My Thoughts on Technology and Jamaica: BOJ stalling on Mobile Money Regulations as new entrants appear - Herald for the Cashless Society as Smartphones and Mobile Money are The Perfect Storm and Curse of Chucky

Thursday, July 11, 2013

BOJ stalling on Mobile Money Regulations as new entrants appear - Herald for the Cashless Society as Smartphones and Mobile Money are The Perfect Storm and Curse of Chucky

Poor JCCUL (Jamaica Cooperative Credit Union League) and Mozido Jamaica!

Their one chance to jump ahead of the competition with their unique e-payment Service aptly titled JCUES (Jamaica Credit Union e-Payment Services) has been railroaded by the BOJ (Bank of Jamaica) back in March 2012, which really has no oversight over them as noted in my blog article entitled “JCCUL JCUES is put on hold by the BOJ - ePayment setback means Mozido has been Bewitched”.

And there’s still no word from the BOJ (Bank of Jamaica), Jamaica’s Central Bank, as to when they can start as stated in the article “Mobile wallet providers race to the starting line - Casserley, AIS among investors-in-waiting”, Published Wednesday July 10, 2013, The Jamaica Gleaner!

The concern back then was Money Laundering was possibly facilitated via this new Mobile Money Service that was powered by Mobile Wallet expert Mozido Jamaica Limited. But since the BOJ intervened as chronicled in my blog article entitled “BOJ to regulate and approve Mobile Money Industry in Jamaica - JCCUL JCUES is the Man of Steel as GraceKennedy joins The Last Stand for a Cashless Society” rumours have been bubbling that Mobile Money Service would be rolling out in Jamaica  by April 2013 with some new entrants into the game.

April 2013 has come and gone and still no word from the BOJ.

Based on the article “Mobile wallet providers race to the starting line - Casserley, AIS among investors-in-waiting”, Published Wednesday July 10, 2013, The Jamaica Gleaner, there are some new entrants coming into the now soon-to-be-regulated Mobile Money arena. These new players are mainly partnerships similar to JCCUL (Jamaica Cooperative Credit Union League) and Mozido Jamaica between a Bank and Mobile Money Service Provider are:

1.      Advanced Integrated Systems (AIS) of Kingston and US-based MOBIbucks
2.      BPO (Business Process Outsourcing) entrepreneur Jamaican, Patrick Casserly via his Florida based company eMagination Ltd in partnership with PayToo Mobile Wallet

Based on Kingston Beta, Ingrid Riley’s bi-monthly Tech pow-wow that’s been held every since 2007and was recently held in May 2013 at JAMPRO, it seems many a debutante Mobile Money Provider have sprung up as stated in “Start-ups want Mobile Money now”, Published Wednesday May 8, 2013, The Jamaica Gleaner. They are impatient to have Mobile Money Services in Jamaica, pending the BOJ Regulatory Framework in place to prevent Money Laundering.

Very true, as after all, the other Money Transfer Services, while not Mobile in nature, are heavily regulated within the US, allowing persons to only transfer Money between Bank Accounts or use their Services to buy things online securely, such as PayPal, which I’ve used before with my Scotia Visa Debit Card as described in my Geezam blog article entitled “How to use Scotia VISA Debit Card Online”.

This type of transactions from Paypal and Google Wallet are allowed in Jamaica as it involves a Local Bank Account going through a Service Provider abroad e.g. Paypal, Google Wallet to enable purchasing activity on the Internet. What Mobile Money aims to do is to allow Jamaicans Locally to transfer Money from abroad sans the Banks via Remittance Services, the main aim of the JCCUL and Mozido Jamaica partnership in the form of JCUES as explained in my blog article entitled “Mozido Jamaica Limited and Mobile Payments - Plants and Zombies say the Gods must be Crazy”.

This is what the BOJ will not allow.

The Unbanked – The Lost Sheep seeking a Shepherd

According to Deputy Governor of the BOJ, Livingston Morrison at Kingston Beta back in May 2013, quote: “There are some who say 35 to 65 per cent of the population is unbanked, yet penetration for Mobile is at over 100 per cent, so there are opportunities there. However, the unbanked can only be served by the Banks”.

It is the reason why the inner working of Mobile Money Banking shrouded in so much mystery, as it involves Money handles by non-Bank Service providers and give the unbanked the ability to use it remittances i.e. Money sent from abroad here Locally without having a Bank Account.

These Jamaicans are called unbanked in Jamaica and are Jamaicans who are a focus group of a study by the Director of the Centre of Excellence of the Mona School of Business, Dr Maurice McNaughton back in 2011 stated in “Jamaica Counting On its Unbanked”, published Friday, September 30, 2011, The Jamaica Observer.

The unbanked, estimated to be as much as 65% of the Jamaican population are of interest to the GOJ (Government of Jamaica) as they are not only the largest users or Remittance Services, their main means of survival, but they also have huge amounts of Money that’s not flowing through the formal Banking System. More precisely, the statistics from the Mona School of Business, recently quoted by the Minister of State in the Ministry of Science, Technology Energy and Mining Julian Robinson tell a more precise tale of the unbanked:

1.      34% of Jamaicans above 18 years do not own Bank accounts
2.      66% of Jamaicans above 18 years own Bank accounts
3.      12% of Jamaicans above 18 years who own Bank accounts have Debit Cards attached and use them actively for Transactions
4.      80% adult Jamaicans have limited access to low-cost, efficient and user-friendly Banking Services

Mobile Penetration  in Jamaica is almost 3 million people and Mobile internet’s growing year by year according to OUR (Office of Utilities Regulation) Statistics for the Fourth Quarter of 2010 and the Second Quarter of 2011 as stated in the articles , blog article entitled “OUR Records Voice Decline for the Fourth Quarter of 2010 - Postpaid, Data Services and Fixed Line Mobile and Landline Saturday Night Fever for Telecom Providers” and “OUR Telecom Provider Stats indicate JA$14 billion profit for Second Quarter of 2011AD - Telecom Providers Stacking up all Faces on the Argo Video Calling and VoIP on Smartphones”.

