Building Inclusive Payment Ecosystems in Tanzania and Ghana

for the poor have undergone a dramatic transformation. For years, financial institutions like banks and microfinance institutions (MFIs) struggled to sustainably serve the world’s poor. But advances in technology have led to innovative business models, and with them, new opportunities for expanding the reach of financial services. At the heart of this financial transformation is the rise of digital payments services through which nearly any individual or business can send or receive money in real time for almost any purpose and from nearly anywhere in the country—an inclusive payment ecosystem.

As mobile technology has found its way into the hands of those excluded from the formal financial system-about 1.7 billion people worldwide in 2017-they have increasingly leveraged this newfound connectivity to gain access to financial services (Demirgüç-Kunt et al. 2018).Mobile money, a service that allows users to send and receive payments using their mobile phones, is perhaps the most notable example of how technology has expanded the reach of financial services.In Sub-Saharan Africa alone, there were 121.9 million active mobile money accounts in 2017 (GSMA 2017). 1 Since 2014, the share of adults with a mobile money account has grown roughly twice as fast (9 percentage points) as the share of adults with an account at a formal financial institution (4 percentage points) (Demirgüç-Kunt   et al. 2018).
Because mobile money services can reach customers and maintain accounts at a lower cost than can banks or MFIs, these payments platforms have revolutionized the economics of providing financial services to the poor.Today, a range of services providers are taking advantage of mobile money networks to reach new customers and enable the provision of innovative financial and nonfinancial products and services.Banks, MFIs, and FinTechs are using mobile money rails to offer savings , loan, insurance, and other products that can deepen financial inclusion. 2,3Organizations from outside the financial services industry, such as off-grid solar companies and agribusinesses, increasingly rely on key features of mobile money, including real-time transactions and the ability to leverage existing infrastructure, such as agent networks and mobile telephone towers, to serve low-income customers and those living in remote areas.
Despite the strong potential of inclusive payment ecosystems to drive greater financial inclusion, progress in developing these ecosystems has been uneven.In 2016, only eight countries in the world had over 40 percent of their adult populations actively using mobile money (GSMA 2016). 4,5is raises questions as to why success has been uneven across countries.Of these eight countries, five are in Sub-Saharan Africa, underscoring the outsized importance of mobile money as a means for increasing financial inclusion in this region.

Building Inclusive Payment Ecosystems in Tanzania and Ghana
Box 1.Why are the Tanzania and Ghana experiences unique?
While this analysis could have highlighted the experiences of any number of countries that have succeeded in developing inclusive payment ecosystems, the Tanzanian and Ghanaian experiences hold unique and complementary lessons: Tanzania.Tanzania has experienced explosive growth in the use of mobile money since the service was first introduced in 2008.With several providers competing for market share, a range of new use cases have been introduced, including digital credit, savings, bill payments, and more.In 2017, nearly a decade after the first mobile money deployment launched, 60 percent of Tanzanians had used mobile money in the past 12 months (FSDT 2017).
Ghana.The use of mobile money did not have much uptake in Ghana in the early years of the first deployments.But after revising its approach to regulation and passing E-Money Issuer Guidelines in 2015, the country saw dramatic growth in the adoption of DFS.Even before the new regulations were adopted, mobile money had already contributed to a 41 percent increase in financial inclusion (InterMedia 2015).Since then, the Bank of Ghana reports that the number of active mobile money accounts has doubled, and use of these services continues to rise even as new players and products are entering the market.

Box 2. Key components of inclusive payment ecosystems
Regulatory Approach.Financial sector regulators adopt a regulatory approach that fosters innovation, encourages dialogue with the private sector, and evolves as market conditions change.
Executive Commitment and Investment.Payments providers have proactive leaders who believe in the business case and are committed to providing the resources necessary to make critical investments in developing a widespread agent network and customer awareness, even in the face of early losses and uncertain returns.
Competitive Landscape.A dynamic market exists in which a range of players compete to offer innovative services at affordable prices.
Interconnected Services.Customers can use payments accounts to transact with a broad range of individuals, businesses, and government entities, regardless of provider.
Compelling Use Cases.The products and services offered via digital channels respond to customer demand and incentivize use.Case Study: Tanzania An at-a-glance overview of Tanzania's efforts to build an inclusive payments ecosystem is illustrated in were not traditionally under its purview, the new law gave BoT broad powers to directly oversee mobile money providers.This, in turn, led to the emergence of mobile money just two years later-a development that would eventually help the country achieve a more than fivefold increase in financial inclusion, from 12 percent in 2006 to 65 percent in 2017 (FSDT 2006, 2017).

Regulatory approach
Betting on innovation Most importantly, the LNOs gave providers the confidence and space to invest and innovate (see Figure 2), even as BoT tested regulations, learned from the market, and began drafting a payments system law that would enshrine these lessons in a more durable and formal regulatory framework.This approach, referred to as "test-and-learn," is widely considered to have contributed to Tanzania's success in developing an inclusive payments ecosystem. 7Chief among these was the formalization of the licensing process for nonbank e-money issuers, which promised nonbank providers continued control over their services and gave them the confidence to continue investing.

Executive commitment and investment
As Jacques Voogt sat down for another strategy   mobile money in Tanzania, by 2010 only about 12 percent of adults had ever used the product (Montez and Goldstein 2010).
"When we started in 2008, the typical beginning of

Driving customer awareness
In the year following Meza's appointment, investment in agents surged (see Figure 3).Clearly, the market had turned a corner, but as Meza and his team celebrated their success, they knew that the battle was far from won.Despite their early mover advantage, competitors had also benefited from Vodacom's investment.With the providers locked in a struggle to become the nation's preferred payments provider, the M-Pesa team turned its attention to the next big innovation that would give it a leg up over the competition.

