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interoperability

Championing interoperability for financial inclusion: carrot or stick?

Thomas Lammer's picture
Mobile payments at Hawala Market in Daykundi, Afghanistan. Photo: Institute for Money, Technology and Financial Inclusion

Interoperability – a term used in a variety of industries, including telecommunications and financial services – is generally understood to refer to the ability of different systems and sometimes even different products to seamlessly interact. For payment systems, “interoperability” depends not only on the technical ability of two platforms to interact but also the contractual relationships between the entities wanting to interact. Traditionally, interoperability has been established by the same type of institutions, by banks’ participation in a central retail payment infrastructure (e.g. a central switch or an automated clearing house) and adhering to a payment scheme (e.g. a card scheme or a credit transfer scheme).

These days interoperability in retail payments is no longer limited by national borders and the overall ecosystem has become more complex. Non-bank payment service providers have emerged (many of them mobile network operators-MNOs) and there are new types of payment instruments (e.g. mobile money). Innovative payment instruments often start as proprietary solutions, processed in-house rather than via a central platform. In that regard, interoperability can help tear down barriers by enabling transactions between customer accounts of different mobile money solutions. In some countries, interoperability even facilitates transactions across different type of accounts (e.g. deposit transaction accounts held with banks and mobile money accounts held with non-bank service providers).

Solving payments interoperability for universal financial access

Massimo Cirasino's picture


Interoperability was a trending topic at this week’s Mobile World Congress (MWC) 2016.

Payments are often the first and most used financial service.

Getting payment products to “understand” each other, or to be “interoperable,” is a big challenge to solve if we want to expand overall digital services and financially include the 2 billion people worldwide who are currently excluded from the formal financial system.

Making it easy for people to access transaction accounts and payment services matters.

We see interoperability as a means for people worldwide to make electronic payments in a convenient, affordable, fast, seamless and secure way through a transaction account.

When payment systems are interoperable, they allow two or more proprietary platforms or even different products to interact seamlessly.  Interoperability can promote competition, reduce fixed costs and enable economies of scale that help ensure the financial viability of the service and make payment services more convenient.