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Payment technology in South Africa goes mobile

Hot on the heels of the FNB Geo Payments application addition launched in the second half of May 2012; Mixit officially launched their own “geo payment” capability. But what do geo payments mean for the man in the street and more importantly, what does this technology mean for businesses that were only just getting to grips with NFC?

Geo payments are defined as payments based on the proximity of “authorised” devices. Geo payments make use of GPS to check how close two devices are to each other; if the two devices are within range (typically set at 500m) the application then authenticates the transaction. FNB launched their geo payments edition to their BlackBerry, Android and Apple versions of their banking application yesterday.

The beauty of geo payments in their current form is that – unlike with NFC payments – you don’t need a reader and a NFC enabled cellphone to complete the transaction. Further to that the paying party also does not need to have a credit card; only a bank account that has the eWallet functionality enabled.

Mixit’s geo payment application – Gust – was launched on May 7 2012.

Gust works when two devices are close to each other. The merchant can then request a payment from the mobile phone user. Unlike other payment systems which use geo-fencing logic, Gust does not need a GPS device or even a GSM connection. Gust rather takes the route of simply using wi-fi, your name and your photo to make a payment with devices on the same wifi network, discovering each other using that basic information. With all communication occurring over the wifi network, the payment process is very fast.

The developer of Gust– TrustFabric CEO Joe Botha says, “The idea with the Gust project was to design a really quick and reliable mobile payment experience without NFC.”

As of writing, Stellenbosch is the only town in South Africa where the Gust payment application is running, and has been doing so for the small group of testers since early April of 2012. Stellenbosch was the perfect test case as it is the only town in South Africa to also offer free wifi to all.

Both these advancements have made the intentions clear that NFC is not going to be the mobile payment option of choice – at least not in South Africa as they are not as restrictive with their barriers to entry as neither the merchant, nor the payer need to have NFC chips or readers.

Mobile payment advances such as these are huge advances for society moving more and more towards being truly cashless. Merchants as a result will become less of a target for crime as there will be virtually no cash on the premises.

Big business and merchants will need to aggressively prepare for the early adopters of this new technology as they will be demanding it the second it becomes slightly more commercially available to the mass market.

Are geo-payments going to take the world by storm or are they going to fade away in to obscurity? We would love to hear your thoughts.

For more information on geo-payments, please contact Reinhard Arndt on rarndt@deloitte.co.za

We welcome any feedback and comments! Please share with your network!

Mobile payments debate- Part 4

The following document is the fourth of a five part series that Deloitte South Africa is publishing regarding mobile payments. The market is rife with activity and we’re taking a deeper look at the inner workings of this market space.

Sharoda Rapeti, a Deloitte Director focused on Technology, Media and Telecommunications (TMT), gives us her take on the mobile payments debate.

The mobile payments and money industry has doubled in size over the past year and Africa continues to play a dominant role in terms of mobile money adoption*. Mobile phone adoption is high in several African countries in terms of individual mobile phone subscriptions usage (above 75%). For example, South Africa (92.7%), Algeria (93.8%), Botswana (96.1%) and Morocco (79.1%) all have relatively high mobile phone adoption**.

Clearly mobile phones will continue to emerge as Africa’s most popular connection device. Given the falling costs of voice calls and data in Africa, mobile operators will increasingly come under pressure to pursue new revenue streams. As industries converge and the boundaries between financial services and telecommunications erode, MNOs may increasingly find mobile payments lucrative.

MNOs that seek operations in the ‘mobi-payscape’ would be able to speed up the introduction of mobile payment services since they do not have to establish and manage partnerships and they own the mobile channel. However, MNOs should not seek to become a bank as mobile operators have infrastructure that is geared towards accessing the lower and middle markets of the unbanked pyramid in Africa. In other words, MNOs should allow for their infrastructure to be used as a value adding service without becoming a fully fledged bank.

MNOs frequently treat mobile payments as a value-added service and generally take the route of ‘home grown’ products, therefore lacking the agility and ability to scale market demand. Their model is geared to service the prepaid market, while banks have a more formal approach to risk in this market segment.

Mobile payments generally present an opportunity to lower broker commissions as it allows brokers to sell airtime directly to their customers. In general mobile operators see payments as more of a vehicle to cross-sell other services and that they generally play the role of building stronger relationships with the mobile operator’s clients, thereby decreasing customers from deferring to a competing operator.

Source: * GMSA Mobile Money for the Unbanked Annual Report 2011

Source: ** World Economic Forum

We would like to hear your comments regarding mobile payments. Do you agree or disagree with the points above? Use the hashtag #mobipayscape on twitter to contribute your points of view.