Competitive landscape
Competition heats up   Reacting to Vodacom's investment, Hodgson and his team began to develop a strategy for gaining a foothold in the emerging mobile payments space.
"We recognized an opportunity to benefit from our competitor's investments in agent recruitment and customer awareness," explains Hodgson."Even though there was no cooperation, I believe that both parties benefitted from a shared agent network and investment in education and awareness." Far from ceding the market to M-Pesa, Tigo moved ahead with their own investment strategy aimed at taking advantage of the business opportunities afforded by mobile money.With support from both the OpCo and Millicom Group, 10 Tigo leveraged its position as the country's number two voice network to muscle its way to mobile money dominance in Tanzania's big cities.Because agent nonexclusivity was mandated in the draft EMI guidelines, 11 Tigo was able to exploit Vodacom's investment in agents by recruiting those same agents to provide CICO services for Tigo Pesa (see Figure 4).The strategy centered on offering competitive commission rates to M-Pesa agents who opened a Tigo Pesa till, 12 even as they offered promotions that would drive customers to these newly recruited agents.Tigo's agent acquisition strategy, which focused largely on Dar es Salaam and other big cities, is borne out in statistics on the increasing number of nonexclusive agents found in urban areas (see Figure 4).10 Tigo Tanzania is a subsidiary of Millicom Group.11 Agent nonexclusivity refers to the prohibition on providers mandating that their agents cannot also serve as agents for a competing provider.
For more information, see Tarazi and Kumar (2012).12 A till refers to the cash kept by mobile money agents to manage CICO transactions for a provider.
Reflecting on how competition affected M-Pesa, especially given the moves by Tigo and Airtel to benefit from the significant early investments that Vodacom made in building its agent networks, Voogt sounds an optimistic tone.Competition from the other providers had helped to increase customer awareness of mobile money, he explains, as competitors poured resources into their own advertising campaigns.Moreover, he claims that the ability of M-Pesa agents to work with other providers was making their businesses more sustainable.But at the same time, he acknowledges that competition may have had more of an impact on the GSM business than on mobile moneyespecially when it comes to pricing. 13As of 2016, Tanzania had the lowest prices for mobile data on the continent (Lyomo 2016); the cost per minute for calls also remains low relative to that of other countries (Corporate Digest 2014).Yet, competition has not had a similar impact on pricing for mobile money: "On the GSM side, it's competitive," acknowledges Lopokoiyit, referring to prices offered to customers."On the financial services side, it's competitive but not as much.Part of this is agent commissions.There's a natural floor because you can't reduce prices too low since you need to cover commissions."

The impact of a competitive market
As BoT was drafting its EMI Guidelines in 2012-2013, it included a provision that requires mobile money providers to use the interest earned on customer float held in bank trust accounts for the "benefit of these customers."The language was left deliberately vague, and BoT's intention was to have providers submit proposals and compete to see who could come up with the best ideas.Most providers were either not in a rush to develop approaches to satisfy this requirement or had their proposals (e.g., to develop a foundation that would donate to charitable causes) rejected.However, Hodgson at Tigo Pesa sensed an opportunity to differentiate his service from those of his competitors.
What Hodgson eventually introduced would shock the financial services industry in Tanzania and draw loud protests from mobile money providers and banks alike.In 2014, Tigo Pesa became the world's first mobile money provider to distribute profits earned from accrued interest on customer mobile wallet balances held in bank trust accounts."We took a lot of heat from the banks and other mobile money providers," Hodgson recalls."The banks accepted that they would need to pay a competitive interest rate to attract operator trust fund deposits, but were not happy when we passed this benefit through to the consumer.They felt it undermined the value proposition of their savings products."Tigo was not actually paying the interest themselves, rather the banks were paying it to them as trustees of customer float, and they were passing this benefit on to their customers.This was a groundbreaking development for mobile money, and one that put Tigo in direct competition with banks that had so far shown little interest in serving low-income customers.
"Due to the size and nature of the funds held in trust, we were able to negotiate a competitive rate approaching the T-Bill rate.The benefits of this return were passed directly through to the customer.The net result could be likened to receiving a long-term, fixed deposit rate on current account balances as low as 1,000 tsh (about US$0.50).That was probably our most meaningful contribution to banking the unbanked at that time," says Hodgson.
Today, all MNOs in Tanzania offer pass-through interest to their customers."Increasingly what we're seeing is that there is more complementarity than competition," says Coulon.
Voogt, the former head of M-Pesa, agrees: "On partnerships, the big guys-like the big banks-will be crucial in building out use cases like savings and loan products and expanding the e-money ecosystem, thus reducing the need to cash out." One surprising development in the saga of Tanzania's competition among MNOs has been the entry of the Vietnamese telco Halotel into Tanzania's crowded mobile space.After launching in 2015, Halotel has pursued an aggressive expansion strategy that explicitly focuses on serving poor, rural communities.
By 2017, Halotel had managed to capture 9 percent of the country's mobile subscriptions, outpacing Zantel to take the number four spot behind Vodacom, Tigo, and Airtel.Already, the company has invested $700 million of a planned $1.7 billion investment in mobile network connectivity and/or agent networks, and has managed to cover 95 percent of the country-including 3,000 villages that had not previously had mobile network coverage.
But perhaps most interesting is Halotel's recent launch of its own mobile money service, Halopesa."We have a comprehensive strategy with our Halopesa strategy which goes in line with the government's wider financial inclusion scheme," Managing Director Li Van Dai said.He added that Halopesa is also partnering with financial institutions to offer loans to its customers through the Halopesa platform.
It remains to be seen whether Halotel's focus on the rural poor will carry over to its mobile money and broader mobile financial services offerings.But what is clear is that intense competition in the mobile space is driving a greater focus on those customers who have thus far been excluded from Tanzania's rapidly expanding array of mobile services.
Box 6.Is competition making mobile money more inclusive?The case of Halotel 14 This paper refers specifically to P2P interoperability in which a customer of one service provider can send money directly into the wallet of a customer of a different service.There are many workarounds for interoperability (including aggregators and OTC), some of which will be explored later in the paper.15 For more on interoperability and ways it can be achieved in mobile money, see Arabéhéty et al. ( 2016).

Interconnected services
Providers forge ahead with industry-led interoperability While financial institutions and MNOs sought to put their past enmity behind them, Hodgson of Tigo Pesa wondered whether this new idea of "coopetition" might also work to benefit mobile money services.
Although Tigo Pesa had come a long way since its late entry into the market, M-Pesa's early mover advantage had proven more durable than he expected."I think that the regulators have a responsibility to ensure that one player is not able to exploit their monopolistic position," Insists Hodgson.In his opinion, the best way to level the playing field would be to ensure that customers who use any mobile money service are able to transact with customers of any other mobile money service-a principle known as interoperability. 14rtunately for Hodgson, the draft EMI Guidelines already stipulated that mobile payments services needed to "be able to provide" interoperable services with other mobile payments services providers (di Castri and Gidvani 2014).This meant that a framework for creating interoperability was already in place, pending an agreement among the providers. 15dgson had been advocating the principle of interoperability to his market counterparts since early

The impact of interoperability
In the end, interoperability did not turn out to be the threat that Vodacom had imagined.As the head of M-Pesa at the time, Voogt, remembers:    Of all respondents, 88% used a mobile wallet to send money in the past year… …79% of those respondents sent mobile money to a different network 57% of all respondents sent money using account-to-account.
an interoperable transaction were unaware that such transactions were even possible, pointing to an ongoing need to educate customers and raise awareness (Cook 2018).