BOJ Regulation’s Agenda – GOJ Taxation of Remittances as Income  

With Jamaicans, mostly Millennials (ages 18 to 28) ditching Blackberries for Smartphones since 2012 as opined in my Geezam blog article entitled “Apple iPhone boosts Jamaican smartphone usage as BB goes Chapter 11 Bankruptcy” and my blog article entitled “Blackberry popularity wanes as Jamaicans go Smartphones - Android and Apple's Smartphone Revolution” this 34% unbanked  and 80% with lack of easy access to Banking Facilities, a hurdle to Traditional Banking in Jamaica, presents a huge opportunity for the GOJ to go after uncollected Taxes in Jamaica by making the Unbanked a part of the Formal Banking System.

After all, Money from remittances, despite being a benevolent donation by relatives abroad to assist with the hardships of living in Jamaica, is for many their only source of revenue. Once Remittances come into Jamaica, the recipient is paid in Local currency, not US dollars. But as this may also be a source of income, it’s basically a salary and is thus subject to Income Taxes.

CEO Don Wehby Mobile Money Gambit - Remittance Service Extinct in 2015

The big entrant was expected to be GraceKennedy Limited, being as they are the largest handler of Remittance in Jamaica, handling almost 50% of all remittances as stated in the article “GraceKennedy responsible for half of Jamaica's remittances, says Wehby,” published Sunday November 25, 2012, The Jamaica Gleaner

GraceKennedy has since indicated an interest in entering the Mobile Money game based on the article “GK goes after Mobile Money”, published Wednesday, May 22, 2013 BY SHAMILLE SCOTT Business reporter, The Jamaica Observer.
But first, a quick look at Kenya.

In Kenya, Mobile Money Services based on the M-Pesa System has killed off Money Transfer businesses due to the sheer convenience of using your Mobile phone to do Banking transactions and paying for Services without having to draw for a Credit Card, Debit Card or carry huge sums of Money. The fact it’s so popular there may also have to do with the terrain and huge distances in this African country, which makes it necessary to have any Service that can easily transfer Money from one part of the country to the other.

Even if you factor in the idea that people in Kenya may steal Mobile Phones, the mere fact that it may be as easy to block their Mobile phone’s SIM (Subscriber Information Number) or Mobile phone handset as it is in Jamaica as stated in my blog article entitled “How to Register your SIM Card and get the PUK1 and access Digicel’s Phone Calling Records” as well as strong regulatory framework may also explain its popularity in that country.

No doubt it went through a teething period of people not trust in to final acceptance, especially given its’ convenience and the terrain in Kenya. Plus now that you use your Mobile phone to do financial transactions, it puts extra onus on the users to keep their Mobile phone secure. To this end, one of the possible solutions was to register the Mobile phone number using Government Identification in Kenya and use the phone number itself as the Bank Account Number, necessitating that the Mobile Money Provider had to partner with as Bank.

This is the main reason why the above mentioned partners, despite their business clout, may have problems; the BOJ won’t allow them to do business unless they:

1.      Partner with a Local Bank that fill accredited and registered with the BOJ
3.      Ensure that all Mobile users are have their Mobile Phones be Postpaid or Registered with their Telecom Provider using a Government ID as described in my blog article entitled “How to Register your SIM Card and get the PUK1 and access Digicel’s Phone Calling Records
4.      Use the person’s Mobile Number, SIM (Subscriber Identification Module), IMSI (International Mobile Subscriber Identification) for the SIM and IMEI (International Mobile Equipment Identification) for the Mobile Phone to fully register and identify the customer, necessitating that the Mobile Money Provider also partner with a Local Telecom Provider
5.      Telecom Providers have to have a means of securely locking down Mobile phone and their associated Bank accounts in case the Mobile phone is stolen. This may require that Telecom Provider provide tracking Services for Smartphone users or smartphone users get a Tracking App from the Mobile Money Provider

GraceKennedy CEO Don Wehby, realizing it’s potential to make their business model extinct overnight has indicated their interest and how this would be done via their subsidiary First Global Bank, quote: “First Global in collaboration with Grace Kennedy has the intention to get into the wallet of Mobile Money Services. What is clear is that a large percentage of our population don't have Bank Accounts. We believe there is a huge opportunity for Mobile Banking.”

With so many Jamaicans not having Bank Accounts and yet receiving Remittances from abroad, they seemed a shoe-in for Mobile Money, which back then US Economist Dr. Dawn Elliot predicted would be very popular among the unbanked due to is user-friendly nature “Mobile Money breakthrough predicted for Jamaica”, Published Friday January 6, 2012 3:26 pm, The Jamaica Gleaner.

Cashless Society –  Smartphones and Mobile Money are the Perfect Storm 

So in summary, the Cashless Society is coming and it’s awaiting the BOJ’s approval. Throw in the fact it was tied closely to Jamaica’s growing affection for Smartphones and we have the perfect Storm for the transition of Jamaica into a Cashless Society with the Unbanked who receive Remittances spending their Money via Mobile Money Services.

The BOJ needs to move quickly to set the regulatory Framework in place to make it possible sans the possibility of Money Laundering. This would’ve given JCCUL Competition in this nascent Field that’s a herald for the Cashless Society as Smartphones and Mobile Money are The Perfect Storm (2000) and Curse of Chucky (2013).

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