Goodbye from Watching the Connectives: hello from The Digital Watcher

Rob Bratby

To all my readers, thank you and goodbye. This blog is now an ex-blog. Continue reading

Myanmar mobile banking and payment: where to start?

Myanmar is currently largely a cash economy.  In this post we consider the types of mobile banking and payments solutions we predict will first gain traction in the Myanmar market: remittance services and banking the unbanked.

Outside Myanmar, the way people bank and pay has been revolutionised: from the introduction of credit cards, telephone banking and mobile banking to the launch of PayPal and Bitcoin.  The global growth of e-commerce has been accompanied by an increasing demand for online and mobile payments systems.

It is possible to imagine places where the use of cash might disappear entirely in the future.Whilst the rest of the world has still not fully exploited the benefits of mobile banking and payments, Myanmar has yet to start.

Burmese brollies

Mobile banking and payment solutions

What do we mean by mobile banking and mobile payments?

Mobile banking means banking done from a mobile device.  Banks provide a portal to access banking services across mobile platforms, including via its website, apps for tablet and apps for smartphones.  The introduction of mobile banking usually requires banks with legacy systems to re-engineer their delivery methods (i.e. to digitise service delivery).

Mobile payments means using a mobile device for the initiation, authorisation and realisation of a payment transaction.  Mobile payments systems allow payments to be made a mobile device via a proximity payment or via a mobile remote payment.  Depending on the way the solution works, the parties involved can include customers, merchants, mobile payment service providers, telecoms companies and banks.

There has been rapid innovation and disruption globally.  From traditional payment systems (e.g. Visa) and Internet payment systems (e.g. PayPal) to varying mobile payment systems (e.g. M-Pesa, Apple Pay) and retailer-led systems (e.g. integration of customer behavioural data and store-cards).  There’s no winning ‘secret formula’ across global markets.  In some countries there are constrains to potential approaches.  In every market partnerships and alliances have been and are still critical to success (between e.g. telecommunication companies, technology manufacturers, traditional banks, payment companies and retailers).

The market in Myanmar and where to start

Both the telecoms and banking sectors are very underdeveloped in Myanmar.

There are a low number of access points, low customer awareness, a lack of services and a lack of infrastructure and processes.  However, these are focus sectors for investment by the Myanmese government and investors, and by foreign investors.

It is tempting to imagine that Myanmar can leapfrog ahead and adopt sophisticated mobile banking and payments solutions for all because it is unencumbered by legacy IT systems and processes and can dive straight into the deep end.  However, as Myanmar also lacks access points, awareness, services, infrastructure and processes, the starting point must still be basic.

One of the biggest current challenges is the lack of distribution networks for getting cash in/out.  In our view, remittance services will be one of the first services to be developed.

There’s no point developing fancy mobile banking solutions and payments if people can’t get cash in/out.  Providing the most basic banking services for a largely unbanked population will the next major focus followed by basic payment services.

Remittance services  

It is common for Myanmese families to work and live apart, and as economic development and foreign investment drives urbanisation it will only increase.  Domestic remittance services are need to help families to send money to each other.  There are also a large number of overseas Myanmese workers and so international remittance services are needed.

The challenge for this in Myanmar is that there is a bottleneck of cash in/out points.  A secondary challenge is that it is difficult to authenticate parties.  Telcos have the ability to address both of these challenges, because they offer outlets and a means to authenticate users.  One solution therefore is for the banks and the telcos to partner and integrate a basic remittance offering.

Banking  the unbanked  

Most Myanmese citizens have no bank account today.  Experience from Africa shows that a move from a cash system to a banking or quasi-banking system brings widespread benefits.  Again, however, the banks have the enormous challenge of building distribution (i.e. branch access), whereas the telcos are already building distribution and reachBank and telco partnerships are therefore a likely formula to success because the scale of the distribution network is critical.

Structuring and negotiating a successful mobile banking partnership

Banks have a clear role to play to build the banking services in Myanmar.  However, they do not have the networks or the technology to succeed alone.  Partnerships with telcos are most likely to offer success but what do the parties to such a partnership need to consider to make it work?

First, the parties must have a clearly defined idea of what the ‘end to end’ system will look like and which role each of the parties will play.

Second, the parties must consider the regulatory risks.  Do one or both of parties need a licence and can they comply with the licence requirements?

