Integrated payment markets will fuel future growth

Wednesday, July 06, 2016 by Mahindra Comviva

A recently concluded workshop on the Future of Money Transfers conducted by TerraPay in coordination with ARTF in Brazzaville and Pointe-Noire established that global digital payment rails would create new opportunities for future growth. Like most economies in Africa, Congo is registering a strong demand momentum for digital payments products - international and cross-border money transfers in particular.

Congo's payment landscape is dotted with multiple money transfer operators, catering to a wide base of banked and unbanked consumer segments. The services however operate in silos and the resultant market fragmentation constrains the pace of digitalisation. Industry influencers - representing a cross-section of banks, mobile money service providers, regulators and money transfer operators - gathered to exchange ideas on interoperating payment services. In Congo, with a 13% banked population, the opportunity includes capturing greater value from existing customers, that is currently being left on the table, as well as expanding the current addressable market to target previous financially marginalised customers.

Building on the theme of accelerating the digital momentum, Ambar Sur, Founder and CEO TerraPay stated, "Ubiquity and trust are two important dimensions to make any payments system relevant and valuable for users. Payments are a volume-driven business requiring substantial scale to make a profit due to low margins. The share of electronic payments is less than 3% of total payments market in Congo.

"Yet service providers compete for the 3% share of the market rather than collaborate to capture the 97% dominated by cash. Cash is successful as it is fully interoperable and customers can use it anywhere. For electronic payments, to effectively compete with cash, they must be simple, interoperable, and easy to use and made for the consumer. Mobile operators are well-positioned to take the lead, as they issue payment instruments (store value accounts) and are the biggest distributors of financial services in the country. Mobile-first international payment networks such as TerraPay can build the rails for global payments by interconnecting traditional money transfer providers to the existent mobile infrastructure".

Consumers would be able to send money seamlessly across networks, using their mobile number. Current transfer systems are expensive and cumbersome. Customers have to withdraw monies from bank accounts and line up outside a service provider to make a transfer. For moving monies between bank accounts sender needs to know the recipient's BIC and IBAN codes.

Sur also cautioned against buzzwords such as fintech disruption gaining wide currency in the industry. The digital financial services space is complex and payment interoperability projects have a significant gestation period, prior to becoming self-sustaining ecosystems. Payment service intermediaries, offering industry-wide transaction clearing and settlement services need to have deep expertise of the telecoms network, the banking network as well as understand the psychology of emerging market consumers.

"TerraPay, is a part of a USD16.9B industrial conglomerate, with a decade of expertise in delivering mobility and financial solutions to MNOs and banks in 90 plus emerging economies. These are core strengths we can leverage and bring to the Congo market," further added Ambar Sur.

Addressing concerns around Know Your Customer processes and overall security of new payment models raised by several conference participants, Ramakrishnan Sundaram, COO TerraPay, explained, "Multilateral payment models can strengthen transaction security and risk governance. Money transfer operators, operating services independent of each other, do not have access to a customer's transaction history on another network. Multilateral payment models strengthen customer screening and fraud management processes, as they have a cross-network view of the customer's transaction history. This is especially significant for cross-border payments, where the payer and the payee reside in different geographies and are affiliated to different networks".

The importance of educating service providers on new digital models to drive consensus around the "one network" model was also discussed. Educating small-scale players, who predominantly operate in cash, on benefits of moving money using mobile networks is often overlooked. It is not enough for banks and payment services providers to interconnect. Small remittance service providers form between 60% and 70% of the Congo's money transfer market. These players need to be on-boarded to reduce incidence of cash usage.

The session ended with leading MNOs, banks and remittance service providers predicting interoperability can expand the contours of the current market.

"Backed by a forward looking regulator, who is keen to embrace innovative digitalisation payment models, the process has been set apace in Congo. Several players have evinced interest in understanding the nuts and bolts of participating in a common payment scheme for domestic and cross-border transfers," Gachlem Ngassaki, regional director, Francophone, TerraPay, stated in his post-event remarks.