Whether we’re paying the rent, receiving a paycheck, splitting the cost of a meal, or simply buying a coffee, people in much of the world take digital banking for granted. Everything is handled with a card swipe or a mobile banking app, and cash transactions are rarely involved.
But while the use of digital financial services has exploded over the past decade, 1.4 billion people around the world, and nearly one in three adults in low- and middle-income countries, still do not have access to a digital financial account. All of their transactions must be handled in person, using cash or through barter, adding extra hardships for families already living in or near poverty.
Without a digital account, getting paid and paying bills can often involve traveling long distances, which can be especially difficult for women caring for small children. In many countries, women also cannot easily access cash, hindering them from job or business opportunities. It’s also harder to save and impossible to earn interest. And when a catastrophe like COVID-19 hits, people without digital financial services—usually the families most in need of help—have a harder time receiving direct aid from the government or from friends or family.
Evaluating at a global scale
A 2023 United Nations analysis found that building digital public infrastructure (DPI) in low- and middle-income countries to provide currently unbanked individuals with digital payment, money transfer, and credit services could speed up GDP growth in those countries by 20% to 33%. Up to 730 million more people could access digital payments, 16 to 19 million more small businesses could obtain credit to help them grow, and direct benefit transfers would increase by US$17 billion to US$21 billion, or US$80 to US$100 per household.
Given these outsized benefits, extending digital financial services to everyone should be a no-brainer. But commercial banks don’t operate as charities: Every transaction they’re involved with must be profitable, and there’s not much profit in reaching those living on less than US$2 a day.
Several years ago, to help close this gap, the Bill & Melinda Gates Foundation began funding the creation of free, open-source, and interoperable “digital public goods” that any country or entity could use to bring more citizens into the circle of financial inclusion. These open-source technologies give countries new options for building out their DPI in a way that ensures national sovereignty over the data and systems and for giving all citizens access to safe, secure digital financial services.
In steps Mojaloop
Among these goods is Mojaloop, an open-source software solution that enables governments and financial enterprises users to launch and maintain an inclusive instant payment system (IIPS)—a system that allows anyone with a mobile phone to access digital financial services and the opportunity to participate in the digital economy.
Eight years after the Mojaloop project launched, and four years after the Mojaloop Foundation was created to support adoption of the software, I’m delighted to say that innovators around the world are taking advantage of this exciting new technology. In Rwanda, the Philippines, and elsewhere, Mojaloop deployments will soon extend the benefits of digital financial services to millions more people.
Rwanda’s digital payment breakthrough
In the video above, Sharon Umunyana, a technical project manager for the Rwanda Information Society Authority (RISA), talks about how and why she and her team have been working on one of the first national deployments of Mojaloop.
Established in 2017 to champion Rwanda’s digital transformation and lead the construction of the country’s DPI, RISA was looking for a digital merchant payment system that could reach the many unbanked populations outside Kigali, the capital city, and also be owned and operated nationally, thus decreasing Rwanda’s reliance on foreign payment vendors. Mojaloop met both of those key requirements with an off-the-shelf package that let Umunyana and her team skip over much of the complex work that would be needed to build such a system from scratch.
Without Mojaloop, Umunyana says, it would have taken them two years or more just to build a payment switch—a software solution that helps move payment transactions between different banks and digital payment providers. The creators of Mojaloop “thought about current scenarios in the world and even predicted some of the functionalities that would be needed in the future and then provided that for any country, anyone who wants to implement their own switch,” she says. “You can use it as is, or you can choose to customize it to your liking. It’s been easy to work with because they’ve already developed everything for us. We’ve just customized it for the local context of users and digital financial service providers.”
“It’s [Mojaloop] been easy to work with because they’ve already developed everything for us. We’ve just customized it for the local context of users and digital financial service providers.”
Umunyana is quick to point out that Mojaloop is easy to customize because of its open-source code, which confers many advantages. “Number one, it’s cost-effective,” she says. “Open-source software is generally free to use, which can significantly reduce the cost compared to proprietary software. Two: It provides enormous flexibility for customization. Since the source code is available, it can be modified to meet specific needs. Three, Mojaloop has a community of support that is continuously enhancing the software, and they can help you manage change and innovation on the platform. Four, transparency: The open nature of the code allows every user to inspect and verify its security. And lastly, I would say it helps to avoid vendor lock-in, and reducing the risk of dependency on vendors is why we’re doing this.”
