Abstract – This post was originally published on 26-January-2015 on Linkedin(Click here). My dream is to see Convergence of Mobile Payments, ePayments, Dedicated Accounts on IN system for payments of subscription services, few value added services of bank and Artificial intelligence based, techniques for data analytics in to ONE CONVERGED SYSTEM. Theme of the article is based on my dream but shared details here are at very high level for a reason. Any one looking for some very basic knowledge or introduction on Convergence and its critical attributes/ key stake holders along with meaning then this article can help but again only on very high level with basic understanding only. Experts in any form of Billing & charging system like Hot-billing(1990), IN System(2000), OCS(2007) or CVBS (2010) or even NCS which is yet to born will find this article at too basic level but that’s the real idea here. Idea here to share some basic and collective out of all those millions of papers and article available on internet.
Introduction – Billing & Charging systems till today are only doing their main job under MNO umbrella i.e prepaid charging or post paid billing. Some vendors have extended their systems already and adopted Mobile Money component or Mobile Wallet components. But till date full appreciation potential still not realised. Although Mobile Money had been designed as a peer-to-peer payment system but it has gone much beyond the basic idea and as on date it helps Utility bill payments, Airtime topup, micro savings, micro loans etc. and this forms Mobile Payments ecosystems or in short now known as FinTech and with flavors of Artificial Intelligence this whole thing is going on to just another level. Provision of converged services are more important as consumers access any services on any device platform and any network.
Main Story – 2014 was the year of innovation in mobile payments and mobile money. The biggest introduction being Apple Pay, which became highlights of the year and shook many MNOs who participated in the mobile financial services space. 2014 will go down in history as the year of mass adoption of mobile payments and from 2015, the industry is geared for many highly innovative and exciting offerings continuing and maintaining the flow for financial transactions.
Mobile payments are evolving into a widely diversified and highly innovative environment where every individual is thinking of new offerings and adding his/her ideas to the current service offerings of industry giants who will en-cash it later on. The classical solution being the use of proximity technology for payments. Near Field Communication utilizing a physical secure element is no longer the only payment option. Alternative options include HCE and other totally different ways to complete mobile payment such as QR codes, scan codes, ultrasound or online solution blended with USSD push.
After introduction of artificial intelligence and its subsets like neural networks, deep learning and machine learning there is a clear distinctions coming out. These offer a clear demonstration that the industry’s center of gravity is shifting. Unlike the situation that prevailed a few years ago, Europe is no longer the center of the secure transactions, Africa and Asia are not jostling for this position and they are coming up with great momentum.
Market dynamics are evolving, especially with mobile network operator market restructuring and prepaid market changes. A more drastic change in the SIM market was triggered by Apple’s eSIM announcement, which is aimed at bringing more added values to its own platform. MNOs typically have many platforms starting from IN (OCS), billing, electronic recharge, physical voucher, mobile money, mobile banking and mobile financial/commerce services systems.
Finally, there is the option to acquire a banking license. Given the regulatory burden, such a move would only be advisable if an MNO targets to move beyond general payments but into full-fledged financial services. Some MNOs seem to be considering this option and at least one, Mobilcom (Germany), has applied for a banking license. It is interesting, however, that Mobilcom has also been seeking a partnership with a bank. Given the complex transformation necessary in order to become a full-fledged bank it is questionable that many MNOs will, indeed, choose this option.
MNOs have to put in huge investments in order to bring all these services together. This huge initial capital outlay covers the deployment and operating costs of the new services. What if the idea of merging these systems in such a way that cuts operating and capital investment by almost 50% or even more. Deregulation, convergence, the rise of the Internet and the emergence of mobile telephony has forced MNO’s to re-think/base their business models. The traditional activity of transporting information is now a commodity business threatened by new players. Facing tough competition, eroding margins on core business and a falling market share at home/international level, MNOs are seeking new markets, which provide better margins in order to maintain revenue growth.
MNO’s also face falling margins on voice calls and rising financing costs for the installation of the new “G’s” networks. Out of crowded possibilities, the financial services sector offers MNOs the opportunity to exploit synergies in their existing customer services and billing, airtime, payment, serving banks as an interface and settlement capabilities so that in the end, customers will become less dependent on bank branches, automatic teller machines and traditional bank-based payment systems. Indeed, MNOs may be able to compete more efficiently than incumbents in areas such as cross-border credit transfers.
