Payments/Money Game – Today’s payment industry can be compared with either a payment war, a payment jungle, or even just a payment storm. The payment intelligence of today is far better than in the past, but it’s still not at the point where it’s needed. Showcasing what’s happening in the payment industry and the contribution or impact made by MNOs and banks The well-known campuses for all types of payments, i.e., mobile, internet, paper, plastic cards, and even vouchers, are all over.

This post was originally published on December 26, 2014, on LinkedIn (click here). This article is not a conclusion by any means; it is just an assumption and a current picture focused on African markets.

Mobile Payments Expected To Explode

Experts in any form of payment, like mobile, Internet, paper, or card, should not get disappointed after reading this, as it’s not meant for detailed or deeper understanding. In the event that detailed information or deliberation is needed on any part, please feel free to get in touch directly.

If we had any global ministry of innovation for regulation and control, then cash would be the single king. The solution that is hastily designed to fall into large sums in offshore accounts can be avoided very well with MFS.

Mobile payments are expected to explode beyond 3 trillion euros by 2020. Mobile money saves 2 billion USD for a few African countries. Mobile money is not just cash in, cash out via agents any more, or P2P money transfer. Africa has given a new and very different dimension and speed of, like a blink of an eye, getting money from the UK, US, or anywhere in the world within seconds, around 24 hours a day, directly to your wallets.

All bill payments, merchant payments, loans, insurance, etc. are never stopping or ending the story. Banks should take a back seat as clerks for reconciliations and accounting units, and the regulator should allow MFS companies to innovate and bring new solutions and products in no time and make customer’s lives easier, less costly, and much faster.

Past Payments and Future Payments

Times have changed, and with change comes opportunity. Over the past few years, the face of financial payments in most developing countries has undergone a radical change from a bank model to an MNO-dominated model.
Digi Wallet

This change has brought financial inclusion to the most marginalized citizens and greatly improved efficiency in the payment industry. This article will focus on why banks’ mobile banking can never outshine MNO mobile money. I am happy to get feedback in agreement or disagreement, as these are purely my own views.

Accessibility is a critical success factor for any service. The role of informal institutions in providing financial services to the members of the community concludes by highlighting the opportunities these present for formal financial service providers, but in order to ensure accessibility of banking services, a bank has to have a wide branch network of fully branded brick-and-mortar marble banking halls with all the necessary security systems. The setup costs of these are so high, and to recoup the same, the bank has to pass on the cost to the ultimate consumer.

MNOs, on the other hand, have embraced the concept of an extensive agent network at a minimal cost. The MNO agent network is usually dense, with at least one agent for every 1km radius. Usually, the cost of setup and signage is borne by the agent itself in a bid to be more visible and to attract more customers, as revenue is highly dependent on the volume of transactions pushed by the agent.

A subscriber does not need to travel long distances or fork out any money to access an agent and perform agent-centred transactions. Due to the nature of the business, MNOs have excelled in the “24×7, around the globe, use me” phenomenon.

This assures timeless and borderless access to services, which provides ease of use, more transactions, and higher revenue for the MNOs. Banks, on the other hand, have limited operating hours, and for those who have utilized technology by diffusing access to service from banking, halls have a great limitation of country borders.

MNO makes money on transactions, but banks earn money when money remains in the account. In order for any business to thrive, it has to observe a wide cost-to-revenue ratio; however, banks are subject to a high customer acquisition cost of $10 to $100 per customer, whereas MNOs stand at between $2 and $10.

Banking & Banks

This acquisition cost has a ripple effect on the charging structure throughout the life cycle of the relationship between the bank and the customer. Naturally, when the cost of customer acquisition is high, the resultant transactional cost will follow the same trend. The cost of transacting on a banking platform is very high compared to transacting on a mobile money platform. MNOs’ interest in retaining subscribers is greater than banks by giving services that may or may not generate revenue and always trying to run promotions around the same to win them back.


