Mobile Money for the Unbanked by Arunjay Katakam for GSMA.com

Smartphones, internet players and mobile payments:  Opportunities and challenges for mobile money in emerging markets

What have learned from mature markets?

In recent months, we’ve been hearing a lot about technology companies launching mobile payments on smartphones in the US. In October 2014 we saw the launch ofApple Pay. In February 2015, Google announced its acquisition of Softcard—a joint-venture between US mobile operators formerly known as ISIS, who had laid off 60 staff in January 2015—a move many commentators believe is in response to Apple Pay. In addition to gaining Softcard’s back-end technology and intellectual property, Google Wallet / Android Pay will soon be preloaded on all phones sold by AT&T, T-Mobile, and Verizon in the United States. Softcard isn’t the only mobile operator joint venture offering payments that has seen a change. For example, both WEVE (a joint-venture between UK mobile operators) and Buyster (its French equivalent) have abandoned their plans to launch mobile payments in 2014.

Integrating mobile payments into existing payment networks

Over the last four years, the battle for how mobile payments integrated into existing payment networks has been brewing. With Apple using their own secured element, and HCE (Host Card Emulation) now a feature on Android, NFC phones can be securely authenticated without using the SIM card. Based on recent developments, it is clear that device manufactures (Apple and Samsung) or operating system players (Google) are in an advantageous position in developed markets. Whilst this battle has had no impact on mobile money it should be seen as a warning by mobile operators in emerging markets.

In emerging markets, smartphone penetration is growing, opening the market to new players

Whilst smartphone adoption in Sub-Saharan Africa is 12.5% [1], a lot of early adopters and influencers already have smartphones.


The subsequent battle is for the next generation digital payment networks. Increasing levels of smartphone adoption are beginning to pave the way for non-MNOs (internet giants or start-ups) to offer mobile payments using apps (see figure above). For instance, 62% of mobile money providers already offer a smartphone application as a channel to access their platform [2]. Social media apps (SnapChat, Line, WeChat, Twitter, Facebook/WhatsApp and Square) have started to dabble in mobile payments. Expect to see many more announcements this year.

So far five messaging services have gone beyond chat and introduced payment services. These are KakaoTalk, Line, WeChat, SnapChat and Facebook messenger.


Mobile operators have a first move advantage and key assets

Without a doubt, mobile operators have made a fast start. In December 2014, there were 299 million registered and 103 million active mobile money accounts [3].  However, given mobile money is primarily a distribution business, agent networks remain a key asset for mobile operators,  and it remains to be seen how long it will be before that is disrupted. In many markets, regulators are removing exclusivity clauses from agent contracts allowing new entrants to piggy back on existing agent networks.

Mobile operators need to interoperate locally and globally fast

Most mobile money services operate as independent schemes with little or no ability to transact with other mobile money services. As a result, the value they provide is severely limited compared to other services than operate without geographical constraints. Imagine if voice calls didn’t interoperate? How useful would it be if you could only make calls to people on your own network? By interoperating their mobile money services, operators can maintain their mobile money leadership position by building out by far the largest cross-platform global digital payment network, and in doing so combat the threat posed by internet players, who already have large global networks and their sights set on taking over mobile payments.

Pricing is the final piece of the puzzle

Both banks and internet players use asymmetric business models. Banks in general do not charge for deposits or withdrawals and generate revenue by intermediating funds (lending, etc.). Similarly, internet players generate their revenue by selling software or advertising. However, mobile operators also enjoy indirect benefits, such as customer retention, increase spend on their mobile network and savings in airtime distribution costs, which will allow them to compete on price.

That said, interoperability is likely to gain faster take-up from customers if operators price cross-network transfers at the same price as within their network, helping to create the network effect they need.


[1], [2] and [3]: See 2014 State of the Industry for Mobile Financial Services


Source: http://www.gsma.com/mobilefordevelopment/smartphones-internet-players-and-mobile-payments-opportunities-and-challenges-for-mobile-money-in-emerging-markets

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Visa, MasterCard to Roll Out New Cybersecurity Features by Chelsey Dulaney for The Walls Street Journel

Updated Feb. 13, 2015 2:46 p.m. ET

Visa Inc. and MasterCard Inc. are taking long-awaited next steps to ramp up security of customer data as concerns over cyberattacks continue to mount.