Compelling use cases Trying to move beyond P2P
With the increasing diversity of providers involved in MFS, a growing list of service offerings, and the ability to transact across networks, providers had an opportunity to make their services more relevant to users.For years, they had been trying to attract new customers and drive up activity rates among their customers by offering new and innovative ways to use mobile wallets. 17

Merchant payments:
The next big use case?Clearly, questions remain around whether and how Tanzania will be able to sustain its successes in the months and years to come.But most signs are pointing in the right direction.Significant CGAP describes aggregators as "the glue that helps many parts of the digital financial services ecosystem to work together."Working behind the scenes, these companies provide a valuable service to organizations that do not have the resources or inhouse IT capacity to connect directly to mobile money network application programming interfaces (APIs).
For example, most electricity payments in Tanzania are now processed by aggregator Selcom.
Without aggregators, many of the services available to mobile money customers in Tanzania may never have made it to market."If it weren't for the aggregators, the smaller banks wouldn't even be there [offering bank-wallet transfers for their customers]," says former M-Pesa Head Lopokoiyit."Who else is going to provide the service that these guys do?Who is going to take the API from Tigo or Vodacom and bring it together?" The importance of aggregators is underscored by the time and resources involved in connecting third parties to mobile money services.Individual integrations between a mobile money service and a third party like a bank or utility company are estimated to cost anywhere between $15,000 to $30,000 and take 4-6 months to complete.Using aggregators not only helps to avoid these upfront investments, but also allows mobile money services to outsource the onerous tasks of managing reconciliations, payment disputes, and customer support.

Case Study: Ghana
An at-a glance overview of Ghana's efforts to build an inclusive payments ecosystem is illustrated in Figure 9.A more detailed narrative follows.

Regulatory approach
Betting on the banks Despite good intentions and a desire to promote a more inclusive financial services industry, Ghana's 2008 Guidelines for Branchless Banking inadvertently created obstacles to the success of mobile money deployments.By limiting the ownership of mobile money services to licensed banks, while also forcing these banks to partner with their competitors, several issues emerged: • Free Rider Problem.There was little incentive for banks to make significant investments in the branchless banking market if their competitors would reap the benefits equally without making their own investments.• Passive Partner.The banks generally declined to assume any of the roles the regulations envisaged, such as registering and serving customers; conducting agent due diligence and managing agent networks; and developing, offering, and marketing products.They were primarily focused on holding customer float in a pooled account and providing passive support in liquidity management to agents through their branches.
• Cost to MNOs.Although MNOs shouldered most of investments and made key decisions, legally, they had few rights.According to the regulations, the products, customers, and agent networks were owned by partner banks.• Communications Gap.Since MNOs were not recognized financial services providers, they had no direct relationships with BoG and needed to go through their partner banks for every interaction with the regulator.As a result, BoG was out of touch with the needs and challenges of MNOs, who were driving the market.

Box 8. Unintentional effects of the 2008 Guidelines for Branchless Banking in Ghana
A new beginning for mobile money Ohene-Adu knew that she needed to act.As it became apparent that uptake of mobile money in Ghana was falling well below expectations, the head of Banking Services and Payment Systems Oversight at BoG was determined to turn things around.
"There were complaints, there were frictions in the market place," Ohene-Adu remembers.So when CGAP approached her in 2011 with ideas for how the Central Bank could revise its regulatory approach, she was eager to hear its suggestions.
While CGAP presented proposals for specific regulatory changes, its first recommendation was that Ohene-Adu and her colleagues meet directly with the MNOs to get their input on how the Central Bank could be more responsive to their needs."We thought that it would be useful for the Central Bank When MTN set out to drive greater use of its mobile money service, most providers in Ghana had an intense aversion to OTC transactions."For a long time, OTC was [considered] the devil," recalls Kwame Oppong, former head of Tigo Cash Ghana.
But, in fact, OTC was perhaps the easiest way for customers to become familiar with mobile money."We are in a market where there was already remittance behavior.People were predisposed to understanding an OTC environment.But the idea of a wallet was not well understood," says Oppong.
Faced with the challenge of getting customers to understand how to transact using their phones, MTN's leadership made a risky decision.Even as other providers were trying to discourage OTC transactions, for which they were forced to pay high commissions to agents, MTN embrace these transactions as an opportunity to get customers to use its service."We didn't shy away from OTC," Hini says."People went out for it, people used it, and it helped them to understand the service better." If customers were visiting agents to conduct OTC transactions, MTN realized that it could also incentivize agents to educate these customers on how to use their wallets to transact.So MTN began giving new customers GHC 5 (about $1.50) in their mobile wallets, and agent commissions were restructured to reward customer transactions rather than just account openings.With guidance from agents, many new customers would use the GHC 5 they received to purchase airtime, which in turn became an important first step along the customer journey to using a mobile wallet.Agents, who were now rewarded for wallet-based transactions made by new customers, further discouraged customer OTC transactions by explaining that wallet transactions were significantly less expensive.And over time, as customer behavior began to shift, MTN began to change its pricing structure to discourage OTC transactions.

Competitive landscape
While MTN was moving full-steam ahead with investments in mobile money, Tigo Cash and Airtel   But there are conflicting opinions about the impact of its dominance-and whether it will be able to sustain their position in the years to come.
"MTN has invested a lot.They've been very, very consistent and no one can take that away from them," concedes Carl Ashie, now M-Commerce manager at Vodafone.But he adds, "There's still a lot of opportunity in the market for all of us." For Oppong, MTN's market share is only part of the story.He argues that having multiple players in the market has been good for customers, even if market shares are lopsided: "Competition allowed us to deliver value to the customer.There was so much testing in the market, Tigo would try something, MTN would replicate it, and vice versa." He adds that MTN's example has inspired other providers to redouble their own mobile money efforts, citing the influence of Eben Asante, who would become CEO of MTN Ghana in 2015 and was later promoted to vice president at MTN Group: "When Eben spoke about mobile money, you could have sworn that he was a mobile money head." Regardless, MTN will continue to face challenges to its dominance in the mobile money space.In October 2017, Airtel and Tigo Ghana merged to create Airtel Tigo, the second largest MNO in the country (Reuters 2017).At the same time, BoG was in the process of connecting mobile money networks to its interbank switch, with the hope of enabling full cross-platform interoperability for the first time.
While some banks actively resisted the entry of MNOs into the financial services space, Ecobank realized early on that mobile would be the wave of the future."This is going to be the channel for the consumer to access banking services," Owureku Asare, regional head, Consumer Distribution remembers of the mindset of Ecobank leadership at the time.
In 2010, Ecobank partnered with Airtel Money to pilot a mobile savings product called mSave, and built on that experience with a new mobile savings product called Express Account, which is accessible from any mobile wallet and currently has over 100,000 account holders.It also partnered with mVisa to allow customers to pay for goods and services using their mobile phones and funds from their Ecobank accounts.And in a first, Ecobank is allowing MTN Mobile Money customers to invest in Ghanaian treasury bills through its TBill4All service.
For its part, Fidelity Bank introduced a card-based agent-banking product, and has partnered with MTN to introduce the Y'ello Save mobile savings product."Banks are now challenging MNOs in the provision of innovative digital products," explains Will Derban, director of Strategic Partnerships and E-Banking at Fidelity.
Have the banks begun to change their approach to MFS? Asare thinks so."The banks that had concerns about the proposed guidelines, gradually you see them now playing significant roles within the MFS ecosystem," says Asare. "So clearly, sleeping banks have woken up.So, there is keen competition within the banks as well." Box 10.Banks get into the mobile business At a time when few central banks were contemplating true payments system interoperability, BoG wanted to ensure that the country's electronic payments systems were ready for the future.In 2007, before the full scope of the mobile payments revolution had come into focus, BoG decided to bet on interoperable, cardbased payments with its e-Zwich Smart Card.
"In 2007, the Bank of Ghana had determined that electronic was the way to go," Yoku Korsah, COO of GhIPSS at the time, recalls."What was the best way to promote electronic payments?To promote alternatives to cash, you needed a solution that was easy to use across the country."e-Zwich is a "load and spend" card that functions as a wallet, allowing users to deposit cash at bank branches in exchange for e-money stored on the card.Users can also transfer funds to or from their linked bank accounts using a POS terminal or ATM.Once users have a balance on their card, they can use the card to pay for goods or services at merchants who have an e-Zwich-compatible POS device.The card uses biometrics to verify identity-users scan their fingerprint to authorize transactions.
To prepare for the card's launch, BoG mandated that all deposit-taking institutions issue e-Zwich cards to their customers and deploy e-Zwich POS devices to all branches and outlets.All existing ATMs and POS devices had to be upgraded or replaced to be eZwich compatible.This required a hefty investment by banks and some complained that the business model did not work in their favor.Most banks complied with only the bare minimum of the requirements or chose to ignore them altogether and pay a fine.Over time, as mobile payments became more prevalent and GhIPSS struggled to convince participating banks to acquire merchants, e-Zwich card use remained flat.In the first quarter of 2013, there was an estimated GHC 14 million per month being transacted using e-Zwich-an amount that increased to only about GHC 17 million by the third quarter of 2015.
There also have been concerns that e-Zwich is creating friction in the market by competing with private actors that would like to introduce their own payments solutions.Moreover, the government could be viewed as having a conflict of interest in its role as both a regulator and provider of payments services."What it signaled was that the Bank of Ghana was getting into an area where a lot of independents would have liked to play," Korsah posits."That was probably the biggest resistance factor that I could identify."

