Zoompass: Implementing Mobile Money, Right
A major milestone has been achieved; the first inter-carrier mobile payments system in a developed market since PayForIt. We were impressed when we first met Zoompass at this year's Mobile World Congress (MWC); we're more impressed now. It will offer Canadian subscribers a comprehensive transfer, transaction, and account management service with encryption, whichever of the three main mobile operators they use.
In so doing it has adopted key Telco 2.0 concepts - trusted agent networks, inter-carrier cooperation, and extending telco assets and capabilities into thousands of other business processes.
Building a trusted network
There are several features of this we would like to draw attention to. First, they've integrated it with a number of other financial and payments systems - a Zoompass account comes with a RFID/NFC payments card, which is automatically topped up from funds in the account, and also a pre-paid MasterCard. Further, it's possible to use the service to withdraw cash from ATMs.
We've said before that much of the value in a Mobile Money Transfer (MMT) system is concentrated in the network of agents which actually deals with the users; for example, using the same street vendors who sell pre-paid GSM airtime to ingest or pay out cash. The situation in Canada is obviously very different, but the problems are fundamentally the same - you need to beat the first-fax problem by making it as easy as possible to get cash in and out of the system.
Zoompass has solved this by integrating with the most common and (reasonably...) trusted financial networks operating in Canada.
Banks, the obvious partners for...money
Secondly, it is always a major question in MMT as to who mobile operators should partner with - banks, "remittance service providers", or retail-focused companies like bus operators in some parts of Africa. Orange's activities in West Africa and the Middle East, for example, have always involved a local bank as a partner, which holds the subscriber funds, deals with other banks and financial institutions, and acts as the bank for regulatory purposes. This has the advantage that it maximises the strengths of both partners, avoids the prospect of the same company being faced with simultaneous banking and telecoms regulation, and makes use of existing financial systems whilst avoiding high-margin wire service firms.
Zoompass has chosen to tie up with a bank; after all, as Orange VP of Payments, Mung Ki-Woo, said a couple of MWCs ago, the bank knows what to do when a customer dies and both his wives try to claim his outstanding balance, and mobile operators usually don't. As we've pointed out before, the bank partnering option is common to all successful MMT projects.
Inter-carrier cooperation considered crucial
Thirdly, we're facing the prospect of many mutually incompatible payments systems. This has already become a reality in parts of East Africa. For example, in Uganda, Valuable Bits reports that there are no less than three competing and balkanised mobile payments networks, and even though two of them both use the same M-PESA technology there is no interconnection between them. Shopkeepers and tradesmen have to maintain accounts with all three to be sure of accepting payments, and keep a balance on all three to be sure of making them. This is clearly far from optimal, especially in an industry that prides itself on providing global interconnection between hundreds of operators in several dozen jurisdictions for billions of subscribers.
And the company behind Zoompass has tackled that. Zoompass is a customer-facing brand for Enstream LLP, a company which operates the common infrastructure, manages the relationship with the banks, and which is jointly owned by the three Canadian GSM operators - Bell Canada Mobility, Rogers Wireless, and Telus. This is the really impressive bit - we' ve always said that carriers will have to cooperate to deliver transactional VAS, either through standardisation or through the creation of a common platform rather like a roaming hub.
Lessons from finance - notably the VISA credit card network and the British LINK network of ATMs - from the Internet - with the importance of Internet exchanges - and from many other industries - notably shipping, with the development of the load-centre ports - support this view. Our containerisation case study is here, with more here; we discussed LINK in this post on Amazon.com and transactions.
The LINK network of ATM operators in Britain originated with the UK's small mutually-owned banks (called "building societies"). As their competitors, the national commercial banks (the clearing banks, in British parlance), installed more and more ATMs hoping to achieve nationwide coverage, the building societies were faced with a serious problem. As (mostly) small local institutions no one society could hope to offer national card service, and it could be expected that the clearing banks would exact a high price to let a small competitor use their system. However, precisely because their territories rarely overlapped, a society that joined LINK hugely increased its coverage at once. More members meant more value, and also helped spread the costs of the shared infrastructure. Eventually, it was the clearing banks who had to swallow their pride and join LINK.
The GSMA's OneAPI project is also an effort to implement inter-carrier cooperation. And the example of the Nordic countries' approach to mobile number portability (MNP) shows that this is the way to go - by putting their mobile numbering plan under the control of an independent company jointly owned by the operators, they were able to deliver faster and cheaper portability earlier than anywhere else.
In fact, the UK's solution to MNP, where numbers remain with the original carrier they ere assigned to, which then refers traffic to the subscriber's current operator, is likely to add considerable complexity to the challenge of inter-carrier API interworking.
Om Malik's remark that getting the US operators to agree on anything was like herding cats needs to be revised in the light of this; famously, the way to herd cats is to move the food. The Canadian operators have recognised that the food is being moved - that their voice & messaging staple business is being eroded - and they are moving to catch up with it.
Arguably, one of the crucial lessons from the success of M-PESA and friends on one hand, and the failure of PayForIt - which after all had the backing of multiple carriers and an interoperability solution - is that it doesn't do to become obsessed by "content". In most of the developed world, mobile operators have looked at mobile payments/mobile money transfer as an adjunct or afterthought to what they imagine is their content business.
This misses the overriding truth that what the public have always wanted from the industry is communication; just as they value the ability to communicate ad-hoc with anyone by voice and messaging, and increasingly the ability to interact with arbitrary Web services, they value the ability to transfer funds ad-hoc much more than they do being able to pay for "content". And who could disagree? The possible market for transaction services is as big as the entire economy; which puts any conceivable content play in the shade.
Making this a reality requires inter-carrier cooperation, partnership with a financial sector now increasingly keen to rebuild its base in retail banking, a strategy to build a trusted distribution network, and urgent attention to the technical challenges of numbering and API interworking. But above all, it requires us to see mobile money in the broader context of the fundamental demand for communication, as expressed in the Customer Participation Framework.