Stay tuned for the next part in the mobile payments series where we will be looking at point of view from Alistair Moorhouse, a Deloitte Senior Executive Lead focused on the Retail industry.

To find out how Deloitte can assist you in integrating these please contact us on twitter @DeloitteSA or contact Sharoda Rapeti via email srapeti@deloitte.co.za

Mobile Payments Debate- Part 3

The following document is the third of a five part series that Deloitte South Africa is publishing regarding mobile payments. The market is rife with activity and we’re taking a deeper look at the inner workings of this market space.

Roger Verster, a Deloitte Partner focused in the Financial Services Industry, gives us his take on the mobile payments debate.

Given the lack of broad-based banking services in Africa, mobile payments offer numerous benefits in terms of providing for financial inclusion and realising efficiencies and profits by tapping into previously underserved markets. Efficiencies are gained in lowering operating expenses and cost to serve as banks often have to put in costly branch infrastructure in rural areas to access unbanked markets, which requires a high volume of low-cost clients in order to justify the costs of the infrastructure.

Therefore, benefits can be realised by owning the mobile payments channel as it will allow banks to provide basic financial services to clients in these areas at a fraction of the cost. It’s not a matter of throwing the baby out with the bath water altogether for banks, as they can also use their strong existing ATM and vendor location network by upgrading them to support mobile payment withdrawals in more developed areas.

It is important to take cognisance of the fact that mobile payments act as a gateway to offering other products such as savings, credit facilities and insurance products. If mobile operators seek to provide these products they would most likely need financially trusted partners, such as banks and financial service providers who are familiar with these products and are regulated in accordance with the financial regulators in most African countries**.

The experience and licenses that banks have in the mobile banking space gives them the clout and ability to offer a selection of payment options, that include services like inter-bank transfers that the mobile and retail operators cannot currently match in the race to own the mobile payments value chain. Mobile payments generally necessitate the development and maintenance of a transactional platform to host the transactions of multiple individual users in order to keep track of client details, money movements, the customer interfaces and the general back-end function of the mobile platform. For banks, the technology infrastructure associated with mobile payments is the largest pain point. However in comparison to branch infrastructure costs, the costs of the technology today, will pay-off for years to come. In terms of consumer adoption, security concerns are the single biggest barrier to consumer adoption of mobile payments. Therefore, effective data management and consumer education will be essential to overcome this barrier.

Banks do appear to have the upper hand in offering secure mobile payments to consumers due to the very nature of the industry and having already established mobile banking and ewallet services. Ultimately, there is a strong business case for banks to be involved in the ‘mobipayscape’ and to take up a leadership position in developing Africa.

Source: ** GMSA Mobile Money for the Unbanked Annual Report 2011

We would like to hear your comments regarding mobile payments. Do you agree or disagree with the points above? Use the hashtag #mobipayscape on twitter to contribute your points of view.

Stay tuned for the next part in the mobile payments series where we will be looking at point of view from Sharoda Rapeti, a Deloitte Director focused on Technology, Media and Telecommunications (TMT).

To find out how Deloitte can assist you in integrating these please contact us on twitter @DeloitteSA or contact Roger Verster via email rverster@deloitte.co.za

Mobile Payments Debate- Part 2

The following document is the second of a five part series that Deloitte South Africa is publishing regarding mobile payments. The market is rife with activity and we’re taking a deeper look at the inner workings of this market space.

The following table looks at points of view from banks, mobile operators and retailers, taking into account the context of their respective industries. We’ve added in an interesting counterpoint to their points to increase the richness of the debate.

  Point Counterpoint
BanksTo follow or lead? Wait for the chips to fall

  • Banks have largely dominated mobile banking and payments.
  • Contactless cards have most of the speed and convenience of NFC mobile.
  • The replacement cycle for contactless cards is quick and easy to control.
  • Banks will not be dependent on mobile operators.
Leaders of innovation

  • The risk of being dis-intermediated needs to be considered as credit cards could become downloadable applications and mobile phones the universal method of payment.
  • Most banks already offer mobile banking services, which positions them to be leaders in the mobile payments revolution and influence consumer behaviour on their terms.
  • Banks can cost effectively be good corporate citizens, as mobile payments allow banks to reduce their reliance in costly branch infrastructure to serve the bottom of the unbanked pyramid.
Mobile operatorsTo pursue or prepare? Aggressive pursuit

