EXCLUSIVE: “Wallet for the World” – Ram Sundaram, TerraPay in ‘The Fintech Magazine’

They’re primarily tools of convenience in the West, but how powerful could mobile wallets really be if the issue of interoperability was solved? That’s what TerraPay has set out to do, as Ram Sundaram explains

The genesis and the genius of mobile wallets differs hugely around the world. In developed economies they were created for convenience, led by Big Tech developments like Apple Pay and Google Pay, which provide tokenised card payments, linked to existing bank accounts.

In emerging markets they were formed to give financial inclusion to the huge swathes of people who didn’t have bank accounts, allowing them access funds on their phones, which was literally a lifesaver for many. But both models share common futures: that of exponential growth and an increasing need for interoperability. One of the fintechs with a significant stake in providing the latter is London-based global money movement company TerraPay.

Formed in 2014, TerraPay’s network was first used by a hotel worker in Dubai to send $13 to his family in Tanzania. Now it processes payments to more than 2.4 billion mobile wallets, 7.5 billion bank accounts and six billion cards across the world. And such is its growing influence that this summer TerraPay announced that it was connecting Swift’s global payment network, which links more than 11,500 financial institutions across 212 countries, to its digital infrastructure to further enhance cross-border transactions for both businesses and consumers.

Providing an interoperable payments network was always central to TerraPay’s founding vision, explains chief operating officer Ram Sundaram, who co-founded the firm with Ambar Sar, now TerraPay’s CEO. With a shared background of working in telecoms in India, the pair quickly realised that there was a ‘silo approach’ to the existing mobile payment platforms.

“You essentially had closed user groups where you could pay merchants or other customers on the same platform but you really couldn’t transact with others who were with anyone else,” says Sundaram. “We thought there was an opportunity to build something like Swift for mobile wallets where we make them interoperable. One of the key drivers here is that a lot of people in emerging countries will never have a bank account in their lives but they already have or will have mobile wallets and they use them as bank accounts. So making them interoperable, making them work with the rest of the financial infrastructure, is desirable. It promotes financial inclusion, it makes services that banked people take for granted available to non-banked people. We thought this was something that we could work towards.”

So, the pair set their sights from the outset on creating cross-border payment capabilities.

“We realised we would have to be a licensed infrastructure that mobile wallet operators can connect to, not just a messaging platform and that’s what we built out,” explains Sundaram. “As we were building that out we found we needed settlement accounts and other capabilities and, as we spoke to banks, some of them said they wanted to join the network as well because they wanted to be able to send money to mobile wallet operators or receive money from mobile wallet customers. So we added bank accounts to the mix. Then we realised it made sense to offer this as a kind of digital infrastructure where we reach mobile wallets and bank accounts. And that’s really what we’ve built out over the last 10 years.”

The global goal of interoperability

As part of TerraPay’s continuing drive towards global interconnectivity, it recently announced a collaboration with five leading wallet operators Airtel, bKash, MPESA, Nequi, and Sama Money to form the Wallet Interoperability Council. Serving millions of customers in countries including Bangladesh, Colombia, Kenya, Senegal, Tanzania and Uganda, the Council members aim to facilitate merchant payments, international remittances, and other use cases in cross-border transactions, interconnecting their diverse platforms by leveraging TerraPay’s technology.

It comes as huge growth in the use of mobile wallets is forecast worldwide. A report published this year by the Global System for Mobile Communications Association found about two-thirds of sub-Saharan Africa’s 1.2 billion people are registered for mobile wallets. International researchers Global Insight predicts the market will see a 18.5 per cent CAGR (compound annual growth rate) from 2023 to 2032. Meanwhile, in the UK, industry body UK Finance’s 2024 Payments Market Report showed that 42 per cent of the adult population registered for mobile contactless payments in 2023 compared with 30 per cent in 2022, and a third of adults used them at least once a month.

“The low-hanging fruit is to make life easier for well-heeled customers and that’s what wallets in Europe and the UK have been doing. There haven’t been many wallets that actively set out to address financial inclusion”

Given that mobile phone penetration in the UK is above 90 per cent, the report’s forecast of trends to 2033 predicts that mobile contactless payments usage will continue, driven by a migration from contactless cards to mobile contactless devices. It’s no surprise then that the UK’s Financial Conduct Authority (FCA) and the Payments Services Regulator (PSR) have turned their attention to the future developments in digital wallets. This autumn they put out a call for views around whether they are working well for consumers, businesses and other users;
f there are any disincentives or barriers to digital wallets integrating account-to-account payments; and asked if stakeholders thought digital wallets posed any significant consumer protection or market integrity issues.

Far from being a threat, the UK Finance report pointed out that mobile contactless payments benefit from additional security features, such as biometric authorisation of individual payments. And these added security benefits compared to physical cards is a theme Sundaram warms to.

“Card payments are legacy, they evolved from a place where there was no security,” he says. “Then, as the world became more digitised we realised these things were very vulnerable. So today all the security that you have around card payments is kind of bolt-on patches on top of patches on top of patches – it’s not a very efficient system.

“I may be very confident that the card I have here in the UAE is secure because it has a second factor authentication but I may travel to another country where the acquirer doesn’t have it or hasn’t turned that on and now anybody can just tap my card and authorise a transaction. That doesn’t exist in the wallet world because it’s a relatively new technology and the way it’s built is that every transaction is explicitly authorised by the account holder on their device.”

It’s not all about the shopper, though as Sundaram points out: “Coming back to emerging markets, a lot of SMEs who don’t really have access to bank accounts use wallets and their requirements are different from individual customers’. So the wallet providers have created SME business wallets that have higher limits or different capabilities.

“Businesses can use them to pay customers and there are also businesses in emerging markets that rely on micro payments, things like micro insurance where they charge a small premium every day for insurance cover because their customers can’t afford to pay a larger amount once a month or once a year. When you do that, you have to have access to wallets because without wallets the cost of a transaction will probably be more than the amount you’re collecting. So there are specific use cases which only wallets can address.”

While the growth in adoption in the UK and Europe has been driven thus far by convenience more than anything else, Sundaram believes there are opportunities to grow the market in other directions – for instance where sizeable populations of migrants have settled.

“The low-hanging fruit is to make life easier for your well-heeled customers and that’s what wallets in Europe and the UK have been doing, but I don’t think there have been many wallets that have actively set out to address financial inclusion,” says Sundaram. “There are lots of migrants in Europe or the UK, for instance, who don’t qualify for bank accounts because of low income levels or because of documentation, and these are things that can be addressed by wallets in cooperation with regulators.

“Obviously, you have to create the regulatory environment for know your customer with a different set of operating rules or thresholds or cost structures for customers like that. But there are also customers, for example, who live on government support in the UK and Europe, and it’s easier to pay them with wallets if there is a widespread wallet ecosystem for acceptance. It’s much cheaper for a start, and helps to make sure that the money goes where it should be going.”

For TerraPay, which was founded on a mission to promote financial inclusion, that seems a perfect plan.

This article was published in The Fintech Magazine Issue 33, Page 26-27