Compelling use cases
In reviewing the impact of DFS in Ghana, mobile money leaders noticed that use of the services was evolving.P2P transactions were still driving customer use of the services, but there were indications that businesses were also increasingly using mobile money services to facilitate payments (see Figure 11 In 2016, payments aggregator Nsano introduced a product called MOVE, which allows Ghanaians to send money from their mobile wallets to a wallet-holder on any network.By simply dialing a shortcode, customers of any mobile network can initiate cross-network transactions for a small fee."Interoperability is not complex.We've already achieved it," asserts Nsano CEO Kofi Owusu-Nhyira.
To achieve this, Nsano has negotiated pricing with individual mobile money providers.It charges customers anywhere from 1.5 percent to 2.5 percent per transaction, depending on their provider, and the MNOs are paid a portion of this.Owusu-Nhyira hopes that he eventually can bring the price down to just 1 percent for each transaction.
Looking forward, Owusu-Nhyira is cautiously optimistic.He notes that MOVE recently reached a milestone of over GHC 1 million in transactions processed using the service, and to the company recently introduced the ability to transfer between mobile wallets and bank accounts.this is how we do things.How can we take this thing a step forward?"So, the youth give me hope.

Conclusion: Understanding the Tanzania and Ghana experiences
The Tanzanian and Ghanaian experiences hold important lessons for other countries that want to develop inclusive payments ecosystems.
Looking across the two markets, there are both similarities and differences in the approaches taken by policy makers and providers, with significant implications for how DFS have evolved.But overall, Box 13.PEG Africa uses mobile money to deliver off-grid energy As mobile money adoption has increased in Ghana, a new class of provider is leveraging payments services to deliver energy to Ghanaians who are excluded from the country's electricity grid.PEG Africa, Ghana's largest PAYGo energy provider offers customers solar power kits on credit, which customers pay off in small installments using their mobile wallets.
The solar kits sold by PEG Africa allow customers to power a few lightbulbs, charge their phones, and listen to the radio.Customers make a modest down payment before receiving the solar kit, and then continue to pay each month over the course of the year.Once customers have finished paying back the loan, they own the kit.Providers face little risk in making the loans because they can shut off power if a customer is late with a payment or defaults.
In The rise of government-led efforts like India Stack, which includes a centralized system for customer identification and payments routing, may affect how countries approach DFS development in the future. 22By making digital financial infrastructure a shared public good, such approaches can relieve some of the pressure on providers to make significant investments for the benefit of the broader market.But even in countries that opt for such a government-led approach, providers will need to educate customers and create access points for their services.

Competitive landscape
When it comes to competition in the DFS market, In Tanzania and Ghana, development partners played an important role in advancing digital financial inclusion through targeted engagement with regulators and providers.BMGF's grant, which was meant to spur investment in agent infrastructure and customer awareness, to Vodacom Tanzania in 2011 was the driving force behind the expansion of the market infrastructure that eventually became the backbone for the growth of mobile money in the country.Likewise, IFC's role (funded by BMGF) in convening mobile money providers in Tanzania is credited with an unprecedented agreement on interoperability.Both funders opted for a market-led approach, in which their involvement was designed to enable providers to make smart decisions that ended up benefiting the market as a whole.
Ghana's experience yields similar insights on the role of development partners.Faced with a regulatory approach that was stifling market development, CGAP engaged with policy makers to offer pragmatic guidance on best practices for regulating the nascent mobile money space.The result was a complete course reversal by regulators at BoG, which spurred provider investments in mobile money and led Ghana to become one of the most successful markets in Africa.
Overall, these two experiences highlight the importance of development partners enabling smart decisions by key market actors.They also point to an approach that allows for these market actors to lead efforts and take ownership, rather than have funders dictate approaches.In both country cases, this approach required development partners to be patient as they waited nearly a decade for their efforts to bear fruit.When coupled with the lessons distilled from these country cases, this suggests that there are concrete ways in which development partners can promote successful market development.Overall, the main message that emerges from a review of both country experiences is that interoperability is important, but it is best pursued in mature markets.Engagement with industry is important, and regulators should be cautious when mandating interoperability so as not to hinder early investment.Stakeholders need to focus on governance and business rulesas was the case in the year-long negotiations between providers in Tanzania-and not just the technical implementation, which is currently the overwhelming focus in Ghana.As both markets continue to mature, it will be important to monitor the Tanzanian and Ghanaian experiences in the years to come to fully understand the impact of interoperability on DFS.

Compelling use cases
In both Tanzania and Ghana, the ability to send Much of this transformation can be attributed to an explosion in mobile phone ownership.According to the World Bank's World Development Indicators (2018), mobile phone subscriptions per 100 people living in low-and middle-income countries increased from just 40.61 in 2007 to 96.89 in 2016.

