Smart rolls out mobile banking to 50 remote rural communities

In the Philippines Smart Communications (Smart) has rolled out its mobile commerce services to close to 50 remote rural communities under its Island Activations Program (IAP).
IAP is an initiative which aims to provide mobile based financial services to remote communities that have limited or no access to banking services.

Smart said that it has set up Smart Money Centers in remote, underserved communities, to spur entrepreneurial opportunities and economic growth.

These Smart Money Centers will allow island-based micro-finance institutions (MFIs) to perform money transfers using Smart Money--the world’s first reloadable payment card linked to a mobile phone.

Aside from mobile money transfers, the IAP enables island residents to perform e-load purchases, bill and utility payments and other micro purchases, all via mobile.

The program was piloted in 2008 in Polillo Island, Quezon Province when the island’s financial channels were cut off.

The expansion of this program is being done in partnership with Seed Finance, a credit provider to MFIs and small enterprises and several MFI Network Organizations like MFI Councils in Mindanao.

Through Smart Money, MFIs are able to provide mobile-based financial services to about 200,000 households or close to 1.8 million Filipinos who inhabit the remote islands activated by Smart.

"The IAP has helped us position ourselves as a provider of enabling platforms that will help MFIs better serve their clients in even the most remote communities," Danilo Mojica, Smart Wireless Consumer Division head said.

He said that they are hopeful that through the Smart Money-powered mobile phone, unbanked and underbanked Filipinos may gain access to funds and opportunities that will help improve the way they live.

A recent study conducted by McKinsey & Co. for GSMA and CGAP stated that while mobile penetration in the Philippines is about 80 percent, banking penetration only stands at 35 percent, thus leaving 21 million mobile subscribers without bank accounts.

Smart’s share of the mobile market is over 50 percent, with 45.3 million subscribers on its network as of June 2010.

Ghanaian cheque codeline clearing system celebrates first birthday

Chief Executive of Ghana Interbank Payment and Settlement System (GhIPSS), Fred France, speaking in an interview with the Ghana News Agency, noted that the Cheque Codeline Clearing system (CCC) introduced in September 2009 has enhanced customer service delivery.

Mr France said GhIPSS and the banks are working to perfect the art so that in the near future cheques would be cleared within 24 hours. The CCC was initially introduced in the Accra-Tema Settlement Zone, before it was extended nationwide.

"Today you pay in a cheque and in a matter of two days, your account is credited and that helps one to plan," Mr France said, adding that it would have been unacceptable for businesses or individuals to wait for a week or two just to clear a cheque.

Mr France assured the pubic that the CCC was robust and secured and encouraged them to patronize cheques to reduce the pressure on the cedi notes and save the country the huge sums of money used to replace the worn out ones.

He thanked the banks as well as the savings and loans companies for their co-operation and urged them to do more to ensure a total transformation of the financial sector.

He said GhIPSS would continue to roll out products and services to ensure that the financial sector is transformed in line with modern trends globally.

GhIPSS was established by the Bank of Ghana to help modernize the payment system. It has so far introduced the e-zwich and CCC and will soon introduce the Automated Clearing House.

Nigerian Central Bank encourages seamless central switch payment system

The directive by the Central Bank of Nigeria (CBN) that banks should migrate to the Nigerian Central Switch has elicited reactions from operators in the sector. According to them, the directive will affect the business of certain existing payment operators.

In a circular titled ‘Interoperability and Interconnectivity of the Payment System Infrastructure in Nigeria' to all banks, switching companies, and other parties in the Nigerian payment system, the Central Bank has directed that all automated teller machines (ATM) and point of sale (POS) terminals should be configured to accept and process all payment card schemes and other electronic payment instruments that are acceptable in Nigeria.

"The deadline for compliance is December 1, 2010," the circular added. The aim, according to the CBN, is to achieve an effective and robust payment system in line with best practice.

The CBN maintains that the Nigerian Central Switch (NCS) system exists to address the issue of interconnectivity and is insisting that private switches shall not connect directly to one another.

All banks have been instructed to adjust "their switching systems connect to the Nigerian central switch and only one other private switch of their choice as determined by the type of business they are involved in. All participants with multiple connections to private switches have been given until December 1, 2010 to terminate multiple connections.

Many seen this directive as a policy somersault. A number of operators who spoke off the record said the directive was contrary to expectations in a free market economy.

"Nothing I am going to say about this matter is going to be complimentary about the CBN," said a staff member of one of the new switching companies.

"A few years after licensing more switching companies and collecting huge sums from them, you now create another company that all other switching companies must connect to."

Another industry operator said the NCS does not have the technology to play the role that the Central Bank is thrusting upon it.

"Right now, even the central switch is not yet in full operation. They do not have the capacity and they are yet to fully take off. Now, how can the Central Bank lump every payment system operator into a central switch, when our operations are different. Each one has its own business model with its own area of specialization."

He said the directive will end up limiting the options available to consumers.

However, Evans Woherem, executive director, operations and IT for Unity Bank, said Nigeria was in need of a central switching system in order to enhance interoperability in the payment system.

"I think it is a good thing because of the need for proper convergence. There was that need for proper interconnectivity and the way the country chose to do it was through the NIBSS (Nigeria Inter-Bank Settlement System)," he said.

Evans Woherem, who was the former chairman of Interswitch, said there was nothing wrong if the CBN reverses an earlier decision, so long as it was for the common good.

