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Ideas & Debate

How mobile infrastructure sharing can win for customer

agent lists
An agent lists details of a mobile money transfer deal. Players can set up a system that enables sharing of such infrastructure which at the end of a specified period will determine how much each of those involved needs to be paid. FILE PHOTO | NMG 

There is a strong case for infrastructure sharing in the telecommunications industry. For starters, players in the sector already share resources in the broadband space by buying each other’s redundancy.

For instance, if a Chinese contractor while digging up Waiyaki Way suddenly severs a data cable, the affected operator can re-route service(s) to another operator who has not been affected on a commercial basis. In industry jargon, this is known as redundancy.

Even the payments space is not being left behind in as far as infrastructure sharing is concerned.

A while back, Visa, a global payments technology company, announced a project to establish an agent switching scheme involving six commercial banks.

A banking agent can offer services for several different banks, in each case having a different device. If an agent is offering services for six commercial banks, that translates to six devices as well as another six outdoor advertising posters often plastered outside the agent premise.

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It is much easier to have a single device and offer services (withdrawals and deposits) for the six banks.

However, behind-the-scene, the owner of the single device runs all the numbers and determines who owes who money and does the settlement (essentially, a clearing framework).

Because payment platforms, such as Visa, have settlement accounts with issuing banks, it is easy for them to issue single devices for agents within the issuing ecosystem. This has been touted as the future of infrastructure sharing in the agent banking system.

A similar scene can be played out in the mobile financial services space where the issue of dominance is something that has continued to feature prominently.

Indeed, Analysys Mason, in its study on telecommunication competition market study in Kenya, found significant market power in the mobile money retail market. As a response, players adopted wallet-to-wallet interoperability.

Essentially, users can send money both across network unconditionally and in a seamless manner. However, as I said before, operators need to scale this a notch higher by also allowing agent interoperability; which is not the same as opening up agents.

It can be a very simple mechanism to implement. First, operators agree to the idea. Second, they appoint a single bank to act as the clearing agent, which will also provide a centralised float system. Third, they re-work their back-office. And re-working back-office is two-pronged.

First, operators re-configure their agent systems to capture off-net cash dispensing/receipt, which can be as simple as a timesheet of how much money an agent dispensed to or received from customers from the other network(s).

Further, a daily agent reconciliation of off-net and on-net transactions (transactions done within the same network and those acquired from the other networks).

At the end of a clearing cycle, which can be daily, weekly or even monthly, the clearing bank determines who eventually owes who money through a series of netting off.

The person owing is debited and money credit into the entity owed money. Because it is a purely commercial arrangement, applicable fee is also loaded into the netting off system.

The clearing bank(s) can also provide a centralised float system whereby agents can also recharge their floats from the same bank(s). This is not a far-fetched proposition, which evidently places the customer at the centre. Infrastructure sharing is the way to go.

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