The plans, unveiled separately by the world’s largest payments networks, include the expansion of tokenization—a way to obfuscate a customer’s information during a transaction—and biometrics verification.

The announcements come as President Barack Obama and a large group of government officials descended Friday on Stanford University to meet with top executives from a number of industries, including Apple Inc. Chief Executive Tim Cook , for a first-of-its kind cybersecurity “summit,” part of an effort to combat future cyberattacks.

Concerns over cybersecurity are growing as high-profile data breaches have hit nearly every corner of corporate America—from retailers like Target Corp. , to Sony Pictures Entertainment, to J.P. Morgan Chase & Co., to most recently health insurer Anthem Inc.

“Part of their role, part of what they charge for, is setting the rules of the road and enforcing them,” said Mr. Luria. “What hasn’t happened yet is that there’s been very little blame put at Visa and Mastercard’s doorstep.”

Visa said it would bring its Visa Token Service, which replaces cardholder information such as account numbers and expiration dates with a unique series of numbers that validates the customer’s identity, to device manufacturers beyond Apple. Visa launched the service on Apple devices in October, allowing users to wave an iPhone in front of a wireless reader and complete the transaction with a fingerprint.

Visa said it also plans to tokenize online transactions for retailers that use its Visa Checkout service, including Gap Inc. and Orbitz Worldwide Inc.

By getting rid of the sensitive card information, banks and merchants can leave hackers with nothing of value to steal if they break into their computer servers.

“Removing card account numbers from the processing and storage of payments represents one of the most innovative and promising technologies we’ve seen in decades,” said Visa Chief Executive Charlie Scharf in a news release.

MasterCard, meanwhile, said it plans to spend more than $20 million on its efforts, which include a pilot program to be rolled out later this year that will use a combination of biometrics, such as facial and voice recognition and fingerprint matching, to authenticate and verify transactions.

MasterCard said it would also continue to push forward with the rollout of chip cards.

The company teamed up with Visa last year to form a new group to speed up the adoption of technology aimed at improving credit- and debit-card security, including the use of chip technology in credit and debit cards. In chip technology, which many countries have already implemented, the magnetic strip found in credit and debit cards is replaced by a smart chip that stores customer data.

U.S. banks and retailers have dragged their feet on implementing new payment systems because it requires significant investments in new payment technologies.

It is estimated that half of all cards will be chip-enabled by the end of the year, according to MasterCard. Both Visa and MasterCard had originally set an October 2015 deadline for retailers to adopt the chip technology, known as EMV.

Still, Mr. Luria questioned whether the initiatives would be enough.

“Nobody’s really come up with a foolproof way to safeguard consumer information,” he said. “At the end of the day, it’s the retailer, the bank that has to keep it secure. [Visa and MasterCard] can only do so much to set the rules, enforce them.”

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

Source: http://www.wsj.com/article_email/visa-mastercard-to-roll-out-new-cybersecurity-features-1423834542-lMyQjAxMTA1ODE0NTAxNTUxWj

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Visa and MasterCard Cut Interchange Fees to 1.5% in Canada by Bloomberg News

Visa Inc. and MasterCard Inc., facing pressure from Canada’s federal government, agreed to lower credit-card transaction fees for the nation’s merchants by about 10 percent.

The two payment networks submitted proposals to reduce their average effective interchange rate in Canada to 1.5 percent on consumer credit cards, the finance department said in a statement posted on its website today. The rate will stand for five years and take effect no later than April, it said.

Prime Minister Stephen Harper’s Conservative government, which has been rolling out consumer-focused policies ahead of next year’s federal election, pledged in its 2014 budget to take additional measures to lower card fees for retailers, a move that would also reduce revenue for Canada’s banks. Merchant groups including the Retail Council of Canada have been the biggest advocates for government action on the fees, which the government claims are among the highest in the world.