Figure 1 .
Figure 1.Registered and Active Mobile Money Accounts in Tanzania

Figure 1 .
Figure 1.A more detailed narrative follows.
It did not take long for innovators to see the opportunities afforded by BoT's newly expanded regulatory authority.That same year, start-up E-Fulusi Africa Ltd. approached BoT for permission to launch a new mobile-phone-based domestic remittance product.But despite its new mandate to oversee such payments providers, BoT had not yet defined specific rules on how to do so and was unsure of how to approach a nonbank seeking to enter the payments space.By mid-2007, as rains gave way to the dry season, change was already in the air.The launch of Safaricom's M-PESA in Kenya and growing interest by Tanzanian mobile network operators (MNOs) to follow in their neighbor's footsteps was placing increasing pressure on BoT to establish guidelines for nonbanks to enter the payments space.BoT responded by creating new rules for electronic payment schemes, codified in the 2007 Electronic Payment Scheme Guidelines.But these rules applied only to banks and similar financial institutions.The turning point came in January 2008, when Bennu Ndulu was appointed governor of BoT.Ndulu was widely regarded as a believer in the potential of technology to drive financial inclusion, and he was keen to see Tanzania incubate a successful mobile money industry.Working with his colleagues in the National Payments Systems Directorate (NPSD), Ndulu decided on a pathway forward: Like its neighbor Kenya, Tanzania would allow MNOs to launch their own payments services through the issuance of letters of no objection (LNOs).LNOs permitted nonbank providers to legally offer their services under BoT oversight, provided they partner with a licensed bank that would keep customer float in a trust account. 6Test-and-learn approach provides space for innovation E-Fulusi received an LNO in early 2008 and subsequently sold its service to Zantel, which launched Tanzania's first mobile money offering, Z-Pesa.Shortly thereafter, Vodacom received its own LNO and introduced M-Pesa to the Tanzanian market.In 2009, Bharti Airtel would receive its own LNO for the introduction of its Airtel Money service, and a year later a fourth provider, Tigo, would likewise be allowed to enter the market with Tigo Pesa (di Castri and Gidvani 2014)."The letters of no objection mimicked the licensing process," explains Kennedy Komba, an adviser to NPSD at the time.Before offering an LNO to a new provider, BoT would conduct due diligence, which included the inspection of the provider's systems and a mandatory pilot period for services that did not have an existing deployment in another country (e.g., M-PESA in Kenya).Furthermore, each LNO stipulated that the provider must supply statistics on key aspects of the service to BoT; regulators were expected to conduct both scheduled and unscheduled inspections to ensure compliance.
Two years after Vodacom M-Pesa and Z-Pesa entered the market, mobile money was beginning to gain traction in Tanzania.But with providers still operating under LNOs, Ndulu worried that BoT's only recourse in the event of misconduct-rescinding a provider's LNO-would soon become a risk in and of itself, given the increasing systemic importance of the country's mobile money deployments."We observed and analyzed the situation on the growth of these services and noted that they have become payment services of wide importance, thus requiring systematic, consistent and predictable risk management processes," Komba recalls."So, the only way to manage this thing was to issue a law."Fortunately, BoT had been engaging with the industry, gathering data on the performance of mobile money deployments, and learning from the approach of regulators in other markets.NPSD began the process of drafting Electronic Money Issuer (EMI) Guidelines in 2010, after a visit to the Philippines to review that country's approach to establishing regulations for mobile money.After submitting an initial draft for review by the Alliance for Financial Inclusion (AFI) and GSMA in early 2012, BoT released a revised draft of its EMI Guidelines in May 2014 (di Castri and Gidvani 2014).While the EMI Guidelines would not ultimately be adopted as regulations until a new National Payment Systems (NPS) Act was passed by Parliament in 2015, the draft signaled to the industry that the Central Bank planned to put in place key regulatory enablers, said Komba (see Box 3).

Figure 2 :
Figure 2: Change in the volume and value of transactions.

Figure 2 .
Figure 2. Change in the Volume and Value of Transactions

Figure 3 :
Figure 3: Mobile money agents and volume of transactions

Figure 3 .
Figure 3. Mobile Money Agents and Volume of Transactions Figure 4: Agent exclusivity, 2012

Figure 4 .
Figure 4. Agent Exclusivity, 2012 Despite the benefits cited by Voogt, his successor, Sitoyo Lopokoiyit, faced a vastly different market landscape when he took over as head of M-Pesa in 2016.While M-Pesa remained the market leader, especially in the rural areas where Vodacom had invested so heavily early on, he and his team could no longer count on their first-mover advantage to guarantee continued dominance.With Tigo Pesa and Airtel Money nipping at his heels, he reflected on how competition had changed the dynamics of mobile money in Tanzania."We're smarter in what we do," Lopokoiyit says."Competition has made us much more careful about how we pursue new products."It had also forced further integration between Vodacom's mobile money and GSM businesses: "The businesses are intrinsically linked.I don't see a GSM and a mobile money customer, they're the same."

Box 5 .
Competition drives innovations in pass-through interest A future of "coopetition" In its early years, mobile financial services (MFS) were synonymous with mobile money.It follows that much of the focus on competition in MFS was discussed in the context of a fight for market share among mobile money providers.But as MFS has matured, the competitive dynamic has evolved.When Roland Coulon became CEO of Access Bank Tanzania in 2011, he was unsure of how to view the rise of mobile money."We come from a very traditional microfinance model," Coulon explains."Digital finance, especially in Africa, didn't come to us as an obvious turn that we needed to take."Like most banks and MFIs in Tanzania, Access Bank did not see a role for agency banking in the early days of MFS.Moreover, even as many financial institutions, including Access Bank, became involved in the mobile payments ecosystem by serving as super dealers, they saw the mobile money providers as competing with them for customer deposits.But as mobile money use continued to grow, Coulon saw an opportunity where he had once seen only threats.He and his colleagues realized that mobile money networks could reduce costs by removing pressure to build new branches and send loan officers to service customers in hard-to-reach areas.Access Bank began by introducing loan repayments through M-Pesa, before upgrading to a full-fledged digital product offering in 2015.Today, Access Bank customers can open a free current account and move money in and out of the account using their mobile money wallets.The bank's strategy is now largely focused on offering digital channels and digital products, with efforts underway to build its own agent network to serve higher balance small and medium enterprise customers.Access Bank is not alone in embracing mobile money as a means for reaching greater numbers of customers at a lower cost.Several banks have already partnered with mobile money providers to offer customers a wider range of financial services.For example, Commercial Bank of Africa (CBA) has partnered with Vodacom to create a digital savings and credit product called M-Pawa; credit provider Jumo has joined with Airtel to offer its Timiza digital credit product; and FINCA Microfinance Bank and Halotel now provide customers the option to save with their HaloYako offering (see Figure 5).
Despite their newfound appetite for collaboration, neither the banks nor the MNOs are resting easy.As Voogt's successor at M-Pesa, Lopokoiyit, warns, "Ali Pay, Facebook, WhatsApp, and others are coming into the market.Competition isn't local anymore, it's international."While no one can predict what digital finance in Tanzania will look like 10 or even five years down the road, Vodacom and others are racing to prepare for the future.

