Over the last two decades Mobile Money (MoMo) emerged as a solution built upon existing telecommunications infrastructures to provide financial services to the unbanked and underserved populations, particularly in developing regions. In many markets, mobile money services were (and still are) offered by Mobile Network Operators (MNOs) as MNO-led MMPs (Mobile Money Providers). Because of the simplistic roots of MoMo transactions, enabling cash-in and cash-out services, MoMo responsibilities are primarily handled by a dedicated MoMo department of the MNO or supported by some resources as a cross-functional responsibility within existing departments like Finance.
The expansion of Mobile Money Services
The GSMA Status of The Industry Report on Mobile Money 2024 reported 1.75 billion registered accounts and a transaction value of $1.40 trillion, reflecting a year-on-year growth of 14%. An increase in transaction volumes by 23% also highlights the rapid adoption and integration of mobile money services globally. Today, Mobile Money services have evolved more than anyone imagined – and there are no signs of it stopping any time soon. Over the years, MNO-led MMPs (Mobile Money Providers) have expanded beyond basic transactions such as peer-to-peer transfers and airtime top-ups. Today, it encompasses a wide array of financial services:
- International Remittances: One of the fastest-growing use cases, enabling cross-border transfers.
- Merchant Payments: Facilitating digital payments for goods and services, with transaction values reaching almost $74 billion in 2023.
- Bill Payments: Users can pay utility bills and other recurring expenses directly through their mobile wallets.
- Savings and Credit: Offering microloans and savings products, with partnerships between mobile operators and financial institutions enhancing service offerings.
- Insurance Products: Providing microinsurance services to cover health, life, and agricultural risks.
RAFM for Mobile Money
There’s a growing recognition among MNOs that what satisfies one part of the GSM business for Revenue Assurance and Fraud Management (RAFM) doesn’t always translate seamlessly to the Fintech part of the business that handles MoMo. When comparing MoMo services with traditional GSM telco services, it’s clear that trying to force-fit telco RAFM solutions into MoMo environments isn’t just inefficient—it’s counterproductive. The distinction between MoMo and telco RAFM operations is increasingly important.
Key Differentiators Between MoMo Service and Telco Services:
- Extensive Interconnect of Partners –MoMo services involve a distributed ecosystem of third-party partners to support inward and outward accounts. This differs from telco services, where reconciliation activities primarily concern different internal GSM systems. When reconciling different third-party systems, there is a new set of challenges varying from currency conversions to refund transaction handling to uncommon event IDs. Examples of MoMo Partners include:
a. Money Transfer Operators (i.e., MoneyGram and Western Union)
b. Payment Schemes (i.e. Mastercard and VISA)
c. Suppliers (Local exchanges and corridors)
d. Bill Payment Processors
e. Local Banks - Different Threat Actors—The addition of MoMo services opens the door to an entirely new set of threats, from dealing with financial transactions to managing vast interconnect partners. While some fraud scenarios like SIM Swap and Commission Fraud translate somewhat seamlessly from the GSM to the MoMo business, the MoMo business is exposed to an entirely new set of risks.
- Data by Volume—GSM-based data sets have much higher volumes than MoMo data volumes. Because of high data loads, GSM-related controls require high-load handling systems to cope with large volumes. Alternatively, MoMo transaction feeds have much lower data volumes and do not require the same degree of high load handling systems for processing.
- Event Complexity – When comparing GSM Call Detail Records (CDRs) with MoMo Financial Transaction Events, the similarities are few and far between. Mobile Money transactions frequently have status change events for the same event (i.e., handling refunds or canceled transactions). In contrast, CDRs have a fixed status (i.e., a mobile-originated call occurred, and therefore a CDR was generated, or it did not occur, and thus there is no CDR). Adequate support is required within an RAFM system to handle the complexities in financial transaction events.
Why Customization in Telco RAFM Solutions Isn’t the Answer
The temptation to customize existing telecom RAFM tools for mobile money applications is strong, but it’s often misguided. Here’s why:
- Misalignment of Features: Telecom RAFM Systems are designed with CDR usage and data throughput in mind. MoMo controls, however, require features such as ETL-based re-rating, float management, reversal handling, and monitoring funds in suspense accounts —elements that are not on the radar of typical telecom RAFM solutions.
- Complex Revenue Sharing Models: While both Telecom and MoMo involve revenue sharing models, MoMo providers have a more intricate agreement that involves many different partners expanding beyond agents, such as the addition of banks, MTOs, payment processors, and suppliers. Since multiple stakeholders are involved with many different revenue-sharing tiers and criteria, this complicates reconciliation and re-rating controls and increases the importance of a robust margin analysis engine. Telecom RAFM systems may not be equipped to handle the complexities in revenue sharing agreements.
- Inefficiencies: Customizing telco RAFM tools to fit MoMo needs often results in an inefficient and error-prone patchwork solution. This not only increases operational costs but also risks regulatory non-compliance. While there are some overlaps, the RA control framework for MoMo fundamentally differs from Telecom RA Controls, and the data sets for each control are not the same.
- Lack of Scalability: Market research has shown that MMPs experience year-over-year rapid growth in transaction volume, amount, and types. MMPs need systems that can scale seamlessly to support new data sources or increased load with minimal disruption. Telecom RAFM systems frequently face scalability challenges that can be costly and often require downtime.
The Right Tool for the Job
To address these challenges, Fintech RAFM solutions need to be designed from the ground up with the specific needs of Fintech companies in mind. They must consider the different ecosystems between Telecom and Mobile Money. They must have a lean architecture with flexible scalability to support the anticipated growth of transactions by volume and the need to process new data feeds as the MoMo business grows. Lastly, they must provide online analytics with real-time data manipulation and control responses that financial transaction handling requires.
Unfortunately, traditional telecom-focused RAFM systems are ill-equipped to support MoMo use cases. These telco-RAFM systems are challenged when they are used to handle the unique characteristics of financial transactions within MoMo ecosystems. We at LATRO recognize the critical need for a dedicated MoMo RAFM system to address the complexities and unique aspects of MoMo services. To address the unique RAFM challenges of MoMo services providers, we proudly announce the launch of ASSURE Fintech, which has been tailored specifically to protect revenues, defend against fraud, and unlock valuable insights using AI/ML technology.
Conclusion
While Telecom and Mobile Money are driven by the same core technology, their operational RAFM requirements are fundamentally different. While it might seem cost-effective to adapt telecom RAFM tools for MoMo use, such an approach often results in using the wrong tool to get the job done. By investing in a purpose-built MoMo RAFM solution, like LATRO’s Assure Fintech, MNO-led MMPs can ensure they have a future-proof system with full coverage for their Mobile Money Revenue Assure Controls and Fraud Management needs.
To learn more about LATRO’s Assure Fintech, please visit us at: https://latro.com/products/assure-fintech/
