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Mobile Money Security: What is the Answer – Regulation or Technology?

Photo Credit: Tony Karumba/AFP/Getty Images

Recently there have been more reports of digital theft within the M-Pesa mobile money transfer service. In Embu, a M-Pesa agent was tricked into sending Sh50,000 (~$600) to an unknown account. It occurred when an individual received a message that he received an incorrect transfer and then he went to the agent in order to have the mistake corrected. Other examples include thieves posing as customers or Safaricom staff and calls or SMSs from unknown numbers informing the individual that they won a prize. With the large amount of money being transferred on a daily basis, it is easy to see why M-Pesa has been the target of fraud. From July to September in 2011, $683 million was transferred over mobile phones in Kenya.

The interesting aspect to this fraud is that mobile money is shown to be a safer alternative to traditional money transfer services. But as the number of fraud cases increases, it could start to be perceived (true or not) as an unsafe way to both transfer and store money. This could diminish adoption rates, especially at the bottom of the pyramid as they tend to be more risk adverse. Since their account totals are much lower, one fraudulent transfer could wipe out their entire account. Fraud could also cause the telecom providers to be further regulated by governments. Since they are not banks, they are not regulated under the same rules as banks. This includes the Know Your Customer (KYC) laws. After 9/11, there was a great push by the United States for banks globally to gather more information about their clients and further verify their identity. But since the mobile money services provided by telecoms (when not partnering with banks) are not classified as banking services, the telecoms are not required by law to follow the KYC laws. As shown in the examples above, once the money had been transferred, there was no way to get it back. The reason for this is that many mobile accounts are unregistered. Because an individual can simply purchase a SIM card at a local store, there is no way for mobile providers to track who received a fraudulent transfer. But some governments have started to require citizens to register their SIM cards. In Ghana, the National Communication Authority (NCA) has made this requirement mandatory by March 3^rd. If a SIM card is unregistered by then, the account could be deactivated. This means that roughly 7.5 million users could have their phone cut off. This is an extreme example of how to further regulate the mobile market. But is it the right answer?

Or can technology provide the answer? Further regulation is probably needed to slow down the amount of fraud, but there is a fine line between being too invasive on the end user and providing greater protection. One of the benefits of mobile money is that the lack of registration required which allows those who do not have a bank account or proper documentation to receive financial services. This is especially true of those that live in rural regions. But along with regulation, how can technology be used to solve the problem? Extra security steps can be taken to verify the validity of the transfer. But, again, it cannot be too intrusive as it could cause a decrease in usage by customers. While regulation and technology could possibly help, one of the main problems is the social knowledge of the end-user. Especially in the “You Have Won” messages, the cons are banking on the end-user lacking knowledge about these types of frauds. As shown in the articles, individuals are starting to catch on as are the authorities. The police have been trying to inform citizens that they need to avoid these messages and take extra steps to confirm the transfer. There is no clear and easy answer to solve this problem, but it must be on the front of the minds of MNOs and government regulators. Mobile money is too strong of a tool to let security issues slow the expansion of financial services to those who never had access to them before.

February 27, 2012/by actualize

New news

Kenyan undersea cable goes live in April

The Lower Indian Ocean Network (LION2), Kenya’s fourth submarine cable, will become fully operational in April this year, the local telecommunications ministry revealed on Thursday.

Map outlying the LION2 undersea cable

The LION2 cable is a 3000 km line extending from Nyali, via the island of Mayotte, located in the northern Mozambique Channel from Mauritius and is set to significantly boost the nation’s bandwidth. Kenya already enjoys connectivity through The East African Marine System (TEAMS), the Eastern Africa Submarine Cable System (EASSy) and SEACOM.

Orange Kenya, involved with laying cables via its parent company, France Telecom, confirmed the schedule, adding that the cable arrived in Mombasa in December last year and is awaiting connection. Work continues to finish the cable’s connection at the Mombasa landing station, the company said.

Angela Ng’ang’a-Mumo, Orange Kenya’s Chief Corporate Communications Officer, told reporters that progress on LION 2 “is on target”. Orange said the construction of the 1.28 Tbps cable “is expected to cost approximately KES 6.2 billion.”

According to reports, the cable is part of a bigger project by France Telecom and 12 members of the Lower Indian Ocean Network to build a submarine cable linking Madagascar to the rest of the world via Reunion Island and Mauritius.

Samuel Poghisio, Kenyan Information Minister, said he was confident that “once it is switched on, LION2 will intensify competition in the industry and help further lower Internet connectivity charges”.

