The third event in SCL Masterclass series was hosted by Simmons & Simmons and chaired by Hinal Patel who began the session by discussing some of the challenges in relation to Mobile Money. In particular Hinal Patel briefly discussed how only 36% of online payments are currently made over mobile despite the proliferation of Mobile Money apps. The first speaker was Alexander Shelkovnikov of Monitor Deloitte who discussed the development of mobile money globally and emerging trends. He was followed by Sophie Lessar of Simmons & Simmons who provided an update on the legal framework for Mobile Money in the UK and the EU. Prince Zhandire from Barclays provided insight into the development of Barclays Mobile Money apps, including Pingit and Bpay, and some of the legal considerations involved when launching these products. Finally, Tim Waller of Skrill explained the key mechanics of how digital wallets work while also providing insight into the current uses of the Skrill Mobile Money technology.
Alexander Shelkovnikov began by providing a clear idea of what ‘Mobile Money’ is, despite the lack of any consolidated or accepted definition. He set out key themes, including that Mobile Money is:
· available to users on their mobiles;
· accepted as a means of payment;
· electronically recorded; and
· issues an amount of money as payment that will reflect the availability of funds in the payer’s account.
Alexander emphasised that Mobile Money can be used as an alternative or complement to cash and that the market is expected to grow to around £280 billion by 2018 with the number of users expected to grow significantly in kind. However, he made a key point that it is anticipated that only one-third of the new users are anticipated to be ‘active users’ (those who use Mobile Money on a regular basis rather than for one-off transactions.) Alexander also provided interesting insights into user trends in Mobile Money focusing on the fact that, although ‘airtime top up’ is the most popular use for mobile money, peer-to-peer transfers equate to the biggest proportion of the monetary value. He also provided interesting analysis of global trends in Mobile Money, emphasising its prevalence in African countries, such as Kenya and Tanzania, and projecting growth in Asian markets.
The final part of Alexander’s talk discussed developments in the UK market, particularly ‘Paym’ which allows the transfer of money using a text message. The prediction that this could be used by up to 30-40 million people in the UK and Sweden in the near future emphasised the relevance of newly adopted technologies. A Monitor Deloitte survey provided further insights into the UK market, including that the most popular use of Mobile Money apps is to check account balances.
In bringing his talk to a close, Alexander provided some predictions in relation to the future of Mobile Money. He would expect more players to enter the market and further development of new ideas and technologies. He predicted that mobile operators would be most successful in countries with limited banking infrastructure and that banks would likely see an uptake in the use of apps such as Paym. He also particularly emphasised that he would expect Bitcoin to become more popular as a currency as the security of the currency is improved and consumers begin to appreciate the transparency of transactions in Bitcoin.
Sophie Lessar’s presentation dealt with challenges that are currently relevant to Mobile Money products in the UK and EU regulatory and legislative landscape. She addressed the fact that the nature of the product is likely to dictate what legal regime will apply.
Sophie suggested that provision of Mobile Money services is likely to be a regulated activity in the UK and Europe, though there may also be different regimes and activities to consider between EU Member States. EU regulation that relates to Mobile Money historically was not considered to be ‘future proof’ and was considered to be inhibiting the market. The key regulatory drivers for more recent regulation were (and are) to enhance end-user confidence, ensure that money and data are safe and protect against fraud. This regulation is intended to enhance market confidence.
Sophie explained some of the legal issues with introducing products developed in other jurisdictions to the EU or UK. She emphasised that there may be barriers to transfer of Mobile Money technology between jurisdictions. For example, when discussing Apple Pay, Sophie considered the fact that certain applicable elements of Apple Pay may not work in the UK in the same way as in the US due to the differing regulatory landscape. For intra-EU transfers this may be simplified by the passporting regime.
Sophie suggested that three questions should be asked from a legal perspective:
· Is the product regulated?
· What is your role in providing the product?
· Are you regulated?
She went on to specifically look at the UK regulatory framework for E-Money which is subject to EU directives and is implemented by UK regulation. E-money activities are considered to be authorised activities and the key focus of the relevant regulation is the access to funds and providing consumers with sufficient product information.
