Tag Archives: mpayments

From early days of PayPal Mobile and bKash to what’s next in Mobile Financial Services?

I’ve been working in the mobile financial services industry as an executive and as an advisor now since 2005, one year after DoCoMo launched their mobile contactless payments in Japan, and 2 years before mPesa’s commercial launch in Kenya. In the early days, it was difficult to find any research to cover the industry. While assisting Wells Fargo with their initial mBanking/mPayments strategy, I remember speaking with analysts from the top research firms who were unconvinced that mobile payments would ever take off since it had an anemic false start in 2000 (in the US) although SmartMoney was breaking new ground during that same time.

As a professional in emerging technologies for over two decades, my timing to enter new markets has always been too early. My former company, Vistify, created iPad-like device with a service for grocery delivery to the home back in 2000 (precursor to today’s iPad + Instacart/ AmazonFresh/ Google ShoppingExpress!) So, no surprise that when I stumbled into the mobile payments industry in 2005, once again I was a bit early. Luckily, it’s been an industry that has intrigued me enough to keep me captivated now for nearly a decade, learning something new every year. Few industries touch so many different angles… business, development, regulations, macro-economics, banking, mobile, technology, ethnography in such a global way. Fortunately, I stuck it out long enough for the industry to catch up and have had the fortune to gain some great early lessons along the way.

Of the most prolific mobile payments services in the world, I have had the opportunity to be involved in the early days with two of them (PayPal Mobile at $25 billion in volume in 2013) and bKash in Bangladesh, now the fastest growing mobile payments service in the world. No, I never had anything to do with mPesa, but I definitely wish I had! What’s interesting about PayPal Mobile North America and bKash in Bangladesh is how different their respective markets are, but what global leaders they have both become.

Early days of bKash

First, let me start with the story of bKash early days, although this story starts about one year after I left PayPal. I was speaking/moderating at a mobile money conference at the end of 2009, when Kamal Quadir approached me to request my help to set up the business plan/go-to-market strategy for what is now bKash in Bangladesh. After later meeting with him and his brother Iqbal Quadir (founder of GrameenPhone), I knew that this would be a very special project, which ultimately brought me out to Bangladesh. In retrospect, with my background from PayPal Mobile, a subsidiary of eBay, it is likely Kamal saw the similarities between my experience at eBay/PayPal and the knowhow that was needed to develop a mobile payment system to support the needs of companies like his mobile marketplace CellBazaar (not to mention to become the financial infrastructure for the 90+% unbanked population.) Unlike the case in Kenya, Bangladesh’s regulatory environment was likely to lean “pro-bank” which meant that their startup, as a subsidiary of BRAC Bank, would be well positioned to be a mobile payments service, but also to resemble PayPal’s structure rather than mPesa’s.

The value proposition for the cash-based unbanked, coupled with the sheer size of the population of Bangladesh proved to uncover a business case I had yet to see. In addition, with the entrepreneurial knowhow of the extremely successful Quadir brothers, I had a strong belief that this startup would be prosperous. At the time, I had no idea it would rise to the levels we now see today. What is particularly interesting about this business is that the market itself was so different from the U.S., but yet, there were lessons to bring from PayPal Mobile that could be applied, not just on the model to be used, but also on design principles and strategic considerations. I recently heard Kamal Quadir speak at the Spring Seminars of the World Bank. He was asked why bKash has had such great success (80% market share) over his competition (20+ eMoney licensed services). His answer was “focus.” I agree that bKash has had the focus that others have not, but the entrepreneurial talent and network of the Quadir brothers is not to be underestimated. Among other things, part of that talent, of course, is understanding what lessons can be applied from other successful models.

How can strategic lessons from PayPal Mobile’s early days in North America apply to mobile payments initiatives around the world? When I begin working with my clients, I always review the necessary conditions required for new payments systems to be successful. They include:

1. Has no significant barriers to entry such as regulatory barriers, prohibitive infrastructure cost, requires new device behavior, or complex partnership requirements

2. Has a clear value proposition addressing a specific pain point at launch for either the payer or payee

3. Displaces a far inferior payment alternative which cannot fight back (e.g. cash or check)

Early Days at PayPal Mobile

When I joined PayPal Mobile as head of North American Business Development on January 2, 2007, we had no traction (PayPal had launched Text2Buy services one year earlier). When I left at the end of 2008, we had very little traction, but it was growing. Last year, 8 years after PayPal’s first foray into mobile, PayPal Mobile was responsible for $25 billion of volume.

