Governments increasingly recognize that connecting their poorest citizens to basic financial services is a valuable tool for overcoming poverty and driving economic growth. From Kenya and Tanzania to Jordan and Peru, digital technology and simple mobile phones are opening up opportunities for millions of people by helping them to safely save and manage their money.
The potential is boundless, and yet significant obstacles remain. One of them is the fragmentation of mobile money markets. Globally, there are 60 countries with more than one mobile money service. And typically customers using one service can’t transact with customers using another. This is analogous to having a mobile phone system where you can only communicate with users on the same network.
Thankfully, companies are realizing that this question of interoperability holds the key to market expansion and are taking steps to innovate solutions.
Four of the world’s largest telco system manufacturers — Sweden’s Ericsson, China’s Huawei, Canada’s Telepin and India’s Mahindra Comviva — have put aside their fierce competition and agreed to collaborate, not out of altruism. But in order to better compete. Announced at the Innovate Finance Global Summit in partnership with the Bill & Melinda Gates Foundation, who works to bring competitors together to meaningfully address financial inclusion for the poorest citizens, these companies are developing a set of “application programming interfaces,” or in plain English, ways of making computers talk to each other. These APIs will create open-source standards for the development of digital financial services that are automatically compatible with each other, lowering costs for providers and increasing the utility of digital financial services for customers overall.
By governing how different digital accounts send and receive money, the APIs can be the basis for a new “internet of payments,” across which individuals, banks, merchants, employers, and governments seamlessly transact. The APIs are still under development, but when they’re complete they will be released as a global public good, available to anyone who wants to invent.
This brings us to the first of two main challenges. Building the internet of payments depends on other businesses — particularly fintech and digital financial providers — taking these APIs and running with them.
This shouldn’t be too hard. Ericsson, Huawei, Telepin, and Mahindra Comviva are signalling the technology promise. They’ll adopt the APIs themselves, setting a precedent for the smaller providers who operate on their systems. The APIs will also help smaller businesses get to scale quickly.
The bigger challenge will be shaping the market. None of the mobile money success stories in the world, from Tanzania to Kenya to the Philippines to Peru, would be possible without thoughtful regulations that strike the balance between managing risk and spurring innovation. The right policies can, therefore, make a difference in reducing barriers.
For example, many of the world’s mobile money products are offered by mobile network operators. But many countries won’t license mobile operators to provide financial services. This is true even in countries with fairly advanced mobile money regulations. Chile, Egypt, and South Africa enable people to pay bills via mobile, but they don’t permit mobile operators to enter the game.