Mobile payments and interoperability: Insights from the academic literature

Abstract

We connect various streams of academic literature to analyze how alternative competition and regulatory policies may affect the development of digital financial services, and particularly of mobile payments. Our main objective is to highlight the extent to which existing models, often coming from related industries (such as telecom, payments, and banking) can be applied to study the effects of mobile money interoperability. We focus on four dimensions of interoperability. First, we consider mobile network interoperability (whether clients of one telecom can access another telecom's payment services) in connection with the IO literature on tying. Second, we discuss platform level interoperability (the ability to send money off-network) in light of the literature on compatibility. We also build on the behavioral IO literature to suggest how the effects of interoperability may be very heterogeneous across various types of firms and consumers, or even backfire. Third, we consider interoperability in the cash-in-cash-out agent network, in light of the literature on co-investment in network industries, and of more specific studies on ATMs' interoperability. Fourth, we discuss how the literature in banking and on data ownership can be used to understand interoperability of data. We conclude with some broader remarks on policy implications and on possible directions for future research.