What made the difference? Barriers to entry began to lessen.

Some of the services we launched were tests in the market that failed – some are still used today. But the real difference between success today vs. failure back then was consumer behavior and device used. Back in early 2007, iPhone and Android devices did not exist. People barely used mobile Internet on their phones and it was extremely difficult to navigate. QR codes existed, but no one used them. (In fact, I remember early gift card companies approaching us with QR code redemption technologies. No one was familiar with QR codes.) The devices were too difficult to do anything meaningful on them and people weren’t used to using text messaging very much for communications, let alone for purchasing things. As an example, I had cut a deal in 2007/2008 with SkyMall so that users could purchase goods by texting a code as they read the magazine. The technology worked. I even used the service to successfully purchase a luxury shower head during my morning commute on the bus to work! But let’s face it, if you need to have a two-page spread in their magazine to explain how to do a transaction, do you really think it will be used? I remain convinced that Apple is the only company that is positioned to change consumer behavior with a mobile device. Every other business will need to bolt on to that new behavior once consumers have adopted it. Those that think they can change consumer behavior over the phone may be a bit delusional as we were with PayPal in 2007. (The exception, of course, are key mobile network operators abroad, such as Safaricom.)

Now, for those of you who say, “but mPesa was extremely successful with feature phones for the unbanked, how can you say that?!” Absolutely true. In Kenya, Safaricom was in a unique position to lead the mobile payments industry and could make the service simple to use via SIM Toolkit in a cash-based market that desperately needed it. In the U.S., MNOs would have to work with financial institutions. I was in charge of those relationships at PayPal. And during 2007/2008, when we were most in need of MNOs to be able to load apps onto the phone (as did Safaricom via SIM Toolkit) prior to App stores being available, the MNOs proved not to be interested in doing so. Back then, in the U.S., MNO’s had a (love)HATE relationship with PayPal since eBay Inc. owned Skype, which was seen as a competitor; the MNOs in the US did not have the focus, investment, know-how to launch a simple to use mobile payments service via SIM Tool-kit; and 3. people preferred using PCs over mobile since the devices were too cumbersome to use. The barriers to using and launching the service proved too high in the U.S. until Apple opened up the market with a far superior UI and began circumventing the MNO lock on services through the iTunes store.


Mobile Financial Services in Developed Markets and Emerging Markets are More Similar than Expected

Ultimately, banks will play a larger role than expected in mobile financial services in most markets due to regulations even though the way mobile financial services rolls out in emerging markets will vary from how it rolled out over the decades in developed markets. We will find that the consumer facing brands/services may not originate from banks, but from third parties or MNOs with closer ties with the unbanked. Banks will play a secondary role in enabling the service and securing the deposits. But beyond this similarity around the role of banks, there are other key resemblances between emerging markets and developed markets regarding mobile payments that many may not realize. After trying to wrap my head around these seemingly disparate markets (developed vs. emerging) as an advisor to clients in both types of markets, I now remain convinced that there are more similarities than there are differences.

Today, emerging markets solve consumer needs. Tomorrow, they will solve merchant needs:

Many aspects of what we see in developed markets will come to the emerging markets over time.  In developed markets, where access to financial services has been prevalent due to card infrastructure, the role mobile financial services plays is that of enabling the final transaction around the mobile shopping experience.  The value proposition no longer centers on the consumer, but rather, on meeting the needs of merchants to increase sales.

Today in emerging markets, there is a global effort towards financial inclusion for consumers.  The next step following this will be access to credit for small businesses.  Once those infrastructures are in place, what will be next?  The velocity of money increases as friction of cash decreases.  Access to small amounts of credit (for individuals and SMEs), insurance, and savings accounts rise as does income.

Tomorrow, we will see the same trends we see in developed markets around data analytics, mobile loyalty, couponing, shopping, etc. to increase sales.  The large brands including consumer goods and pharmaceuticals see that the next few billion customers are their oysters… It will happen much sooner than many expect.  With the infrastructure of mobile payments/mobile financial services, both the consumer and merchant shopping experience will revolve around the mobile phone.

Although MNOs have the reach into the SME segment, these new services  are far from their core competencies.  Similarly, financial institutions such as MFIs, COOPs, and Banks do not have this expertise.   It will be interesting to see how this new services offering ultimately rolls out in the future.  Likely we will find that those involved with access to mobile credit for SMEs will use their distribution reach to offer new services by partnering with new marketing platforms globally.

