portfolio itself is improving slowly and steadily with many innovative and unique propositions. Sample this-in end-2013, according to the GSMA’s State of the Industry 2013 report, mobile money services were available in most emerging markets. The stats speak for themselves-219 services were live in 84 countries during this time. If this wasn’t evidence enough, the report goes on to state that every operator worth its salt is rushing to make mobile money an integral part of their business strategy. In fact, over 70 per cent of operators plan to increase their investments in the mobile money business this year alone! If that doesn’t signify progress, nothing does!

    Before we begin applauding the industry’s success, though, let’s sit back and take a long, hard look at the issues still at large. Everyone following the mobile money space will agree that the biggest challenge before this space still remains lack of interoperability between mobile money services.

    So, why has interoperability (or lack thereof) occupied the pride of place in almost every industry debate? Simply put-imagine you walk into a store and after a hard day’s shopping, proceed to the payment counter, only to be told that you cannot use a particular debit or credit card. Why, because the merchant in question does not have a point-of-sale machine that supports that particular bank! To be fair, however, this isn’t such a big issue today thanks to the MasterCard and the Visa’s of the world. Mobile money, though, has many miles to go before it reaches this stage. Another example is the customer not being able to transfer funds from their bank to another. Sounds tedious, doesn’t it? Now, let’s talk about what benefits having an interoperable mobile money ecosystem can offer. First off, it would sound the death knell for cash-which is already underway globally.

    Of course, the various stakeholders in the mobile money ecosystem stand to benefit too. For operators, it would mean providing customers with more flexible payment options which could increase the overall number of transactions and the velocity and volume of money in the ecosystem. For regulators, it is an opportunity to draw more cash into the formal financial system; for customers-more accessible and flexible services and last, but not the least, financial inclusion is expected to get a significant fillip. In a nutshell, having interconnected platforms for mobile money sounds like a no brainer.

    The next obvious question-why aren’t the various players in this space ensuring their mobile money services are interoperable? Do they not want to capitalize on the amazingly high demand for the same, thereby ensuring this industry meets its potential? Well, yes and no. For now, most mobile money services currently work as closed loop systems, unconnected to other payment services.  This approach has its advantages though, namely minimized costs, simplified operations, and access to real time transactions.  Why did operators adopt this model? At the time of its conception, mobile money was originally designed to replace cash for customers who did not have a bank account. For this purpose, a closed loop system fit the bill perfectly.  However, as time went by, demand for the service grew by leaps and bounds and now consumers are looking at using these products for most of their financial and payment requirements. . So, naturally, the need for open-face interfaces to make the service interoperable is assuming more importance. Another factor hindering any attempt at interoperability in these services is the significant challenges involved in any initiative that brings competing companies together and the road to success is arduous. Yet another reason is the still nascent state of many markets.

    Luckily, the overall industry is beginning to sit up and take notice of the importance of interoperability. In fact, this cause has been enthusiastically taken up over the past year by several players in the global mobile money ecosystem. The trailblazers in this context were Indonesia’s three leading telecom operators-Telkomsel, Indosat and XL. In May 2013, these players went “live” with a ground-breaking initiative which enabled their mobile money customers to send and receive money across each other’s networks. For the first time in this space, mobile money platforms run by telecom operators could “talk” to each other-account-to-account or wallet-to-wallet in real-time. What’s noteworthy is that this initiative helped demystify the concept of interoperability to a large extent. To illustrate, despite the fact that all three deployments operated different mobile money platforms, the technical development to enable the platforms to talk to each other took only four months by agreeing to standard interfaces and protocols. The business and technical teams from the three operators jointly defined the functionality of the inter-scheme collaboration and how information could be exchanged between them. How’s that for collaboration between traditionally warring entities to further the overall market!

    Of course, let’s not forget that when it comes to mobile money, Africa remains the biggest success story. So, not surprisingly, in June this year, Tanzania’s three mobile money heavyweights-Airtel, Tigo and Zantel – signed an interoperability agreement, as per which, users of their respective Airtel Money, Tigo M-Pesa and Zantel’s EzyPesa services will be able to send money to each other from their handsets. Naturally, the hopes of over 16 million mobile money customers in Tanzania are pinned on this, as it is the first agreement in Africa to adopt interoperable mobile services.

    What of the rest? Well, players MTN Group, Bharti Airtel and the Orange Group haven’t been letting the grass grow under their feet either. The MTN Group and Bharti Airtel recently announced a cross-border remittance partnership to facilitate the transfer of money between Cote d’Ivoire and Burkina Faso. Meanwhile, in 2013, the Orange Group launched the Orange Money International Transfer service, a mobile-to-mobile money transfer service between users, for its customers in Senegal, Mali and Cote d’Ivoire. A good move, I think, given that over $250 million in money transfers is moved between these three countries!

