Several regions across Africa are zeroing in on what promises to be a new frontier in the fast-growing digital economy: mobile money interoperability. That means anyone in an interoperable region with a mobile money account can transact with anyone else who has an account, whether they use the same service provider or not. And when that happens, mobile money instantly becomes more useful to more people, enabling them to more easily save, borrow, and transact with all the people and institutions they need to connect with, instead of just those on their same network. When connected with banks, mobile money becomes even more valuable as people have a safe, secure place to store their assets.
As the interoperability movement grows, I believe that now is the chance to reach and nurture these “connected customers.” Across Africa and worldwide 1.7 billion people, especially those at the bottom of the economy, don’t yet have these opportunities for easy, seamless transactions. But countries and regions can take the lead in ensuring all people have more control over their finances, spending and saving on their own terms and conducting the business of their life from one central place.
One of the regions entering this frontier is West Africa. The eight countries of the West African Economic Monetary Union (WAEMU1) are building an interoperable system that will connect 110 million people to more than 125 banks, dozens of e-money issuers, and more than 600 microfinance institutions. With a common currency and a single central bank, the region has already laid the groundwork for a connected digital economy. It is on track to go live with more than 600 stakeholders by the end of next year. The work expands on early regional connectivity of cards established a decade ago, with more opportunities ahead to connect more than 55 million e-money subscribers making US$36 billion in transactions. Today in WAEMU, a person may still have to visit a utility to pay a bill or a kiosk to send money to a family member across networks. But by 2020, that person will be able transact with anyone in their market directly from their mobile phone, putting them at the center of their financial life.
I see this progress in West Africa and with similar projects across the continent as very positive signs of things to come. The sooner that governments, central banks, telcos, mobile network operators, and other players integrate their services, the sooner we can empower a wave of connected customers to transact, save, spend, innovate, and control their financial futures. When digital finance is unencumbered, people are empowered. With a simple mobile device in hand, the connected customer can transact constantly, in even the smallest monetary increments, growing the economy that she now has access to like never before.
Of course, it takes time and careful coordination to achieve interoperability, as the leaders and stakeholders of the WAEMU project can attest. These challenges are why my work with the Bill & Melinda Gates Foundation is focused on building tangible, scalable solutions and helping stakeholders realise the immense opportunity they have in driving financial inclusion if we all work together.
A recent report in The Economist highlights the data security and other technical challenges the private sector in particular will face as it serves the unbanked. Until recently, there were only two ways to create an interoperable system. One is that governments step in to build a new digital system to sync all networks. The Central Bank of West African States has been facilitating this type of effort for WAEMU as it empowers stakeholders to define their own technical specifications while ensuring a more secure, streamlined path to broadening financial inclusion. The other option is that each mobile money provider makes individual connections with the other providers, which requires special considerations around efficiency and security. Both options can be time consuming, expensive, and prohibitive, especially as industry players, the government, or a combination of both must unite myriad payment systems.
New open-source code and other public resources now enable markets to achieve interoperability more quickly and efficiently than ever before, but coordination among stakeholders is paramount. Public and private sectors must collaborate to shape systems that empower customers, providers, and innovators to engage more deeply than ever in their markets.
It’s not easy, but it’s vitally important, and the untapped potential is enormous. In just the next seven years, the McKinsey Global Institute estimates that widespread adoption and use of mobile money could increase the GDPs of all emerging economies by 6 percent, or a total of US$3.7 trillion.
Today, more markets than ever can lead the way in making interoperability accessible and in driving the next wave of on-demand transportation, subscription, or other innovative services that will keep customers empowered and the businesses that serve them thriving.
*Kosta Peric is the deputy director of the Financial Services for the Poor programme at the Bill & Melinda Gates Foundation.
July 20, 2018