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The Bill and Melinda Gates Foundation has released a new open-source software for creating payment platforms that will help unbanked people around the world access digital financial services easily.
The new software called Mojaloop, which is designed to provide a reference model for payment interoperability between banks and other providers including telcos across a country’s economy will drive financial inclusion and take full advantage of the largely unbanked population in Nigeria which now records about 47 percent of the entire country, as the software has been made available, free-of-cost, for software developers to adapt and banks, financial service providers and companies to implement.
Rapid growth of mobile has become the driving force of almost everything in the technological evolution of the world and
with payments by mobile predicted to continue increasing around the world over the next few years, industry analysts have attributed expansion of digital financial services to convenience for users and cost-effectiveness for companies aiming to serve new markets.
Although, in Kenya, an estimated 194,000 households have moved out of extreme poverty due in part to their access to M-Pesa, a mobile money platform, and users’ ability to save money more effectively. Digital financial services are now available in nearly 100 countries according to GSMA, an organisation representing mobile network operators. However, mobile money adoption has continued to suffer in Nigeria because the Central of Nigeria (CBN) insists that banks should drive it and not telecommunications operators on whose platform the service runs on.
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Experts also say that global expansion of these services—especially to the world’s poor—has been hampered, in large part, by a lack of interoperability between digital financial services and payment platforms.
“Interoperability of digital payments has been the toughest hurdle for the financial services industry to overcome. With Mojaloop, our technology partners have finally achieved a solution that can apply to any service, and we invite banks and the payments industry to explore and test this tool,” said Kosta Peric, Deputy Director, Financial Services for the Poor, at the Gates Foundation.
“Just as the internet revolutionised digital communication, open-source solutions like Mojaloop can spark innovation and democratise access to digital payments, empowering billions of new customers and driving massive economic growth in developing markets,” Peric said.
Mojaloop (building off the Swahili word “moja,” which means “one”) was created in partnership with fintech developers Ripple, Dwolla, ModusBox, Crosslake Technologies and Software Group, using cutting-edge technology such as the Interledger Protocol, a solution for settling funds among multiple providers across their individual systems. It joins other promising digital financial software, but is the first model that can help extend interoperability from mobile money providers to any bank, merchant or government institution in a customer’s economy in a way that specifically meets the needs of the poor.
Speaking on the necessity of digital payments, Benno Ndulu, Governor of the Bank of Tanzania, the country’s national bank said; “Interoperability is necessary both for financial inclusion and market maturity, but it is a complex thing to achieve. We are excited to explore implementation of this because of how it can simplify that capability for businesses and governments, and speed up access to financial services.”
Chris Hamilton, CEO of BankservAfrica said; “As we modernise and develop national and cross-border payments infrastructure in Africa, the only way to sustainably reach and serve the world’s unbanked communities is through new technologies. Our aim as an organisation is to offer national payments platforms for the next generation of financial innovators and Mojaloop gives us some tantalising new options for doing that in a way that integrates with the entire national economy.”
The foundation has stated that developers can access the new software on GitHub, the world’s leading open-source development platform.
It includes four components: an interoperability layer, which connects bank accounts, mobile money wallets, and merchants in an open loop; a directory service layer, which navigates the different methods that providers use to identify accounts on each side of a transaction; a transactions settlement layer, which makes payments instant and irrevocable; and, components which protect against fraud. The software will not be owned or implemented by the Gates Foundation. It will be used in the foundation’s ongoing work to promote the development of pro-poor, digital payment platforms.
Jumoke Akiyode Lawanson
