I’ve been meaning to get this post down for months now … I’ve been remiss BUT having after an interview yesterday with Gabrielle Smith; who’s doing an assessment for CaLP on new technologies in the humanitarian sector, I feel inspired to take a few minutes and get some thoughts onto the virtual whiteboard .. hopeful with some debate and better learning for all of us!
In writing this post, I don’t wish to be misinterpreted, so let me say right off the bat – mobile phone payments are great. They bring levels of heighten security into cash distribution and when the gremlins in the machine are tamed, mobile payments proffer reliability and convenience to an often over-looked segment of the population in need of financial tools and services. The possibilities for mobile e-wallets to be used for extended functions like international remittances are fantastic. As are the opportunities to add more competition to the financial services market, which may yield benefits to the “customer” a.k.a beneficiary. But there are things that we need to also be cognizant off as concerns when it come to mobile phone payments. Here are a list of things of a few issues that come to me and and questions that I have:
- The practice by aid agencies to select preferential suppliers under the guise of a partnership, is in my mind dangerous. I see these actions as distortions to the market. What are merits to aid agencies behind selecting a supplier (a.k.a partner)? The answer to that question can be vague, meanwhile preferential selection of a carrier runs the risk of promoting one corporation over another not on the basis of superior services or products. The implications of corporate success over the competition means monopolistic (single supplier) or an oligopolistic (few key suppliers) market space. Economics 101 tells us that such a situation will never be positive experience in terms of service levels to expect or fees for the end client. I think we need to ask ourselves are we actually practicing “Do No Harm” when selecting preferential mobile partners? For this reason, within LMMS we have been adamant that the software will not be tied to any one mobile supplier. Additional carriers who can offer the services for crediting e-wallets, will (gladly) be available for inclusion in a mobile payment program. To do so requires humanitarian program officers/cash experts to work with the various carriers for inclusion in particular humanitarian projects underway. (It should be said that the LMMS system will actually generate payroll files for any number of mobile carriers that are associated with humanitarian cash projects, so that limits to the number of carriers are avoided).
- When a bank defaults, many countries have depositor insurance legislation that will provide some degree of protection to customers. What happens to customers with mobile money if a phone carrier fails? What is the legislative protection to consumers of these services? Associated with this, what are the controls to have the equivalent of bank reserves in place for mobile carriers (that look and act like banks)? So while mobile payments may be convenient, there is a real case to managing risk here that requires government jurisprudence. Aid agencies should be aware and active in promoting practices and supporting efforts to have protection in place for the very people we are promoting to use such systems. If people know of specific legislation on protection, I would love to hear back.
- The transfer from mobile credits to cash, comes with middlemen and service fees. We need to understand the commission structures and the implications these fees have on the beneficiary. Relative to income levels, how do the various charges levied for mobile phone services compare with traditional banking services? There are cases cited where mobile service fees are deemed as reasonable amounts to begin with and then over the course of time are subjected to rates of inflation akin to Zimbabwe during the 2000s … okay slight exaggeration but the examples from the Asian Tsunami are there on rates increasing very quickly once the humanitarian pilots end).
- Accountability often is pointed in the direction of donors … but being accountable, also means to our beneficiaries. When credits are applied to mobile accounts – how are aid agencies making the beneficiary aware of what they should expect to be credited? In the electronic transfer world mistakes can happen and what is the recourse for beneficiaries when disputes arise? The issue can get complicated as multiple players are now involved – banks, mobile carriers, cash out agents and middlemen. In LMMS we try to promote accountability to beneficiaries by producing individualized payment slips that document the amount recipients can expect to be credited and for what. These can be generated for every project in which remuneration for labour (Cash for Work projects) is performed.
- How do we move to greater interoperability of systems holding electronic funds …. by which I mean, that if I take my ATM card and go to another bank, I’m able to withdraw cash (albeit at a fee) .. now if a beneficiary is on one carrier’s e-wallet system, how are they able to switch funds between different accounts and access funds.
All of the above said – I love my mobile and I’m sure as LMMS is put through the paces with mobile payments, other things will come. Thanks to Gabrielle for the chat yesterday and helping me to post this thing .. I would love to hear what others have to say on this.