Figure 5 :
Figure 5: Volume of mobile banking transactions compared with their value

Figure 8 .
Figure 8: Volume of mobile money transactions, by type Turning his attention back to the present, Lopokoiyit began to contemplate his next move."Business-to-business [B2B] and retail payments may not make a big dent in financial inclusion, but it does bring volume," he thought."We have over 450,000 customers using Lipa na M-Pesa [M-Pesa's merchant payment service], and if you look at the amount of money that they keep in their wallets, it's more than doubled."At the end of the day, what kept Lopokoiyit and his competitors up at night was activity rates, and merchant payments were demonstrating the potential to change how customers use their mobile wallets."You tend to do more transactions because you already have the money in your wallet," he reasoned."The majority of customers who use Lipa na M-Pesa make more transactions than the average customer."Vodacom's competitors were already actively exploring the merchant payments space.Tigo launched a campaign to promote merchant payments, while aggregator Selcom was trying to make a play for a share of the payments market with new NFC (near-field communications) cards linked to a Selcom wallet.As Vodacom moved ahead with its strategy to acquire merchants and promote its Lipa na M-Pesa product, Lopokoiyit suspected that the first provider to solve merchant payments would control the future of mobile money in Tanzania.Looking ahead By 2017, mobile money's spectacular early successes in Tanzania had given way to the long, hard work of driving deeper customer use of DFS.Findex numbers for 2017 showed only modest gains in active mobile money account ownership, from 32 percent in 2014 to 39 percent in 2017. 18This despite the country boasting a competitive market, a range of compelling use cases, and interoperability between provider networks.

Box 7 .
figure out merchant payments, and the specter of BigTech lingers on the horizon.

Figure 9 .
Figure 9. Registered and Active Mobile Money Accounts in Ghana Seeking to get out ahead of new developments in the payments space, BoG released Guidelines for Branchless Banking in August 2008.The Guidelines reflected BoG leadership's preference for a bank-led and bank-based approach to payments services, with only banks permitted to issue electronic money and establish agent networks (CGAP 2017).While many other countries outside of Sub-Saharan Africa have opted for bank-led electronic payments, Ghana's decision differed sharply from the approaches taken by countries like Kenya and Tanzania, each of which had allowed nonbank actors like MNOs to issue e-money and establish their own service offerings and agent networks."Mobile money was viewed, at best, as a channel for use only by banks and deposit-taking financial institutions to reach unbanked segments of the population," recalls Elly Ohene-Adu, director of Banking Services and Payment Systems Oversight at BoG from 2010 to 2016."MNOs were seen as agents making their platforms available to banks to use" (Muthiora 2015).At the same time, BoG was pushing ahead with its own digital payments solution-a biometric card that it had released through its subsidiary, the Ghana Interbank Payment and Settlement Systems Ltd (GhIPSS).The e-Zwich Smart Card was designed to be an interoperable digital payments solution that could be used by customers of any financial institution."We thought, let's do something that even the rural banks could participate in, something that didn't need a contract with Visa or MasterCard," explains Yoku Korsah, COO of GhIPSS at the time (see Box 11).The bank's vision of digital payments interoperability also influenced its approach to crafting the Guidelines for Branchless Banking.In addition to limiting participation to banks, BoG regulations mandated a "many-to-many" service model that aimed at preventing exclusive partnerships between MNOs and a single financial institution.This model required any new mobile money service offering to be introduced by a consortium of at least three regulated banks (BoG 2008).The intention behind these guidelines was to provide greater access and higher value for consumers through an open and interoperable system driven by banks.But much to the chagrin of the Central Bank, the new rules did not spur banks to rush to invest in new mobile money services.Early mobile money services struggle to gain tractionAs he walked out of a meeting in Accra, Carl Ashie, the head of M-Commerce at Ghanaian MNO Zain, looked to the launch of the country's first mobile money service with some trepidation.Under the 2008 Guidelines, Zain was forced to introduce its Zap mobile money product in partnership with several banks, including United Bank of Africa, Standard Chartered Bank, and Ecobank.Because the banks owned the new service, Zain depended on them to ensure Zap's success."The banks were supposed to recruit the agents, they were supposed to promote the product," explains Ashie.But the banks would prove uninterested in making such investments.Ashie was not alone in his struggles.At MTN, the general manager of Mobile Money, Bruno Akpaka, was facing his own problems as he attempted to build the MTN Mobile Money service that had been launched in July 2009.Akpaka had secured the partnership of nine separate banks.But as his successor Eli Hini would later say, "Most of the banks sat back and did nothing."Worse still, because the MNOs were considered agents of the banks under the Branchless Banking Guidelines, they were unable to approach BoG directly to voice concerns or obtain approval for the introduction of new products.According to Hini, "Anything you needed to do, you had to speak to the nine banks, who then needed to speak with the Central Bank."Two years later, despite the entrance of the country's third mobile money service, Tigo Cash, use of mobile money among Ghanaians remained low.By 2011, there were only about 100,000 active mobile money accounts in Ghana (CGAP 2017), and the MNOs were becoming concerned that Ghana would never catch up to markets like Kenya and Tanzania that were seeing explosive growth in the use of mobile money."We were operating," Ashie recalls."But we were not operating fully." to take a second look at the regulations and maybe engage with the telcos and be able to understand what their issues are so that we could all sit down and address it," says Ohene-Adu.With Ohene-Adu's approval, CGAP organized a workshop in December 2011 that included the MNOs and Fidelity Bank and Ecobank-two banks that had demonstrated a particularly high level of interest in and commitment to developing DFS.Ohene-Adu recalls that the MNOs were clear about what regulatory reforms would be needed to change the course of mobile money in Ghana.They asked that BoG eliminate the bank-led requirement and allow them to own and operate the payments services.To make the BoG aware of their demands, the MNOs drafted a white paper, "The Joint Position of the Telcos to the Bank of Ghana," and sent it to the Central Bank governors.BoG governors (the governor and deputy governors) initially hesitated to embrace the recommendations in the White Paper.Like all central bankers, they were primarily concerned with ensuring financial sector stability, and the interests of nonfinancial institutions like MNOs were simply not high on their list of priorities.But when Ohene-Adu approached the Governor in 2012 with statistics on the value of money that was passing through the new services under de facto control of the MNOs, he quickly realized that BoG needed to act."I marched up to the Governor and said, 'This is the level of money out there that we are not regulating,'" Ohene-Adu says, because MNOs had, in practice, taken over day-to-day operation of the mobile money services that were nominally under bank control."And the moment I said that I got his attention, because I said, 'If anything happens, Bank of Ghana will be faulted.'"With the approval of the governor, Ohene-Adu and her colleagues embarked on an ambitious effort to rewrite BoG's regulations on electronic money.The Bank's internal drafting committee began work on the new regulations in 2013, with CGAP providing support through several rounds of drafting, stakeholder feedback, and revisions (CGAP 2017).After more than a year of consulting and engaging with market participants, and convinced that they had finally found a way to address the concerns of all stakeholders, Ohene-Adu and her team prepared to issue the new regulations in 2014.By November of that year, the new rules had been approved by the Board of Governors, and Ohene-Adu looked forward to celebrating her hardfought victory.The regulations, which refrained from dictating a specific partnership model and permitted nonbanks to be directly licensed by BoG, were already being hailed as a best practice policy framework for DFS(CGAP 2017).But as it turned out, one last fight stood between Ohene-Adu and the implementation of her vision.In December 2014, some banks decided to push back against the pending regulations with a public campaign and private pressure on the Central Bank Governor.The head of one major commercial bank was quoted in the media as warning that mobile money would lead to chaos in the country's financial system: "Digital money is different.The minute you allow it to go independent, who controls it?Which central bank is responsible for it?" he asked pointedly (Klutse 2014).Privately, the banks were also lobbying the governors to quash the regulations.Bowing under the pressure, the governors decided to delay implementation-much to the chagrin of Ohene-Adu and her supporters, who had already published the new regulations on the BoG website.But shortly thereafter, at a meeting between the Central Bank and the heads of Ghana's banks's, Ohene-Adu decided to take a stand."Look, if you had read the regulations and seen its contents, you would be speaking differently," Ohene-Adu told the heads of the country's largest banks.For months, the two sides continued to spar over the regulatory changes.But Ohene-Adu would eventually prevail.On 6 July 2015, the new agent and e-money guidelines were finally issued by the Central Bank, opening a new chapter in Ghana's efforts to extend financial services to the country's financially excluded people."This was what the telcos were waiting for," Ohene-Adu explains."So, they just spread their wings."Executive commitment and investment In 2013, with discussions underway to revise the 2008 Guidelines on Branchless Banking, Eli Hini at MTN Mobile Money sensed an opportunity.If Ohene-Adu got her way at the Central Bank and the proposed changes to the regulations were adopted, Hini expected that the new framework would unlock new opportunities for MTN to grow its mobile money user base.Still, he knew that his team's success would depend on securing significant investment capital from his operating company.Hini sought to leverage a 2010 reorganization at MTN that had already increased the profile of the mobile money unit within the organization.Recognizing that the fledgling mobile money service was struggling to gain traction, management placed the mobile money team under the supervision of Sales and Distribution Director Eben Asante.The reorganization completely changed how mobile money was managed at MTN.New resources were made available to expand the agent network and advertising, and sales staff were able to access clear key performance indicators on new accounts opened.Asante was a big believer in the potential of mobile money, and he made it his mission to build MTN Mobile Money into one of Africa's most successful digital payments services.Drawing on his marketing expertise, Asante began by approving a massive new advertising campaign called "MTN Mobile Money Month," which included messaging designed to educate Ghanaians on what mobile money was and the opportunities it presented for users (Modern Ghana 2013).The campaign did not go unnoticed by MTN's competitors."The ad campaign was huge.It gave everyone the idea that you could receive money on your phone," says Kwame Oppong, the former head of Tigo Cash.But he also acknowledges that a marketing campaign was only part of the battle: "When you had people going out explaining it, you saw people trying to slip money into their phones."Realizing that advertising would not be enough to drive awareness of mobile money, Asante and Hini looked to agents as an important channel for educating customers and driving greater use (see Box 9)."The agents who were initially doing the acquisition weren't educating customers, but they were earning commission on opening an account," Hini says.To encourage agents to spend more time on customer education, MTN revised its commission structure to place greater weight on customer transactions rather than account openings."If customers cashed in, agents would get a commission.If customers used their wallet to make a transaction, the agent would get more.And if customers continued to transact, the agent would receive something further, up to the 4 th transaction," Hini explains.The new commission structure, coupled with an aggressive campaign to recruit new agents, was supported by a massive infusion of investment capital.Behind the scenes, Asante had been working hard to convince the MTN Group to approve the capital to underwrite his ambitious strategy.Beginning in 2013, Asante secured an additional $2 million for investments in mobile money.Funding doubled to $4 million the following year.According to Hini, this infusion of capital supported a two-fold increase in spending