Joseph Mayton

February 24, 2012/by actualize

New news

An ICT4E Lesson Learned: Offline Content is Key

I recently made one of the biggest ICT4D mistakes in the book. Pay close attention, and see if you can pick it out.

When I was in Arusha, Tanzania last month, I was working with a primary school that recently set up a learning lab with 13 donated computers. The technology was not being used because the teachers were not sure how it could be leveraged for education. The computers were simply collecting dust.

The semester before the trip I wanted to develop something that would allow the school to use the computers effectively. I began searching for online educational content relevant to the Tanzanian curriculum and found all sorts of learning materials, games, and software downloads. Once I had collected a good chunk of quality content, I created a website and placed links to each of my findings alongside the specific curriculum objective that they addressed.

Did you catch it? My big mistake, I mean…

The school wasn’t connected to the Internet yet. How could I possibly have overlooked something like that?

To make a long story short, even though I was told the school would be connected when I arrived, there were some bureaucratic problems that slowed the process of getting Internet access there. About three weeks into my trip, the Internet was finally hooked up, but the wait had cut into the majority of the time that I had allocated for teacher training.

Moral of this story: Do not rely on the Internet. Offline content is key.

While Internet access is spreading rapidly throughout developing countries, it is important that ICT4D projects do not place all of their trust in its availability. There are still countless communities throughout world without access, and many of these communities have several obstacles preventing them from obtaining access. Even when rural communities have the infrastructure to connect, Internet subscriptions in these areas can constitute a large percentage of per capita income. Individuals simply cannot afford Internet access.

It’s important to note that access is not the only issue. Let’s imagine for a second that the school I was working with did have Internet when I arrived. This still would have been problematic since bandwidth in most developing countries remains limited – definitely not conducive to streaming online educational games and videos.

Relying on Internet content also makes projects less transferable. If I found that my idea was successful, and I wanted to scale it out to other schools, I would likely run into the same Internet issues elsewhere. In using the cloud as a solution, remember that weather is always local. Having offline content is much more reliable and practical.

The good news is that there is tons of content that can be downloaded from the Internet in order to accumulate offline content. Wikipedia allows you to download entire libraries of information, and I found plenty of open source educational games that proved to be very helpful to the instructors at the school.

So how did I fix my project?

By the end of my trip, the entire focus had shifted from allocating online material on the website to installing offline content on the computers. This proved to be a much more reliable means of technology use in the school.

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February 24, 2012/by actualize

New news

Successful Community-Based Forestry Management

Photo Credit: CARPE

The Congo Basin is a critical tropical forest that supplies vital regional and worldwide ecological services. It is one of the largest tropical rainforests in the world, home to thousands of endemic plant and animal species such as lowland gorillas, chimpanzees, bonobos, and forest elephants. More than eighty million people depend on its abundance of timber and other natural resources for their livelihoods. A paradoxical note is that despite the richness of the Congo Basin, the people near it are some of the poorest in Africa. The forest is constantly cleared to make room for agricultural pursuits and to feed urbanized areas’ hunger for lumber. In addition to deforestation and forest degradation, illegal hunting and commercial bushmeat trade are major threats to biodiversity.

The Central African Regional Program for the Environment (CARPE) is a USAID longterm and regional initiative formed in 1995 in association with a consortium of government and NGO partners that concentrates its resources on six principal forested countries in Central Africa: Cameroon, Central African Republic, Democratic Republic of Congo, Equatorial Guinea, Gabon, and the Republic of Congo. Uganda, Rwanda, Chad, Burundi, Rwanda and Sao Tome Principe are also involved in the initiative. CARPE is intended to be a 20-year process, resulting in complete local guidance. A major objective of CARPE is to protect forest resources by reducing degradation and protecting biodiversity. Modern tools such as Landsat satellite-derived maps, remote sensing, GIS, and geospatial databases are used for planning and monitoring of the forest. With this information, threatened species are under the protection of local communities and logging is controlled.

Prior to the development of CARPE, vast areas of the Congo Basin were unknown. Since then, a number of initiatives and activities have taken place, resulting in an overall evaluation in 2011. In this evaluation, CARPE was deemed extremely successful for introducing large-scale ecosystem management approaches. Tens of thousands of individuals have been trained in a variety of conservation methods and techniques. With empowerment through such training and motivation that educates and organizes local groups to play an active role in forest and biodiversity conservation programs, civil society is being strengthened. This is seen as critical, circumventing the often inefficiently administered and economically weak centralized governments. The tools practiced allow for an understaffed patrol to communicate with a wider audience, limiting the “weak state management of these resources (that) creates a vacuum where local populations are often stripped of benefits as stronger or elite groups including private companies expropriate natural resources at sub-national and local levels.”Where will CARPE head in the coming years? The implementation of land use management plans for micro- and macro- zones, strengthening of government capacity and transparency are key.

