Page 194 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

Figure 8 – Overview of MSP Merchant Acceptance Model

In some countries, the presence of multiple wallet providers may promote a the emergence of third parties
to operate between networks as they can connect closed loop eMoney schemes and create interoperability
at the POI, driving a network effect. This may occur to satisfy a government initiative to develop a payment
ecosystem, a company’s own commitment to generating merchant interoperability, or a company’s desire
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to expand into a space where merchant payments are already prevalent.

Probably the strongest case, however, for MSPs, has been their provision of value-added services such as
working capital or loyalty programs which provide merchants with attractive value propositions for accepting
electronic payments, beyond core payment acceptance offerings. They can also provide upgrades to POI
technology, a capability requiring skills and expertise that the MMO may not possess. These roles are often
difficult for MMOs to fulfill because it may not be core function of their business.

Developed acceptance markets have seen MSPs such as ISOs (Independent Sales Organizations) compensated
by their merchant acquirer partners through distinct mechanism and we would expect to see similar approaches
emerge as eMoney deployments expand merchant acceptance. To incent high volume or a focus on low
hanging fruit MMOs could offer a commission or bounty for acquired merchants. Alternatively, a residual can
be paid to the ISO based on the quality of the acquired merchant in turn determined by associated spend
volumes. In addition, the merchant may leverage additional services the ISO may supply. It is possible for the
ISO to play a role beyond account acquisition, which will affect incentives. Finally, it is possible to have several
third parties active across the value chain; a sign of increased specialization in merchant acceptance.

Technological change contributed to the use of an MSP by Easypaisa in Pakistan. Telenor decided to adopt
an NFC enabled POS device to enable merchant acceptance. This technology is a material change from that
used to enable P2P payments, driven mainly by OTC transactions by agents on behalf of customers. Telenor
contracted KEENU for the support necessary to enable acceptance through a technology with which they had
no experience. Given its background in payment services KEENU is able to provide this support as well as a
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number of additional services across the value chain.
In Kenya, Kopo Kopo played a similar role as KEENU and has evolved to play that role in other contexts. Kopo
Kopo built and expanded M-PESA’s initial merchant network. It succeeded and continues to provide value-
added-services, such as loyalty program and merchant cash advances to the approximately 20,000 merchant
it retains a direct relationship with under Safaricom. Kopo Kopo continues to efforts to provide value added
products and service to M-PESA merchants. In other countries, such as Ghana, Kopo Kopo has become a white
label provider of its Paywith platform to Ecobank. Its basic value merchant acceptance value proposition
13

11 Examples, though not explored in this paper, include a handful of central bank led payment platforms; Better Thank Cash Alliance
Representative. Phone Interview. 23 Oct 2015.
12 MasterCard Representative. Phone Interview. 24 Nov 2015.
13 Wakoba, Sam (2014), Exclusive: Kopo Kopo Goes International: Ready to Integrate Merchants from Everywhere. Retrieved
from http:// techmoran. com/ kopo- kopo- goes- international- ready- to- integrate- mobile- money- payments- for- merchants- from-
everywhere/ #sthash. HAqDCNxi. dpbs;

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