Comments on: A view from Indonesia: Real mobile banking needs solid partnerships http://technology.cgap.org/2009/03/18/a-view-from-indonesia-real-mobile-banking-needs-solid-partnerships/ How can technology increase the reach of microfinance? Mon, 06 Feb 2012 18:55:24 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Peter Goldfinch http://technology.cgap.org/2009/03/18/a-view-from-indonesia-real-mobile-banking-needs-solid-partnerships/comment-page-1/#comment-1007 Peter Goldfinch Wed, 18 Mar 2009 22:25:00 +0000 http://technology.cgap.org/?p=787#comment-1007 Hi Mark It is pleasing to read a blog from someone who understands the issues with mobile operator managed e-wallet services. I may be bias but the Smart Money service in the Philippines to me is the correct approach. Smart Money is in effect an open system where most other mobile operators e-wallet deployments are closed. Smart Money is open because it is integrated with a number of banks and ATM networks. Funds can be transferred to and from a bank account. Because a MasterCard is issued against the wallet funds can be accessed 24x7. A closed scheme will always have limitations and a weak account holder proposition. When an individual buys airtime or reloads a transit card they are prepaying for a service they know they will use. Loading discretionary income into an e-wallet with limitations on accessing those funds is not appealing. The problem with emerging markets is the banking systems are not really open and accessing funds is not necessarily convenient. This is because the banking infrastructure is not developed. ATM, POS and branch/agency networks are underdeveloped and all bank sharing is not a supported function. This situation is not helped because there are limited or no inter-bank clearing and settlement system. Deploying mobile e-wallet systems into these countries will meet a need and have varying degrees of success but one feels they are just adding to the mess that already exists, the dysfunctional banking system. The challenge is one of addressing an immediate need against the development of a long-term sustainable banking system. Indonesia is a middle ground country. There is a strong case for banks and operators to cooperate as in the Smart Money model to reach out to the unbanked. The banking system is sufficiently well developed to inhibit the success of e-wallet solution that operate on the outside. Hi Mark

It is pleasing to read a blog from someone who understands the issues with mobile operator managed e-wallet services.

I may be bias but the Smart Money service in the Philippines to me is the correct approach. Smart Money is in effect an open system where most other mobile operators e-wallet deployments are closed. Smart Money is open because it is integrated with a number of banks and ATM networks. Funds can be transferred to and from a bank account. Because a MasterCard is issued against the wallet funds can be accessed 24×7.

A closed scheme will always have limitations and a weak account holder proposition. When an individual buys airtime or reloads a transit card they are prepaying for a service they know they will use. Loading discretionary income into an e-wallet with limitations on accessing those funds is not appealing.

The problem with emerging markets is the banking systems are not really open and accessing funds is not necessarily convenient. This is because the banking infrastructure is not developed. ATM, POS and branch/agency networks are underdeveloped and all bank sharing is not a supported function. This situation is not helped because there are limited or no inter-bank clearing and settlement system.

Deploying mobile e-wallet systems into these countries will meet a need and have varying degrees of success but one feels they are just adding to the mess that already exists, the dysfunctional banking system. The challenge is one of addressing an immediate need against the development of a long-term sustainable banking system.

Indonesia is a middle ground country. There is a strong case for banks and operators to cooperate as in the Smart Money model to reach out to the unbanked. The banking system is sufficiently well developed to inhibit the success of e-wallet solution that operate on the outside.

]]> By: Joakim Nordblom http://technology.cgap.org/2009/03/18/a-view-from-indonesia-real-mobile-banking-needs-solid-partnerships/comment-page-1/#comment-1006 Joakim Nordblom Wed, 18 Mar 2009 15:05:20 +0000 http://technology.cgap.org/?p=787#comment-1006 As I view it there is a fundamental difference in how banks and operators interact with customers. Banks want to have a few customers with as much money as possible while mobile operators are experts in administering small sums with a lot of customers. I don't know the conditions in Indonesia but even in Sweden it is a problem to find a bank when you need one and even if you find one they dont want you to enter for a small sum deposit or withdrawal. ATMs are very well distributed so withdrawal from a mobile wallet can easily be made through them but not deposits. Who are experts in handling small cash, who are best suited to receive deposits? Who are everywhere? Merchants. So the best solution is that operators own the device, the bank keeps the money and merchants take control of deposits and withdrawals. When the mobile wallet system grows mature enough to be recognized as a salary receiver, then the demand for deposits will decrease quickly and the system really will fly... Joakim Nordblom As I view it there is a fundamental difference in how banks and operators interact with customers. Banks want to have a few customers with as much money as possible while mobile operators are experts in administering small sums with a lot of customers. I don’t know the conditions in Indonesia but even in Sweden it is a problem to find a bank when you need one and even if you find one they dont want you to enter for a small sum deposit or withdrawal. ATMs are very well distributed so withdrawal from a mobile wallet can easily be made through them but not deposits. Who are experts in handling small cash, who are best suited to receive deposits? Who are everywhere? Merchants. So the best solution is that operators own the device, the bank keeps the money and merchants take control of deposits and withdrawals. When the mobile wallet system grows mature enough to be recognized as a salary receiver, then the demand for deposits will decrease quickly and the system really will fly…
Joakim Nordblom

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