Digital payments in developing countries set for major boost

TECHNOLOGY | INNOVATION

KAMPALA- The availability and affordability of digital financial services (DFS) in developing countries is set to improve following the launch of the Mojaloop Foundation and the formation of a charitable non-profit organisation to extend financial inclusion to the poor.

Launched in partnership with Coil, Bill and Melinda Gates Foundation, Google, ModusBox, Omidyar Network, and The Rockefeller Foundation, Mojaloop Foundation, an open-source software targets to reach at least 500 million people in Africa.

While formal financial inclusion in Uganda has improved to about 58%, it is estimated that over a billion people are still financially excluded globally.

It should also be noted that despite mobile money services emerging in nearly 100 countries globally, 1.7 billion people still lack access to digital financial services, according to the World Bank's Global Findex.

This is partly because of the lack of interoperability between digital financial services and payment platforms.

The Mojaloop Foundation chairperson, Kosta Peric, said the Mojaloop Foundation provides the needed platform to enable interconnectedness within an economy to reduce barriers to customer access to financial services as well as increasing opportunities for low-income individuals to access services that are traditionally out of reach. 

He said this will enable them to serve banks, digital financial service providers, governmental offices, non-governmental organizations, regulators, technology companies, and other entities in emerging economies where financial inclusion efforts can most benefit underserved communities. 

"Our vision of universal financial inclusion is a world where everyone, everywhere, can access and use the digital financial services, they need to build economic security and resilience," Peric said.

He added: "As the emphasis of the digital payments moves to ‘real-time' and ‘person-to-person' payment platforms, new, innovative service companies in transportation, solar-pay-as-you-go, digital markets, and others can benefit from Mojaloop's model. I hope that Mojaloop will be an innovation vector for the creation of more innovative companies of this nature that can benefit the lives of the poor," Peric said.

The Mojaloop Foundation executive director, Paula Hunter said more affordable, accessible digital financial services are still needed to close the financial inclusion gap. Similar views were echoed by the head of partnerships for Google's Next Billion Users Initiative in Africa Adama Diallo and the director of Data and Technology, the Rockefeller Foundation, Kevin O'Neil, who said it is important to increase access to affordable high-quality digital financial services for all people.

Africa focus

While Africa has been the pacesetter for mobile financial services, with the introduction of M-Pesa by Keya's Safaricom in 2007, accessibility and affordability are still key challenges due to lack of interoperability, given the apparent involvement in cross-network transactions.

Mojaloop software will enable interoperability between all financial service providers including banks and mobile money providers at a low cost, using one platform. This is expected to boost usage and reduce redundant accounts.

The 2019 Global System for Mobile Communications Association (GSMA) state of the industry report on Mobile Money, for instance, indicates that while Africa has close to 500 million mobile money accounts, only about 200 million were active users.

Eastern Africa has about 249 million registered accounts and including some 102 million active accounts while Uganda alone has over 22 million mobile subscribers currently. A bigger percentage of these users mainly use the platform to send, receive, or withdraw money.

This is, however, expected to change with Mojaloop, which has already taken root in Africa.

In West Africa for instance, MTN and Orange Group are using Mojaloop for a joint mobile money wallet product code-named MOWALI, early last year, Tanzania also rolled out the Tanzania Instant Payments System (TIPS) fully supported by the same software while in Kenya, a Mojaloop developers community is picking up.

Mojaloop made its entry into Uganda in September 2019, with a three-day Hack Mojaloop Developers workshop in Kampala, organized by HiPipo - a local Mojaloop partner, leading the software's adoption in Uganda and Africa.

The HiPipo chief executive officer Innocent Kawooya said the Mojaloop Foundation is timely as FinTechs will now have a chance to better serve the over 500 million unbanked people in Africa by developing affordable interoperable secure payment systems, across different sectors and industries, at a very low cost.

"We should be excited about the fact that with Mojaloop, you can connect not only the mobile money systems but also the traditional banks. This means users and service providers alike will be able to openly process payments flexibly to any network or bank anytime. It also presents the amazing possibility of transacting across borders affordably," Kawooya said.

He added that the software has come at the right time, given the current outbreak of the COVID-19 pandemic, which makes digital financial services crucial in combating its spread.