February 23, 2012/by actualize

New news

Somalia gov’t intends to create independent telecoms regulator

Few nations lack a dedicated telecommunications regulator. These days, most have an independent regulator, some have a state-controlled regulator, and a couple only have a ministry that more-or-less covers regulatory duties. Not surprisingly, Somalia is one of the few African nations that lacks a regulator. (For reference, Libya, Seychelles, and Western Sahara are the others.)

Although Somalia’s Ministry of Posts & Communications oversees all telecoms operations, the government is scattered and ineffective (the ministry website hasn’t been updated since 2009).

However, we were shocked to read how Somali telecommunications stakeholders recently hammered out a draft communications law that will establish a legal framework for Somalia’s nascent telecoms industry. Ministry of Posts & Communications representatives were even present to discuss the main goal of the workshop: to establish a well-defined independent regulator by the end of the year. The hope is that the regulator, to be designed as the Somali Communications Commission, will promote investment, encourage fair competition, and diligently monitor prices for services.

Hopefully the law can pass relatively quickly, but not so hastily that it lacks substance. A lot is riding on the Communications Act. As the Minister of Information, Posts, and Telecommunications points out, the act will be “a key step in the process of strengthening the rule of Law in Somalia”. The banner for the event even highlighted the ability of ICT to bring peace.

Banner for the 13-14 Feb session in Mogadishu {Horn of Africa News}

Of course, the question remains whether the SCC, once created, will enforce (or be able to physically enforce) the telecoms law.

February 23, 2012/by actualize

New news

Attention ICT Innovators: Have you Considered Peace Corps?

No, I don’t actually mean you should commit to 2 years of service in the Peace Corps (though if you have the time, “life is calling” as the PC recruiters say), but what about joining forces with them? With over 9,000 volunteers, 40% of which focus on education and another 12% in business and ICT, and spanning the globe in about 76 developing countries, isn’t that a resource worth exploring?

I’ve been thinking about this lately since there seems to be a growing amount of speculation about how new innovations in information communication technologies (ICT) are being introduced into classrooms throughout the developing world without enough, or any, teacher training to ensure sustainability. Take for example the One Laptop Per Child (OLPC) program. It drew a lot of criticism after it first released the XO 1.0 laptop for lack of teacher-focused training programs on how to use the devices and it is soon to become even more controversial with the release of the much talked-about XO 3.0 tablet.

Amidst reading the numerous critical blogs and some rather heated debates, I’ve started to wonder: What on-the-ground research is being done to assess the need for some of these new innovations in a specific country in the first place? What resources, particularly people, are already available to help introduce and support the teacher training needed for local teachers to deem the technology useful and relevant within the unique cultural context?

In Cambodia, where I recently served as a Peace Corps Volunteer at the Prey Veng Regional Teacher Training Center (RTTC), the Khmer have a saying: “Don’t take the straight or winding path. Take the path your ancestors have taken.” And new innovations in ICT can be seen as just that — a long winding path of new and confusing devices, unfamiliar to an aging population of school officials and teachers that think they have fared well enough as educators without the help of new gadgets.

Last month, leading experts and stakeholders in the field of mobile learning discussed how people’s perceptions of mobile phones are impeding progress in mobile learning in the recently released UNESCO Mobile Learning Week report:

Perhaps due to the intellectually-light and entertainment-heavy content that has been optimized for mobile devices over the past decade, the primary social challenge is convincing people that phones are NOT a barrier to learning.

Even in American classrooms, mobile phones can often be thought of as a distraction, most commonly used for texting and watching YouTube videos, rarely ever thought of as a valuable teaching aide that teachers could already be using if they had the training or interest to explore its potential on their own.

And mobile devices are just the tip of this growing iceberg of ICT, OER, FOSS, and a plethora of other acronyms used in this field. So once the need and appropriateness of a technology is determined useful for a particular country and educational environment, who might be able to help train teachers how to use and develop it? Who has three months of intensive language training and culture-sensitivity seminars, works and lives with the locals, has a wide range of connections within the school system, and strives to understand the complexities of the education system? That’s right — the tech-savvy Peace Corps Volunteers.

Now that’s an assumption and generalization that all PCVs know and care about what’s going on in the ICT4D field and have any interest of being involved in such endeavors — dealing with stray dogs and gastrointestinal diseases is a challenge enough. But why not reach out to the volunteers in your ICT-destined country and give them a chance to use some of those international relationship building skills that they spent hours cultivating during training.