The commercial aspects of the deal will also need to be agreed.  Who is responsible for taking what actions and providing which services?  Can each party fulfill their relevant obligations?  What are the consequences if a party fails to meet its obligations?  And what is the price or reward for each party?

Final tips

Parties involved in these kinds of negotiations should never assume that the other parties know what they are doing.  The mobile payments and mobile banking space can be very complex and parties who are more familiar with in the space will use often use jargon.  You should not be afraid to ask simple and basic questions, especially in a new market.  Finally, don’t be wowed by complex solutions.  It’s definitely better to walk before you can run, so we predict the winners will be those who keep it simple and do the basics first.

This post was co-written with @matthew1hunter.

Monetary Authority of Singapore publishes consultation on revising outsourcing guidelines

On Friday 5 September, the Monetary Authority of Singapore (which regulates financial institutions in Singapore) published a consultation on revising its existing guidelines on outsourcing.

Responses are due by the 7th October.


International bar association debates mobile payment

Mobile payment is a topic close to my heart, so I am delighted to be joining a distinguished panel at the International Bar Association‘s annual conference in Dubai this afternoon to discuss developments in mobile payment from a comparative perspective. The session is being run jointly by the communications, banking and technology committees of the IBA and that theme of the collision of world-views from players in the different eco-systems (traditional payment, mobile and online) is a consistent theme that arises in the business, as well as the legal, context of this topic.

The panel consists of:

  • Yutaka Nakamura, General Counsel, NTT DOMOCO Inc, Tokyo
  • Alessandro Fiumara, Strategy and Business Development, Post Mobile, Rome
  • Odusola Rotimi, Legal Counsel, MTN Nigeria, Lagos
  • Hartmut Siebel, Legal Counsel, European Payments Council, Brussels
  • Samee Zafar, Director, Edgar, Dunn & Co, London
  • Gareth Rowlands, Legal Counsel,  Visa Europe, Foster City
  • Tom Levine, Partner, A&O, Abu Dhabi
  • Rolf, Auf der Maur, Vischer, Zurich
  • me

and will be ably moderated by Marco Dalla Vedova and Ewa Butkiewicz.

I plan to update this post after the session, but if you are in Dubai at the IBA, do come along for what promises to be an interesting session.

(Apologies to regular readers for the recent radio silence. I am in the process of moving to Singapore to set my firm’s first office in Asia – normal service will be be resumed shortly, although with a more international flavour with the regular diet of UK and EU regulatory developments coupled with a view from Asia, as well as general updates).

UK mobile operators create m-commerce joint venture

Last week, three of the UK’s four mobile network operators announced a mobile marketing and payments joint venture.

The venture is subject to regulatory approval, and is summarised in the press release as:

  • Creation of a single ecosystem for m-commerce helping advertisers, retailers and banks to reach consumers through their mobile phones
  • Consumers will be able to replace their physical wallet with a secure mobile wallet using Near Field Communications (NFC) technology to pay for goods and services
  • Consumers will also benefit from relevant offers and coupons, delivered direct to their phone
  • Everything Everywhere, Telefónica UK and Vodafone UK to provide start-up investment

The mobile operators will continue to compete in the retail market, so it appears that the join venture will not affect the previously announced mobile payment products from O2 and Orange/Barclays.

Instead the strategic rationale for the joint venture appears to be around creating a common interoperable infrastructure platform, and also gaining economies of scale.

With initial products already launched by O2 and Orange, the next announcement to look out for is the retail proposition from Vodafone.




Visa adds mobile payment and banking capabilities, as Google and MNOs launch contactless payment services

This week Visa Inc added significant incremental mobile payment and banking capabilities – acquiring Fundamo, a mobile money transfer software company and announcing a five year deal with Monitise.

The Fundamo deal is designed to bolster Visa’s position in developing markets where the mobile operators are increasingly able to leverage the lack of a traditional banking infrastructure and their customers’ trust into providing ‘banking for the unbanked’ (or at least mobile enable payment and money transfer). In contrast, Monitise provides a sophisticated platform and links to the banking ecosystem that enables banks in the developed world to provide mobile banking solutions. See this recent post on the launch of the  Monitise sponsored Future Foundation’s report on their research into consumer adoption of mobile banking for more background on why adoption rates are likely to increase over the near future.

Visa’s announcement follows Google’s recent announcement of its (so far available only in the US) mobile wallet,  which will exploit NFC technology in the current generation of android smartphones to enable users to use their phone to make payments. The announced functionality seems similar to that provided by Orange / Barclays in the UK, shortly to feature in a TV ad.

