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Technological advancements in this digital era is dictating how we pay for things. The advent of electronic point of sales systems will eventually see the demise of the paper cash systems which has dominated the world of finance for several centuries. Mobility and money seem to go hand in hand.

mpesa

 

Getting the right combination of security and usability could accelerate the realisation of a cashless society. Already in several markets, mobile money solutions are up and running and mature trials are underway in other markets.

 

Near Field Communication

In Western markets much hype has been generated regarding NFC (Near Field Communication). The concept uses RFID technology built into the mobile handset to pay for small items such as train tickets or goods from convenience stores. Simply by holding your mobile phone to a payment reader will be sufficient to make a transaction and debit your account. Passive systems which don’t require a second stage authentication are limited to low value transactions to reduce the likelihood of fraud. The specification also supports active two way authentication where the mobile users’ phone can prompt for a security pin, along with the transaction value, and trials are underway in various cities across the world. The challenge for solutions is that to realise traction in the market, worldwide and universal adoption by banking institutions must occur, and the challenge for NFC advocates is to address the security concerns surrounding the technology. It currently limits the value of each transaction, which prevent NFC from emerging from the trial stage. 

 

MPESA

In the West we pretty much take for granted banking services, ATM transactions and paying for utilities and services electronically. What makes this possible is identification. Without it, banks and financial agencies would not allow us to open accounts and move money around. In developing nations, which aren't quite so fortunate to have in place a structured process of birth registrations and identity process, obtaining the legitimate documents that allow you to open and operate regular bank accounts, access to these type of services presents a challenge.

 

For some people living in remote rural villages access to ATM or banking services is impossible, and often these families have the breadwinner working in one place and family living in another. In order to meet this demand e payment systems have sprung up in many nations where banking and payment services are limited. Using a combination of SMS/WAP or a SIM card based application (SIM Tool Kit),  which is available on most mobile phones, payments and money exchanges for everyday items can be handled electronically. Probably the best known mobile payment system is M-PESA. It not only allows users to deposit money into a micro ewallet account attached to a mobile phone account, but also allows users to pay for goods and withdraw cash from participating outlets. Since it’s inception in 2007, M-PESA has attracted over 17 million subscriber in Kenya alone.

 

Its success has spread to other African nations and India. Payment services are facilitated using USSD or WAP and its flexibility and simplicity has provided electronic banking services to millions of people who would otherwise be excluded from a modern society. However, it hasn’t been completely plain sailing for the MPESA scheme. In 2010, the payment system was extended to South Africa in conjunction with Vodacom and Nedbank, but tougher banking and government regulations has meant that adoption has been much slower due to the complicated registration scheme.


International Payment System

In Nigeria, due to high levels of electronic fraud Internet card transactions are blocked for Internet users based on their IP addresses alone, which has found new opportunities for offshore organisations to process online payments by providing a proxy service. For example, British mobile payments processor Bango has partnered with Nigerian mobile software developer MMIT to produce the country’s first e-wallet solution, which overcomes the source address blocking by providing a virtual payment gateway, which is linked to the user’s real local accounts. Fraud, availability, banking regulations and international agreements on operational standards have to be addressed and resolved before widespread e-money solutions replace cash. Any successful replacement solution needs to be as reliable as cash, which still is the most reliable method to make a payment.

By Angela Sutherland

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