And Peace Corps is just one of several organizations that send volunteers into the developing world. VSO UK and VSO International, Volunteer Service Overseas organizations, are quite similar to Peace Corps volunteers in regards to their culture and language immersion and 26% work in the education sector. The interactive map below shows where Peace Corps and VSO volunteers are currently serving and the program sectors that they work in. Almost every country has volunteers working in the education sector and some have already launched information technology-related projects:

View Volunteer Programs in Education and ICT in a larger map

February 23, 2012/by actualize

New news

Mobile Money and ROSCAs: The Intersection of Technology and Informal Financial Services

Photo Credit: Nin Andrews

As reported in the working paper “Mobile Money Services and Poverty Reduction: A Study of Women’s Groups in Rural Eastern Kenya,” women’s groups in Eastern Kenya are using M-PESA as a part of an informal savings product. Through the Vinya wa Aka Group (VwAG), along with support from the New Partnership for African Development (NEPAD), 21 women’s groups were provided with financial literacy training which included investment, savings, money services, and management. After their initial training, Dr. Ndunge Kiiti of Houghton College and Dr. Jane Mutinda of Kenyatta University stated that the goal of the research was to see how mobile money services could be used as a tool in the women’s groups to reduce poverty in Eastern Kenya.

While all the groups had formal savings accounts along with other investments, the groups still continued to use an informal savings vehicle that has traditionally been used in areas that lack access to an institutional savings product. ROSCAs, Rotating Savings and Credit Associations, are groups of people who form in order to force themselves to save on a schedule. The group members will meet weekly for a set number of weeks, and in each week, each person “deposits” their savings for the week. But, instead of letting the money accumulate each week , a specific person in the group receives the entire pot for the week. The idea is that each week each group member saves a specific amount (say $100) with the understanding that when it is their week, they will receive the pot. For example, if there 10 group members, each week for 10 weeks one individual will receive $1,000. During the weeks that a member does not receive the pot, they still must deposit $100, even if they have already received the pot. This is an example of a social contract in which the group members hold the other members accountable to pay each week. ROSCAs are especially popular when individuals are looking to make a larger purchase (i.e. stove, TV, merchandise for their business) and they do not have a formal financial product to save the money.

In these women’s groups, they saw M-PESA as a benefit in order to receive payments on time from the ROSCA group members. Instead of having to attend each weekly meeting to make the payment, women transfer the money using M-PESA. This allows for group members that are not located in the area, either permanently or because of travel, to still be a part of the group and make timely payments.

This is a great example of how end-users will always dictate how a product or service is used. In the case of the women’s groups, they saw a way to leverage M-PESA in order to make their ROSCAs more efficient. While M-PESA was not originally developed for ROSCAs, this is another way for Safaricom to market its services. These types of reports are very valuable since it shows how customers are using a product or service. By understanding how and why the service or product is being used, companies can further tweak their model or even create other innovative products to match the needs of the customer.

February 23, 2012/by actualize

New news

Project Spotlight: Green Prakriya

Green Prakriya, a joint initiative of Digital Empowerment Foundation and Association for Progressive Communication, was formed to address India’s “tremendous economic growth owing to the influx of the information and communication technology revolution.” With this advancement, a wave of e-waste ensues. The initiative works as an eco-web platform that acts as a green ICT knowledge base for practitioners, policy advocates, policy makers, researchers, professionals and the masses interested in environmental sustainability, networking, coordination, and implementation.

Green Prakriya’s philosophy is:

to engage stakeholders working on green technology
to develop a network of stakeholders working on Green technology
to create a rich knowledge base of technology solutions for addressing environment issues
to conduct awareness and outreach programs through seminars and workshops
to develop a collaboration amongst scholars and practitioners nationally and internationally
to act as a policy advocate
to act as an intermediary or medium to promote e-waste management in the city

Green Prakriya strives to bridge the gap of a lack of information and communication of stakeholders aware of the issues of technology waste. The initiative has taken part in mapping exercises and workshops to raise awareness.

February 21, 2012/by actualize

New news

Sierra Leone poised for success with transparency portal, ACE fibre cable, 3G

Sierra Leone has carried the momentum from the October 2011 landing of the ACE fibre cable in Freetown and is off to a progressive start to 2012.

We must all be ready now to embrace change, change in our attitude towards one another, change in our attitude to our work and responsibilities. All of those changes should translate positively into progress and development for our country.” – President Ernest Bai Koroma, 2008.

