Mobile money interoperability has been a ground-breaking development in Tanzania. However, it was also a complicated one, because it was largely untested for mobile operators. It required all providers and industry stakeholders to jointly develop a process to identify and manage potentialrisks and considerations. To date, this was the most extensive example of industry collaboration in Tanzania.
Millicom had an unwavering belief that interoperability was the only way to create a true inclusive financial ecosystem and that the result would deliver exponential growth for all participants. Myths highlighted were the challenges raised by the industry players that we had to overcome.
Myth 1: Interoperability will negatively impact competition because customers will no longer differentiate between providers
Since the beginning of mobile money in Tanzania, building the network of customers has been a key priority and, as a result, the success of most campaigns was determined by impact on customer acquisition. The more customers we could acquire, the better the network we could offer.
However, in Tanzania’s mature market context, the focus on acquisition was resulting in little more than customer poaching, where customers shift between networks. Acquisition had become an expensive tactic that added limited value in terms of market growth.
In reality, interoperability has contributed to market growth in a way we have not experienced before. In addition, we have developed a better understanding for how we compete. Competition lies in quality of service, and agent quality and liquidity are far more significant determinants for
success. Tigo Pesa’s success is measured by driving value into the system, rather than growing our own, segregated network. We have also found customer engagement more responsive because it is much easier to position mobile money as a tool that more seamlessly fits into everyday life.
Myth 2: Providers will either win or lose with domestic interoperability
The second commercial concern associated with launching interoperability was a fear that, once launched, the result will be a “win-lose” rather than “win-win.” Practically, the concern was that there would be a one-directional flow of transactions which would unfairly benefit one provider.
In Tanzania, the flow of funds appears to be two ways, allaying concerns that only one provider would benefit and making this service a true ecosystem play. This is likely due to two aspects: the first is that each provider has strong mobile money operations in place and the second is that customers do not pay extra to send money across networks, allowing behaviour patterns to mirror those of on-net transactions. The success of this approach is intrinsically connected to the fact that the commercial arrangement between providers was equitable. By sharing the interoperable P2P revenues, providers were able to eliminate the risk that another provider would influence the flowof transaction or discourage interoperable transactions.
Myth 3: Off-net vouchers make the need for account-to-account interoperability redundant
A frequent counterpoint to interoperability is that off-net vouchers is a pre-existing and viable alternative to interoperable P2P transactions. From our experience in Tanzania, it is clear that the need for interoperability exists beyond the voucher, as it retains value in the e-money ecosystem while keeping the end-to-end transaction digital, eliminating the need to convert to cash frequently.
We can see that usage of off-net vouchers continues, but is not growing. By contrast, the volumes in interoperable transactions are double that of the voucher. For Millicom, this is a clear demonstration that the need to send money directly to the account of the subscriber on another network is preferred and can be viewed as a separate use case which has not cannibalized the voucher transactions.
Two years on, it is clear that, at least for the Tanzanian context, many commercial concerns with interoperability have not borne out in the data. For Millicom, demystifying these commercial concerns have reinforced our commitment to scale interoperability by driving P2P growth and by extending interoperability to new use cases, including merchant payments. Creating a sustainable and robust mobile money ecosystem will continue to require industry collaboration – and Millicom will continue to remain an active advocate for collaboration.
CREDIT: GSMA: The impact of mobile money interoperability in Tanzania