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Mobile networks holding back financial inclusion

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Out of 7.5 billion mobile users, two billion adults worldwide are unbanked. Although banking institutions offer solutions to bridge the gap, little impact is being achieved on the number of unbanked, says BRIAN RICHARDSON, founder of WIZZIT.

Financial inclusion is a key enabler of sustainable economic and social development. Initiatives by the United Nations and the World Bank Group continue to drive financial inclusion and it has become a priority for regulators and policymakers worldwide.

Out of 7.5 billion people and a mobile phone in almost every pocket, two billion adults worldwide are unbanked. Financial service providers (FSPs), FinTech’s and mobile network operators (MNOs) offer superior solutions to bridge the gap. However, despite the size, reach and power of banks and MNOs, little impact is being achieved on the number of unbanked.

Regulation is often blamed as a major barrier. What doesn’t help either are statements from European Central Bank executive board member Yves Mersch, who has given a spirited defence of cash, praising its ability to facilitate privacy, equality and security, insisting there is “no viable alternative”.

Digitalisation is the key to financial inclusion. Basic transactional accounts should be a birth right, together with a concerted effort by governments to remove cash and to support every effort towards financial inclusion. Illegal and illicit activities such as money laundering and funding of terrorist activities are facilitated predominantly through cash. The sooner we accept this fact, the better. What is urgently required is the removal of cash and the enforcement of policies that promote simple and seamless access to bank accounts for all. This provides full audit trails of every single transaction.

MNO’s have the reach and understand the power of marketing. Banks understand compliance and systems. As a leading global FinTech, WIZZIT International works effectively with all leading MNOs and banks in providing digital financial services. However, instead of embracing mutually beneficial partnerships, MNOs in some countries refuse to give banks access to their Unstructured Supplementary Service Data or USSD gateways.

The bulk of mobile phones in Africa are feature phones and the USSD channel provides functionality that is quick, safe and easily accessible from all mobile phones. For the vast majority, USSD will remain the clear channel of choice for many years to come. To date, it is the most successfully integrated and widely adopted technology for financial services in emerging markets and the lower end of the market.

MNOs in some countries seem to think that by denying banks access, they can create a bigger market for their own financial service offerings. This is most evident in countries like Angola and the Democratic Republic of Congo where the unbanked populations are 71% and 89% respectively. This abuse of power is tantamount to anti-competitive behaviour and is creating a major barrier to financial inclusion, something communication regulators should be aware of. The lack of progress in these and other emerging markets may well be the result of the prejudiced practices of Telcos gatekeeping access to the USSD gateway.

As smart phones become more affordable, so will the popularity of app-powered platforms as a channel for financial services. However, until there is a dramatic decrease in the cost of smart phones, the number of feature phones will remain at around 70%. USSD is still therefore critically important and banks will depend on MNOs for access – unless as has happened in some markets, banks get their own MNVO licence and control their own destiny.

A bigger pie or a bigger slice? 

The boundaries between the offerings of banks and MNOs are becoming increasingly blurred – yet the playing fields are not level. In some West African countries, for example, banks are by law not allowed to charge customers for deposits to bank accounts. MNOs, however, are unaffected by these laws and have the freedom to charge for deposits into mobile wallets.

Starting out as a convenient way to buy airtime and send money to family and friends, the financial services offering of MNOs has broadened to include offerings such as savings and loans. This is taking the banks on directly.

It will be argued that banks cannot be all things to all people and effectively service all segments of the market. It will also be argued that bank regulators are not there to protect banks from innovative competition from non-banks such as MNOs, Apple, Samsung, Google, Amazon, Pay Pal and Alipay. However, where governments and global agencies are putting enormous pressure on banks to drive financial inclusion, this is made increasingly difficult where banks are denied access to channels such as USSD.

To collaborate or not to collaborate

The Mobile Banking industry globally started some 12 years ago with WIZZIT (South Africa), Mpesa (Kenya) and GCash (Philippines) recognised as the early pioneers. It is interesting to note that there has not been a single successful partnership between banks and MNOs despite numerous attempts.

Perhaps a truly strategic collaborative model is still a ways off and competition between banks and MNOs is here to stay – at least for the foreseeable future. The question is whether or not this competition is supporting global efforts on financial inclusion through digital financial services.

The way forward

Digitisation and mobile penetration will continue to drive the growing trend of MNOs and FSPs infiltrating each other’s space to gain traction in new services. However, these rapidly blurring lines are bound to spark territorial claims regarding customers. This could impede financial inclusion if it lacks the required consumer protection measures and regulations.

Governments must regulate competitive behaviour amongst all role players and promote cross-sector collaboration towards financial inclusion. It is essential for countries to enforce policies that promote responsible financial access, financial capability, innovative products and delivery mechanisms. Any initiative that promotes financial inclusion should be praised and much work needs to be done.

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Money talks and electronic gaming evolves

Computer gaming has evolved dramatically in the last two years, as it follows the money, writes ARTHUR GOLDSTUCK in the second of a two-part series.

