The State Department had a half day event for employees and guests about Mobile Money. Well attended and great interest in mobile money for “development” (improving political, economic, and human conditions around the world).

The group was diverse in experience – which is a challenge for a presenter. Since I co-presented the first session my goal was to create a common understanding of mobile money, how it is successfully implemented, and what are the benefits. I wanted to make sure the audience came up to speed quickly and got beyond the simplistic view.  The feedback was overwhelmingly positive about the opening session (partial credit goes to Jan Chipchase my co-presenter who started the session with a look at the needs of under-served people around the world) .

What is the role of State in Mobile Money

In conversations I learned that although State is enthusiastic about mobile money for development, their engagement model is still to be determined. They want to see these solutions go to places like Haiti as well as large markets like India. Yet I don’t think they yet know exactly what their role should be in helping make that happen. I was able to give them some initial input and plan to follow up in the coming weeks. Here are some of my thoughts on how they should get involved:

1. Encouraging financial services regulatory certainty for mobile money. As they “encourage” they have vast resources of knowledge and experience on regulations.  Obopay operates in diverse regulatory environments – which is one of our great strengths. Yet it is prohibitive to launch mobile money in markets where regulation is uncertain.  State has the influence and resources to accelerate this in some cases.
2. Discourage anti-competitive and anti-innovative practices. We have seen around the world financial and telecom actors take action to inhibit new entrants and innovation. The State Department can encourage mobile network operators and financial actors to adopt open access practices. This will encourage innovation and create a vibrant market. And this will in turn translate into more services reaching more people that need them.
3. Help trusted actors connect. Especially important in challenging markets. We have passed the test and demonstrated we are trusted to US regulators as well as regulators and partners around the world and, as a result, we get inquiries from many developing countries (for example Nigeria, Pakistan). We would like the State Department to help local actors know about us, since we have the trust of US regulators. And we would like their help in understanding which local actors are good partners – especially in challenging countries. Of course, we would want this for the industry  – not just for Obopay.

Tell us about your other meetings in Washington DC.

I have to confess that although I have been to DC many times, I have never reached out to talk with law makers. I met with staff from 6 Congressmen and 1 Senator. I was impressed with how accessible their offices were and how open they were to discussing important topics with me. I wanted to focus on legislators who were involved in foreign affairs, and banking regulations—two areas where we have a great deal of experience to share.

All were keenly interested in mobile money – learning more, understanding how it works, asking how they can be helpful. Most meetings were primarily initial discussions but clearly there is opportunity to engage government in the dialogue and policy setting to ensure we maximize the opportunity to create growth and jobs.

One surprise was the lack of cross government coordination. I ended up educating people about what activities were going on in other agencies – treasury, state. Although we are a collaborative government in spirit, our size and complexity makes cross functional sharing difficult.

This administration is young and clearly tech enthusiasts. I am hoping that it will help build more communication between the Legislative and Executive branches. While most offices where watching CNN or CNBC – maybe in the future they will be reading blogs and watching tweets from each other. No question that social media should have a strong impact on intra agency communications

Do you expect follow up and results from your visit?

Hard to say. I know it was worthwhile to make the connections. I will keep in touch with many of the groups and individuals I connected with and we shall see what comes out of it. I have to admit it made me a little patriotic coming to Washington and meeting with different organizations. Despite all our challenges, we have many great qualities. One is the number of smart, passionate, hardworking people working on the “Hill”.

What will be the impact?

For a time, we’ve been saying in this space that the tipping point for mobile payments in the United States was upon us.  A story covered by Bloomberg news yesterday serves as corroboration of this belief. Shortly after the final bell rang on the NYSE yesterday, Bloomberg reported that unnamed sources claimed AT&T and Verizon Wireless were planning a joint venture(JV) to uproot the hold traditional plastic credit cards have on electronic transactions by developing a smart phone based payment system. T-Mobile was also reportedly a minor player in this consortium.

• The pilot of this JV is reported to be in 4 cities with smart phones and proximity payments as the key application (instead of swiping a card you wave your phone in front of a special retail terminal).
• Discover and Barclays are participating as financial services partners
• They don’t yet have a CEO for the JV and are undertaking a search.
• This is being seen as a potential threat to Visa and Mastercard and their 82% share of consumer retail payments in the US.  This could also have a big effect on banks since they have significant revenue from “interchange” – the fees tied to MC and Visa transactions.