That said, Umunyana notes that perhaps her biggest challenge is overcoming skepticism of open-source technology due to data privacy concerns—she has to explain to people that Mojaloop “can be customized to not expose any data. In addition, as required by Rwandan law, all data used by Mojaloop is hosted in-country instead of on foreign servers.
Umunyana estimates that the Rwandan deployment of Mojaloop is 85% complete and the system will go live before the end of 2024, several months earlier than anticipated. “With Mojaloop, we’ll be owning our own switch—a national payment switch,” she says. “Everyone will be included, regardless of economic status.”
How Higala is banking the unbanked in the Philippines
On the other side of the world, in the Philippines, another team is set to debut an open payment system built on Mojaloop. A startup called Higala is building an IIPS that aims to reach the millions of Filipinos left out of the digital financial system by current banking institutions.
While the Philippines already has an instant electronic funds transfer system called InstaPay, which debuted in 2018, it includes only 18 of the country’s roughly 400 rural banks—which means that many Filipinos are left out. The problem, says Higala CEO Vice Catudio, is costs and infrastructure. “To be part of an instant payment system, a bank must have its records and core systems in digital form,” he says. “They also need to offer a mobile banking service to customers that includes IT and cybersecurity provisions. Then they need to get a license from the central bank, which includes requirements that are out of reach for smaller banks. And they need a talented pool of manpower to operate and maintain the payment system, and a lot of small banks just don’t have the capability.”
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For an affordable fee, Higala will provide all these services to rural banks to help them join the InstaPay system. Its Mojaloop-backed payment switch is also 75% cheaper to operate than the current switch, thus making these digital financial services much more affordable to low-income communities in the Philippines. Currently in a pilot phase for regulatory purposes, Higala expects the system to go fully live within a year.
“When we were exploring the idea of the platform and evaluating the different options, we thought about building everything from scratch,” says Higala’s chief technology officer, Francis Plaza. “Then we came across Mojaloop, which basically met all the criteria we were trying to evaluate, the biggest being that we wanted a platform we could build on top of, to extend, make it interoperable, and without adding high costs to our end users.”
Plaza also highlights the advantages of using an open-source technology that incorporates best practices from across different regions: “[A]s the community grows bigger, there will be a bigger support system, which will help derisk future implementations and maintenance,” he says.
Catudio adds: “If you want to deploy an instant payment system in your country, I think the quickest, most efficient, and most cost-effective way to implement one is to use Mojaloop.”
Mojaloop builds digital payment bridges across Africa
While Rwanda and Higala are leading the way, other Mojaloop deployments are also in the works. After a successful proof-of-concept implementation last year in the Malawi-Zambia trade corridor, the Common Market for Eastern and Southern Africa (COMESA) is piloting a Mojaloop-backed IIPS for small and medium-sized enterprises in eight of its member states: Egypt, Ethiopia, Kenya, Malawi, Mauritius, Rwanda, Uganda, and Zambia. Once the COMESA Digital Retail Payments Platform is up and running later next year, it will complement existing payment systems in these countries by enabling instant cross-currency transactions between sellers and buyers, supporting the micro and small merchants doing business along the border between COMESA countries. By connecting domestic digital payment systems, it will provide a payment bridge between markets. COMESA’s six Francophone member countries have also expressed interest in joining the system.
Tanzania, a member of the East African Community and the Southern African Development Community and a former COMESA member, was the first to adapt Mojaloop and other open-source software and techniques to create a national payment system, the Tanzania Instant Payment System. Mexico and Myanmar are using Mojaloop to build their own inclusive instant payment systems, and new proof-of-concept implementations have been launched in South Sudan, Kenya, and Burundi.
As Umunyana and Plaza note, one of the great things about an open-source system like Mojaloop is that everyone learns from each rollout. As more countries launch efforts to build their own IIPSs, they will have more best practices and software add-ons to draw on in adapting Mojaloop for their own purposes. With every launch, the community grows, the software improves, and it becomes that much easier to reach every person with digital payments. As the circle of financial inclusion expands, everyone will feel the benefits.
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