A story of paperwork and compliance
This is the first piece in a series of articles by PaygOps -and guest contributors- on TelCo.
Payments through mobile money became an essential part of the Pay-as-you go (Paygo) model in the last few years and contributed to its rapid growth. A study from GSMA shows that between April 2018 and June 2019, the penetration rate of mobile money among Paygo solar customers increased from 27% to 113%.
Distributors who are keen to penetrate the Paygo market want to seize the opportunity offered by the mobile money technology that facilitates the collection of payments in hard-to-reach areas and, therefore, enable them to scale their operations faster. While acknowledging that technical issues may arise from such an operation, often too few of them are aware of the cumbersome compliance and administrative procedures that must be undertaken to benefit from this service.
The compliance issues faced by MTN, one of the largest mobile telecommunication companies in Africa offers some perspectives on a topic which complexity is often underestimated, and this precedent explains, to some extent, why Telcos are strict on this dimension. Indeed, in 2015, an audit conducted by the Nigerian Communications Commission (NCC) revealed that MTN failed to comply with the Telephone Subscribers regulation (TSR), that since 2011, requires MNOs to deactivate newly registered lines that remain inactive for 48 hours after registration.
The investigation exposed that the lines of 5.2 million unregistered customers were still activated beyond the time limit. Unlike other MNOs, MTN couldn’t meet the 7-days granted by the NCC to deactivate these subscribers. Consequently, the company was fined with the sum of $1000 for each unregistered subscriber, which amounted to $5.2bn. While not being directly related to mobile money account setup, this case is a striking illustration of why Telco operations would be demanding in terms of respect of local requirements or frameworks in the context of mobile money services. In this article, we will describe the most common steps of the administrative and compliance procedures to help Paygo distributors better understand its implications and challenges.
Similar to any other service, the account opening is the first step that must be taken by the distributor. Once they decide which Telco operator they want to work with, the distributor gets in touch with a Sales Manager, chooses the best plan, and the account is open with the unique company credential, e.g. shortcode, account number or Paybill number depending on the Telco. In practice, the process is more complex. Distributors must be ready to face latencies due to Telcos bureaucratic rigidities.
Vicenzo Capogna, CTO at a renown paygo distributor, Oolu, points out that “when we look at integrating with a new mobile money provider, we would say that ⅔ of the time if not more, is actually spent around what we call “passing papers”. Agreeing on terms with the Telco, receiving the contract and getting it signed by legal and commercial teams, that is where we spend most of the time”.
Another compelling testimony highlights the delays faced when he tried to integrate with a Telco in Tanzania: “they lost our form requesting to integrate at least 3 times, leading to over 12 months just to get the form signed back and starting the process”.
With the precious number in his possession, the distributor will pass it on to his software provider that will use it to roll out the integration in production.
Type of accounts available
When starting the registration process, distributors must consider the distinction between both "shared" and "bring your own" accounts and their specificities. Shared accounts are quicker to set up as they are mostly offered by Aggregators who already have partnerships with the Telcos. Aggregators do not request the paybill number on behalf of the distributor, but act as intermediaries in the integration process, avoiding Telcos from requiring additional documentation to the distributors to approve the integration.
For "bring your own'' account, distributors have their own account which is better for branding and easier for clients to use, but can require up to 70% of the original integration time. It takes between 4 to 12 months to actually set it up as the Telco needs to follow their internal process to approve the integration for that specific account:
Benjamin David, CTO at Solaris Offgrid - PaygOps and leading the Telco integration processes, points out: "In addition to the red tape surrounding account opening, there is often a lot of work to do in ensuring that the mobile money provider goes through and prioritizes your integration setup with their technical team. Convincing them of the value of your business and the promise of future revenues is often a first step towards them giving a greenlight to their technical teams. While having an existing technical integration usually helps by reducing the investment of time for testing on their side, each account setup can still require a lengthy process".
In this crucial step, the most time-consuming element is usually the testing, as Telco operators often do not have an easy-to-use or easy-to-setup testing environment and the response time can be relatively long. Synchronizing with their technical teams to roll out the integration for production is also a challenge (i.e. getting approved by the telco to use their production environment URLs): “In Nigeria, the average response time for the engineer to answer our question was around 60 days, leading to very simple conversations taking months” according to a consultant.
Telcos’ technical team responsiveness is really key and can considerably impact the duration of the whole process. The technical integration usually takes between 1 and 4 weeks after validation and needs to be done one-time only per Telco in the same country: “Once the project is finally approved, and the Telcos development team is available, it’s only a matter of a few lines of codes and maybe a few days or a week to be online and in production. Probably the shortest was a month and a half from when we first interacted with the company to when it was done and this was in Niger. The longest one in Senegal, where the operation took more than 2 years for 1 operator between when we signed the contract and when we were on the USSD menu. Nothing happened for 1 year and a half for some reason ” says Vicenzo.