It is too soon to predict the full impact and the speed at which this new venture will be rolled out.  If, however, it is successful the potential is huge since more than half of all the new phones shipped in the market today are smart phones. What is predictable is a response from the other players in the US. Some, like banks, VISA, Mastercard, retailers, have had a “wait and see” attitude about mobile money in the US. Compared to their counterparts in other parts of the world, the US-based companies have been slower to invest in mobile.  This news will accelerate their plans, serving as a call to action for financial institutions in the US to quickly begin planning how to enter the mobile payments market, not just launch mobile banking solutions.

Is the opportunity for mobile payments in proximity payments or wireless payments?

Both, only proximity payments take a lot more time to gain broad adoption.   In Japan it took a decade.  The opportunity is very large – the biggest segments are retail, check replacement, money transfer, and online commerce.  All four represent significant opportunity.

One of the big questions is what will get things started here. We think the US market is more likely to ignite around wireless payments first, then move into proximity due to challenges in bringing together the number of players required to roll out proximity payments and the expense involved.  Once started, people will expand their use to other types of payments. We see this in every country where we are – it starts with one compelling reason but once the consumer trusts it they are looking for other uses.

This  venture into retail proximity payments could change how we pay for things when we are doing in person transactions. Visa and MasterCard were responsible for processing 82 percent, representing $2.45 trillion of consumer spending on cards in the US according to the Nilson Report. If mobile payments from the mobile operators take off, this could be impacted. This would also impact the banks since they generate revenue from VISA and Mastercard payments.

Do you think the mobile carriers will be successful in payments?

They can be. And mobile carriers playing a lead role in mobile payments in the US may be a concern for financial institutions, which have traditionally played that role here.  We see and even work with mobile carriers in other markets who are creating successful solutions. However, in the US the mobile payment market is the financial service providers’ to lose. But they must act quickly, and move into a full range of mobile money  transactions because the carrier efforts have already begun—and they have already seen some success in other areas like “text to donate” and digital content billings. In the US consumers are first looking to other financial service providers to provide mobile money. If they move quickly, they definitely can be a part of consumer solutions. There is a window open right now for financial service providers to move quickly into wireless payments, since proximity payments will take some time to rollout.   The necessary physical changes required in phone and merchant terminals will increase the time for implementation.

How will Obopay respond and what does this mean for Obopay

We offer a comprehensive mobile money service operating in 4 countries. Today, we offer our partners Mobile Money solutions which will allow them to deploy their own branded mobile money service. Designed to make the bank’s accounts or existing prepaid offerings the anchor for all current and future mobile money transactions, the service combines complete brand control, and a full range of mobile transactions and applications with simple low-cost integration and deployment. Obopay’s Mobile Money for includes the ability to send and transfer money as well as payment card acceptance available to everyone. It can be implemented in 30 days or less.

We know that this JV will accelerate interest in mobile payments and with it the adoption of our service. And those financial service providers that prefer to get the capability from MasterCard can adopt MasterCard’s Mobile MoneySend or FIS Global’s People Pay solution–both of which are offered in partnership with Obopay.

What is Tech@State Mobile Money?

The US State Department‘s mission is to “Create a more secure, democratic, and prosperous world for the benefit of the American people and the international community”. It reports to Secretary of State Hillary Clinton, as does the Foreign Service.  It is the arm of the government focused on foreign affairs.

Tech@state are conferences to give state department staff an opportunity to learn about important technology trends.  On August 2, 2010, the State Department will host a Tech@State focused on Mobile Money. They will address the following key questions,

1. How do we scale the mobile frontier, leveraging technology and partnership for sustainable development and financial inclusion?
2. What do case studies reveal about success and failure?
3. What are the applications of mobile money and its implications for U.S. foreign policy?

They expect around 250 people to attend in Washington DC and then more through remote participation (embassies around the world). The sessions will also be web broadcasted.

I am co-presenting the opening talk entitled “Scaling the Mobile Frontier: How do we leverage technology and partnerships for sustainable development and financial inclusion?” My co-presenter is Jan Chipchase, Director, Frog Design.  Obopay’s perspective is unique since we are delivering mobile money on three continents, in four countries, and our service operates in diverse banking and payment market conditions from the US to India.

