Open banking. It’s a term we started to hear about at the end of 2016 and since 2019 interest has remained high. That’s according to Google Trends. Along with those searches, the related hot topics were PSD2 and APIs.

Regulation and technology is opening up access to bank accounts for payers, billers, and service providers. But the state of that openness varies by region and country with important consequences for billers, merchants, and their payment providers.

In this wide ranging discussion, George and Duncan Barrigan, Chief Product Officer at GoCardless, cover a range of topics, all through the lens of the company’s primary value proposition, the use of direct debit from bank accounts to enable recurring and one-off payments across 30 different countries.

As you'll appreciate, stitching together a network capable of using the domestic low cost rails (think ACH and BACS) in 30 different countries to provide both domestic and cross-border recurring payments is no easy task.

Topics discussed include:

• The definition of open banking
• What the impact of open baking has been
• Where open banking is taking off, and where it isn’t
• Recurring payments defined and use cases
• APIs and integration
• How a biller or merchant can move customers from one payment method to another
• Cross-border direct debit
• And, of course, the GoCardless value proposition, something its financial backers believe in given its recent $95 million raise.

Financial inclusion for the poor is a global challenge. In this episode, we dive into the story of Mojaloop, a platform that enables interoperability and transaction routing between mobile money system operators, banks, and other providers. It’s a fascinating, and evolving, story. Take a listen.

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Individual Benefits, Nation Building Impact

Financial inclusion for the poor is a global challenge. Over two billion adults lack access to financial services. While that number is declining - and in no small part because of the work done by this episode’s guests - that level of digital disenfranchisement and cash dependence suppresses well being at multiple levels:

• Individuals must spend significant time to pay bills when they must travel to the biller or its agent, never mind travel to acquire cash. Carrying cash, of course, comes with its own set of risks
• Families suffer as time away from work and home reduces family income
• Entrepreneurs and small businesses face the same time penalty, high transaction costs, and uncertain credit access
• Entire countries experience diminished GDP because of productivity losses and transactional friction. Cash-based transactions also fuel the shadow economy, making audits and taxation very difficult

While Kenya's M-Pesa is the most well known exemplar, there are hundreds of systems around the world offering digital payments, bill pay, savings accounts, microlending, and other services to their accountholders. 

Not Without Concerns

Financial inclusion efforts are not without downsides as some credit extension services, riding the e-money rails laid down by the provider, charge usurious rates. Gambling services are similarly problematic.

With success, e-money systems become systemically important to a country and, therefore, pose a level of systemic risk should the operator go offline for technical or security reasons.

And as with every digital activity that touches money, there is the problem of fraud.

But these are not insurmountable challenges. Some are candidates for regulation-based cures. Others can be addressed by providers themselves.

The Network Effect Matters

Another challenge to the growth and health of mobile money systems is interoperability among those systems. In many countries, multiple e-money systems compete for accountholders but do not interoperate. A user on one system cannot send money to a user on another. That condition adds friction, reducing the e-money value proposition for all stakeholders.

The challenge becomes even more acute, and costs rise, when the sender and receiver are in different countries.

Ecosystem Enablement

A thriving digital ecosystem and economy requires the right conditions:

• Regulation that encourages innovation while also protecting the end user
• Low cost enabling infrastructure, and
• User-focused services that meet real needs

The Bill & Melinda Gates Foundation has taken on financial inclusion for the poor in multiple ways, through support of:

• Development of guiding principles for the delivery of financial inclusion through the Level One Project
• Creation of guidance for regulators to speed accountholder onboarding while limiting fraud and risks concerns
• Support for the development of open loop software designed to speed system interoperability. Called Mojaloop, this open source effort’s goals include the development of a reference platform

In this episode, we dive into the Mojaloop story with two leaders of the work:

• Paula Hunter, Executive Director, of the Mojaloop Foundation
• Kosta Peric, deputy director, Financial Services for the Poor at the Bill & Melinda Gates Foundation

It’s a fascinating, and evolving, story. Take a listen. And, if financial inclusion for the poor in developing markets is important to you, get involved with Mojaloop. It's quite a team.

For a front row seat on payment innovation you have plenty of choices. Yes, Stripe and Square are based in the tech hotbed of the Bay Area and it’s tempting to stare at their success. But a look around the world reveals the evolutionary breadth of how payments are made, regulated, and brought to market. India and China alone reveal how remarkably different approaches can scale to enormous dimensions.

There’s no better guide to what’s happening in payments around the world than Glenbrook’s own Carol Coye Benson. In this episode, Carol and George discuss her new book Global Payments and the Fintech Innovations Changing the Industry.

Carol spent much of the last decade traveling throughout the world consulting to organizations on the impact of technology and business models on national payment infrastructure. The book is informed by the scores of discussions she’s had with tech executives, the leadership of development banks, government agencies, and fintech start-ups.

Take a listen to why she wrote the book, some of what she found, and her take on some of the big questions still to be answered.

Here's how she introduces the book via video: