Developing Countries Are Revolutionizing Mobile Banking

Disruption is occurring in many different industries. Where next, and how will it affect you? Aivars Lode

10:57 AM Monday April 30, 2012

by Vijay Govindarajan | Comments (37)

On February 16, 2012, Barclays of U.K. launched Pingit, a service that lets people send and receive money using a smartphone.

But this isn't the first big innovation in mobile banking. These innovations are already happening in developing countries.

Poor countries are jumping ahead of rich ones by building a 21st century infrastructure (because they have little legacy infrastructure to begin with). For example, India has leapfrogged from no land-line telephones to the latest in wireless telephony. That revolution, in turn, is causing India to leapfrog brick-and-mortar banking to wireless banking for the masses. We see similar patterns in other poor countries as well. Mobile money transfer in Africa, M-Pesa, is a case in point. Counterintuitive as it may seem, poor countries may be ahead of rich countries in mobile banking.

The story of one such innovation, NPCI's Inter-Bank Mobile Payment Service (IMPS), shows how far ahead India is with this technology.

India has a large un-banked population because of the challenge of reach and affordability. But with 840+ million mobile subscribers, mobile banking can provide a fast, inexpensive, easy, convenient and secure channel for customers across India to carry out banking transactions. While the mobile banking application of banks offers a set of services to its customers, there was a need for connecting major banks to offer an instant 24/7 remittance solution to customers. NPCI's Inter-Bank Mobile Payment Service (IMPS) — an innovative payment mechanism — addresses this need.

NPCI has one major asset: The 60+ large banks in India connected to its ATM Network. It leveraged this infrastructure to cost-effectively offer an instant 24/7 payment service. NPCI used mobile as the channel. NPCI worked with banks and co-created this product in a very short time. It defined standards for message exchange using the same ATM connectivity infrastructure and provided a routing and settlement mechanism for transactions. The transactions are instant and immediate. Now that the banks are connected, many value-added services can also be offered through the same mechanism. NPCI plans to connect various approved non-bank entities offering prepaid solutions on this platform to provide wider access. NPCI itself is promoted by 10 leading banks in India. While these banks fiercely compete in the market, they also collaborate to achieve national objectives.

NPCI's key innovations are:

Person-To-Person Mobile Banking

    Instant, 24/7, 365 days/year operation — the first such remittance solution without the need for cards of any kind, money moves from account to account instantly using mobile as the channel

    Works on all mobile phones

    Mobile Money Identifier (MMID)

        A unique 7 digit number for each account

        Enables customers to link same mobile to multiple accounts

        Removes chances of wrong transfer resulting from change of mobile numbers and typing errors

    Mobile number and MMID combination uniquely points to a bank account

    Works on the existing ATM Messaging, Switch and Network, making it easier for banks to adopt this quickly.

B2B Mobile Banking

With the ease and convenience of transfer and instant nature of payments, IMPS is now being used for merchant payments, bill payments, cash-on-delivery payments and as a corporate cash management tool. (A major bank, Citi Bank and major beverages company, Coca-Cola are doing pilots). NPCI is constantly enhancing these services. For instance, it is experimenting with the concept of mobile point of sale devices as a relatively inexpensive alternate to traditional point of sale terminals. This should help reduce the overall cost of the transaction and offer customers inexpensive payment options.

Service Innovations

NPCI is also working on service innovations. Recently, it piloted a common USSD gateway application for banks. USSD is more secure than Short Message Service (SMS). NPCI will eventually establish connectivity with all telecom carriers and have a common USSD short code *99#. All customers of participating banks can just dial *99# and get an interactive menu to complete basic banking transactions. Customers can do basic banking transactions such as balance inquiry, funds transfer, merchant payments, cheque book request, statement request, etc. through a common number and a simple menu-driven mode irrespective of where the telecom account is and where the bank account is.

The M-Pesa in Africa and NPCI's IMPS in India have the potential to revolutionize and democratize the mobile-based remittance/payments. These innovations can effectively transfer money across wide distances thereby saving cost of transport. For example, electricity bills can be paid from home instead of carrying cash to a distant office and having to wait in long queues. Mobile banking is cheaper, faster, reliable and secure. It can convert millions of "non-consumers" of financial services in the developing world into consumers, and large sections of the world's poor population will benefit.

In time, the rest of the world will catch up too, as innovations created in developing countries flow into the developed ones.

Oracle contract 'not in best interest' of gov't, official says

This is the fall out from predatory behavior. Aivars Lode

  

By Matthew Weigelt

Apr 20, 2012

A senior General Services Administration official said April 20 that it was not in the government’s best interest to continue to offer Oracle Corp.’s IT services.