Why is US State Department interested in mobile money?

People and organizations working on foreign policy are keenly interested in anything that has the potential to create a more secure and more prosperous world. Although it is a very new area, we already know that mobile money has been shown to contribute to increased economic opportunity, improved quality of life, and enhanced security.

Most of the world still is heavily dependent on cash for personal, business, and government use of money. In India, for example, 91% of all payments are in cash. Cash can be lost or stolen; is expensive to handle; is difficult to trace activity and detect illegal usage; and can dramatically increase the time and resources needed to make a business or personal payment. Mobile money changes people’s lives by bringing mobile banking and electronic payment to people and small businesses who have traditionally had limited or no access to these services.

The State Department sees the potential of mobile money from many angles: economic growth; political security; the empowerment of women; health care payments; enabling commerce, especially for rural markets for supplier payments; and ,of course, the big goal of financial inclusion (bringing full range of banking services to underserved people). There are five billion mobile users but only 1.5 billion people with good access to banking. Mobile money has the potential to bring banking to everyone with a mobile phone.

What is the social and economic impact of Mobile Money?

Mobile phone adoption is unprecedented – reaching over 80% of people in a fifth of the time it took for landlines to reach similar penetration. The initial successes with mobile money are demonstrating the same unprecedented growth. Early indicators are showing that the same breakthrough in adoption will happen with Mobile Money.

In two years in Kenya – two years since the start of mobile money – over 38% of households have at least one mobile money account according to William Jack of Georgetown University and Tavneet Suri at MIT. In contrast, after five decades of traditional banking, only 22% of adults have bank accounts.

Financial Inclusion

In Africa, only 5% of the population of most countries in banked. There are now approximately 18 million mobile money users in Africa. It is climbing by approximately 35 thousand per day.   In India, 41% of people are unbanked and traditional banking is struggling just to reach 500 million people. Yet India now has over 600 million mobile phone subscribers and a strong retail network to service those users. The potential for mobile money in these markets is huge – and the impact it will have on the people, the businesses and the economies will be significant. India has been slower to rollout mobile money for two reasons; first it is a bigger country and more complex implementation by the nature of the market; and second, regulators have been slow to establish the necessary guidelines–although that has recently changed.

At Obopay we are working with Nokia in India. We have started our rollout after a successful pilot in Pune. We believe that in India, although it will take longer to get started than in Kenya, once established we will see the same rapid adoption that was experienced in Kenya.  Because we also have an implementation with the fastest growing mobile operator in Kenya (YU), we see firsthand the similarities between the two markets.

Scale this around the world, and you can understand the full potential. GSMA estimates that around 2 billion people who have no access to bank accounts already have mobile phones. That number is expected to rise as mobile phones continue to grow in emerging markets.

Tell us more about what is happening around the world?

We are seeing tangible savings for mobile money users around the world. This comes from reducing transaction fees, and lowering transport and time to transactions– sometimes dramatically.  In Senegal, paying the water bill took three days (two for travel and one standing in a Queue). Now the rural people can load money in their village and pay electronically.  In India, rural businesses can now send payments to suppliers in the city. This reduces travel time, speeds deliver of supplies, and increases safety because they don’t have to carry cash when they are traveling.  And in the US, we are helping families and small businesses to save time and money with a better way to pay and get paid.

We are also seeing it start with one use – money transfer in Kenya, remote top up in India, pay your water bill in Senegal. But once it starts, consumers begin to expand their use, and the benefits they receive. GSMA calls this moving to more sophisticated payments, creating stronger financial literacy that empowers life and work.   We encourage this by adding more uses for the service – although we always focus on driving adoption with a simple value proposition.

Ironically, the  number of unbanked consumers taking traditional bank accounts increases after exposure to mobile money. Therefore, this promises to be a good standalone business but also will drive people to other traditional bank products.
For many, Mobile Money is the first time they have created any tangible financial history. This allows a user to build up a documented history of good behavior. That financial identity will be useful in assessing their qualifications to receive microcredit and other financial products.

Is mobile money important in the US or just emerging markets like India?

