Vodafone’s attempt to launch its mobile money transfer scheme in India have hit a roadblock with regulators insisting on tie-up with a licensed bank. The operator was looking to roll out its mobile money transfer service after it took off successfully in Kenya, where it was called the M-Pesa. Vodafone has also deployed the service in Afghanistan and Tanzania. In India, however, the operator claims to have been barred by regulators from launching the service on its own.
“Regulators won’t allow any mobile payment scheme. India has said you have to be a licensed bank,” Vodafone’s head of mobile payments Nick Hughes told AFP.
Vodafone has a global tie-up with Citibank for mobile remittance services and had announced that it planned to focus on Eastern European and Asian markets, such as Poland and India, after its pilot in Kenya, according to this 2007 press release.
Nikhil Adds: I find it hard to believe that Vodafone would want to provide remittance sevices without tie-up with a bank or an Non Banking Financial Corporation. The telecom license fee in India is based on the gross revenue, and if money transfer takes place through Vodafone, the amount they pay to the government will increase. Mobile operators in India, therefore, have refrained from launching money transfer and payment services by themselves.
Other Operators
In 2007, Airtel tied up with money transfer service Western Union to launch m-banking services. Airtel had also tied up with State Bank of India, while Reliance Communications partnered with ICICI Bank.
Reliance Communications International, the US based subsidiary of Reliance Communications inked a deal with Times Financial Services to offer mobile remittance services. RCom also offers Reliance Global Calling services.
(Update: added link to Vodafone’s launch of M-Pesa in Afghanistan)
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7 Comments until now.
Nikhil, a very good illustration indeed of why companies need to understand the regulatory environment completely before strategising! Emphasis on 'completely' which means beyond their immediate industry.
I am working on a client project that requires an understanding of so many regulators and regulatory trajectories in India that few people (but me) would have been able to do it. It is not for nothing that my strapline is what it is ;-)
"Vodafone has also deployed the service in Afghanistan and Tanzania" Does Voda operates in Afghanistan? Or have they deployed it with a local operator?
ghosh — they tied up with an afghani operator called Roshan. Details – http://bit.ly/7Qs6A
Hmm..interesting. I've been focusing on the Telecom, Internet, Media and Entertainment bit…more on the former than the latter. But really, Voda can't expect India to change its regulation. I've updated the post with a few more inputs…the post is by Preethi :)
True, but this facility is a very potent method of reaching out to the unbanked. It is a god send that Mobiles are reaching the remotest corners of the country now. However we need to set the standards for M- gov ( as done for e-Gov)simultaneouly to encourage cash transactions on mobiles.
Preethi: Sorry to miss the attribution.
Nikhil: My point was not about Vodafone wanting India to change regulation but senior managers' inability to think beyond their own blinkered views of the world. It doesn't help that their 'advisors' are also equally super-specialised in their own narrow niches.
M-Pesa's success is to do with deploying agents which are cheaper than having bank branches but that is where the difference ends. In reality the M-Pesa system is merely a deposit taking (cash in) and deposit out (cash out) using a remote database to account for all the transactions. There is no external accountability nor transparency and not even any dispute resolution. I am not even sure if the floating amount is guaranteed. As an experiment in payment technology, it worked well. But to move this into a real world and as a permanent business, regulation and insurance may be required to protect their clients. My issue is that it also does not take it to the next level which is ensuring that any one on any network could also be paid (currently those on different network is merely paid by cashing out – ie going to M-pesa agent to receive the money after notification on his mobile). What is needed is electronic currency that is acceptable by all telcos on all the networks (so there is no reason to cash out).