I have been trying to use contactless payment wherever possible, but judging by the blank looks  from retail staff when I try to use it to buy a coffee it is clearly in the very early stages of adoption, and is still not a familiar technology.

Mobile banking and payment: what consumers really want?

Mobile banking and payment is a recurrent theme for this blog.

I have previously posted on rumours that the iPhone 5 might contain NFC technology, and mused on the possibilities unlocked by the integration of mobile payments with location-based offers and services.

This week sees both the publication of the (Monitise sponsored) Future Foundation’s research on emerging trends in mobile banking and tomorrow’s launch of the UK’s first commercial NFC mobile payment service by Orange and Barclays. Meanwhile, O2 announced that it had signed up Wave Crest, FIS™, Intelligent Environments and Visa Europe to enable its mobile wallet launch, following its earlier announcement that it was applying for e-money authorisation in its own right.

I was lucky enough to attend the Future Foundation’s launch event, presided over by Barry Clark. The attendees were more drawn more from the world of the traditional banks and payment institutions than the mobile ecosystem, but in contrast to the nascent mobile NFC payment products what struck me was that mobile banking is here, and that the debate has moved on from ‘if’, to ‘how fast?’. One common denominator between the traditional payment and mobile worlds was that both mobile banking and mobile payment were both enabled by increasing smartphone penetration (although another key enabler, not addressed by the Future Foundation’s work, although a key complement to smartphone penetration, was the availability and speed of mobile broadband).

The research illuminated the debate around ‘how fast’ with some evidence based insights into consumer behaviour. The first was that the recession had made controlling the household budget a task that made people feel good about themselves. The availability and always-on nature of mobile banking helped consumers to do something that they wanted to do, and that led to both adoption and advocacy of mobile banking products. The second was that mobile banking enabled people to fill time that would have otherwise have been wasted – what the Future Foundation called ‘smart boredom’.

Moving to Orange and O2’s announcements, the research also explored consumer attitudes towards adoption of mobile payment. Encouragingly for the emerging mobile payment services, 70% of those already using mobile banking are interested in using their handsets to pay for goods and services.

I intend to go to a shop to see if I can play with the technology on the Orange launch tomorrow. Initially the service will only be available on one handset, the Samsung Tocco Lite, and requires users to have a Barclays or Orange card. My feeling is that we will look back on this product in years to come with the same sense of ‘how far things have come’ that we have now when we look back on Gordon Gekko’s cellphone from the 1980s, but a first is always exciting. The O2 announcement is short on detail, but long on ambition, explaining future capabilities for their mobile wallet will include ‘m-commerce, airtime top ups, contactless / NFC payments and peer-to-peer payments.’

Lenders over-exposed to real estate move into TMT

I was lucky enough to chair Olswang’s semi-annual CPD catch-up day for in-house lawyers today. It was a very interesting set of talks (for those who are interested I commented using twitter, see: #olswangcpd), which covered a wide range of topics:

Session Speaker

Employment update: the latest red tape changes and other hot topics
(Daniel Aherne, Partner, Employment)

Daniel Aherne

Click for Slides

Commercial tax update post Finance Bill 2011
(Natalie Coope, Senior Associate, Tax)

Natalie Coope

Click for Slides

Dispute resolution: What are my options – which one should I choose?
(Anna Caddick, Associate, Commercial Litigation)

Anna Caddick

Click for Slides

Bribery Act 2010 – When? What? Why?  A practical look at what businesses need to do to comply
(Steven Corney, Partner and Oliver Gayner, Associate, Commercial Litigation)

Steven Corney
Oliver Gayner

Click for Slides
Click for Practice Note

Hot topics for borrowers: what increased regulation means for you (including the cost of borrowing, Basel III and accounting for leases)
(Charles Kerrigan, Partner and Jane Innes-Jones, Associate, Finance Group)

Charles Kerrigan
Jane Innes-Jones

Click for Slides

Social media marketing and the law: an overview of the relevant legal principles and risks,  including the new ASA CAP Code provisions effective from 1 March 2011
(Ashley Hurst, Senior Associate, Media Litigation)

Ashley Hurst Click for Slides

Commercial boilerplate quiz:  a practical look at recent case law developments and how these impact on day to day drafting
(Rob Bratby, Partner and Claire Walker, Head of Commercial Know How, MCT)

Rob Bratby
Claire Walker

Click for Slides
Click for Guide

Convergence: does it add up?  Highlights from Olswang’s 2011 Convergence Survey
(John Enser, Partner, MCT)

John Enser

Olswang Convergence Survey 2011

Rather than attempt to summarise everything, I thought I’d pull out from the morning a couple of take-away issues that impact telecoms and technology.