Sophie also explained the current regulatory position for payments. The EU intends to introduce regulation to encourage end-user confidence in third party platforms and so encourage customers to take advantage of new payment options.
There are also moves to tighten up technology requirements relating to payment security. The EU plans to regulate in an attempt to protect end users.
Prince Zhandire’s presentation focused on the Mobile Money technology that Barclays has produced for consumer use. Barclays have developed Pingit, Bpay (a wristband that can provide contactless payment) and use Paym to expand the Pingit functionality so that Barclays customers can make payments to non-Barclays users. Pingit is a particular success story as the first UK peer-to-peer payment app, winning 36 awards and with 10 million payments made since its launch. This app is under continuing development and will allow users to make donations to charity, buy bus tickets instantly and make international payments without paying otherwise expensive transfer charges.
Prince went on to explain the legal considerations that Barclays had taken into account when launching their various Mobile Money applications, not least the fact that no one had launched one before. Some key legal processes that he discussed included customer due diligence and on boarding and how the traditional wet signature and document pack can be translated into a purely digital soft copy environment. It was also important to ensure that users received and were aware of all relevant information and that any consents were obtained with sufficient scope to cover all the elements of the Mobile Money services.
A key point for discussion was how to deal with mistaken payments and redress when the payment service is instant. An additional point for consideration in the process was which services within the app would be regulated and how the services that were regulated and unregulated interact with each other.
As the final part of his presentation Prince summarised his view of the future for Mobile Money. He distinguished between ‘Push’ payments (where a third party intermediary facilitates a payment on behalf of a consumer) and ‘Pull’ payments (where there is no third party facilitator) and the way that Mobile Money technologies can be categorised using these terms. He also suggested that the use of NFC and wearable communication, such as Bpay, was likely to increase.
Prince ended his presentation by highlighting that over 2.5 billion adults globally have no deposit account but 6.8 billion have mobile phones.
Tim Waller began his presentation by illustrating the history of Skrill and the development of their technology since the company was founded in 2001. Highlights of the timeline included that Skrill was the first regulated e-money issuer in Europe (regulated by the FCA) and the launch of their digital wallet that now has more than 40 million users. Skrill’s e-money solutions are used by over 180,000 merchants worldwide in over 200 countries and process nearly €16 billion annually. Tim went on to explain the basic mechanics of a stored value digital wallet, with a clear description of how Skrill transfers e-money between a Customers e-wallet and the Merchants e-wallet without the transfer of customer details. Skrill also provides Group Mobile Payment products with a Skrill payment page that can be integrated with a retail merchant’s online page.
He also explained how another Skrill product the ‘paysafecard’ enabled consumers to make purchases online without sharing payment details. Prepaid vouchers, with a 16 digit PIN, are made available in denominations in various currencies. These cards can be topped up or combined with other paysafecard PINs. This system also provides a free balance and transaction overview so the user can ensure they are constantly up to date on spending. Tim explained that the key benefits of this system are the security and the ability to keep payment data safe.
Tim also discussed the emerging markets for Mobile Wallets with a particular emphasis on the estimated 1 billion consumers with a mobile wallet but no bank account and the ability for a mobile wallet to carry a digital monetary balance and perform domestic peer-to-peer and online payments. Skrill has developed systems that work closely with merchants using the application to make sure that the payment process and systems are compatible with online sites and apps. For example, Skrill has produced the ‘MNO (mobile network operator) Co-branded Skrill Merchant Portal’ that provides consumers with relevant content and helps to drive traffic through merchant sites.
Tim also discussed what contractual relationships are necessary when using the Skrill wallets for e-commerce. Skrill contracts with the online merchant and the MNO. The MNO or local bank will contract with the e-wallet end-user. As a result of these contracts, the funds can flow from the user’s e-wallet via the MNO or bank to Skrill and then be transferred on to the online merchant by Skrill.
Hinal Patel is a Partner at Simmons and Simmons LLP, Sophie Lessar is a Managing Associate there and Sophie Sheldon is a Trainee Solicitor there.