PayPal and Discover – A game changer?

Today’s announcement that PayPal has partnered with Discover Card, another closed loop payment company – but in retail, could mark a game changing scenario in the land grab for alternative payments in retail. While Discover certainly doesn’t have the reach of Visa and Mastercard, it does provide a significant boost to PayPal’s merchant acquiring network. This is a smart move for both companies since Discover is the network that lags behind the others in terms of acceptance and issuance, and PayPal knew that it couldn’t win the game by organically acquiring its merchants.
Still, as an ex-PayPal Mobile exec and as someone who has used the PayPal payment at Home Depot, I believe the user experience is flawed. Having the consumer type in their mobile number and PIN is an experience that derives from a technology solution that stands without the need for partnerships and significant POS upgrades rather than the right consumer experience. The problem with the mobile number and PIN method is that it goes against the grain of the user behavior everyone else in the industry is promoting (card swipe, bar code off the phone, and NFC). This leaves PayPal alone in building that behavior which is very heavy lifting, and one that would require a SIGNIFICANT value proposition to the convince consumers to try – a value proposition well beyond what is provided by PayPal today. Can PayPal pull this off? PayPal has never been known to really understand their consumer base. They never had to as they could ride on the coat tails of eBay to get their first 50+ million users. Or will PayPal finally shift into the technology handshakes that are promoted by the industry? Starbucks and the airlines finally got us all used to the barcode on the phone. Will PayPal finally adopt this handshake? Or do they believe that the laser required to read the bar code is too much of a hurdle for its now Discover merchants to buy into (let alone NFC POS readers)?
While the Discover deal is a huge boost on the merchant side, it’s now time to focus on the consumer. Let’s see whether PayPal makes a drastic change to the consumer experience as well. An Apple deal would be the perfect marriage, but perhaps too uncharacteristic for Apple…

Mobile Financial Services: Uganda and back

Recently, I had the opportunity and the pleasure to work with a large NGO seeking to launch mobile financial services for poor, unbanked small holder farmers. This NGO has a big mission: to create sustainable development in post-conflict areas. In Uganda, I worked out of the Kampala office, but focused the mobile financial services work on the Northern and Western Acholi and Karamoja regions. Incidentally, for those of you familiar with the Kony’s LRA child army devastation, much of this conflict occurred in the Acholi region of Uganda.

As I worked with this NGO’s amazing team to develop their Go-to-Market strategy, I felt so fortunate to have the opportunity to meet such incredible, smart, and interesting people and to hopefully have a positive impact in their overall mission. I was also reminded how far I was from home as I saw these 4×4 trucks parked at the client’s offices.

There is nothing quite like a sign for AK47’s on four-by-four trucks to remind someone she is far away from home, where my previous work residence a few years ago was the lovely PayPal building in San Jose.

While all of my work involves mobile payments or mobile financial services, the work itself is vastly different as I work with clients like the one in Uganda seeking to build sustainable development and increase the incomes of the poor versus the large banks or technology companies in the U.S. I often think of my business as completely bifurcated, and yet, I have to believe there is a common thread in what I do.

This question has been my inspiration for my next mobile payments event in San Francisco to explore what the connections are between seemingly disparate initiatives around the world and what is occurring here in the U.S. As I prepare for this event, I will be researching the commonalities of various initiatives worldwide. At our panel discussion, we will seek the advice of experts from around the world to get their views on linkages. Come join us as we begin to uncover what links mobile payments initiatives from Post-Kony conflict Uganda to Silicon Valley on July 23 at The Commonwealth Club in San Francisco.  For more information on the upcoming event, you can find it here.

