Endpoint: The New Mobile Ecosystem

Collaboration between banks, mobile carriers and utilities could pave the way for enhanced services, including money transfers, says Eyad Hasan.

Is there an ongoing dispute between banks and mobile service providers? Absolutely not.

Eyad Hasan is senior project manager at EastNets Holding Ltd., with U.S. offices in Los Angeles and New York City. Reach him at ehasan@eastnets.com.

Banks and other financial institutions are most effective when they can utilize technology and outsourcing services to give customers full accessibility to their accounts, but reduce their direct interaction with customers.

To this end, we are seeing banking technology vendors continuously generate new and innovative solutions. During the past decades, we’ve witnessed the evolution of checks and their clearing systems, ATMs, point-of-sale devices, interactive voice-response systems, and the list continues.

The evolution of mobile technology now allows banks to embed services for mobile-device users in their front-end solutions offering flexibility, ease of use, and accessibility to their customers. Through mobile-banking (m-banking) services, account holders can review their balances, transfer money between accounts and make bill payments.

On the other hand, technology vendors have started to offer services for mobile-phone users, including mobile payments (m-payments). The contributors in this new area include mobile network operators (MNOs) and payment gateway providers. Both the financial and mobile ecosystems played a major role in the development of their new services.

M-payment solutions offer different services to mobile-phone subscribers such as utility payments—electricity, mobile bills, water services, etc.—in addition to mobile top-up, airtime transfer and many other services. For its basic functionality, m-payments depend on using the cards systems: credit, debit, loyalty, business and others, whereas m-banking gets the majority of its transactions via customers’ bank accounts. M-payments also use the mobile wallet in other areas.

Despite the fact that most banks are not in the forefront in providing mobile services directly, especially in the context of m-payments, banks still have the opportunity to conquer this market and make use of their infrastructure.

The question that might arise here is this: Is there an ongoing debate or dispute between banks and other service providers to win the market? The answer is absolutely no.

These days, the business model encourages partnership and collaboration rather than competition between companies that may offer joined services. In this view, we could see partnership among different ecosystems while at the same time providing a unique and unified new ecosystem. This new ecosystem would consist of the financial ecosystem (banks), the mobile ecosystem (MNOs) and utility service providers.

The Future of Money Transfer

I mentioned above the different services provided by both the m-payments and m-banking systems. One major function that has a wide impact in the global financial system is money transfer, which varies in amount and directional flows.

New money-transfer services are a clear example of what the new financial-MNO-utility ecosystem could provide. Partnerships between financial institutions and the m-payments providers such as MNOs will expand the capabilities of this ecosystem and could add huge amounts of money traveling from one continent to another.

Moreover, software and technology vendors are promoting the concept of the card-less ATM where a bank account or mobile wallet (both managed by banks) is linked to a mobile number managed by an MNO. This will enable a wider range of money-transfer beneficiaries to receive money, despite being unbanked consumers or financial-institution customers who don’t hold ATM cards. This is a significant feature and an added value to all stakeholders in the money-transfer cycle.

This new partnership will enable the different technologies in the market to facilitate both established and newly started services, including money transfer.

The new ecosystem will benefit from old and new technologies supported by the mobile-phone manufacturers and the MNOs. These technologies can be: Short Message Service (SMS) for text messaging; Unstructured Supplementary Services Delivery (USSD); mobile application; mobile Web, and the newest technology in the market, near-field communication (NFC).

Each of these technologies has its advantages and disadvantages. However, it is worth mentioning that the majority of stakeholders prefer investing in mobile apps and NFC due to their capabilities in providing accessibility and usability for customers.

Challenges

This new ecosystem will not thrive, however, if it doesn’t overcome some major challenges.

Trust. Newly launched services will lack consumers’ trust and confidence until there is a success story and some real proof of credibility. This is especially important because cardholders are apprehensive about providing account information without a guarantee that their information is secure.

But who said that we shouldn’t trust our own mobile devices to perform money transfers or utility payments? I would say such devices can be as or more secure than cards since most mobile applications are secured with digital certificates and use the different mechanisms of data encryption. In addition, m-payment solutions should comply with the Payment Card Industry data-security standard (PCI) to secure the transactions.

Fraudulent Transactions. Closely related to the trust issue, banks and service providers should address all issues that might fall under the fraud category. Central banks and regulators are publishing rules and regulations to prevent and manage fraudulent transactions. It is not difficult for service providers to adhere to such rules, follow regulations, and accordingly protect their consumers and their revenues from fraud.

Also, it will be a good idea to use shared services in which huge databases are in place, monitoring tools are implemented and the rules followed by these shared services are maintained and enhanced frequently.

Know Your Customer. With anti-money-laundering regulations and laws imposed worldwide, the identity of people involved in the money-transfer process becomes a major issue. Service providers must address know-your-customer issues and provide solutions that eliminate the potential for the financial system to be used by people with criminal intent. Collaboration between MNOs, payment gateways and banks, both card issuing and merchant acquiring, provides a larger scale of databases and information about the people involved in this process.

In order to provide quality services and reduce risk, partnership and collaboration are the keys to success. The future will tell the success stories.