Telecoms and payment networks have a lot in common. Both types of networks are basically communication networks that allow the transmission of certain types of data but regulated by different entities, apply different regulations and rules but in both cases there have been large established networks that enable people to transfer information or value. In the case of MNOs often one large network provider with a dominant network for instance AT&T in the US and Deutsche Telekom in Germany or Telkom Cell in Indonesia. In the case of money system/networks, the central/reserve bank and the commercial banks jointly run the dominant payments network. All these networks are based on certain standards that allow the transmission, receipt and interpretation of signals sent through the network. Finally, in both cases there are subsidiary networks, such as cellular phone networks or credit card and e-money networks that compete with the dominant network.
3rd Party companies brining in new diversification and their business model is on Mobile Money and Mobile Banking and their business model talks about payments, micro payments and merchant acquiring by these 3rd party companies there are success stories of such companies in Japan, Indonesia, Kenya and many more where everything is done by tease 3rd party and rest last mile is achieved by bank and MNO and interesting MNO and Bank don’t relies at back these ride on their infra structure only
Through the adoption of a converged MFS-OCS system, subscriber/customer profiling would be easy to an extent that any time the entire transaction history of customer/subscriber would be readily available for recharge history, call patterns, data spending, Mobile money will tell spending habit and shopping choice for daily and monthly, bill payments history, Mobile Banking will tell payments & transfer history and payroll history can be combined into system known as SCB- Subscriber Credit Bureau.
Merging and creating excellent innovative architecture of OCS that should give complete new design and transform IN/OCS into MFS-OCS (Mobile Financial OCS), which would be 100% modular and have separate physical boxes for each module and looks like a “MNO Financial Cage”. Each box will have its own independent function and operates in an optimized manner such that the impact or change on one box should not affect the other box and at any point in time if any box master (Vendor) is trying to control the MNO, then MNO will have a choice to just replace the box with another master and kick the noisy box out of the data center.
This means the integration and architecture should be very strong and though all the boxes may come from the same vendor to ease up administrative tasks at the MNO side. MNO initiatives, idea or Intellectual Property (IP) should be 100% controlled and owned by the in house team (Service Creation Platform Box) driven by product management team so that no vendor will steal MNO owned ideas for which the MNO will have paid a great sum to get developed but later on sold to others MNO across the world. The converged system has the ability to integrate with any system with universal open API’s and has the advantage of quick time to market for new ideas and the flexibility to offer mainstream MNO dependent promotions from the MFS part of the business that allowing cross pollination of ideas and service offerings.
These moves demonstrate the center of gravity of our industry is moving. Also, events such as the successful Alibaba IPO, the emergence of China UnionPay as a global player and the ongoing Chinese EMV migration demonstrate in which direction the wind is blowing. The evolution from 4G to 5G can be interpreted as a shift in the center of power towards Asia.
The 3GPP OCS is heading toward multiple charging access provision for networks bearing different services. To meet network evolution demands, the OCS’s internal components should be further abstracted and modularized. Payments from various channels ie. Proximity (POS, mPOS, NFC, Thin SIM, Ultrasound) , Internet , USSD, SMS, ATM or agents , Person to Person can be embedded as separate modules will keep tap and record of each transaction and create temp wallets in buffer before moving to actual wallets and moving temp wallets from buffer to trash and writing logs
Recommendation to the evolution of the mobile financial services ecosystem and IN system at MNO end is very important as its no longer is mobile money an enticing possibility or an unproven concept. In the last ten years since the first concept, mobile money has provided millions of people around the world with access to finance, and demand continues to increase. This Mobile Money Article is convened to help the industry/people who wants to know more a better understanding how the ecosystem has grown and how each of these factors affects mobile money’s role in developing a larger e-money economy: one in which cash wallets are replaced with mobile wallets and other electronic payment instruments. To continue its growth and begin to fulfill the promise of an e-money economy, industry stakeholders must work together to unleash convergence, drive customer acquisition, and refine enable technology.
Mobile money must have a clear appeal to consumers, the public sector, and the private sector. The Mobile Money system identified a number of key lessons for all of the industry’s stakeholders. Primary among these was that mobile money’s development value rests in its ability to facilitate financial sector inclusion. To do so will require financial institutions and Mobile Network Operators (MNOs) to work together with regulators on a country-by-country basis. Providers will need to introduce basic mobile money services where they do not already exist and foster the consumer’s appetite for more sophisticated services. Effective distribution networks must be developed in order to reach critical mass in the industry.
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