This is a guest blog by Ignacio Mas from the Bill & Melinda Gates Foundation.

It’s always hard for competitors to decide to work together on some key aspects of their business. It usually comes down to whether the players involved opt to maximize the total size of the pie or just their slice of the pie. In networked businesses, in general, the more the players work together to grow the pie, the larger the slice each one will get. That’s why mobile operators have a tradition –of which they are rightly proud— of interconnecting their voice and data bearer services. They long since discovered that their customers are best served by making sure they can send and receive messages to/from anyone, even if they are on a different network.

But we haven’t yet seen this logic extend to mobile money. In most countries, mobile money providers working together is probably less a matter of if and more about when, just like it has been for banks with sharing ATMs and mobile operators with sharing towers. And it’s probably not even about when but about how.

Let’s not forget that customers can always take interoperability into their own hands – through multiple SIM ownership. It just seems unfortunate for a customer to have to interconnect two mobile money platforms by cashing out from one platform on which it is receiving money and cash into another on which it needs to make a payment. Let’s cut out the cash in the middle.

And in countries with multiple mobile money schemes where none are strong enough to extract exclusivity from stores, it is not unusual to see the same stores serving multiple mobile money providers. The various mobile operators are sharing cash merchants, just not in a very smart or deliberate way.

So why don’t mobile money providers jump to the future, and agree to interconnect their platforms and share some infrastructure elements such as their cash merchants? Doing it at an early stage can help reduce deployment costs and jump-start network effects.

Mobile money is about building an ecosystem with three types of players. First, there are the end-users, normal people and businesses who want to keep some money in their account and occasionally transfer money to others. Then there are the corporate or bulk users who want to make payments to many people (e.g. distribution of salaries, social welfare payments, dividends) or to receive payment from a large number of users (bill payment, government taxes). Finally, there are the cash merchants, who are stores seeing an opportunity to make money from reselling mobile money and exchanging it for cash, on-demand.

Mobile money players need to give serious thought to how to work together to add most value to each of these three types of users. Should they interconnect their platforms, to create any-to-any payment possibilities for their end-users? Should they offer common payment interfaces to bulk users, so that utilities, employers and the government don’t have to negotiate with and integrate into each mobile money scheme separately? And why shouldn’t the customer of any mobile money scheme be accepted at any cash merchant regardless of which scheme they are with, much as VISA and MasterCard merchants accept payment from any issuing bank? (We blogged about this last case in the MMU blog.)

It is too facile to argue that mobile money will be trickier to achieve in countries with more fragmented operator market shares than in Kenya, where Safaricom enjoys a market share of more than 80%. Operators can always come together and collectively replicate or even exceed Safaricom’s market share.

And the fact that a player or two are ahead of the others in a particular market is in principle no reason not to seek ways to collaborate. Everything has a price. Those further ahead should see sharing their cash merchants or bill payment systems as a way of monetizing their prior investment in channel building.

Different mechanisms for mobile money interoperating will emerge; it’s only a matter of time. But it is best if this is worked out by the industry itself, without regulatory impositions which, while well-meaning, can be inefficient and retard investment. And the operators will need to figure a way for working together to maximize the value of the market and share in their pain points, while still preserving ample scope for service differentiation and branding. This should not negate operators’ desire and need to increase customer loyalty.

What a difference it would make for the industry if operators built up the resolve in this new year to figuring out how to work together. 

- Ignacio Mas