Mobile money clearly will bring better affordable access to financial services for people who need it. But it also provides benefits to banked people, providing more convenience, ways to connect better to family members and young people  And for small businesses, it gives them a better way to get paid. It also allows for the elimination of checks and cash – which helps the environment by using less paper and gas for transport. In the US most people have bank accounts, but there is a growing number of families considered underserved by traditional banking. Both groups can benefit

What else are you doing in Washington DC this week?

I am meeting with Congressional staff members “on the Hill”. I have requested introductory meetings with people involved in the following committees. My goal is to make sure they understand the full potential of Mobile Money.

House Committee on Financial Services

Subcommittee on Domestic Monetary Policy and Technology

House Committee On Foreign Affairs

Subcommittee on Africa and Global Health
Subcommittee on the Middle East and South Asia

House Committee on Financial Services

Subcommittee on International Monetary Policy and Trade

Senate Committee on Financial Services

Banking and Financial Issues

State Department
International Communications and Information Policy

Earlier this week we announced a multi-country partnership with Société Générale. The partnership starts with the launch of a new service in Senegal offered as “Yoban’tel by Obopay”. It’s the comprehensive service which allows you to transfer money to any other person in Senegal just by sending a text message. It also enables you to pay bills right from your phone providing unprecedented convenience for people . Read about it here.

Why is this announcement important?

As many of you know, Obopay’s goal is to deliver mobile financial services that empower people’s life and work. We are announcing a multi-country partnership to team with SG to bring mobile money services to Africa and beyond. We are especially pleased because a) SG represents such a great partner in delivering mobile money, and b) Africa is such a great market for mobile money. Early implementations of mobile money in Africa, have proven consumer demand and achieved breakthroughs in consumer reach – achieving success beyond traditional brick and mortar banking.

The partnership and new offering holds the promise to bring mobile money services to banked and unbanked people including billions of people around the world. Over 4 Billion phones compared to 1.5 B bank accounts. In some countries in Africa, only 5% of the population has good access to banking service. Our joint offering has the following benefit to consumers:

-          For those that have existing bank accounts it offers greater convenience and utility,

-          And to those that have been unbanked it promises to bring unprecedented new access to financial services

With this offering Obopay now has operating experience with live mobile money service, and experience with the regulatory requirements, and market dynamics, in four very different markets including – the US (as MasterCard MoneySend and as Obopay), India (as Nokia Money), Kenya (as Yu Cash by Obopay) and now Senegal (as Yoban’tel by Obopay). This gives us the robust platform; service offering and expertise needed help our partners expand into new markets very quickly.

How is this different than Obopay in other markets? Mobile Money in other markets?

The service we are launching with SG in Senegal combines many of the best of attributes of our platform.

-          It leverages our US platform and strategy in enabling one of the world’s leading banks to quickly and easily bring bank branded mobile money services that make their accounts the anchor for mobile transactions

-          It leverages our India and Kenya offerings in enabling new channels of distribution for financial services, with agents that will bring new unparalleled reach to people that have traditional not had access to financial services. These people can now sign up for services and load or pick up cash at any of thousands locations through the commercial partnerships that are already a part of the new offering.

-          It leverages our money transfer capabilities from all our offerings, and our bill pay capabilities from our offering in India

-          And it is carrier agnostic, open to all of the people of Senegal, leveraging Obopay technology to make mobile money services available to anyone with a mobile phone, regardless of who they have their phone services or banking relationships with.

-          These capabilities, and the partnerships required to take them to market, have leveraged the flexibility of our platform and service to tailor them to the unique go to market requirements of a new market like Senegal

-          Open ecosystem lead by SG but with participation from leading carriers (Tigo) and commercial partners (Credit Mutuel du Senegal and CanalSat) in the market

What is a “Mixed Model”, as referred to by American Banker?

The American Banker covered our announcement this week in their article titled “Obopay Finds Focus with Mixed Model”. Obopay has always focused on partner ecosystem lead approach in each of the markets that it operates in, and enables its platform to be customized for the specific dynamics of either a developed or a developing market. This may be referred to as a ‘mixed model’.