Box 9 .
How MTN used OTC as a gateway to mobile money use on market activation and agent commissions aimed at motivating agents to educate customers.MTN's investment paid off.Statistics showed that beginning in 2013-two years before the new e-money issuer and agent banking regulations went into effect-mobile money in Ghana had already begun to turn a corner.Between 2013 and 2014, the number of active agents would double to over 20,000, while the volume of transactions performed using mobile money went from 41 million to an astounding 113 million over the same period (see Figure 10) (BoG 2018).

Figure 10 :
Figure 10: Transaction volume and active mobile money agents, in Ghana

Figure 10 .
Figure 10.Transaction Volume and Active Mobile Agents, in Ghana

Box 11 .
The e-Zwich smart card signals a focus on payments interoperability Interconnected services Efforts to create payments interoperability in Ghana date back to 2007, when the Central Bank made the ability to transact with customers of various financial institutions a centerpiece of its vision for DFS in the country.That year, BoG established GhIPSS, an independent entity that would "migrate Ghana into an electronic payment community as part of efforts to modernise the country's payment system" (GhIPSS 2017).In addition to establishing a national switch for ATMs called GhLink, GhIPSS was tasked with implementing a new biometric card-based payments solution, called e-Zwich Smartcard, that could be connected to any bank account and used to make payments (see Box 11).The government's commitment to interoperability was also evident in its decision to include a "manyto-many" requirement in the 2008 Guidelines on Branchless Banking, which prevented exclusive partnerships between banks and MNOs and required any new service to include at least three banks (and in the case of MTN Mobile Money, a total of nine).At the time, the Central Bank argued that "this model offers maximum connectivity and hence maximum outreach and is closer to the desired situation where all banks and all telcos should be able to entertain each other's customers" (McKay 2011).But as Ohene-Adu argues, this approach belied a poor understanding of what interoperability really meant: "[N]ow we know that [interoperability] involves much more than even association.At the time, it was all about being associated, being in a group-many-to-many."Even as the Central Bank introduced a new mandate to interconnect, some in Ghana argue that the country had already achieved functional interoperability with the help of aggregators like Nsano, which facilitates wallet-to-wallet transactions across networks (see Box 12)."Today, people can actually send money across networks," says Ashie from Vodafone, citing emerging third-party payments services."It's already happening," adds Korsah, former COO of GhIPSS.But Korsah also wonders if interoperability-whether achieved through a government switch and mandate or through third-party providers-will be enough to chip away at MTN's dominance of the digital payments space: "MTN is dominant.Will the interoperability game change that?It's a big question." ).The big question was where the market would move next."The first stage was really fighting for legitimacy and for a foothold," Oppong, former head of Tigo Cash, explains."Now we're at a stage where the focus has to be on the quality of access that we're creating."Already, a range of new products were being rolled out to customers, from mobile-wallet-connected savings accounts like Y'ello Save, to investment products such as TBill4All.PAYGo solar providers like PEG Africa offered customers the ability to pay for solar energy using their mobile wallets (see Box 13).And the current head of BoG's Payments Systems Department, Settor Kwabla Amediku, says that the BoG's recent decision to relax restictions on the use of airtime and mobile money for payment of insurance premiums has led to increased interest in the development of microinsurance products."The next three years are going to be amazing!"exclaims Amediku.Today, Ghanaian payments providers see a major opportunity to expand the use of mobile money for payments beyond P2P.Hini says that MTN Mobile Money is increasingly focusing on driving the use of mobile money for merchant payments."Investment in technology to enhance experience and merchant acquisition, that's the phase that we're in now," says Hini. "My CEO says, 'Make it as close as possible, or actually better than cash.'"Box 12. Nsano facilitates mobile money interoperability in Ghana