    Now let’s talk about how this issue is being addressed in other markets. In the context of banking, interoperability is already a ground reality. For example, in India, the Industry alongwith the regulator introduced the immediate payment service (IMPS) which allows customers to seamlessly transfer money between various banks with the mobile number as the identifier. According to data pertaining to Payment System indicators released by the Reserve Bank of India, in financial year 2013-14, the volume of IMPS transactions stood at 15.36 million, valued at Rs 95.81 billion.

    Yes, interoperability is becoming a reality, albeit slowly. Yes, there are (and probably, will remain) several issues to tackle before it does. But-a word of caution-before the mobile money industry can leverage the awesome power of interoperability, the various faces of this concept need to be clearly understood, prioritized and then introduced. Otherwise, the exponential growth witnessed will be a thing of the past.

    September 23, 2014 0 comment
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    Has the concept of mobile-based payments had its moment in the sun? It isn’t the latest kid on the technology block or (arguably) the most impressive. Its potential in making cards a thing of the past has been discussed to death. Indeed, it has been at the forefront of thousands of industry-wide debates and forums.

    So, can it be written off as just a flash-in-the-pan? Well, yes and no. No, because in theory, the concept of a mobile handset coupled with a digital wallet is sound. It has the potential to transform the overall payments experience by introducing contextual awareness into the mix, resulting in happy customers and merchants (the former with personalized offers and the latter with better customer outreach).

    The not-so-great news is that despite the potential, a mere handful of pilots have been conducted across multiple geographies. The grand idea of mobile payments seems to have turned out to be a paper tiger. All teeth but no bite.

    Is the failure to identify the right kind of technology its downfall?  Again, yes and no. There have been several hits and misses. To illustrate, in the initial years, Near Field Communications (NFC) was touted as “the” technology for mobile payments. Over the years, though, industry experts steadily started dismissing NFC on multiple grounds. To begin with, the business model entailed was complex and also added several more players in the ecosystem. This meant more contenders for the already wafer-thin margins.  Each solution suggested to salvage the situation, though put forward with honourable intentions, was deemed badly planned. Invariably, all the players involved wanted to have first dibs on the customer.

    In the end, while NFC never made it to the mainstream, the idea of mobile payments didn’t die. As a result, many other technologies-in particular QR Codes and Biometrics-have been given a fair trial but these are not really expected to become mainstream unless there are standards defined, followed by an industry-wide push for adoption. Also, security concerns for these alternate payments have to be thought through and a robust mechanism built before these find their feet in this space.

    In this scenario, Host Card Emulation (HCE) has arisen as a potential solution to the “which technology ought to be used for mobile payments” conundrum. It seems to have hit the bulls-eye, with bigwigs like MasterCard and VISA announcing their specs and EMV following suit and developing their own guidelines for tokenization. HCE has taken off very rapidly and, in fact, has helped sort out a few kinks in the traditional NFC model. I think it’s appropriate to mention Google at this point, for the HCE specs it introduced in the KitKat version of Android.

    Of course, what’s well begun is often half-done. The next step is extending the magic of HCE-based NFC payments outside the Android universe.

    To be fair, there has been a fair amount of activity on this front. Several banks have enthusiastically signed up for the same and have been rolled out HCE-based wallet pilot projects. Let’s not get ahead of ourselves, though, it is still a bit premature to measure the success of such projects. Every player worth mentioning operating in this space is attempting to have a “eureka” moment in this context and are certainly pulling out all the stops. Take, for instance, the enabling of tokens for disconnected modes or the solution that ensures the customer carries out the transaction in record time.

    Meanwhile, the next big question is: which platform would provide a more secure environment to support HCE-based wallets-the Trusted Execution Environment (TEE) or the secure element (SE on the cloud)? The former is widely regarded as the winner , but it is not without flaws. To begin with, it is dependent on the mobile handset’s processor (always a red flag) and introduces an additional player in the value chain-not always a welcome development.

    Of course, the wheels of technology keep turning and so, it is unsurprising that an alternative mechanism – the latest buzzword – white box cryptography (WBC) is already squarely in place. In fact, it has already been implemented to enable token management securely within the phone memory without a secure element in place. While HCE started with the SE being present on the cloud which helps in processing transactions being in the connected mode, the WBC mode is to enable disconnected transactions where required.