Obopay enables financial service partners, mobile operators, handset manufactures, and merchants to come together, and brings the best, most complete set of services possible for their designated target market. We are also one of the only mobile money providers with operations in both developed (US) and developing markets (India, Kenya and now Senegal). This enables either financial service providers or mobile partners (or a combination of the two) to offer mobile money service. We are excited to add Societe General, and the other Yoban’tel by Obopay commercial partners, to our list of industry leading partnerships. Other partners include both FIs such as MasterCard and FIS Global, and mobile partners, such as Nokia and Essar (Yu).

Why is Obopay working with SG?

SG is a great partner for us. They have the reach, resources and brand recognition in key markets to make mobile money services happen. They also share our vision of the importance of creating an ecosystem. They are extraordinarily well positioned to offer mobile money services in Senegal and many other countries around the world where they have a strong presence.

Why is SG working with Obopay?

SG evaluated the best approach for offering mobile money services and selected Obopay as its partner. SG selected Obopay due to its extensive experience in working with large financial institutions to meet their needs, and dealing with local regulations, making it easier to provide the service in Senegal, and to quickly extend it into other markets.  The service was easy for Société Générale to deploy, inexpensive, and provided simple integration.

Why Senegal?

Senegal is a market that SG has a strong presence in and is well positioned to offer mobile money services. It has a high penetration rate of mobile phones, but a low penetration rate of bank accounts. SG has a very strong brand recognition and perception in the market. Senegal is also representative of other markets that SG is exploring and views it as a good first market to offer the service as it can extrapolate on its experience in Senegal and gain learnings that will allow it to quickly expend into other markets.

What is next?

Societe Generale Group has an ambition to promote financial services to the greatest number of people around the world. Obopay offers the bank the expertise, robust platform and service that it would need to expand into new markets very quickly. We are actively working on expansion into other markets for this service; however, we are not announcing which specific markets are being targeted at this time. Stay tuned.

And the fact that payment is instant means something else unique to Senegal.  Soccer fans who only want to watch a particular series of matches during the World Cup don’t have to continually run down to their TV service provider to make those payments in cash.  This may seems strange to us, but imagine if you could only see certain televised Olympic sports by going to your cable providers office!  And most of the country is not banked—which means dealing in cash.  Whether it is paying a bill or paying a friend, this service also means that they don’t have to risk the danger of walking around with a lot of cash on payday.

Societe Generale is one of the largest banks in the world and this is a real opportunity to start bringing mobile money to their existing and potential customers.  We look forward to helping them achieve this goal.

The MasterCard MoneySend iPhone app  is another clear illustration of the power smartphones (and iPhone in particular) are proving to be in driving adoption of mobile payments. According to NPD Group, smartphone shipments were up 47% in the first quarter of this year and according to IDC , the iPhone’s share of market grew dramatically in 2009—reaching 14.4% of the 174 million that were shipped during 2009.

All this spells the tipping point in mobile payments.  We have already seen the usage of our own iPhone app drive as much as 3 to 5 more active usage of our service. Smart Phone users adopt things more quickly and are more active.

U.S. banks are beginning to realize that if they don’t move to make bank accounts the anchor of mobile payments, they will lose out to competition both inside and outside the banking industry.  That has been the driving premise behind our announcement last month of Mobile Money for Banks—a low cost, no hassle, and swift product suite for banks to get into this market in as little as 30 days.  Of course, we are pleased to be powering this new app from MasterCard.  We are also pleased with what this means to the development of mobile banking across the country.

We want to share with you a letter that we have posted to the American Banker site in response to their article on our new offering Mobile Money for Banks which we announced yesterday. We also welcome your comments on this.

Daniel,

I read your American Banker article yesterday concerning our mobile money announcement with some surprise, and I thought it might be helpful to clarify a few important points.

Naturally, analysts differ in their opinion about the maturity of the mobile money market.  We received very positive feedback from many analysts and bankers as we discussed our plans, and the extensive speculation in the article about Obopay’s timing misses the point of how transformative and different mobile money is from many existing categories.

The title of your article incorrectly says that Obopay is in the “bank transfer segment”.  When I think of the “bank transfer segment”, I think of legacy ACH and billpay vendors which are already used by thousands of banks across the U.S.  In contrast, “Mobile Money” is focused on helping banks solve a separate set of issues:

-          Providing the millions of mobile, cash-based merchants in the U.S. with a solution for accepting card and ACH payments directly into their DDA.

-          Enabling consumers to send money to anyone – instantly.

