This is a Q&A interview with Nick Essame, GBS Payment expert that ran last week ahead of this week's Mobile Money Global 2012 being held in Dubai. Special thanks go to Nick, as well as Smarter Commerce Banking Lead for MEA Jo Down and Mobile Payments Global Leader Allison Baller, for collaborating to advance IBM's thought leadership in this emerging space. Watch for more coverage on the mobile payments storyline for IBM in 2013.

1. 13th November 2012
“Trust and security are critical elements of mobile
money operations”
Exclusive interview with Nick Essame, the Payment SME, at IBM Nick Essame
Payment SME
IBM
1. What is the relationship between investment, uptake and critical mass
in driving mass-market adoption of a mobile money service in a cash-based society?
There is obviously a relationship among these three factors, but investment alone will not drive mass
adoption of mobile money. It will require multiple industry players to come together and collaborate in
developing a service that is interoperable, open, secure and provides real value that is easily understood by
consumers.
There is increasing demand for, as well as significant business, economic and societal benefits to be
gained from, mobile payments services. Strategic partnerships, global best practices and modern solutions
such as cloud based computing – and not just depth of pocket – will be key determinants in the creation of
successful, widely adopted systems.
2. How do you build consumer trust in both your product and your distribution channels?
Trust and security are critical elements of mobile money operations. Mobile network operators (MNOs)
have already built huge brands and have a significant footprint on the ground via their pre-paid airtime
resellers and their mobile phone support infrastructure, such as SIM card and handset sales outlets
The banks also have broad market recognition. However, in the developing countries, banks may not have
existing relationships with consumers on one end of the spectrum, due to lack of access and financial
inclusion.
Building trust and credibility requires MNOs and banks to collaborate on ensuring the security of the mobile
payments system and to work with government and regulatory agencies on striking the right balance of
regulations that provide consumer protections.
Consumer education is key, in developing markets where consumers may have minimal experience
engaging in financial transactions, as well as mature markets, where security and the fear of hackers
remain an impediment to broad consumer adoption.
3. Considering that financial inclusion is the end-game of many remittance services, how do you
convince customers to migrate their remittance accounts into e-savings?
There is often a natural evolution in this direction, but it is one that takes time. Once the basic trust is
established then the move to e-savings will be driven by several factors:
o Value proposition to the consumer – is it interest earnings, ease of use for related purchases, safety for
the funds (versus under the mattress), or even a status-related instrument (such as an associated
premier withdrawal card)
o Advocacy – funeral societies, Stokvels, MFI’s etc promoting e-savings
4. How effective is an agent network at turning the fixed costs of implementing a nationwide
banking infrastructure to the variable costs of cash in/cash out transactions?
The fixed costs of implementing a nationwide banking infrastructure in the developing markets are typically
prohibitive, and may be further hampered by regulation. The coverage possible is severely constrained by
bricks and mortar costs, staff costs and availability, where opening hours, for instance, is often at odds with
community needs.
There are good examples of both new agency networks being implemented (in Brazil for example) and the

2. piggybacking of the cash in/cash out functionality onto existing agency networks ( M-Pesa on the back of
the Safaricom pre-paid airtime agents).
The piggy backing model may be easier and faster to implement as it is already established and cash flush
(note liquidity issues the further spread the agent network is) and helps because the fees/margins that an
agent receives for supporting cash in/cash out transactions tend to be lower than the discount received for
selling tangible (sodas) and intangible (pre-paid airtime) products. This is a direct result of having to price
the service to the end users at price points that encourage service uptake and effectively competes with
other options available to the consumers.
5. Will as usage-based revenue model really drive mass-market adoption of financial services?
What are the risks on the back-end?
In the developing world, this is an easier model for the end users to embrace. The concept of payment for a
useful service is well understood, as the majority of the market is very value conscious. If the service is
useful, has value associated with it and is trusted then extensive market adoption can be achieved.
Other models have not been as successful. Charges may be hidden, poorly communicated to the
consumer, and in some cases, perceived as theft.
One risk on the back-end is the inability to achieve the necessary scale. Other risks may be more
operational, such as security compromises, lack of resources or leakage of funds and fraud. The political
risk are related to regulation and nationalisation concerns.
6. How will the expansion of financial possibilities for the unbanked population be realised by
mobile banking services?
Historically, the unbanked population has lacked the funds, literacy requirements and access to financial
institutions. These barriers are now being overcome with the significant penetration of mobile phones into
the unbanked population.
Mobile payments are the entry point into the unbanked population – through remittances, bill payments etc.
Over time, the mobile payments market will evolve into light banking (pre-paid, no-frill accounts and e-
savings) with incremental increases in banking functionality..
7. What are the major barriers to scaling mobile money services now that we are past the pilot
stage?
Lack of interoperability remains a key constraint, as the closed loop solutions – even with big MNO
foundations – doesn’t allow for ubiquity to be achieved. Conflicting interests among the ecosystem players,
as well as conflicting standards, must also be overcome.
For further information contact : Jo Down, JODOWN@uk.ibm.com +971 562 162 772 or Nick Essame,
NICKESSA@za.ibm.com + 27-082 893 4701