  • Mobile operators have the infrastructure and can obtain higher levels of customer retention and new revenue streams.
  • This new revenue stream is particularly relevant as profits from voice calls diminish and the emergence of low cost data begins to be realised.
  • Payments can be done through a prepaid value model or the charges may be integrated into the customer’s mobile bill.
  • Due to the possibility of payments being prepaid, mobile operators have high degrees of access to the unbanked.
Steady preparation

  • Mobile operators are not as developed as banks in terms of the tax, regulatory, security and risk management surrounding mobile payments. This becomes particularly relevant with cross-border payments in Africa.
  • Mobile operators would need to comply with current regulations, which may require them obtaining a costly banking license.
  • Mobile operators often do not have the where withal to perform real time interbank clearance or payments.
  • Mobile payments are still often viewed as a valued added service (VAS) and therefore they battle to get critical mass.
RetailersGet led by customer experience or cost? Customer experience is king

  • For retailers, mobile payments can reduce cash-handling costs, theft and other associated risk.
  • Mobile payments can also aid in increasing consumer convenience and spending.
  • Mobile payments can be measured and tracked allowing for richer customer insights.
  • Newer mobile payment technologies that allow for location-based services and barcode scanning could provide added convenience to consumers and increased market share.
Show me the business case

  • Retailers have limited experience with mobile payment processing.
  • There is a need to invest in new technology, which has cost implications.
  • There is a level of dependency on the operator, which could create delays in payment.

We would like to hear your comments regarding mobile payments. Do you agree or disagree with the points above? Use the hashtag #mobipayscape on twitter to contribute your points of view.

Stay tuned for the next part in the mobile payments series where we will be looking at point of view from Roger Verster, a Deloitte Partner focused in the Financial Services Industry.

To find out how Deloitte can assist you in integrating these please contact us on twitter @DeloitteSA

Mobile payments debate- Part 1

 

The following document is the first of a five part series that Deloitte South Africa is publishing regarding mobile payments. The market is rife with activity and we’re taking a deeper look at the inner workings of this market space.

Who will dominate the “mobi-payscape” across Africa?

The current amount of press coverage, merger and acquisition activity and product launches in the mobile payments arena cannot and should not be ignored. From a technology perspective most mobile payments in Africa have been WAP or message based.

Two-way SMS has allowed for bill payments, funds transfers, mini statements requests, chequebook requests and balance enquiries. While one-way sms has been for notifications such as salary payments in, overdrawn accounts, account balance checking, currency fluctuations, card payments, account movements and marketing promotions.

However, new mobile payment technologies are coming into play in the form of mobile money transfers, virtual currencies, the tap and go near-field communication technologies (NFC) and even using a mobile device as a payments processor using hybrid clip-on devices. Over the next couple of years it is likely that we will see a combination of these mobile payments mechanisms being used in the market rather than one specific method dominating another. Indeed this rapid technological change breeds a disruptive state of flux in the mobile payments arena.

A key issue that is heating up is the rivalry between previously non-competing industries, as they move swiftly to dominate the mobile payments space. Mobile network operators (MNOs), banks, retailers and a host of secondary services are all vying for their slice of the mobile payments market. Mobile payments or transactions, to a larger extent, present a highly attractive income stream for potential payment providers in Africa, where mobile phone subscriptions are estimated to be pegged at over 500 million*, indicating that the penetration of mobile phones on the African continent has more than doubled in the past three years.

Mobile phones are not only currently outstripping the distribution of debit and credit cards, but over the next four years it is possible that more people will have access to a mobile device than to electricity in Sub-Saharan Africa. There is an undeniable connection between technology and economic development and with this form of intense mobile growth and the witnessed success regarding the Kenyan mobile payments product, M-Pesa, there is no question that mobile payments present an exciting opportunity to many industries.

 

However, given mounting social, competitive and technological pressures, it is worth considering how the ‘mobipayscape’ may appear in the future. It is worth considering the different arguments for and against why banks, MNOs or retailers would seek to be involved in mobile payments or on the other hand, what is holding them back?

Source: * Informa Telcoms and Media

Indeed, banks, once the original payments gatekeepers, have much to gain and lose from altering their “Payments as usual” approach.

We would like to hear your comments regarding mobile payments. Do you agree or disagree with the points above? Use the hashtag #mobipayscape on twitter to contribute your points of view.

Stay tuned for the next part in the mobile payments series where we will be looking at points of view from banks, mobile operators and retailers. We’ve added in an interesting counterpoint to their points too.

To find out how Deloitte can assist you in integrating these please contact us on twitter @DeloitteSA

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