Journeying towards a more global mobile money interoperability: how Swift and Terra Pay are paving the way.

Fragments of Interoperability.

Earlier this year, I wrote on mobile money interoperability in Africa in a piece titled "Swift, Onafriq, MOWALI, Thunes and others: On Mobile Money Interoperability in Africa." In that article, I mentioned different initiatives and companies, such as Onafriq, Mowali, Thunes, and iPiD, taking a jab at mobile money interoperability in Africa. Interoperability can take on various forms, but at its core, it allows mobile money providers (MMPs) to enable customers to transfer funds between accounts across different mobile money platforms or between a mobile money account and a bank account. At a national level, achieving interoperability is generally straightforward, and it's feasible in regions with strong economic alliances focused on connectivity. However, the complexity increases when attempting to implement interoperability on a global scale.

Globally, various stakeholders have pursued different routes to interoperability. Across the globe, stakeholders have taken diverse approaches to achieving interoperability. Service providers have independently implemented interoperability through direct partnerships or intermediaries in some markets. Governments or regulators have played a more prominent role in other markets, establishing central technical infrastructures that industry players are encouraged to join. Additionally, regional interoperability initiatives are advanced in certain markets to foster a more interconnected financial ecosystem.

Why is interoperability important?

Interoperability is crucial for financial inclusion because it allows different financial systems and platforms to work together, enabling seamless transactions across networks and ensuring that more people, especially in underserved regions, can access and benefit from a broader range of financial services.

Why should you care?

Mobile money has grown exponentially, with registered accounts skyrocketing from 134 million in 2012 to 1.35 billion in 2021. As of 2021, mobile money services providers have grown to 316 services in 98 countries, up from just 169 services in 71 countries in 2012. In 2021, the mobile money industry transacted over one (1) trillion USD annually compared to 68 billion USD in 2012. Yet, despite this massive user base, growth in service providers and transaction value, global interoperability remains elusive—where users can seamlessly transfer money across different mobile networks, countries and platforms. The challenges aren't just technical; they stem from a complex mix of regulatory hurdles and coordination gaps among key players in the industry. 

Comparing Apple with Oranges?

While Swift has long been a leader in global financial interoperability for banks, mobile money systems are still struggling to achieve the same level of integration. Unlike the centuries-long evolution of commercial banking and the SWIFT network, mobile money has surged in just over a decade, driven by rapid technological advances and consumer adoption. So it's clear that mobile money has not had the luxury of time to develop the way Swift has. This accelerated growth has not allowed the same maturation period, and as a result, the industry is still grappling with how to replicate the coordination that SWIFT achieved among banks.

Interoperability is beyond Technology

The need for interoperability in mobile money is undeniable. Still, it's not just about technology—it's about aligning the interests of various stakeholders, from mobile network operators (MNOs) to financial institutions, and navigating the regulatory landscapes of different countries. MTN and Orange's attempt to use MOWALI to create a pan-African mobile money platform is a case in point. Despite their technological capability to establish interoperability across countries, regulatory barriers proved too daunting, leading to the initiative's collapse. 

Swift's Decade effort at cross-interoperability is bearing fruit.

Recall that in its 2012 white paper, Swift suggested that the Mobile Industry Association (GSMA), the Interbank World (Banks' retail organisation), the Mobile Payments Association (Mobey Forum), the International Standards Body (ISO), or a platform vendor could get banks together to work on mobile payments interoperability on a global level. Over the years, Swift has continued championing interoperability in the financial system. Interoperability was the central theme of the 2024 Swift Connect Africa conference, where attendees discussed the growing importance of mobile money and the obstacles posed by regulatory issues and infrastructure gaps. 

Hope is on the horizon.

However, there is hope on the horizon. Firstly, the recent partnership between TerraPay and Swift marks a significant step forward. The collaboration aims to enable cross-border transfers in bank-to-mobile wallets. This crucial milestone could open up new opportunities for banks to participate in the remittance market, traditionally dominated by international money transfer operators (IMTOs). 

Secondly, TerraPay's recent formation of a "Wallet Interoperability Council" to push for interoperability across digital wallets for cross-border payment is another promising development, signalling that the industry is moving from discussion to action. TerraPay is collaborating with five leading wallet operators: Airtel, bKash, MPESA, Nequi, and Sama Money, with services spanning regions such as Bangladesh, Colombia, Kenya, Senegal, Tanzania and Uganda. Together, these operators serve millions of wallet users. Of course, these efforts will still need to navigate the complex regulatory landscapes of various jurisdictions. Still, they represent a proactive approach that has been missing from the conversation until now.

Four viable technical models for interoperability

GSMA, a non-profit industry organisation representing the interests of mobile network operators worldwide, deduced four viable technical models for interoperability, namely:

• The bilateral agreement model (where interoperable participants connect to each other via one-to-one connections).
• The aggregator model (where a third party that is already integrated with multiple ecosystem players in a market helps to establish payment interoperability between participants).
• The mobile money hub model (where mobile operators set up a central entity that acts as a hub to connect them (as well as other DFSPs) interoperably
• The global payments hub model (where an entity that is not a mobile operator sets up a central hub that enables DFSPs to be interoperable).

The GSMA report concluded that while the mobile money hub model appears to be the most promising option for the long-term growth and sustainability of the industry, widespread adoption is currently challenging due to the lengthy and complex setup process.

Which model does the TerraPay's new move fall under?

While the recent partnership between Swift and TerraPay to enable bank-to-mobile wallet cross-border transfers falls under the aggregator model, TerraPay's formation of a wallet collaboration council through collaboration with wallet providers falls under the global payment hub model. These developments are significant in showcasing the potential for combining different models—aggregator and global payment hub—to advance interoperability, enabling seamless cross-border transactions between banks and mobile wallets while fostering collaboration among wallet providers worldwide.

As mobile money continues to grow and evolve, achieving global interoperability will require more than just technology—cooperation, regulatory alignment, and a willingness to innovate across the board. Initiatives like the partnership between Swift and TerraPay are setting the industry steps in the right direction.

***About the Author: Based in Hong Kong and the United Kingdom, Ifunanya has built a diverse career spanning retail, commercial, and corporate banking in Nigeria, with recent experience in Africa's fintech giants such as Flutterwave, Interswitch, and OPay China. She has also navigated Hong Kong’s vibrant fintech scene. She leverages her expertise in technology-driven financial solutions, customer-centric strategies, and innovation in financial services. If you enjoyed this piece, please like, comment, and share it with others.

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