By now it’s a well-known fact: strategic alliances in general are complex to structure, and harder to manage. This is especially true when stakeholders are large, powerful, and from different industries with fundamentally distinct business models, as the case is with banks and mobile operators. What, then, are different ways that these two parties can structure a mutually beneficial partnership to offer mobile money?

The heart of the new MMU article “Mapping and Effectively Structuring Operator-Bank Relationships to Offer Mobile Money for the Unbanked” is an inventory of all of the activities that must be performed in order to offer mobile money for the unbanked, and then a discussion of what kind of entity—an operator, a bank, or a third party—is best positioned to carry out each one. The first step is to understand the components of the mobile money value chain—that is, what needs to happen for mobile money to be offered to customers? There are lots of ways that a value chain can be visually depicted. In our version, activities which create and deliver the mobile money service to customers are shown along the bottom, while support activities—those that are required in order to carry out primary activities—are shown in horizontal bands along the top. In the article, we discuss each of these activities in detail.

Citi Global Transaction Services and the GSMA hosted a conference in Nairobi in December titled "Mobile Money Policy Forum: Partnerships for Financial Inclusion in Africa". The two-day event was designed to discuss regulatory frameworks to enable mobile commerce in Africa. The forum was attended by industry participants including key mobile network operators, CEOs from major utility and large public sector entities, as well as NGOs active in promoting financial inclusion including CGAP and the Gates Foundation.

At the 2010 Leadership Forum for mobile network operators and financial regulators in Rio de Janeiro, one attendee made a provocative suggestion during a discussion about operator-bank partnerships: “The premise of partnership is a premise. A bank could just be a service provider... and that may be the role in which they’re most comfortable.” Take, for example, Commercial Bank of Africa (CBA), which is the institution which held the combined value of all agent and customer accounts for Safaricom’s M-PESA, the most famous mobile money service in the world. For CBA, the M-PESA float account is simply a deposit account—albeit a high-transaction-volume one, on which it earns very significant transactional revenues. In this case, the operator-bank relationship is simple—CBA provides a service to Safaricom—and consequently straightforward to manage....

Banks and operators have come together in a wide variety of configurations in order to offer mobile money for the unbanked. In our research for “Mapping and Effectively Structuring Operator-Bank Relationships to Offer Mobile Money for the Unbanked,” [link] we found that the vast majority of mobile money for the unbanked services are operated in large part by mobile operators, who contract with banks to carry out particular functions, like float holding. After float holding, operators are most likely to turn to banks to handle license acquisition, regulatory engagement, and compliance. This is because in many jurisdictions, mobile operators are not allowed by their central bank to acquire a payments or e-money license themselves. Instead, they ask a bank to secure the relevant regulatory approvals, and then operate under that approval. It makes sense to turn to a bank to take on this role, since banks already have a banking license, a relationship with the regulator, and an existing compliance function. But here’s the confusing part....