The long road to interoperability in Jordan Lessons for the wider industry DECEMBER 2016 The GSMA represents the interests of mobile The GSMA’s Mobile Money programme works to operators worldwide, uniting nearly 800 operators accelerate the development of the mobile money with more than 300 companies in the broader ecosystem for the underserved. mobile ecosystem, including handset and device makers, software companies, equipment For more information, please contact us: providers and internet companies, as well as organisations in adjacent industry sectors. The Web: www.gsma.com/mobilemoney GSMA also produces industry-leading events Twitter: @gsmammu such as Mobile World Congress, Mobile World Email: [email protected] Congress Shanghai and the Mobile 360 Series conferences. For more information, please visit the GSMA This publication was written by Claire Scharwatt corporate website at www.gsma.com and Anant Nautiyal, GSMA. Follow the GSMA on Twitter: @GSMA Front cover photo: “Amman al atardecer” by Edgardo W. Olivera, used under CC BY / Resized from original. 2 Acknowledgements The story of mobile money in Jordan started in 2009, with the launch of the first mobile money service. Over the past few years, the Central Bank of Jordan has developed a clear regulatory framework for mobile money and initiated the process to develop a National Financial Inclusion Strategy. These critical steps are putting Jordan on the forefront of financial inclusion efforts in the region and globally. The Central Bank adopted a test-and-learn approach with the objective to build the best possible environment for mobile money in the country, and this has led to the development of an interoperable model for mobile money which is unique in the world. A lot can be learned from the rich experience of Jordan and we commend the Central Bank for their willingness to share that story. In particular, the authors would like to thank Ms. Maha Bahou from the Central Bank of Jordan for her time, openness and unrivalled commitment to financial inclusion in Jordan. The authors would also like to express their sincere appreciation to the teams from Orange, Umniah and Zain for their great collaboration over the last year and a half, specifically Emma Lala Bouali at Orange Group, Mohamed Beides at Umniah, and Sultan Kashoura at Zain. Finally, the authors are grateful to Abbassi Law Office, CGAP, Enclude, Emerging Market Payments, eServGlobal, MadFooatCom, ProgressSoft and USAID for insightful discussions and for helping us to get a better understanding of the mobile money sector in Jordan. 3 Table of Contents Acknowledgements .............................................................................................................. 3 Introduction ........................................................................................................................ 5 Part 1 – Market context & regulation ................................................................................ 6 Regulation ............................................................................................................................ 7 Differing approaches following the new regulation ............................................................... 8 Part 2 – Rolling out interoperability ................................................................................. 9 Building the switch ............................................................................................................... 9 Integrating with the switch .................................................................................................. 10 Defining the commercial model, operating rules and governance ..................................... 10 Part 3 – Early findings from interoperability ................................................................. 13 Next steps and upcoming challenges ................................................................................ 13 Lessons learned from Jordan ......................................................................................... 15 4 Introduction In December 2013, the Central Bank of Jordan published Mobile Payment Services Instructions, providing the new regulatory framework for mobile money in Jordan. The new regulation allowed for an open and level playing field for banks and non-banks to provide mobile money services in a safe and sound manner. It also prescribed a specific model for interoperability between providers. Specifically, it introduced JoMoPay (an abbreviation of Jordan Mobile Payments), a national switching infrastructure with the purpose of enabling interoperability between mobile money services from day one. At the beginning of 2016, Jordan became the first country in the Middle East and North Africa to have implemented interoperability of mobile money services. However, it took more than two years to launch the first mobile money service integrated with JoMoPay and in compliance with the 2013 Instructions. As of September 2016, there are two1 live mobile money services in Jordan witnessing limited traction, while the full potential of mobile money remains to be seen. Thus, despite a strong commitment from the Central Bank to deepen financial inclusion in a country where less than a quarter of adults are banked, the intended impact has not yet materialised. What lessons can we learn from the Jordanian experience? What were the key success factors, and what have been the main barriers slowing down the development of mobile money in Jordan? This story is very rich for the mobile money industry and shows that implementing interoperability can be much more challenging than expected. Specifically, this case study highlights that: Dialogue between mobile money providers and regulators is key to ensure alignment in understanding the timing, benefits, costs, and risks of interoperability; Interoperability is only a means to an end and cannot by itself guarantee the success of mobile money if solid foundations are not in place, such as strong distribution networks or good customer experience; The choice of the technical solution to support mobile money interoperability has a direct impact on the cost structure and on the business model for mobile money providers; The timing of interoperability is critical. If mandated and introduced prematurely, interoperability could undermine early-stage investment incentives and increase operational complexity and risk, without advancing market growth; Ongoing monitoring of mobile money interoperability in markets where it is live as well as further research will be necessary to ensure we continue to learn about how to swiftly connect third parties to the mobile money ecosystem in a safe and secure manner, and to develop new services to achieve the complementarity of mobile services in Jordan. 1 The Central Bank has provided licenses to four service providers, but only two of them – Zain and Umniah – have commercially launched their mobile money service. 5 Part 1 – Market context & regulation With its strong international reputation and prominent position on the world stage, Jordan is not a country many people would associate with financial exclusion – but that would be an oversight. With only 24.6% of Jordan’s adult population having an account at a formal financial institution, the level of financial inclusion in Jordan is lower than in many other countries – including Angola (29.3%), Zimbabwe (32.4%), and Somalia (38.7%).2 Jordan Market Context At A Glance Population: GDP per capita: Smartphone penetration: 7.7 million3 $4,8314 70%5 Number of mobile Adults with an account at a Gender gap in mobile connections: formal financial institution: ownership: 8 10.3 million6 24.6% 21%10 And in Sub-Saharan Africa: Number of unique mobile Gender gap in financial 28.9%9 subscribers: account ownership: 11 5.6m7 53% The figures above show that there is a clear opportunity in Jordan to leverage mobile technology to increase access to financial services, particularly for the following segments of the population. Unbanked citizens, especially women: The majority of adults are financially excluded and don’t have an account at a financial institution. While the gender gap in mobile ownership persists in Jordan, the gap in access to financial services is actually much higher. In fact, the 2 2015 Findex data 3 http://data.un.org/CountryProfile.aspx?crName=JORDAN 4 http://data.un.org/CountryProfile.aspx?crName=JORDAN 5 Figure obtained from Central Bank of Jordan. According to GSMA Intelligence (https://www.gsmaintelligence.com/markets/1826/dashboard/) there are 3,990,859 unique smartphone SIMs in Jordan 6 https://www.gsmaintelligence.com/markets/1826/dashboard/ 7 https://www.gsmaintelligence.com/markets/1826/dashboard/ 8 2014 Findex data 9 2014 Findex data 10 Bridging the gender gap: Mobile access and usage in low- and middle-income countries, GSMA Connected Women, 2015 11 Bridging the gender gap: Mobile access and usage in low- and middle-income countries, GSMA Connected Women, 2015 6 gender gap in financial account ownership reaches 53%, while the gap in mobile ownership stands at 21%. Refugees: According to the UNHCR, there were an estimated 664,118 refugees in Jordan in 2015.12 These refugees are especially vulnerable and tend to live below the poverty line. Mobile money services can enable humanitarian assistance and cash transfers to refugees. Mobile money can also help to increase financial inclusion as well as access to other basic services such as education and healthcare. Urban