Welcome to the digital/convergence mobile ecosystem!
A new industrial revolution is taking place where digital and mobile are forcing almost all the other industries to adapt to the new market, competitive, customer, technological realities and paradigms.
Amongst the most disrupted industries – after the inexorable and painful transformation of the content industry (in particular music production and distribution) – it is little doubt that the financial services and banking sector are the most visibly impacted.
Although the process of convergence between digital technologies and financial services/banking is not entirely new – it is developing since at least 20 to 30 years – the pace of these changes have accelerated beyond doubt in the last 5 years or so.
The Financial crisis and resulting economic downturn have both demonstrated the risks but also open new opportunities.
An accelerating convergence between the digital and financial services/banking industries
The convergence between digital and mobile on the one hand and financial/banking services on the other hand have resulted in some spectacular successes particularly in emerging markets where mobile payments and mobile money products and services have done wonders for financial inclusion, sustainable economic growth and empowerment.
Led principally by mobile operators such as Safaricom/M-Pesa/Vodafone, Airtel, Orange, Millicom among others, Africa – particularly Eastern Africa – have been pioneering the developments of these innovative services with an initial strong support from Central Banks.
However, competition is increasing and heating up, with mobile operators fighting more fiercely than ever between them, with challengers using regulatory and competition law proceedings to unsettle the incumbents, regulatory and competition authorities trying to force open the sector and impose interoperability and Governments attempting to cash in on the exponential growth of mobile money services by imposing taxes on mobile money transactions.
The situation in mature markets, mobile commerce is leading the growth of mobile payments with new mobile payments and wallets emerging. Banks sometimes working in cooperation with mobile and digital players still have the lead.
The rise of mobile banking
Interestingly enough, some of the most interesting trials are coming from the development of full digital/mobile banking products/services either by new players like startups Moven and Simple in the US or subsidiary of competitive challenger to incumbent banks such as SOON, created by Axa Banque in France.
The involvement of banks into the digital ecosystem can even go further as demonstrated in the past by the creation of Mobile Virtual Network Operators (MVNOs) by banks such as Rabobank in Netherlands and Credit Mutuel in France.
One of the most recent interesting example is Finserve, the MVNO created by Equity Bank in Kenya, using Airtel’s network and that is intending to shake the Kenyan market and the dominance of Safaricom/M-Pesa.
Another innovative development along with Moven or Simple, is SOON, the full mobile/digital bank created by Axa Banque in France.
I have interviewed two key stakeholders in the development of these innovative mobile banking projects in Kenya and in France that are each of them emblematic of some current and future developments in the mobile convergence ecosystem.
Two recent examples of convergence in mobile banking: Finserve in Kenya and Soon in France
- Finserve, Equity Bank’s MVNO in Kenya: Interview Dirk-Jan Koeman, Senior Telecom Consultant.
Interview: Dirk-Jan Koeman, Senior Telecom Consultant on Finserve, the new MVNO launched by Equity Bank in Kenya
Jean-Stéphane Gourévitch (JSG): What are the key reasons and rationale behind the creation of Finserve by Equity Bank?
Dirk-Jan Koeman: There are three elements of mobile channel control that Equity Bank felt it needed to take back: full security, reliable speed and fair price. By becoming a mobile virtual operator, Equity Bank has taken control of its customers SIM cards, and through that of the secure elements and banking menu on their phone, and has also secured favorable pricing on substantial volumes of mobile connectivity across all channels.
JSG: But why the creation of a MVNO? Is it an ambition to expand the scope of activity of Equity Bank? Did you consider other possible forms of cooperation?
Dirk-Jan Koeman: Equity Bank´s only purpose in becoming a Mobile Virtual Network Operator (MVNO) is to gain more direct control over the experience that its customers will have when they access Equity´s mobile banking services. To the extent that Equity customers use the telecommunications services that come along with their new SIM card, that will help to pay for costs associated with the roll-out of the MVNO. But Equity does not see it necessary to fight the operator in its core business. As an MVNO, Equity will run all the services that mobile operators typically offer, but without managing the network infrastructure or owning the radio spectrum over which they run. All that is outsourced to the MVNO host: the mobile network –in this case, Airtel— from which Equity has negotiated a basic connectivity service off-take agreement.
JSG: Do you believe this form of competition between banks and telcos will increase?
Dirk-Jan Koeman: In our view, banks shouldn´t have to become telcos in order to deepen their mobile banking offer. But if telecoms regulations and national competition policies don´t address the fact that increasingly telcos are an essential-component supplier as well as a competitor to banks –a clear conflict—, the choice for banks will be stark: sit out the mobile money revolution until such time that everyone has smartphones, or else join the telco club and get on with the job of financially including people.
- SOON, the Mobile bank by Axa Banque, France: Interview with Patrick Bucquet, COO and Co-Founder of Chappuis Halder & Cie. & Launch Director, SOON.
Soon is the new 100% mobile bank by AXA Banque, one of the first initiatives in the world. This new bank answers to a new need: make the bank available from anywhere, in anytime. The best way to do this is to make mobile banking.
Patrick Bucquet, partner at Chappuis Halder, is at the origin of the idea, and worked almost two years with AXA Banque to help to the development of Soon. From the idea to the commercial launch, Chappuis Halder has been present on the project.