"I think it is understandable that you might proceed on a particular path only to realize that you ought to have done it differently. l think it is okay. It shows that we are making progress," he said.

Visa starts subway tickets mobile payments tests

Visa has started participating in a test program that will enable passengers pay for some New York subway tickets by tapping a credit card or a smartphone at the turnstile.

The program, which was initially begun by MasterCard and exclusive to MasterCard users, has now been opened to Visa.

The program allows passengers to buy a subway, bus or train ticket by tapping or waving their credit or debit card, or a sticker attached to the back of their phone, over a turnstile electronic reader, instead of buying a separate ticket.

It was announced last week that consumers will get an ability to use their Visa cards, or in certain cases their smartphones, to buy some subway, train or bus tickets in New York and New Jersey.

Visa has also commenced a separate test of contactless transit payments in Los Angeles. Under this program, passengers will have to purchase special prepaid debit cards, which they can tap to ride a subway or bus, and which can also be used to buy goods or services from other retailers.

New study examines the cost of remittances

How much remittances cost depends on the number of migrants, the cost of living and competition among remittance service providers, according to a new working paper by Thorsten Beck and Maria Soledad Martinez Peria.

Looking at average costs across all types of financial institutions, the authors find that costs are lower in areas with more immigrants, lower incomes and more competitive banking sectors. By contrast, remittance costs are higher in areas with higher incomes and greater bank participation in the remittance market.

The study finds that costs don't vary much across all banks and money transfer operators. One exception is Western Union, one of the largest money-transfer operators, whose prices don't seem sensitive to competition.

The study draws on data covering 119 pairs of remittance-sending and -receiving countries from the Remittance Prices Worldwide database collected by the World Bank Payment Systems Group.

The findings are important to policy makers, because remittances are a very significant source of financing for developing countries. Moreover, in 2009, heads of state at the G8 Summit in L'Aquila, Italy pledged to reduce the average price of remittances from 10 to 5 percent within five years.

To download the study please click HERE.

M-PESA mobile payments wins “The Economist” 2010 Social and Economic Innovation Award

Based on the success of mobile money-transfer services in Kenya and other developing countries, “The Economist” has announced that Nick Hughes and Susie Lonie will jointly receive the newspaer’s Social and Economic award at its forthcoming Innovation Awards ceremony for their outstanding contributions in this field. Nick Hughes (Signal Point Partners) and Susie Lonie (Vodacom South Africa) started a mobile money initiative in Kenya in 2005 called M-PESA, which is a joint venture between Safaricom, the leading mobile telecommunications company in Kenya, and Vodafone.

The M-PESA service allows people to transfer money, pay bills and save using a mobile phone, without a bank account. The service is designed to work on even the most basic handset and is secure, quick and simple to use. The scheme became widely available in Kenya in 2007, has since been deployed in Tanzania and Afghanistan and has recently been launched in South Africa. It has also inspired a host of similar services, in Africa and beyond.

Commenting on the award decision by a panel of independent judges, Tom Standage, Digital Editor at The Economist said, “Since its launch in early 2007, M-PESA has attracted over 12 million users, or nearly a third of the Kenyan population. M-PESA has changed the way money moves around in Kenya and has made a big difference to many people’s lives, offering them a safe, secure and low-cost way of transferring money, paying bills, receiving wages and running small businesses. By contrast, there are only 750 banking outlets and fewer than five million bank accounts in the entire country. The judges are recognizing Nick Hughes and Susie Lonie for their innovative and successful scheme that has great potential to increase financial inclusion and drive economic activity. The reach and influence of their product has been extraordinary, not just within Kenya but also beyond, as operators have been inspired by M-PESA’s success and launched similar services.”

FSA sets out best practice recommendations regarding contact with the media

The UK’s Financial Services Authority) (FSA) in the September edition of “Market Watch” has raised concerns regarding leaks.

They state that over the past three years they conducted two examinations concerning leaks:

1. During 2008 to 2010 they carried out a number of intensive enquiries into potential disclosures of inside information to the media ahead of certain announcements. These leak enquiries were conducted with the aim of identifying suspicious contact between insiders to a corporate transaction, and the media. This work also included discussions with regulated firms about their policies governing such contact. 
2. They continued their thematic work assessing regulated firms’ systems and controls on handling leaks.

In the “Market Watch” article they set out the background and present the key findings on both work streams. They also give a list of best practice recommendations regarding contact with the media, as they believe improvement is necessary. They appreciate that several recommendations that they have made could result in significant changes to current media handling practices at regulated firms. However, it is their belief that these changes, particularly those concerning restricting/recording contact between non-media-relations personnel and the media, could substantially benefit most firms. As an example, they indicate that these controls could help exonerate the firm and their staff early on in any leak enquiries conducted by their clients, regulators or the firm itself.

Leaks ahead of announcements threaten market integrity. Strategic leaks – designed to be advantageous to a party to a transaction – are particularly damaging to market confidence and do not serve shareholders’ or investors’ wider interests. It is therefore in all interests to ensure that senior management of all organizations who handle inside information establish (and are seen to establish) a much stricter culture that firmly and actively discourages leaks.

The FSA indicate that they will continue to actively monitor for leaks of inside information and conduct enquiries into these with the aim of identifying contact between the media and individuals at regulated/unregulated firms or issuers, and to take appropriate action. If no improvement is noticed in the levels of leaking in UK markets, they may consider rule changes. They will also take action where they deem unacceptable practices have occurred or the relevant existing systems and controls requirements applying to regulated firms and issuers have been breached.

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