The world is currently facing an economic crisis, and most people are living on a hand-to-mouth basis. Banks go against the economic tide by encouraging savings (which is correct and required for the country’s economy and the betterment of each person’s life), while MNOs encourage spending. There are few savings and investments in most countries; hence, most citizens spend whatever they earn on basic survival requirements. MNOs were quick to realize this and enabled ease of payment for most commodities through merchant payment facilities and for most utilities and bills through bill payment services.

In the case of a new startup, MNO helped boost GDP by helping people with the will to start up their own businesses and grow with free consultation and support—the “You Grow, I Grow” philosophy. For distribution channels, money distribution should be treated as the distribution of cigarettes, coke, and water bottles, which MNOs can do easily with flexibility, and banks never thought of creating agent networks where MNOs’ key success factor is agent banking only. On the limit side, MNO financial services limits are set at the upper limit, and for banks, they are set at the lower limit. So MNO’s whole game is volume, and the bank only wants value.

A small study on the Informal Financial System of Indonesia depicts very clearly that there are three products or services that are key in the Indonesian market: savings, loans, and remittances (domestic and international), which are also key products for banks, but due to the bank mindset of playing with big or large figures, this will never rise up well, and if Reserve Banks, Regulators, and of course MNO play well, then this market size can grow up to approximately about a billion USD a month and can grow to even much higher.

Following the crisis, most countries have increased monitoring and regulation of banks. It is believed that the formal banking system was used to transmit funds that were used for these attacks and crises. Most regulators have set up anti-money laundering laws, which intensify the regulation of players in the payment industry.

Most countries have slackened regulation of MNOs, while banks are subject to stringent regulation by their respective central banks and deposit protection bodies. Banks were known to be the centre of most economies’ financial transactions, and in order to ensure stability, most governments maintain a close watch on transactions in the formal payment system. Relaxed regulation allows MNOs to diversify and tap into financial services, while banks find it difficult to venture into any other industry outside the usual core financial payments.


Most regulators impose stringent KYC requirements on banks for account opening, ignoring the fact that it’s a digital era and they should promote digital identity. These requirements form a wide spectrum, spanning from proof of residence to a copy of ID, confirmation of employment to assure a source of funds, and a passport-sized photo. Most citizens fall short on some of these requirements, and failure to meet any one of the above immediately makes one ineligible to open an account. This places banks at a disadvantage because most people operate outside the formal employment system and therefore lack some of the account opening prerequisites.

The relationship between customer and bank is one of trust; any customer deposit held by the bank is a liability that has to be honoured whenever it falls due. Some banks have failed to manage liquidity risk, resulting in their being placed under curatorship by the respective regulators. Such a move has the catastrophic effect of disrupting the bank’s ecosystem as the banks hold cross-investments with each other.

Banks have a restrictive approach when it comes to onboarding customers. When one approaches a bank with a request, be it a new account opening or a loan request, they are subjected to rigorous checks and processes that frustrate would-be customers. This “who is eligible to be my customer?” approach results in a low onboarding rate for banks. MNOs, on the other hand, use a “please be my customer” approach, which proves to be a hit as they onboard multiple subscribers daily.

For this reason, MNOs are more inclined to tap into both the formal and informal sectors of the economy, while banks concentrate on the formal sector. Informal sectors prove to be more profitable than formal sectors because they push high-volume, low-value transactions. MNOs, through underlying banks, have started giving instant loans using online credit rating systems based on credit data, transactional data, tenure with the MNO, daily spend, and other conditions.

Banks take days to approve loans because they have a low-risk appetite. The informal trade market size is estimated to be worth around $7.4 billion for most African countries (based on assumptions and reading internet articles). The telecoms business is also characterized by a high rate of churn as subscribers switch operators looking for favorable deals. Some countries have adopted number portability, where subscribers maintain their number when they switch operators. Banked customers, on the other hand, have a lot of thinking and clearance to do before changing banks because a number of financial services like loans, investments, and mortgages are tied to their bank account number.

MNOs run exhibit a high affinity to retain subscribers than banks. This is observed by the multiple promotions which may or may not be revenue generating and encourages customer win back. An MNO can run as much as 3 promotions per quarter while banks could go for a year without any activity simulating promotion.

