India is moving cautiously into opening up the payments space to non-banks and the RBI has recently announced a pilot by the end of March 2014, to understand the technical and operational issues in cash-out by non-bank issued PPIsOne of the crucial issues that has to be addressed is interoperability amongst the various services and a look at what Indonesia has achieved gives us some insights into making a headstart here into these key concernsWhat has Indonesia done? A GSMA paper by Gunnar Camner describes the initiative taken up by the three major mobile operators to send and receive money across each other's networksWhy did they do this?
By 2012, each of the three operators - Telkomsel, Indosat and XL- had set up payments systems on their own, but in a geographically dispersed country like Indonesia, isolated payments schemes found it difficult to achieve scaleThey got together in December 2012 and in six months were able to launch an interoperable solution by March 2013.What worked for them?
To begin with, the discussions were held by the CEOs, with the first priority agreed upon to make sure money could be sent directly to accounts of the different schemes instead of a redeemable voucher within the originating schemeThis cleared the way for defining areas for cooperation and competition at the highest level, making it easier for the lower levels of the firms to work on the detailsA single tripartite agreement was signed to ensure that they all followed the same principles for implementationFor each area of operation - legal, customer care and IT, they set up teams with members from each firmWhat were the key concerns?
There were four main issues : 1) How to route transactions between the schemes,2) How to enable communication across platforms, 3) How to manage AML/CFT checks and procedures and 4) the Financial Processes.
While the paper explains the details of how each of these issues were tackled, it is still too early to measure the impact of this scheme, the message for India is clear, interoperability can be achieved by the operators themselves, it is the first step, a necessary and not sufficient condition for each operator to build scale:
Interoperability was achieved in Indonesia thanks to CEO commitment, strong technical¬†teams collaborating across operators, and mobile money managers designing robust SOPs to address customer service and risk management
On the other hand, in Kenya, interoperability is now coming through via regulation and while the latest entrants are obviously in favour of this, all eyes are now on the dominant operator Safaricom to see how it will adapt to the change.
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