Jamaica is not too far away from seeing money remitted from overseas being sent to mobile phones.
The Development Bank of Jamaica’s (DBJ’s) non-commercial pilot, which will test loan disbursements over mobile networks over the next year or two, could give the Bank of Jamaica (BOJ) the remaining piece of information it needs to provide the complete regulatory framework for mobile money.
Transcel developed the software that will deliver high-level, secured financial transactions for the pilot. The company, which will also manage the micro accounts, is positioning itself to be a major service provider when commercial use of mobile money gets the all-clear from the central bank.
Its mobile money application, which works on feature phones used by 70% of Jamaica’s population and which uses GPRS to make financial transactions across the networks, enables it to rapidly deploy its service on a wide scale.
“GPRS, by design, is an interoperable service,” says Hugo Daley, Transcel’s CEO. “In terms of our core transaction framework, it is a web services integration framework which is specifically designed to connect very quickly to networks. Just like with NCB, we could connect with credit unions within half a day.”
He was referring to the arrangement Transcel has with National Commercial Bank (NCB) under DBJ’s pilot, which connects the service provider to NCB’s network that by extension is connected to the cross-bank, nationwide automated banking machine (ABM) network provided by JETS, called MultiLink.
NCB will hold DBJ funds in a trust account, which is to be accessed by approved microfinance institutions (MFIs) for on-lending, and will also act as the central bank’s certifying agent.
The BOJ requires that persons’ identities be verified by a qualified agent, or, in other words, individuals wanting to use mobile money services have to physically appear at an entity regulated by the central bank, in this case, NCB.
But that should change soon. The mobile money pilot includes a fourth and final phase, which, after extensive consultation with the central bank over the course of the project yields all the necessary guidance for mobile money to go ahead, aims to “open services to a wide market, and open a wider array of payment mechanisms, and transfer mechanism”, according to Daley.
“Rather than have to go to an NCB agent they go to a qualified network approved agency under the BOJ guidance,” he said. That could be anywhere, from a supermarket to an outlet that sells lottery tickets.
The central bank has already issued guidance on certain electronic retail payments which doesn’t necessarily cover more complex transactions like lending and will start taking applications from investors interested in becoming service providers in April.
That set of guidance establishes capital and liquidity requirements for agencies, but it also relaxed know your customer (KYC) rules that make it more difficult for the unbanked to become a part of the formal financial system. For instance, mobile money customers won’t have to verify their source of funds, provide proof of address and occupation/business details for accounts below $50,000.
Although designed over four, three-month phases, the DBJ’s project may take longer than a year. Discussions among the development bank, Transcel, NCB and the BOJ in between phases may be lengthy and any stage of the project could conceivably run longer than three months.
But when the full range of mobile money services are ready to be rolled out, it may revolutionise the financial sector. “The motivation behind mobilising social benefit transfers (such as remittances) is to make small transfers feasible and to avoid the waste in terms of the bureaucratic and physical process in transfers that exists today,” continues Daley. “Just as in Kenya, the likelihood is that the total volumes of money that will go into the institutions that support these transfers will get less.”