Making an Impact: One Mobile Payment, One Human Connection at a time

The Story of Jean D
My story begins 14 years ago after a 6-week overland truck tour in Sub-Saharan Africa. I had caught the adventure travel bug which subsequently brought me back to Africa many times since. On my bucket list was a trip to Rwanda to see the gorillas. It was a dream I had for quite some time. So, when I had the chance opportunity to do a one week project in Uganda for mobile money, I jumped at the opportunity to take it and then to tack on a short trip to see the gorillas in Rwanda.
When planning a trip to Rwanda, the question, “Will you visit the genocide memorial?” invariably arises. I had heard it was a profoundly moving and disturbing memorial to see. I had decided that I did not want that to be my final memory of Rwanda, so I opted out. I wanted to remember the happy moments of seeing the gorillas.
I’m writing this on my way back to Kigali for my 48 hours of travel back home. The gorillas were amazing. It was a dream that I feel fortunate to have done. It was expensive… very expensive, but well worth the money. The trekking ended up being a bit more difficult than I had expected. The mountains where the gorillas are located are a chain of 7 volcanoes called the Virungas. The tallest is 4,500 meters. Others are around 3,000 meters. The mountains, or volcanoes, are thick with bamboo vegetation which becomes alpine forest as you gain altitude. The ascent can be quite demanding at times, depending on which gorilla family you visit. The closest town is in Kinigi, about 18km from the Volcanoes/mountains.
Interestingly, as I look back on my past four days in Rwanda, I suspect the gorillas aren’t the only memory I will take home with me… which brings me to today…
This morning, I went into the lovely breakfast area to have my last breakfast at the upscale lodge near the gorilla mountains, I was greeted by the friendly 20-something Rwandan staff with big smiles and perfect white teeth. Today, Jean D was at the breakfast area helping the guests. Actually, he was just helping me as the other two guests from the lodge were on their trek tour. We had friendly chat, and I asked where he was from. He told me the town nearby. As we chatted some more, I heard him say,” After the genocide…,” in a hushed tone.
When I landed in Rwanda 4 days ago, I saw billboards all along the road in Kingali that were memorializing the 18th anniversary of the genocide that lasted from April 7 for three months during which time 1 million Rwandans were killed out of a population of 8 million. There is no one in the country above the age of 17 who was not affected by this genocide. What was I doing during that time? I was one year out of college and working in Northern Virginia. I was probably working, partying, and definitely oblivious to the atrocities that were happening half way across the world.
While I conceptually knew and had read about the genocide in preparation for the trip, I guess I hadn’t really realized that EVERYONE, including this gentleman in front of me, was affected by it. I wasn’t sure whether to broach the subject with the Rwandans I was meeting, but I thought that since he brought it up, I would ask him about it.
“Do Rwandans speak to their children about the genocide?” I asked.
He was not fluent in English. French was the major language in Rwandauntil2007 when it was decided to switch everyone to English for ease of trade and business with neighboring English-speaking countries. He misunderstood me. He said softly, “Many, many children died.”
I decided to switch the subject, “Do you live nearby?”
“Yes, in a town near the lodge.”
“Ah, is your family there?”
He got quiet and shook his head. “No, they were all killed in the genocide.”
My light chit-chat took on a sudden weightiness I had not prepared for.
“How old are you?”
He said, “I am 28.”
“So, you were only 10 when it all happened?”
“Yes. My brother was 4. He is the only other one who survived. My mother, my father, and my sister died. My brother and I fled into the mountains.”
“You fled into the mountains? How long did you stay there?”

All of a sudden, I thought about the mountains which had nothing. No shelter, no food. No humans. I also remembered that the guidebook had said that the genocide and killings threatened the gorillas in the mountains and that they escaped into the Congo at that time. I didn’t quite understand how that was since there were no humans living in the mountains. Now I realized, people were fleeing for their lives in the forest. What kind of terror would children of the ages of 4 and 10 witness to be orphaned and fleeing in a forest, on the run from killers for two months, alone?

“We lived there for 2 months. We would climb down the mountain to find food in the farms and steal avocados… whatever we could find.”
When he returned, his family was gone. He heard later about how they were killed. I will spare you those details.
I couldn’t help myself. I suddenly began to cry. What a life this man has had. And he was only 1 of 8 million people with a story. He gave me a tissue. All I could say was, “I’m so sorry. This is so sad.”
He mentioned earlier that he wanted to go to university someday and is trying to save money working at the lodge to afford the yearly tuition. He told me this as chit chat, not because he was looking for money. I was embarrassed by the opulence in which I found myself there, now recognizing what his life had been. I thought about the fact that my four days stay at the lodge would have paid for his entire college education.
Suddenly, my head was spinning. Could I find money to send to him? Western Union? PayPal? For God’s sake, I’m in the mobile money industry, I should be able to send him money easily! Then I thought about whether the money would be used properly for college. Could I send the money directly to a University? Should I start a scholarship fund? What about the other people working at the lodge? What about everyone else in Rwanda?! I would start small. Help Jean D get a college education.
So, now here I am, putting on my entrepreneurial hat. I will figure this one out. Jean D deserves a college education after the life he has been through. And so do the others. I will start out small and see how things go from there. If any of you have ideas or would like to help, I’m all ears.
Stay tuned…