    I believe that this isn’t mere hype-it could very well be a genuine possibility of enabling over-the-counter payments through NFC. We have already engaged with various players who have evinced interest in deploying HCE solutions. Again a disclaimer-technology can never be perfect. In this context, the jury is still out on the question of who would manage the tokenization systems – would banks have their own system or would the network scheme players like MasterCard and VISA lead the way? While the former seemed to be a logical solution, the process of managing the flow of payments could become complex and while the latter could help in deploying the token systems faster, another question arose-would everyone subscribe to the model?

    If history has taught us anything, no-one would have been taken by surprise by Apple’s grand announcements in early September. While I am still unclear of how the overall market will pan out, the launch of the Apple Pay solution on the iPhone 6 and Apple Watch (users of iPhone 5s can use Apple Pay through this) signals the beginning of the US market’s journey towards NFC adoption.

    Apple’s heavyweight status became even clearer at the event-as it has already roped in every major player including banks, networks and merchants to be an integral part of the launch. Keeping in with time-honoured tradition, the solution makes it clear that Apple has thought the overall process through to develop an offering which is not only frictionless but also secure. The tokenization thought process which began with HCE has clearly been adopted and I am sure this is destined to become pretty much part of any payment flow.

    In fact, the biometric authentication feature    they introduced in the last version of the iPhone is now being given space to play-the perception to consumers would clearly be that their payment credentials are secure, which will hopefully translate into a healthier adoption rate. While not stated clearly, the context aware services would have their moment as well. Of course, Apple will continue to mix things up and will most likely steadily throw in the passbook and the ibeacons facilities. Add the payments feature to that and you’re likely to end up with a product that offers more value to consumers and gives the world a solid reason to subscribe to the mobile payments thought process.

    But is the world ready? I believe so, especially with the US retail industry going through the EMV migration. In this case, contactless and NFC terminals can be part of the same migration process. This will make the acquiring side ready for the mobile payments revolution while the nuts and bolts have started falling into place on the issuing side-well at least for consumers who will pocket the latest iPhone.

    While all the hype surrounding Apple’s latest offering is exciting and full of promise, let’s take a moment. The company has already stated that 83 per cent of card holders in the US can already access this service. But wait what about the other mobile platforms (including Android) which need to enable NFC so that the market will become broader? While this may not give the good people at Apple sleepless nights, it is important to remember that Android rules the roost outside the US.

    Speaking of teething issues, personally, I am curious to see how Apple will tackle the issue of a “disconnected” environment and who will introduce payments and authentication to, let’s say, the transit industry-traditionally considered a killer app for NFC. Further, how will wallet providers including large format retailers club their wallet offering with the Apple payment systems? How will Apple build in context awareness in this product, keeping in mind their recent proclamation that they do not hold customer info? While I never claimed to have a crystal ball, I am clear about the fact that Apple will slowly but surely be the ID and access mechanism for various applications and this is where they may open their platform to the developer community.

    But that’s Apple. What about the larger Android universe I had mentioned earlier? Well, for one, the right solution is required. Further, banks and payment providers will need to offer their payments products to consumers irrespective of which OS platform they are on. Now the tricky part-dealing with HCE on Android is very different from what Apple Pay is offering. Banks will have to do their homework to figure out how to replicate the process across platforms.

    It doesn’t end there. Players like MasterCard and VISA have increased their relevance with tokenization at the network level. It will, therefore, be mildly-I joke-VERY difficult to change the existing system to support NFC payments for other platforms. Also, wallet providers exercised more control on the Android platform and the overall consumer buying behaviour including payments could be more tightly integrated. So, where does all this stand? Are we to believe that the payments piece will  now become a platform play? The big question is will Google follow suit? Is there room for it to do so? Interesting times are coming and it won’t be an exaggeration to say that Apple’s recent announcements have led to the makings of a storm in the NFC space. From the viewpoint of someone who has been eagerly waiting for this (me), looks like wishes do come true!!

    September 18, 2014 0 comment
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    Know your audience……the customer knows more than you!

    This is the first trick of the trade taught as a part of Marketing 101. Nothing much has changed over the years, except jargon becoming the norm of the day. To drive home this point, industry experts have been  tossing around phrases such as “consumer experience management (CXM)”, “customer engagement”, “personalized services”, “customer value management” etc. Of course, explaining these phrases (especially CXM) entails several long-winded definitions, which leaves the audience completely bewildered.

    So, how does one cut to the chase and define CXM without any buzzwords? How about this- CXM essentially entails understanding that every customer is different. A customer wants companies to recognize this by providing personalized content, services and attention at all available touch-points. Customers want to be valued by companies.

