solving for personal commerce: interoperability as the key to scale
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Visa Confidential Visa Confidential
Solving for Personal Commerce:
Interoperability as the Key to Scale
Gavin Krugel
Tuesday, November 12, 2013
| Digital Solutions, Emerging Markets | November 14, 2013 2 Visa Confidential
Market leader Market leader Market leader Market leader Market players
Mobile Money is replacing cash in many countries
Percentage of GDP processed by mobile money services is significant:
KENYA BANGLADESH UGANDA PAKISTAN TANZANIA
31%1 of Kenya’s
GDP
3.6%2
of Bangladesh’s
GDP
20%3 of Uganda’s
GDP
44%5 of Tanzania’s
GDP
1.5%4
of Pakistan’s
GDP
4. Based on $0.88bn transactions in Q4 2012 (CGAP, June 2013) cf. $231.2bn GDP (World Bank, 2013)
5. Based on $1.06bn per month (Bank of Tanzania, Dec 2012) cf. $28.2bn GDP (World Bank 2013 stats).
Each company logo represents the mobile money market leader by registered wallet value.
1. GSMA Mobile Money for the Unbanked: The Kenyan Journey to Digital Financial Inclusion (July 2013)
2. Based on $1.03bn transactions in Q1 2013 (CGAP, June 2013) cf. $115.6bn GDP (World Bank, 2013)
3. GSMA Mobile Money for the Unbanked: Global Mobile Money Adoption Survey, 2012 (February 2013)
Amount of value moved over mobile money platforms annually (see references below):
Note: All brand names and logos are the property of their respective owners, are used for identification purposes only, and do not imply product endorsement or affiliation with Visa.
| Digital Solutions, Emerging Markets | November 14, 2013 3 Visa Confidential
82.20%
0.00%
2.70% 8.30%
0.90%
5.30%
0.60%
P2P
Micro Payment
Airtime
Bill Payment
International Remittances
Bulk Payments
Merchant Payments
Transaction types differ significantly from traditional retail payments Mobile Money Transactions (2012)
Source: GSMA Mobile money for the underbanked, 2012
Global Mobile Money Adoption Survey
| Digital Solutions, Emerging Markets | November 14, 2013 4 Visa Confidential
Barriers to adoption
34% lack of
interoperability as
the primary barriers to
adoption
Security concerns do not appear to be a barrier to adoption
Source: Visa Mobile Money Survey 2012
| Digital Solutions, Emerging Markets | November 14, 2013 5 Visa Confidential
Regulators are responding
‘Electronic retail payment service providers shall utilize open systems capable of becoming interoperable with other payment systems in the country and internationally’
‘Electronic retail payment service providers are encouraged to enter into interoperable arrangements’
Kenya proposes National Payment Systems Regulation
Movements toward interoperability begin in Nigeria, Pakistan, Indonesia, Tanzania, Uganda, Rwanda…
6
What does a closed loop mobile money service look like?
Mobile network operators and banks who have implemented mobile
money platforms have developed closed-loop systems to serve their
consumers, but do not operate beyond their networks as yet
C = Consumers A = Agents
There are over 325 closed-loop mobile payment systems planned or in market1
Mobile Money Implementation A
Primary Transactions: Cash-in, Cash-out, P2P Transfers, Airtime Top-up and Bill Payment
Mobile Money Implementation B
Wallet Platform
C1
C2
C3
A1
A2
A3
1Source: GSMA November 2013 Deployment Tracker
Wallet Platform
A1
A2
A3
C1
C2
C3
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Mobile Money ecosystem’s are complex
Bank / Financial Institutions
Remittance Partners
Business
Mobile Network Operators
Government
VisaNet / Other
Regional Switches
Other Mobile Money
Platforms
Enterprise Platforms (CRM)
Agent Network Managers
(ANM)
Bill Payment Service Provider
Merchants
Mobile Money
Service
Interoperating them more so….
8
Defining interoperability
• Ability for consumers to send money to each other irrespective of Mobile Money service
• Ability for consumers to cash-in or cash-out at competing mobile money agents
• Ability for consumers to use retail payments at all retailers irrespective of who signed the retailer up
• Ability for consumers to use existing payment system infrastructure such as ATM, POS, eCommerce and international remittances
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Considering interoperability
• Technical interoperability – how will the messages flow or be defined or standardized?
• Consumer awareness – how does the consumer know the retailer/ATM/agent or mobile money service is interoperable?
• Where does the consumer go to query or dispute an interoperable transaction?
• What are the rules governing such disputes?
• What are the mechanisms for compensating mobile money service owners for facilitating your customers transactions?
• What are the entry standards or conditions to be a part of an interoperable service?
• Can you be sure that you will be settled for the transactions you process on behalf of other service providers?
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U.S. Credit Card Market Programs 1958-1969
Sources: Electronic Value Exchange – Origins of the Visa Electronic Payment System by David L. Stearns; The Power of an Idea by Paul Chutkow
Acceptance Financial Accounts
1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969
BofA and
30
other closed-loop programs launched
Only
10 more
closed-loop programs
added
Visa / Telenor Partnership Overview
11
VisaNet
U.S. Credit Card Market Programs 1958-1969
Sources: Electronic Value Exchange – Origins of the Visa Electronic Payment System by David L. Stearns; The Power of an Idea by Paul Chutkow
1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969
BofA and
30
other closed-loop programs launched
Only
10 more
closed-loop programs
added
481 Programs
added
1,207 Programs
added
Bof A begins licensing banks nationally and internationally
Acceptance Financial Accounts
Visa / Telenor Partnership Overview
Visa’s Solution: Organizing Complexity Visa eliminated the need for individual acceptance agreements. Visa’s open-loop alternative connected merchants, banks, accountholders worldwide through one payments network.
Visa
Acceptance Financial Account
12
13
Déjà Vu? 2003-2012
Sources: GSMA Mobile Money Tracker, 2013
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Over 208 deployments in
over 35 countries
Acceptance Mobile Money Accounts
Visa / Telenor Partnership Overview
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Mobile Money Programs Predictability and Security Expanded Payment Eco-
system
Person to person Agents
Remote Payment
Mobile Money Account
Mobile Money Account
+ =
What Visa brings to Mobile Money
Operators
Merchants ATMs
eCommerce
Person to person
Remote Payment
Agents
Traditional Visa Payment Transactions
Visa Personal Payment Transactions
New Transactions based on Agents
15
Visa Mobile Prepaid enables interoperability between mobile money platforms
Evolving Mobile Money
Emergence of low-cost, ubiquitous mobile technology now allows mobile network operators (MNOs) to provide financial services to subscribers via mobile money platforms
Visa will connect mobile money platforms to the worldwide Visa Network through Visa Mobile Prepaid, expanding payment and purchase offerings to subscribers and increasing revenue for MNOs
+
A Simple Question… “If anything in the world were possible, what would be an ideal organization to create the world’s premier system for the exchange of value?”
- Dee Hock, founder of Visa
In other words,
“what is the best way to pay and be paid?”
16
With a Visionary Answer
An open-loop infrastructure and
network that moves money (value)
Trusted and guaranteed
payment for all parties
Security, reliability, convenience
Global reach, multiple markets
Scalability to handle sudden
and large variations in volume
The answer to the original question became our vision and Visa was born.
Gavin Krugel