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Is eMoney now real money?

The latest version of the EU eMoney directive comes into force in April 2011. Having attended the World Roundtable on Electronic Money Management, hosted by the Malaysian Central Bank, Bank Negara in Malaysia on Saturday, it was a fascinating topic to debate. The meeting was held at the start on the two day OMFIF meeting, and attendees included regulators and central bankers from around the world. There were some interesting thoughts bounced around as you would expect, but an overview of where we are is probably something like this:

There are currently 4.7 billion debit cards in use worldwide which by some coincidence is also around the same number of mobile phone handsets in use. If that is a 1:1 relationship then the link between mobility and payment capability to bank accounts already exists, and when SEPA finally gets off the ground across Europe it gets really interesting since it could effectively bypass the local niche debit card products making services provided by some Internet Payment providers obsolete.

Open loop stored value eMoney has worked very well, in fact in Japan, they pass one person a second through their railway ticket authentication booths, something I’ve seen evidence of kindly shared by JP Morgan. Tesco would kill for a similar checkout system, and yet it could be just around the corner. Of course in Japan the stored value limit is set by the consumer, and is not restricted to £15, and if you lose your card you don’t lose your cash because the data is stored and maintained centrally. Mass Transit card payment applications were initially planned to hold the value locally, but the Japanese model beats that. What’s more, you can also buy a coffee or pay for a round of beers or even gold with the same system.  Interestingly, the operator is not the telco but the transport operators and if you don’t want to use them there are a few others to chose from which all will work simultaneously on your mobile phone. Lose your phone? No problem, get your new phone, download the app and your cash balance arrives automatically and away you go. It’s the same story in Hong Kong with Octopus.

We also touched on M-PESA, the Swahili word for money that is used to promote the Kenyan eMoney system. Here a combination of lack of infrastructure and the unbanked has created a showcase, which satisfied the market but didn’t satisfy the regulators.  In the end common sense prevailed and M-PESA is the winner and now offers betting alongside its payment and money transfer services. M-PESA sought to help the unbanked population, who make up around 280million of the population which is around 8% of the existing market today (4.7billion).

Taken this all in to consideration - Europe must be the hotbed? It seems not. According to one EU central banker, there are only 20 Full eMoney licences granted and operational in the EU, excluding closed loop and the most active organisation is in Austria. Interestingly Thomas Capka from A1 Bank and I are both speaking at the keynote  session of the TM Forum in Nice tomorrow, and yes, no prizes for guessing,  on e-money, so the European update will follow!


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