What an open mobile money platform means for innovation

When Mr Ben Lyon came to Uganda on a research trip in 2007, he was fascinated by Uganda’s microfinance sector. He was also blown away by the ability for Ugandans to transfer airtime to one another and money too.
“I had never seen that in my life,” he says. He left after three months with the conclusion that the idea of mobile money transfer had endless possibilities. So he started a company and zeroed in on merchant payments in Kenya.
“We launched Kopo Kopo which became the industry’s first merchant aggregator where we would go and acquire merchants directly and then bring thousands of merchants to the operator and then maintain that relationship,” Mr Lyon says.

The year was 2012. It was an incredible time but very difficult time too. It turns out that without Application Programme Interfaces (APIs), it was really difficult to build these services and the next wave of financial inventions.

An API is a set of rules and tools for building software applications and it specifies how software should interact. Think of it this way. MTN opened up its mobile money platform to the public after nine years on the market. According to MTN, lifting the veil off its copyrighted software took long because of the perceived risk it poses to the telecom. But also, it drowned itself in innovating on its own until it realised connecting 10 million registered mobile money users to its platforms and merchants would take long.

The open platform enables developers to build products that receive payments for goods and services, make payments to a list of specified recipients, enable transfer and reception of money across borders or enable mobile money payments off an e-commerce site. Accessing this platform is the reason people can pay for their Safe Boda fare or Jumia Food without paper money.

Mr Lyon says, “We did not have APIs. Much of the industry still doesn’t. Imagine that! “A small young startup paying its employees is struggling and it takes you 12-18 months before you can get to that first shilling in revenue.”
He was fortunate enough that he got private investors to keep the company alive through the period. Getting revenue in quickly is critical and if there are no funders, developers need to go to the market as quickly as they can. To date, Kopo Kopo has processed nearly $1 billion (Shs3.7 trillion) in payment volume across a network of more than 10,000 merchants.

In 2015, Mr Lyon joined a FinTech accelerator that invested in financial technology startups across Africa and Asia. His experiences with Kopo Kopo were not unique.
“The main issue that made this challenge so real was just lack of access to infrastructure like APIs. Just the simple ability for you to query something, maybe validate identification if you are onboarding a new customer or need to code to notify you that a payment has occurred and you can release goods and give a customer a great experience,” Mr Lyon explains.

For most startups, this is something they have had to lose sleep over in the past years. This is why opening up the mobile money platform to developers is considered a game changer because then it breaks the monopoly large companies have on innovation.

When Safe Boda drops you off, there is no exchange of cash at times so the act of payment is becoming an invisible process.
Increasingly, Mr Lyon thinks Ugandans will see decisions being made by the applications in our pockets as they save, invest for our future and borrow for us. But for that to happen, he says, APIs such as MTN’s mobile money platform have to be opened up.
“You cannot deeply integrate payments into every facet of life if you do not have these APIs,” Mr Lyon says.
“You cannot build on top of services unless you are exposed to an API. If MTN didn’t offer an API, developers would have to build some kind of hacks to deliver services. But with official API, they can go to market faster.”

Access will be free for now and this dramatically decreases the costs of innovation.
For Safe Boda’s Nicholas Kamanzi, an open platform is a very important piece of innovation. He says it took three months to integrate a product with MTN mobile money.
“Most small startups do not have a lot of money and time so that speed is going to unlock a lot of products that are built on top by opening up the platform. All networks opening up means someone like me can take money from 18 million people and that is powerful,” Mr Kamanzi says.

How big is the opportunity?
Gerald Otim, founder of Ensibuko, a Ugandan startup that provides banking systems for SACCOs, thinks the opportunity is huge.
“There are 6,000 SACCOs in Uganda with 18 million people. Many of the clients we work with do everything in cash and huge amounts of money are moving every day. Since 2015, our key value proposition has been getting SACCOs paperless and cashless and we are successfully getting them paperless. Getting them cashless has been difficult and it is until a few months back that we were able finish our MTN mobile money integration process,” Mr Otim says.
Will cash go away? He is convinced it will, at least among his clients.

What it will take
According to Mr Michael Niyitegeka, consultant programme director (Applied ICT) at Clarke International University, leveraging the power that the open mobile money platform gives will require innovators to “get dirty.”
It is not just building an application where payments happen but understanding the product they are building and whether the market needs it.
“You find a number of people building lots of products they believe will make them lots of money until they launch and it hits them that the product was not needed,” he says.
Instead, innovators have to invest in understanding communities and what cash means to them.
It will also take having the right skill sets.
“It will be who else we have on our teams other than the guys writing codes. We need to open up these hubs to bankers, musicians or marketers to build payment solutions that will work,” Mr Niyitegeka says.

Convergence is happening among insurers, bankers and telecoms. On who an innovator should work with, Mr Niyitegeka says, it is critical to have a 360 degree view of what is changing and be agile enough to respond.
On whether to use the free mobile money platform or not, Mr Lyon says it starts with researching on how people transact because the reason a developer needs this API is people are already using mobile money. Meeting a customer at that point is key to avoid inconveniencing them.