We highlighted below the critical milestones, distributors, Telcos and Paygo providers must achieve to complete successfully a full mobile money integration:
As the graph illustrates, the two stages that can become the longest, are those related to Telcos organisational procedures that slow down the whole process:
To approve the account opening and finalize the contract, Telcos ask for several documents from the distributors, which is more demanding for small/new distributors. In a recent webinar regarding integration with payment providers in Africa, highly experienced global payment executives explained that, since startups can face challenges with compliance processes at the beginning, and may not have the volumes yet to be interesting for the Telco, they are placed at the end of the queue. It seems that the only way to progress in the queue is to prove very neat compliance processes and build strong relationships with them to gain their confidence. Once the documents have been sent, Telcos can take from several weeks up to 1 year to review and validate the documentation.
The synchronization with the Telco’s technical team to test the integration and to roll out the integration for production can be a lengthy process as the response time can be relatively long.
Misconceptions about Telco Integrations
As described previously, integrating with a Telco can be a long process due to administrative procedures. Preconceived ideas remain on the ease-of-use of an existing integration, and distributors are not always aware of some subtleties that may delay the availability of the mobile money service:
If a distributor has benefited from a specific integration between a Telco and a PAYGO provider, it will be faster for a new distributor to benefit from that same integration: False. Even though this can fast track the technical integration, still every new distributor doing a Telco integration must go over the Administrative procedure of opening the account and obtaining the approval of the telco to proceed with the integration. Telcos might ask the client for a business plan because it is very costly for them to accept integrations due to their old infrastructure. This step, as it was mentioned above, can take even more than 1 year.
Telcos have standard operating procedures across markets: False. Telco companies are local entities that collaborate with worldwide brands but remain under a unique ownership structure in each country. As an example, Orange as a brand is available all across western Africa, but Orange in Senegal is a JV with Sonatel, a State-owned Senegalese Telco. This means that ultimately a unified brand like Orange, MTN or Vodacom, is actually an agglomeration of local companies with their own methods of working with their own local third party providers; they have their own unique APIs with their own local legal framework. This means that a distributor requesting an integration with a Telco in a given country will very likely face the same lengthy procedure despite having conducted an integration in the past with the same Telco in another country.
Conclusion: main blocking points in the Telco Integration Process
1. Administrative inflexibility inherent to Telcos:
Distributors have faced issues related to opening account files having been lost for months, which makes the process much longer.
In some cases, before opening an account, Telcos demand the distributors information related to the number of customers and a business plan that guarantees thousands of installations; this demand not only makes the process longer but is not convenient for distributors that are just starting a pilot or in the first stages of their operations.
The account opening and contracting process can take from 2 months, in the best scenario, up to 1 year.
2. Long time of response in the testing step of the integration process:
Telcos often do not have an easy-to-use or easy-to-setup testing environment and can take several days or months to respond.
The synchronization with the Telco's tech team to roll out the integration for production can also be a lengthy process as Telco’s engineers can take a long time to approve the PAYGO software provider to use their production environment URLs.
Even though the technical development of the integration can take a few days, the coordination with the Telco’s tech team in charge of approving the integration and testing it can take up to 1 year.
As a result, the whole Telco Integration process is in most of the cases, a lengthy process of 1 to 2 years.
For more information about Telco services (SMS and Mobile Money integrations) in relation to Paygo operations, go visit our dedicated page and engage with our team to discuss it further at [email protected].
This article has been produced with the participation of Enable Digital. Enable provides Digital Technology Solutions for Emerging Market Ventures and investors, including Technology Due Diligence, Business Intelligence, and advisory services.
About Solaris Offgrid:
Solaris Offgrid supports distributors of essential services to build strong customer traction and greater relations with investors through flexible and inclusive Paygo solutions, designed for last-mile operations. Adopting a bottom up approach in the design of its solutions and creating synergies with a strong network of partners to solve last-mile challenges, the company has already deployed Paygo solutions in more than 30 countries through PaygOps, Solaris Offgrid in-house software solution built “In the Field, for the Field” and its product development services. Leading reference in the off-grid solar market, PaygOps is engineered to deliver modular and interoperable solutions to address off-grid energy access challenges and distribution complexity. For more information on PaygOps, please contact [email protected].
About Enable Digital:
Enable offers flexible, future-proof, digital technology and data management solutions to clients in emerging markets. Their clients are providing essential goods and services for customers in emerging market sectors such as Ag, Energy, Mobility and Waste. They support entrepreneurs and social innovators in emerging markets to grow their businesses more affordably and efficiently.