By Dung Phan
Ten years ago, one used to have to drive a long way to a store just to rent movies. Just five years later, that concept was already been consigned to history.
Today, we think of moving toward a “cash-lite society”, as the interoperability of mobile payment platforms enables customers to send money across network boundaries – just like sending SMSs on mobile phones.
Superficially, platform-level interoperability means that two or more mobile money providers interconnect their technical platforms, to allow a customer of one service to send money from their mobile wallet/e-wallet to another customer of yet another service.
These providers are not necessarily mobile network operators, but could also be banks, merchants or small retailers. To put interoperability into perspective, just imagine that you cannot withdraw money from ATMs run by a different bank from your own, or that you cannot call or message your friends and colleagues because they use a different mobile network operator (MNO). Even being charged at higher rates is annoying enough.
For end users, interoperability means the convenience and flexibility. It implies cost sharing; hence services are delivered at lower costs to consumers. In other words, interoperability is favored because it promotes consumer rights. Now, imagine you can easily use your mobile money in your e-wallet to pay your baby sitters, personal trainers, cleaners and even street vendors at very low cost.
Of course, when there are more customers who get involved in this mobile financial service market, the overall number of transactions and velocity of money will be expected to increase. Transaction volumes in any network are proportional to and driven by interoperability possible between customers. The operators therefore can capitalise on the market’s potentials.
The development of interoperability is also aligned with the reduction in using cash and fostering financial inclusion. Platform-level interoperability can create a compelling network effect that helps attract consumers unaccustomed to making electronic transactions into a world in which their friends, employers, merchants are all able to make these payments cheaply, safely and quickly.
Therefore, once more people have access to formal, electronic financial services, it is more likely to reduce the use of cash. Equally, high levels of financial inclusion are much more difficult to achieve in a cash-dependent financial system because the costs of carrying and managing cash are likely to make formal transactions unaffordable.
What is the future of interoperability in ASEAN?
Change is already happening as many MNOs start to join hands in a boost to interoperability. In fact, Indonesia is the first large market in the world adopting mobile payment interoperability. In May 2013, Indonesia’s three leading MNOs, Telkomsel, Indosat & XL, made a pioneering move to allow customers to seamlessly transfer funds across networks.
Back to 2012, each of the three operators had established payments systems on their own. But in terms of geography, isolated payment platforms find it difficult to have enough reach to boost significant usage. The two MNOs (XL and Indosat) found an agreement and then invited the largest provider Telkomsel to join the collaboration which was eventually finalized in only six months.
After implementing interoperability, the operators have made bold predictions that 52 million mobile money users will transact volumes of US$42 billion and generate service revenues of almost $2 billion by 2017.
Following the footsteps of MNOs in Indonesia, interoperability came to Africa in 2014 when Tigo, Airtel and Zantel made a pioneering move to interoperability agreement in Tanzania. Last February, Vodacom joined this partnership to make Tanzania become the first African market with full interoperability for person-to-person transactions. According to Reuters, 16 million mobile financial users transact the equivalent of more than 50% of GDP each month in Tanzania.
Last year, Thailand’s three leading mobile phone operators AIS, dtac, and TrueMove H started to launch an e-wallet for mobile devices which allows transfers across their three applications – AIS mPAY, Jaew Wallet, and Wallet by TrueMoney.
Not too long ago, PayMaya Philippines marked the first successful interoperability trial between two mobile money providers in Southeast Asia. With the collaboration between PayMaya and Globe GCash, customers now do not need a credit card or a bank account to make financial transactions. This can be regarded as a milestone for the development of interoperability in the ASEAN region.
Reports in 2015 indicate that ASEAN has the potential to enter the top five digital economies in the world by 2025. Especially, implementation of a radical digital agenda could add $1 trillion to the region’s GDP over the next 10 years. As a result, it is more likely to develop interoperability as ASEAN needs to reduce its reliance on physical cash to enable wider and deeper participation in the digital economy. Although platform-level form is the most basic for operators to develop interoperability, at least, it is a start. The smartphone penetration in ASEAN has been growing rapidly and stayed around 35% in 2015.
With a large and youthful population increasingly equipped with smartphones, ASEAN has an opportunity to pioneer the development of interoperability, especially advanced mobile financial services. We are likely to see a number of markets jumping onto the interoperability bandwagon.