The first was the observation that as banks were diversifying their lending books that some banks with historic over-exposure to real-estate were nevertheless open for business to borrowers from the TMT sector. The second was the impact of the extension of the CAP code to social media – the full impact of which has yet to play out. The final thought was the continued life of linear TV programming – isn’t it interesting that although technology may enable us to watch whatever we like, whenever we like, human psychology still prefers watching programmes with friends so you have someone to chat to?

Premium rate regulation extended across the value chain from 1 September 2011

News item topics are like buses – nothing happens for weeks or months, then everything happens at once. Following yesterday’s publication of the Phonepayplus annual plan and a market study, today Ofcom approved Phonepayplus’ 12th edition of its Code of Practice, which will become effective from 1 September 2011.

For those not familiar with UK premium rate regulation, Phonepayplus is a slightly odd organisation. At a very top level it regulates the content and marketing of premium rate services. It started life in the 1980s as a self-regulatory organisation (ICSTIS) which was only given statutory backing in 2003. When operating as a self-regulatory body it could only operate through network operator applied sanctions – in essence withholding of money or ceasing service provision. Over time Phonepayplus has increasingly applied regulation directly, and one of the key changes from September is to continue that trend by directly applying the new Code to those providing or marketing premium rate services, whilst extending existing network operator due diligence requirements (which in theory should already pass down the value through contractual mechanisms) directly to various intermediaries not currently directly covered.

The new Code will also extend the scope of registration requirements, streamline certain investigation and sanction processes, and require PRS service providers to have effective complaints procedures and take measures to minimise ‘bill shock’.

Phonepayplus publishes market trends report and 2011/12 plan

Phonepayplus, the UK’s premium rate services regulator, has today published:

Report on Emerging Trends in the Premium Rate Services Market

Phonepayplus commissioned the report from Analysys Mason and deals with services which are billed via a consumer’s telephone bill.

The report splits the premium rate services market into various market categories and segments including:

  • information (directory inquiries and general information);
  • calling services (e.g. reverse charge or international call routing);
  • entertainment (adult, competitions and quizzes, voting and participation TV/radio, flirt/chat/date, gambling and lotteries, games, astrology/tarot/psychic, other); 
  • personalisation and gifts (mobile personalisation such as ringtones and graphics, virtual gifts); and
  • payments (charity donations, payments for non-phone based content and services).

The report estimates the market size at £816 million with entertainment the largest category worth £428 million, driven by growth in gambling, participation TV, and flirt / chat lines segments, with other categories and segments flat or declining.

Outside the growth segments, the report identifies a number of factors which are contributing to revenue stagnation or decline:

  • service delivery becoming platform agnostic, so users need not use their phones to access content or services;
  • greater availability of free information and content both user generated content and ad-funded content;
  • greater internet access as smartphone penetration increases;
  • migration of services and interaction to social networks which premium rate services do not currently integrate well with;
  • increasing diversity of payment methods:  a topic covered in detail elsewhere on this blog, but lower transaction costs in other payment methods is driving migration away from premium rate services as a payment method.

The largest single segment is directory inquiries, worth an estimated £206 million which was the second most frequently used service segment (after competitions and quizzes). Adult services remain a significant revenue generator at £129 million, but are used by a relatively small group of (presumably more frequent) consumers.

TV or radio advert calls to action were the biggest demand generators, followed by web advertising. App stores, QR codes and social networks are new, relatively small, but growing discovery methods.

Issues important to consumers include:

  • accurate price information;  and
  • user privacy.

Phonepayplus plan and budget 2010/11

The annual plan sets out Phonepayplus’ priorities for the year. These include:

  • successful implementation of new Code of Practice and industry Registration Scheme;
  • supporting implementation of the results of Ofcom’s Non-Geographic Number Review;
  • launching improved ‘Number Checker’ consumer information service;
  • developing guidance in emerging areas such as in-app billing; virtual currency and PRS on social networks;
  • reviewing success of 0871/2/3 regulation and measures brough in following 2009 mobile review; and
  • driving internal efficiencies.