After reviewing the company’s GSA Schedule 70 contract, “it was determined that it was not in the best interest of the government to continue the contract,” Mary Davie, assistant commissioner of the Federal Acquisition Service’s Office of Integrated Technology Services, said in a statement.

GSA officials would not provide more any details. However, a spokeswoman said April 19 the contract that has been canceled due to the company not meeting the terms of the contract.

The cancellation takes effect May 17.

An expert says Oracle has many other contracts through which to offer IT services to agencies.

Mark Amtower, partner of Amtower and Company, said the GSA Schedule contract accounts for less than 7 percent of total government purchases. Oracle offers services through other avenues, such as NASA’s Solutions for Enterprisewide Procurements (SEWP) and other Defense Department indefinite-delivery, indefinite-quantity (IDIQ) contracts.

“Oracle losing its GSA contract is news, but don’t overlook these facts,” he wrote in a comment on Washington Technology’s initial story about the cancellation.

As a result of GSA's cancellation, all blanket purchase agreements (BPAs) awarded against the contract will end. Existing task orders may continue through their set period of performance but agencies will be unable to exercise options to these task orders or place new orders.

Agencies can still buy Oracle’s software and software maintenance products through resellers with active IT schedule 70 contracts, Davie said.

GSA has notified agency customers through Federal Business Opportunities website and is contacting agencies with known BPAs directly.

Oracle executives declined to comment on the cancellation.

8 angel investors that entrepreneurs should avoid

Predator’s are everywhere. Finding a reliable partner is difficult. Aivars Lode

April 23, 2012: 1:56 PM ET

By Marty Zwilling, contributor

Many entrepreneurs believe all money is created equal. As long as somebody recognizes their million dollar idea and writes them a check, the source really doesn't matter. Most angel investors are pure, but there are some exceptions to watch out for:

1. Shark angels. This is the ultimate bad guy whose sole intention of getting involved in early-stage investing is to take advantage of what they believe is the entrepreneur's lack of financial and deal-making experience. If the term sheet process turns to pure torture, it may be time to respectfully bow out.

2. Litigious angels. The litigious investor will look for almost any excuse to take you to court. This type of investor never really focuses on the returns your company can deliver, but instead tries to make money by intimidation, threats and lawsuits. They know you won't have the resources to fight them, so they count on you "caving." Keep your attorney close by your side.

3. Superior angels. A number of successful business people, some of whom become angels, develop the belief that they are destined for greatness because of their clear superiority over everyone else. These are usually overbearing, negative people who are hypercritical of every decision you make. Don't be intimidated into bad decisions.

4. Control freak angels. This angel starts out looking like your new best friend. Once you are funded, he waits until you hit your first pothole and then points out "gotcha" clauses in your agreement that give him more control. This escalates into a requirement that he must step in to run your company himself. Only your Board can save you here.

5. Tutorial angels. The tutorial investor is not after control, but wants to hold your hand on every issue. The mentoring offer always sounds good up front. But after they write the check, it soon becomes apparent that their desire to be helpful 24 hours a day is a nuisance at best. Initially, your gratitude for their investment may prompt tolerance, but eventually the burden wears you down. Keeping your distance is the best solution.

6. Has-been angels. These tend to appear with every perturbation in the economy. They are usually high-flyers with a liquidity problem. They are still at the country club every day, but are now running up a tab. They will meet with you, and ask a thousand questions, but never get around to closing the deal. Learn to ask the closing questions.

7. Dumb angels. Wealth is not synonymous with business savvy. You can spot dumb angels by the questions they ask (or don't ask). If they ask superficial questions or don't understand business, a successful long-term relationship is not likely. But don't forget that people with wealth usually may have some savvy friends to meet.

8. Brokers posing as angels. These people are all over the place, often posing as lawyers and accountants. They have little intent to invest in your company, and will eventually solicit you to sign a fee agreement to pay them to introduce you to actual investors. Brokers are often worth the fee, but don't be misled about who is the angel.

How do you avoid most of these? Whenever possible, only accept investments from individuals in credible, professional angel investing organizations - not people who solicit you. Even then, do your own due diligence in the business community. Ask what other companies they've invested in, and talk to the CEOs of those companies to find out what kind of investor they've been.

Also, make sure your lawyer writes the initial investment document or term sheet - not the investor. This document should be standard for all your investors and not negotiated on a one-on-one basis. Watch out for any attempts to add clauses that can come back to bite you. Not all angels these days are even trying to earn their wings.

The one-night stand gets a digital makeover

Collaboration will be key to the future of commerce. Aivars Lode


Collaborative consumption websites and microlabour services may lower transaction costs but they raise the issue of internet-based trust

Loyal readers will recall the second-hand Volvo I bought six years ago. After an unpromising start, it’s now ticking over nicely. Well, ticking over may be the wrong phrase. Mostly it just sits around. It is occasionally invaluable for our family of five. Still, it hasn’t moved today. It didn’t move yesterday. It feels like a waste of a good car, but what is the alternative?