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The clue that gaming has become big business in South Africa was delivered by a non-gaming brand. When Comic Con, an American popular culture convention that has become a mecca for comics enthusiasts, was hosted in South Arica for the first time last month, it used gaming as the major drawcard. More than 45 000 people attended.

The event and its attendance was expected to be a major dampener for the annual rAge gaming expo, which took place just weeks later. Instead, rAge saw only a marginal fall in visitor numbers. No less than 34 000 people descended on the Ticketpro Dome for the chaos of cosplay, LAN gaming, virtual reality, board gaming and new video games. 

It proved not only that there was room for more than one major gaming event, but also that a massive market exists for the sector in South Africa. And with a large market, one also found numerous gaming niches that either emerged afresh or will keep going over the years. One of these, LAN (for Local Area Network) gaming, which sees hordes of players camping out at the venue for three days to play each other on elaborate computer rigs, was back as strong as ever at rAge.

MWeb provided an 8Gbps line to the expo, to connect all these gamers, and recorded 120TB in downloads and 15Tb in uploads – a total that would have used up the entire country’s bandwidth a few years ago.

“LANs are supposed to be a thing of the past, yet we buck the trend each year,” says Michael James, senior project manager and owner of rAge. “It is more of a spectacle than a simple LAN, so I can understand.”

New phenomena, often associated with the flavour of the moment, also emerge every year.

“Fortnite is a good example this year of how we evolve,” says James. “It’s a crazy huge phenomenon and nobody was servicing the demand from a tournament point of view. So rAge and Xbox created a casual LAN tournament that anyone could enter and win a prize. I think the top 10 people got something each round.”

Read on to see how esports is starting to make an impact in gaming.

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Blockchain unpacked

Blockchain is generally associated with Bitcoin and other cryptocurrencies, but these are just the tip of the iceberg, says ESET Southern Africa.

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This technology was originally conceived in 1991, when Stuart Haber and W. Scott Stornetta described their first work on a chain of cryptographically secured blocks, but only gained notoriety in 2008, when it became popular with the arrival of Bitcoin. It is currently gaining demand in other commercial applications and its annual growth is expected to reach 51% by 2022 in numerous markets, such as those of financial institutions and the Internet of Things (IoT), according to MarketWatch.

What is blockchain?

A blockchain is a unique, consensual record that is distributed over multiple network nodes. In the case of cryptocurrencies, think of it as the accounting ledger where each transaction is recorded.

A blockchain transaction is complex and can be difficult to understand if you delve into the inner details of how it works, but the basic idea is simple to follow.

Each block stores:

–           A number of valid records or transactions.
–           Information referring to that block.
–           A link to the previous block and next block through the hash of each block—a unique code that can be thought of as the block’s fingerprint.

Accordingly, each block has a specific and immovable place within the chain, since each block contains information from the hash of the previous block. The entire chain is stored in each network node that makes up the blockchain, so an exact copy of the chain is stored in all network participants.

As new records are created, they are first verified and validated by the network nodes and then added to a new block that is linked to the chain.

How is blockchain so secure?

Being a distributed technology in which each network node stores an exact copy of the chain, the availability of the information is guaranteed at all times. So if an attacker wanted to cause a denial-of-service attack, they would have to annul all network nodes since it only takes one node to be operative for the information to be available.

Besides that, since each record is consensual, and all nodes contain the same information, it is almost impossible to alter it, ensuring its integrity. If an attacker wanted to modify the information in a blockchain, they would have to modify the entire chain in at least 51% of the nodes.

In blockchain, data is distributed across all network nodes. With no central node, all participate equally, storing, and validating all information. It is a very powerful tool for transmitting and storing information in a reliable way; a decentralised model in which the information belongs to us, since we do not need a company to provide the service.

What else can blockchain be used for?

Essentially, blockchain can be used to store any type of information that must be kept intact and remain available in a secure, decentralised and cheaper way than through intermediaries. Moreover, since the information stored is encrypted, its confidentiality can be guaranteed, as only those who have the encryption key can access it.

Use of blockchain in healthcare

Health records could be consolidated and stored in blockchain, for instance. This would mean that the medical history of each patient would be safe and, at the same time, available to each doctor authorised, regardless of the health centre where the patient was treated. Even the pharmaceutical industry could use this technology to verify medicines and prevent counterfeiting.

Use of blockchain for documents

Blockchain would also be very useful for managing digital assets and documentation. Up to now, the problem with digital is that everything is easy to copy, but Blockchain allows you to record purchases, deeds, documents, or any other type of online asset without them being falsified.

Other blockchain uses

This technology could also revolutionise the Internet of Things  (IoT) market where the challenge lies in the millions of devices connected to the internet that must be managed by the supplier companies. In a few years’ time, the centralised model won’t be able to support so many devices, not to mention the fact that many of these are not secure enough. With blockchain, devices can communicate through the network directly, safely, and reliably with no need for intermediaries.

Blockchain allows you to verify, validate, track, and store all types of information, from digital certificates, democratic voting systems, logistics and messaging services, to intelligent contracts and, of course, money and financial transactions.

Without doubt, blockchain has turned the immutable and decentralized layer the internet has always dreamed about into a reality. This technology takes reliance out of the equation and replaces it with mathematical fact.

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