-          Rapidly deploying services in a way which reinforces the bank’s brand – to include brandable services via web, SMS, and WAP, as well as smartphones like the Blackberry and iPhone.

Concerning the speculation in the article that Obopay may be “too late” to this market, when we look across the landscape of U.S. financial institutions, what is remarkable is how few of them offer the services I describe above.  What is further interesting is the extent to which the carriers and other non-bank competitors are positioning themselves to offer services like this.  When millions of Americans recently used their phones to send money for Haitian relief efforts, they did so with zero involvement from the banks.  By and large, banks now recognize that they quickly need to enter the market and many have targeted mobile payments as a key area of investment this year. Mobile Money is the most important innovation in banking in 30 years.

Bob Hedges, Managing Partner of Mercatus (yes, an analyst) said it best: “Any bank that isn’t looking at how to enter the mobile money market as quickly as possible is risking the loss of business to competitors, the carriers, or PayPal.  Given the considerable level of consumer interest, what banks need is a solution that is easy to implement, inexpensive, and fast to deploy.  We should anticipate a wave of bank deployments over the next six months.”

I was further surprised you would suggest that our focus on the bank market is some sort of new endeavor for our company.  Our partnerships in recent years with both MasterCard and FIS are just two proof points which indicate that banks have been a key element of our strategy for some time.

Finally, in any company which is focused on changing the way the world moves money, there is a process of innovating, deploying, observing, learning, and applying those lessons in ways which benefits customers’ lives.  Obopay has been doing that for 5 years, and throughout has remained laser-focused on mobile money and its growing importance around the world.  I am very proud of what we have accomplished.  We will let the analysts and writers in our industry argue about whether we are “too early” or “too late”, but we will continue to engage with those who are awake and aware of how the world is fundamentally changing.

I hope this response clears up misconceptions for your readers. We look forward to continuing the conversation with those who are as passionate about mobile money as we are.

Regards,

Michael Diamond

Senior Vice President

Obopay

michaeldiamond@obopay.com

http://banks.obopay.com

http://blog.obopay.com

Mobile Money is reaching a tipping point in the US. I just returned from traveling around the world meeting with bankers discussing their successes with mobile. All the bankers I talked to are working on mobile banking. But it isn’t just about the rest of world anymore – it’s happening here in the US as well and it is changing everything.

Today Obopay announced a new offering, Mobile Money for Banks. US banks are beginning to understand how big and transformational mobile will be for their business. And Obopay has developed a bank offering that benefits from our innovation on three continents. It gives the banks what they need to have a strong innovative offering and provides it in a way that they can do a very fast, low cost implementation with a complete mobile money transaction set. 1 month to advanced bank branded mobile money which includes mobile applications, web widgets, and most sought after consumer use cases. Mobile payments have reached a tipping point.

The offering is way beyond bank transfer (repackaging ACH) and traditional niche P2P services.  It includes a number of industry firsts for mobile payments, all based on successful use cases we have experienced: the ability for small sellers and cash based merchants to get paid through mobile phone, website or email; instant payments from one family member to another; and P2Ps that are instant and optimized for a mobile experience. Analysts and our primary research confirms that banks must act now to implement a mobile payment program or risk losing this revenue stream to their competitors or non –traditional providers like Paypal, Apple or Mobile Carriers. With Mobile Money for Banks we are giving them the ability to lead not follow.

It is also the culmination of years of experience and these products are a natural extension of our company strategy, since we have been working with banks some time now. Thus far the response has been very positive as we have shared the details with our banks, channel partners like MasterCard and FIS, and with press and analysts.

We have heard the message from our banking partners regarding what they really want – and we have provided it:

• Bank branded and controlled
• Easy and swift implementation
• Inexpensive solution

I am really excited about the market opportunity and our new offering. Mobile Money will be $630B market according to Jupiter by 2014 – and mobile has a track record of being faster and bigger than anyone ever predicts. Proud of our offering and excited to work with banks.

Links:

Carol Realini, CEO Obopay, Inc.

Carol Realini is the driving force behind Obopay which has allowed customers to send and receive money through mobile phone SMS since 2005. In this exclusive NEXTcast interview, Realini reveals Obopay’s strategy to bring mobile payments to the masses. Listen to the interview