What’s happened in the mobile and Internet industry this year? Thanks to great reporting by Sierra Express Media, we have quite a few stories to be excited about as Sierra Leone positions itself as a regional ICT leader:

The government (including President Koroma) launched Transparency Sierra Leone, an online portal to increase its level of openness. (More on this below)
GoSL announced plans to revise the existing Telecommunications Act to reverse the monopoly of Sierratel over the GoSL international internet gateway before the ACE cable is operational later this year. (A study by the GSM Association in February 2007, citing Kenya, Nigeria and Egypt as case studies, showed that competition in the international gateways market can reduce call prices by up to 90 percent and double call volumes.)
Airtel launched 3G service on February 3rd (Africell began offering 3G access in 2011).
The Government of Sierra Leone (GoSL) launched an online system to manage system contains mineral rights, export licenses, and related payments.

The transparency portal encourages interaction and collaboration between citizens and the government. Citizens may ask questions and read about government projects. In return, the government can be expected to implement suggestions and remain honest about how the nations’ resources (ie. people’s taxes) are spent. In fact, Dr. Kelfala Marrah, Chief of Staff in the President’s Office, made some excellent points at the launch event:

people will pay taxes without hassle when they see how their money is spent
the village square is now the internet
impose attacks and you will be rewarded for imposing attacks

The site has a very clean layout with large text. Homepage slides are uncluttered. Registries allow for quick filtering based on region. The color scheme (green, white, and blue) even matches the flag!

Click to enlarge. {Transparency Sierra Leone}

Also positive:

a focus on national issues and not political debate
collaboration between regulator, finance ministry, infrastructure authorities, broadcasters, and journalists
the idea centre allows for user submissions (only one has been added as of writing)
a blog is frequently updated with news of projects
social share buttons in the footer
FAQs explain how to participate and even how to comment on posts
the president has created a YouTube video (viewed 200 times since January 20th)
‘Agenda for Change’ is prominently displayed as a PDF link, as are links to government websites

The nation is now busy preparing for the operation of the ACE cable later this year. After all, capacity is useless if there is no demand or if the cost structure doesn’t make sense for consumers. Profits from the ACE gateway are expected to contribute to Sierra Leone’s economic progress. The government is clearly not taking any chances is missing this tremendous opportunity.

February 21, 2012/by actualize

New news

End of the African telecoms boom?

The upsurge in sub-Saharan Africa mobile telecommunications seems to be subsiding as companies continue to overcrowd the market while trying to gain more clients. Sizeable investments and how businesses aim to win over customers’ favour was investigated in a new report.

As one boom ends, another begins Bitange Ndemo, secretary of the Kenyan Ministry of Information and Communications, believes. (image: file)

The Morgan Stanley Research report, a global investing firm, says as firms backed by big money, like Bharti Airtel, continue improving their network coverage and decrease tariffs, Africa will become more competitive. Old timers, such as MTN and Safaricom, that have enjoyed market dominance are set to be affected the most. According to the report, the boom will be replaced by market driven innovation, new products and expanding data services.

“All companies are focusing on driving data usage, and new services to reduce churn. The most important are mobile money services like M-Pesa, where innovation take-up is high,” the report says.

“We expect mobile revenues to grow from 3,4% of gross domestic product (GDP) in 2011 to 3,7% by 2015, as we believe mobile revenue growth will outpace GDP in the next four years,” the report says.

Bitange Ndemo, secretary of the Kenyan Ministry of Information and Communications, says there is little room for new entrants in the local market.

“Unfortunately, there has been market erosion of about 20%, mostly because of competition that has seen cuts in tariffs in the sector. A new entrant would have a lot of problems as the four firms (Safaricom, Bharti Airtel, Yu Mobile, Orange) are struggling due to stiff competition,” Bitange told Daily Nation.

Industry analysts agree with his conclusion. ”What we are seeing is a correction of factors like the supernormal profits that some telecoms have been enjoying in the past,” Techie Makau, a Nairobi-based telecommunications consultant, said.
Makau added that providers now have to focus on provision, customer service and value addition. In the Kenyan market, the average price per minute fell by 80% due to competition largely from Bharti Airtel, between Sh2 and Sh4 ($0.03-0.05).

Despite the report, Bitange believes the data market is set to kick off next. Kenya’s internet penetration is only 30%, so once fibre optic cables expansion starts he believes we are set for another boom. “The data market is beginning to take shape as the fibre optic network continues to expand,” he said, adding: “this will see a lot of consumption of broadband… and that is what the companies should be looking at.”

Nico Gous

February 21, 2012/by actualize

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