Since the Bill and Melinda Gates Foundation launched an open source banking code project, Mojaloop, at Swift’s Sibos conference in Toronto in 2017, adoption has been rather slow. Orange Group, one of the world’s leading telecommunications operators and MTN Group, Africa’s leading cellular telecommunications company, have launched Mowali, a mobile money wallet and the Tanzanian payment system TIPS (Tanzania Instant Payments System)) announced in February they are also using Mojaloop.
But interest is growing with help from DFS Lab, an accelerator backed by the Gates Foundation which invests in early stage fintech startups in Sub-Saharan Africa and Asia. It recently held a hackathon to introduce tech companies to Mojaloop and work with them on potential solutions using the code.
In his invitation for a Mojaloop hackathon in Tanzania, Jake Kendall, executive director for DFS Lab, said:
“Mojaloop is a tool that can help reduce traditional barriers that banks and financial services providers face to interoperability. It isn’t a product or app. It’s the code to build a platform for bridging all the financial products and applications in any market."
Each user would be able to build something different with the code to meet their specific goals and, ideally, open up financial services to those who don’t yet have access.
”In mid-April, more than 30 people from eight countries (Bangladesh, Ethiopia, Kenya, Myanmar, Mozambique, Nigeria, Pakistan, and the U.S.) participated in the four-day hackathon in Tanzania under the auspices of the Lab.
“We see Majaloop as part of bigger trend toward standards-based interoperability and improved interlinking in financial services,” said Kendall. The hackathon drew a variety of companies — some pretty well established and others in the startup phase -- he added, including companies looking at merchant payments, digital credit, interoperable agent networks to convert digital payments to cash and some e-commerce and mobile commerce companies.
The hackathon started with a day of design exercises to understand the problem the participants are trying to solve and the elements required, such as transaction flow and the user experience they want to provide.
Mojaloop will make payments faster, and through its centralist directory, more secure, said DFS.
"The clearing time between transactions on a Mojaloop deployment will eventually be 15 seconds and is available 24/7. Considering one can’t even access basic EFTs in Uganda on Saturdays and Sunday because bank account managers aren’t at work, this is a massive improvement over existing payment schemes. You can make or receive a payment to/from anyone on the scheme via your DFSP (digital financial service providers) without going through (and paying) a 3rd party integrator.
A centralized directory within the Mojaloop grows more valuable as the number of participants grows. Merchant Request, which is essentially an e-invoicing function, is built into the switch, which means anyone can request and accept payments from anyone else on the payment scheme, according to DFS Lab.
"Multi-country/multi-currency — Mojaloop is inherently built around interconnection and the scheme designers envision a seamless cross border interoperability once Mojaloop instances are set up in multiple countries."
Kendall, who previously worked in financial development for the Gates Foundation in Seattle, said the Foundation is unusual in developing a platform and attracting for-profit companies to use it. DFS is setting up a venture fund for Africa to bring in venture funds that want deeper insight into developments on the continent but don’t to make a commitment of people right now.
“These would be for-profit investors,” Kendall said. “Our view is that most things need a profit motive, otherwise it is unlikely they will become large scale.”
Tech startups in Africa often expand into multiple countries at a very early stage, which Kendall thinks is because the individual country markets are too small to support significant growth. He has written about it on Medium where he notes that Nigeria has a GDP slightly smaller than metro Boston and Kenya's is just a little bigger than Jacksonville, Florida.
“African startups must target the broader continent and even beyond to find a big enough market to be interesting to international venture investors,” he added.
In his latest book, Digital Human, fintech author Chris Skinner said Africa is leading the world in financial innovation. He has been repeatedly surprised at the amount of innovation he has seen in several trips to the nations of the continent, he wrote.
A look at the participants in the DFS hackathon shows the range of innovation underway:
Jumo: One of the larger digital credit companies in Africa to partner with mobile network operators (MNOs). Their prototype explored using the metadata fields in the Mojaloop messages to exchange data on credit status of clients (e.g. an over-the-top credit bureau, cleverly integrated into existing Mojaloop protocols).
GrameenPhone: Large MNO from Bangladesh. Their prototype illustrated how they could deploy Mojaloop to manage integrations with a large number of banks who will use their agent network as an interoperable CICO (cash-in cash-out) network.
Juvo: Partner with MNOs to do both digital credit and other financial offerings. Prototype of a financial services market place where multiple banks and MNOs could offer financial products to clients.
Paystack: High-profile Nigerian fintech, known for well-designed payment stack for merchants (aka "the Stripe of Africa"). Prototyped the use of Mojaloop to enable cross-border payment flow for online merchants.
OneLoad: The largest 3rd party CICO retail agent networks in Pakistan. Prototyped a similar use to GrameenPhone where they would deploy Mojaloop themselves to manage integration with all the banks who they are trying to give access to their CICO network.
Ssnapp: Create tools for online loyalty programs. Prototyped a split payment protocol where they could get multiple people to pay for a single transaction (e.g., for gift purchase).
Teller: Creating chatbots for banks and telcos in developing markets. They prototyped a "Kayak for payments" that would help merchants pick the best payment method to minimize fees, using the fee verification feature of Mojaloop.
Famoco: Created a fully digital workflow for the World Food Program that would allow them to pay digitally the merchants who administer food voucher programs to refugees without a lot of offline and manual steps and going through a single interface rather than a separate interface for each bank and mobile money account.
EthSwitch: One of the national switches in Ethiopia, cooperatively owned by the banks, processing ATM now and looking to move to merchant and other use cases. They prototyped a merchant transaction flow as an exercise to help them evaluate Mojaloop.