“These commitments represent a meaningful long-term reduction in costs for merchants that should ultimately result in lower prices for consumers,” Finance Minister Joe Oliver said in the statement. “As a result of the voluntary proposals, there is no need for the government to regulate the interchange rates set by the credit card networks.”

In a separate statement, Visa said it is entering the agreement on the expectation there will be a level playing field in the industry.

“If Visa or our clients are disadvantaged as a result of entering into this undertaking, Visa reserves the right at any time to terminate or amend it,” the Foster City, California-based company said today in a statement.

Source: http://www.paymentssource.com/news/compliance/visa-and-mastercard-cut-interchange-fees-to-15-in-canada-3019602-1.html

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Alto Global Processing: Canadian Bitcoin Processor Nets $8.5 Million Round

alto global processing-Canadian-Bitcoin-Processor-Nets-8pt5-Million-RoundVogogo, a Canadian e-commerce processor based in Calgary, said last week it has secured an $8.5 million round of financing that will enable it to expand its recent success in processing bitcoin and other cryptocurrencies in Canada to the U.S. and other countries around the world. The 13-year old company said it handles $6 to $10 million in cryptocurrency-based transactions monthly and that its dedication to “[meeting] strict compliance and risk mitigation requirements of conventional banks and regulators” will help bitcoin shed any negative perception that remains.

“We had been watching Bitcoin and crypto currencies closely. As a payments company we were very intrigued by the potential of Bitcoin,” said Vogogo Co-Founder Geoff Gordon. “We watched several crypto groups enter the Canadian market, have a lot of success only to then be shut down by their bankers due to payment-related fraud and/or no compliance structure. We put the Vogogo platform in front of a few crypto groups to resounding success in Canada. We are now adjusting our platform to scale these services and we will be replicating the service in the U.S., EU and other target markets.”

Cormark Securities led the funding round with participation from Salman Partners Inc., Clarus Securities Inc., Beacon Securities Limited and Canaccord Genuity Corp.

Source: http://cardnotpresent.com/news/default.aspc?id=6234

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Alto Global Processing: Zynga Piloting Bitcoin Payments

While the value of Bitcoin has taken a hit recently as a result of action by the Chinese government to restrict its use, gamers who use the virtual-currency got a boost on Friday when it was revealed that Zynga would begin piloting Bitcoin payments. The online game developer said in a Reddit post that it is partnering with virtual currency processor BitPay to make Bitcoin payments available for some of its most popular games.

Zynga Piloting Bitcoin Payments

“In response to Bitcoin’s rise in popularity around the world, Zynga, with help from BitPay, is testing expanded payment options for players to make in-game purchases using Bitcoin,” the game publisher wrote in its post. “The Bitcoin test is only available to Zynga.com players playing FarmVille 2, CastleVille, ChefVille, CoasterVille, Hidden Chronicles, Hidden Shadows and CityVille.”

In BitPay, Zynga has partnered with a growing virtual-currency processor that reported its busiest month ever in November.


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Alto Global Processing: International e-commerce sales to triple by 2018

Sales of online goods between countries are set to triple over the next five years to be worth USD307bn. The figure, which comes from a report commissioned by PayPal, represents a jump from USD105bn this year in cross-border e-commerce between Australia, Brazil, China, Germany, the UK and the US.

The report found that last year a quarter of all marketplace revenue and more than half of payments processed by PayPal came from international transactions. With figures set to rise, PayPal has been upping its cross boarder promotion in emerging markets, focussing on China as a particular area for further growth.

The US was the top exporter, with 45% of those surveyed saying they bought goods from there, followed by the UK with 37%. China was the biggest destination for US goods, with 84% of Chinese online consumers asked buying from the region.  Clothes and shoes are expected to remain the most popular items, followed by beauty products and consumer electronics devices.

Source: http://www.paymenteye.com/2013/07/24/international_e-commerce_sales_to_triple_by_2018/?goback=%2Egde_2196752_member_260551702#%2EUe_PK42ceuI%3Futm_source%3Dlinkedin%26utm_medium%3Dinsight%26utm_campaign%3Dincrease_traffic

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