May 17, 2012
After I had heard his story, I requested his email and gave him mine. I did not tell him why, but at that moment, I knew that I was going to help him in some way. As if by fate, I had received an email from Jean during my journey home to let me know that the email he had provided to me had a few letters missing and to give me the proper email address. Had he not sent me that email, none of the rest of this would have been able to transpire…
When I returned home, I began thinking through how to remit the money safely to his University. I remembered that one of the companies I advise Willstream had set up a program exactly for this type of remittance to Senegal, the home country of the CEO. I reached out to him to see if he could do this for me in Rwanda. He set to work. Within a week, he had called the University and had verified the credentials. He called Jean and verified that he had the high school diploma and ID necessary to enroll. He set up the University as a merchant and confirmed the exact amount needed for registration, 4-year education, and living expenses. He contracted with a local bank to move the funds. We are now finalizing everything and will begin to send the money soon.
When I think about the connections that occurred to make something like this happen, I am amazed. The powerful combination of human connection, the Internet, and mobile has reduced all distances and obstacles to make things happen.

Once we successfully complete this remittance, I am also seeking to expand this into a larger scholarship program for orphaned genocide survivors of Rwanda and will be speaking to a few non-profit organizations to see who can assist with choosing recipients of such a scholarship fund. More to come…

June 25, 2012

Today I received confirmation from CEO of www.willstream.com, the company that I used to remit the payments to the university, that Jean D. is officially now enrolled this semester into college!  Thank you to Toffene, CEO of Willstream for his dedication in making this a reality!!!

Where there’s a Will(stream), there’s a way!!!!

The Mobile Money Movement(TM): Catalyst to Jumpstart Emerging Markets

In the spring of 2010, I was asked to speak at Columbia’s Center for Tele-Information on the economic impact that Mobile Money will have in emerging markets. This presentation was the genesis for a whitepaper which I recently published with The Innovations Journal by the MIT Press.
To download the whitepaper
If you are interested in hearing the original presentation that was given at Columbia University, fast forward to 22:30 on this video.

Tech@State – Mobile Money Public and Private Partnerships

I recently had the honor to present at The State Department’s Tech@State event for Mobile Money on the intersection of Mobile Money with Food Security. It was great to see the level of interest and momentum that the government has behind this, recognizing the mobile money will be the key to financial inclusion world-wide. I was joined by a number of other mobile money experts. The recap can be found here.
The Food Security/Mobile Money presentation can be accessed on slideshare. Two critical videos to watch to gain a better understanding of the use of mobile money for food security are:
Mobile Money Vouchers by Mobile Transactions
Mobile Micro-Insurance by Syngenta Foundation

At the end of the event, I joined my colleagues to discuss the opportunities and challenges that lie ahead and reiterated that I hope this is just the beginning of a dialog between private-public sectors to help advance this industry. The video can be found here.
Stay tuned on a number of items…
1. Working on the intersections of mobile money and mHealth for the mHealth Alliance (United Nations Foundation) and The World Economic Forum
2. Upcoming event on September 13, 2010 in San Francisco as a Bay Area recap of Tech@State and “Around the World in 80 Minutes” to demonstrate some mobile payments systems from around the globe. Registration for this event will be announced on my LinkedIn Group: Mobile Payments Series – mPay Connect

Comparing Volumes of mPesa Kenya vs. PayPal Mobile in 2009 (monthly estimate)

PayPal reported that their global mobile payments volumes in 2009 was $600 million, or roughly $50 million/month.  Let’s assume most of this came from the U.S.  In contrast, Safaricom reported their monthly mPesa volumes at $300 million at September of 2009.  PayPal Mobile launched one year before mPesa Kenya, and yet the volumes are vastly different.  This chart compares relative populations, average income, and monthly volumes of mobile payments for US. PayPal Mobile (largest mobile money transfer system) vs. Kenya’s mPesa (largest mobile money transfer system.)  These results are further exaggerated if we normalize by population (let alone if we normalized by income.)  Clearly, something vastly different is transpiring in these two markets.  My belief lies in the difference of the consumer value proposition mobile payments provides in markets with no other alternatives to cash vs. sophisticated financial services markets like the U.S. whose populations have access to cards and computers.