Banks have generally been found lacking in the areas of innovation, technology utilization, and adoption. A typical bank will review the architecture of its banking system once every 5 years, while MNOs employ solution architects who work hand in hand with their product development and innovation arms to deliver efficient and relevant solutions that meet the needs of the market. Suppliers of core banking systems have kept the system ecosystem as complex as rocket science, which makes integration with other systems a nightmare. This is in opposition to the open API approach adopted by MNOs.

In order to improve profitability and gain relevance in the mobile payment space, banks should invest more in market research and gather the requirements of the markets they operate in. This is easily achieved by setting up a dedicated R&D division and allocating an adequate budget for this cause. Based on the closed nature of core banking systems, banks can separate a mobile money system from the core banking system to achieve the flexibility required from a mobile payment system.

The restrictive KYC requirements can also be applied in a tiered manner depending on the value at risk and the transactional volume of the account. A number of banks in Africa have embarked on agency banking to increase their footprint in the operating countries. Banks need to make a radical change from their current modus operandi in order to beat MNOs in the field of mobile payments.

So the billion-dollar question here is, “How can banks win the mobile/money payments game?” Banks are beginning to realize that mobile payments are better left to tech giants, but is this realization enough? Protecting customer relationships and data is also not enough.

To win the game, too many things are required; let me mention just one or two here. Chatbots in banking are a digital solution that is relatively inexpensive to develop and maintain. Artificial intelligence, as cutting-edge technology, can help banks come out on top. Machine learning and deep learning techniques to strengthen the mindset of bank-like secrecy, security, and privacy matters

Many countries, including Greece, Cyprus, and Italy, had no choice but to accept rescue terms that affected not only bank bondholders and shareholders but many thousands of private deposit holders. Their cash or savings were simply scalped and went to help fund the closure of one bank and the propping up of others. The so-called “haircut” comes along the way and helps in worsening the problem in a negative way.

Points to Note:

All credits, if any, remain with the original contributor only. We have covered all the basics of adapting cashless payment models. The importance of such a quality system full of big data is the backbone of any digital economy. In the next upcoming post, we will talk about implementation, usage, and practice experience for markets.

Sign-tConclusions: Running on an unknown path without a roadmap or direction, with due respect, often results in disasters. I personally have seen and taken part in programs to build my experience or hands-on mastery in such situations where mobile payments or mobile wallet-based cross-border remittances support country economies and have proven with 100% confidence that when it came to the crunch.

Books + Other readings Referred

  • Research through open internet, news portals, white papers and imparted knowledge via live conferences & lectures.
  • Lab and hands-on experience of  @AILabPage (Self-taught learners group) members.

Feedback & Further Question

Do you have any questions about AI, Machine Learning, Telecom billing/charging, Data Science or Big Data Analytics? Leave a question in a comment section or ask via email. Will try best to answer it.

Hash Tagas : #Payments, #AI #MobilePayments, #MobileMoney, #MachineLearning #Money, #Mobile, #ChatBots #Banking, #Banks, #MobileBanking

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Posted by V Sharma

A Technology Specialist boasting 22+ years of exposure to Fintech, Insuretech, and Investtech with proficiency in Data Science, Advanced Analytics, AI (Machine Learning, Neural Networks, Deep Learning), and Blockchain (Trust Assessment, Tokenization, Digital Assets). Demonstrated effectiveness in Mobile Financial Services (Cross Border Remittances, Mobile Money, Mobile Banking, Payments), IT Service Management, Software Engineering, and Mobile Telecom (Mobile Data, Billing, Prepaid Charging Services). Proven success in launching start-ups and new business units - domestically and internationally - with hands-on exposure to engineering and business strategy. "A fervent Physics enthusiast with a self-proclaimed avocation for photography" in my spare time.


  1. Innovation Economy at

    May be after ISO12812


  2. Mobile Money Experts at

    Never …. they need to born again if they want to


  3. […] Banks should take a back seat as clerk for reconciliations and accounting units and regulator should allow MFS companies to innovate, bring new solutions and products in no time and make customers life easy, less costly and much much faster, see my post Why Banks struggling for Mobile Payment Services […]


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