Digital technology is providing several alternatives, making it easier and easier to unlock the hidden value in such assets. Companies such as Zipcar will rent you a car by the hour. More radical are the likes of WhipCar, which allows owners to rent out their cars when they don’t need them. The opportunities are obvious, as are the obstacles.

WhipCar is an example of what the hip kids are calling “collaborative consumption”. The term seems to cover a multitude of activities. Ebay will let you sell your old stuff to someone who wants it more than you do. It was radical when it first appeared, not because the idea of a second-hand shop was new, but because of its unparalleled ability to find buyers – and sellers – for narrow niches.

More recent sites such as Swap.com or Freecycle will let you swap with others, or simply give away unwanted kit. On Zopa, lenders find borrowers without the need for a bank. Then there’s Airbnb (WhipCar for your spare room), or Landshare (people with unruly gardens meet people who want to do gardening).

Alongside the collaborative consumption sites are microlabour services such as TaskRabbit and Amazon’s Mechanical Turk, both of which connect people with small tasks to be done and people with time to do them. The actual offerings seem very different: TaskRabbit operates in just a few markets, such as Boston, Chicago and San Francisco, and is full of cheerful-looking background-checked locals who will run errands for you or put together an Ikea desk. Mechanical Turk distributes digital tasks anywhere in the world – but it has acquired an unenviable reputation for rock-bottom pay and spam.

For all the variety on show here, collaborative consumption and microlabour share two important characteristics. The first is that digital technology is lowering transaction costs, making it easier and easier for people to sell (or swap, or share) very small offerings. The second is that because so many of these offerings are in the hands of individuals rather than branded corporations, mechanisms for maintaining trust are very important. If we are going to let strangers stay in our homes, or drive our cars, or have custody of our dogs, on a one-night-stand basis, we may need some kind of reassurance.

Internet-based trust mechanisms where website users rate each other after each transaction also seem to be working tolerably well. Online rating systems can be tricked, but have held up better than anyone might have anticipated 15 years ago. Rachel Botsman, an evangelist for collaborative consumption, argues that trust is the pivot on which many of these new possibilities turn. It is hard to disagree. Presumably the likes of Google and Facebook are licking their lips as they contemplate their role in creating digital identities where your punctuality on eBay, efficiency on TaskRabbit and cleanliness as an Airbnb guest can be stitched together in a seamless tapestry of reputational capital.

And there is a curiosity here. Enthusiasts such as Botsman celebrate the way in which the internet enables human connection, where you can transact with real people rather than faceless corporations. But the other thing that is emerging is an ever-more-perfect market, with high price transparency, low transaction costs, and few interactions that cannot be priced and paid for.

The promise is either of creating value with a far more human touch, or of a hyper-competitive global marketplace. It would be fascinating if these things amounted to much the same.

GSA cancels Oracle IT contract

Oracle’s predatory business practices are legendary. Given the current business environment there will be a backlash against those practices, and this is the start.  Aivars Lode

Washington Technology     April 20, 2012

By Matthew Weigelt

Apr 20, 2012

A senior General Services Administration official said April 20 that it was not in the government’s best interest to continue to offer Oracle Corp.’s IT services.

After reviewing the company’s GSA Schedule 70 contract, “it was determined that it was not in the best interest of the government to continue the contract,” Mary Davie, assistant commissioner of the Federal Acquisition Service’s Office of Integrated Technology Services, said in a statement.

GSA officials would not provide more any details. However, a spokeswoman said April 19 the contract that has been canceled due to the company not meeting the terms of the contract.

The cancellation takes effect May 17.

An expert says Oracle has many other contracts through which to offer IT services to agencies.

Mark Amtower, partner of Amtower and Company, said the GSA Schedule contract accounts for less than 7 percent of total government purchases. Oracle offers services through other avenues, such as NASA’s Solutions for Enterprisewide Procurements (SEWP) and other Defense Department indefinite-delivery, indefinite-quantity (IDIQ) contracts.

“Oracle losing its GSA contract is news, but don’t overlook these facts,” he wrote in a comment on Washington Technology’s initial story about the cancellation.

As a result of GSA's cancellation, all blanket purchase agreements (BPAs) awarded against the contract will end. Existing task orders may continue through their set period of performance but agencies will be unable to exercise options to these task orders or place new orders.

Agencies can still buy Oracle’s software and software maintenance products through resellers with active IT schedule 70 contracts, Davie said.

GSA has notified agency customers through Federal Business Opportunities website and is contacting agencies with known BPAs directly.

Oracle executives declined to comment on the cancellation.