Figure 11 :
Figure 11: E-money transactions in Ghana, by type (2015) Figure 11.E-money Transactions in Ghana, by Type (2015) Tanzania and Ghana both demonstrate the value of a diverse provider landscape.It is unclear whether competition has any major effect on the success of DFS during the early years of market development-in both cases, a single player was responsible for big initial investments that drove early adoption.However, as inclusive payments ecosystems mature and several providers jockey for market position, each country experience points to the positive benefits of greater competition.For example, providers in Tanzania and Ghana credited their competitors with helping to inspire innovative approaches to serving customers, while providers in Tanzania consistently cited competition in the GSM space as an important factor behind their decisions to invest in mobile money networks.In the end, innovations and investments motivated by a competitive market landscape benefit customers and providers alike.Because Tanzania is a more mature market, new developments there can offer insight into the importance of competition.As the Tanzanian market has become more saturated, there are signs that providers are moving their offerings further down-market, with new entrants like Halotel pursuing a strategy to target rural and poor customers.With growth in the number of new accounts beginning to slow, questions remain as to whether competition for customers will drive new use cases, lower prices, and expanded access.Maturing markets like Tanzania and Ghana are expanding the very definition of competition in the DFS space.As the rails of an inclusive payment 22 For more information on India Stack, see Raman and Chen (2017).

Box 14 .
The role of development partners in driving market development ecosystem are built, the focus of competition broadens to include businesses such as aggregators, FinTechs, PAYGo companies, banks, and MFIs-all of which are offering products and services that ride on the rails established by mobile money providers.As the space becomes increasingly crowded, both Tanzania and Ghana show early indications that the future of competition in DFS will move beyond mobile money services to the use cases they enable.Interconnected services Because neither Tanzania nor Ghana implemented full interoperability during the early years of DFS development, it is difficult to draw hard conclusions about the importance of interconnected services to DFS success.However, emerging data from Tanzania indicate that interoperability has been important in driving greater value for customers who are increasingly taking advantage of their newfound ability to transact across networks, while helping smaller providers gain a foothold in the market.Furthermore, the emergence of third-party providers that facilitate cross-network transactions like Nsano in Ghana and the decision among providers in Tanzania to connect their platforms bilaterally provide further evidence that there is a greater appetite for interoperability as markets mature.Ghana's decision to impose a form of interoperability (i.e., many-to-many regulations) in 2008 before mobile money services had launched offers evidence that mandating interoperability too early can backfire and hinder investment among providers who fear that their efforts would benefit competitors.The difference in the collaborative process pursued by Tanzania, where industry was a key player in developing the approach and rules for interoperability, and the Ghanaian decision to impose interoperability early on, demonstrates the importance of engaging with providers to implement interoperability.
and receive P2P payments was what convinced customers to start using mobile money, and it remains the predominant use case.Hence, compelling use cases such as P2P are crucial to early market development, because customers need a convincing reason to use the products and services on offer.However, it remains unclear how new products and services will affect the use of DFS as markets mature.Customers today have more reasons than ever to use DFS, and the success of M-Pawa in Tanzania and the TBill4All product in Ghana indicates that customers are becoming more aware of how to use their mobile wallets to do more than just P2P.Mobile money and digital payments, more broadly, are increasingly being used to pay bills, facilitate new service categories like PAYGO solar, and pay merchants.Conversations with providers in both countries indicate that digitizing government payments and driving greater use of digital payments at merchant points of sale are central to their strategies moving forward.The sheer volumes of government payments, much of which are currently made in cash, means that digitizing these payments would dramatically increase the use of DFS.And digitizing merchant payments, which are more frequent than remittances or bill payments, promises to drive up activity rates and convince merchants themselves to conduct higher value transactions with suppliers digitally.
Box 3. Tanzania and the four basic regulatory enablers for digital financial services M-Pesa was: Let's put out a value proposition for sending money home," Voogt recalls of the early Vodacom strategy in Tanzania."Let'sputoutsomeadvertisements,andlet'sgetreadyto onboard millions of customers.But it didn't happen."Meanwhile,themobilepaymentsspacewasrapidlybecomingcrowded.That year, Tigo launched Tigo Pesa, the fourth mobile money service to go live in the country.Unlike Safaricom in Kenya, Vodacom could not take its position as the country's top mobile money provider for granted.Faced with fierce competition in the GSM (global cellular network) space, Voogt and his colleagues suspected that a successful mobile money service could be a game changer for attracting and retaining customers.But before customers could begin using the new service, Vodacom needed to invest in building an extensive agent network to facilitate cash-in and cash-out (CICO) transactions.And despite Vodacom's presence throughout Tanzania, moving cash across the country was quite different from selling airtime and required an entirely new distribution model.Voogt worried that securing buy-in fromVodacom's management would not be easy.As part of Vodacom's Brand and Marketing unit, M-Pesa still was not treated as a separate business line.Relegated to a category of services that included ringtones, mobile money was simply not seen as a priority by management, who were locked in a battle for dominance in the business they knew best-voice and data.In its early days, Kenya, was intimately familiar with the potential of mobile money.During his time in Kenya, he had seen Safaricom launch a juggernaut that not only reshaped the financial services industry in the country, but also cemented Safaricom's already dominant position in the GSM space.For Meza, ensuring the success of Vodacom M-Pesa Source:Staschen and Meagher (2018).inTanzaniawas core to his strategy as managing director, and he quickly set about reshaping how the service fit into Vodacom's overall business.Meza's first move was to restructure the company so that M-Pesa would report its own profits and losses as a separate business line, and more Mobile money customers †Data represent use in the preceeding 12 months from year reported.Sources: Bank of Ghana, MTN Ghana (timeline and marketshare chart); Global Findex (pct using mobile money)

Table 1 .
Lessons from Tanzania and Ghana for developing inclusive payment ecosystems

Table 1 .
Lessons from Tanzania and Ghana for developing inclusive payment ecosystems (continued) customer awareness.These early investments by providers are what end up setting the foundation for a successful market, by solving problems related to use cases, customer education, and agent recruitment and training.Donors can play a role in supporting MNOs in the early stages of market development, as demonstrated by BMGF's Country context is also important.For MNOs in African nations like Tanzania and Ghana, launching the first mobile money services can be particularly burdensome.With little to no existing digital payments infrastructure, these providers must build this infrastructure themselves, and they need to develop solutions for managing cash, educating potential customers, engaging with and educating regulators, and more.