    But isn’t valuing one’s customer and providing customized content a marketing thumb-rule? Of course it is and CXM is just one of the thousands of ways this can be achieved. Before CXM became an essential part of any marketing handbook, all eyes were on customer relationship management (CRM). CRM was the Holy Grail of marketing, especially when it came to understanding one’s target audience. This essentially involved concerted efforts across an organization’s sales and marketing teams to capture, store and process as much customer data as possible. Sometimes the mad rush to collect data took precedence over the purpose itself. While these were (and remain) essential tasks, marketing dynamics shifted. While the companies which realized this moved on with the new paradigm, others continued to just do what they did before-make better mousetraps. Eventually, the customer began to sit up and ask, “What’s in it for me?” And that’s when CXM emerged.

    Without falling into the trap of using marketing jargon, I want to add another dimension to the definition of CXM. From an organization’s point of view, CXM makes providing great, personalized and on-time services to the individual customer central to a company’s strategy leveraging all products and services in its portfolio as opposed to just capturing data. Any effective CXM thus ensures and not just helps offering the right product, at the right time to the customer, using the right channel. With CXM, just hoping to sell better is no longer a strategy!

    At this point, let me also pause and completely flip this argument. Does a completely customer centric approach kill innovation? Someone famously said, “The customer does not know what she wants, till I tell them”. Well, no. You may create a great product that the customer didn’t even imagine was possible…then what? How do you tell the customer, convince them that they need it? That’s CXM for you and that’s where the ‘X’ in CXM re-invents itself as Value in the Customer Value Management proposition.

    Sounds good, but why has CXM suddenly stepped into the limelight? To sum up in a single word-competition. Take for example, the current face of India’s telecom space. It’s overcrowded, product differentiation is difficult and roughly every month, a price war breaks out. The challenges before every telecom operator are three-fold- finding new and innovative ways to net more customers, retaining existing ones and increasing revenues. In sum, the challenge is to give a reason to the Indian customer who has choice, to not only choose a provider over another but also continue with its services. To achieve this, launching various services and tariffs is a tried and tested method. However, at the heart of any successful marketing strategy are (and will remain) two fundamental questions-how does the company improve its interactions with the customer? How does it understand them and deliver tailored services? Can a marketing strategy just rely on the erstwhile ‘carpet bombing’ concept of communication and hope that there would be at least one customer who would relate to it and actually pay for the service on offer? This was true. No longer now.

    In a nutshell, operators have to wage war on several fronts. Equations with the customer have to be built and retained in the face of stiff competition from both other operators and over the top players. CXM comes to their rescue, as it helps these players understand and maximize the value of each individual customer through ongoing, tailored interactions. It helps these companies make sense of an overcrowded, complex marketplace. It enables operators to think differently and see their customers from the “inside-out”. ‘I have a good product’ is not good enough anymore!

    Here is where technology steps in. It helps the organization improve CXM by benchmarking it appropriately. Remember the saying, “If you can’t measure it, you can’t manage it?” That is what technology does. It collects, analyzes (and, in many cases, predicts) and aptly applies customer data, all of which are essential to make CXM work. In nerd-speak data streams can be harnessed to create a complete profile of the individual and match marketing offers and communications appropriately. From spend patterns and usage information to location, handset type and rate plan or contextual information such as balance information, details of a transaction that just happened, location and even the weather, operators are now able to add various dimensions to a customer’s profile while fine-tuning their own communication strategies.

    For example, in a consumer poll conducted by Omnibus research, commissioned by customer service specialists Kana Software, it was revealed that over the past six months, the average consumer in the UK used more than seven electronic communication channels. Also, among 18-24 year olds in the UK, one in 20 checked their smartphones every minute each day. Such insights are like gold to operators-consider the data available for them to help decide what product or service to push!

    Of course, there is a downside. Despite the potential, there still exist several factors inhibiting companies from effectively engaging customers. The primary factor is the product-centric approach adopted by a few players. The longer companies remain faithful to the belief that value is intrinsic in the product the more difficult it will be to achieve growth and an upward sales graph. Another important factor is data. Yes, you read that correctly, it isn’t a typo.

    While companies may have access to vast realms of data, leveraging it effectively is the challenge. Industry experts believe that the data silos in certain organizations is responsible, because if data is siloed, then the company will have siloed insights. Most companies capture and store petabytes of data on their customers but the level of know-how to analyze that data for meaningful, actionable information is nascent.

    To sum up, there is industry data to prove that companies with high levels of CXM typically grow at more than double the rate of their competitors. The inverse case is that the company can lose its competitive lead very quickly by focusing on the wrong things or by trying too hard to push things which were in vogue maybe even three years back, not today

    CXM is here. There is no turning back. Know your audience.

    September 3, 2014 0 comment
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