DESIGN AND IMPLEMENTATION OF AN ORGANIZATION FINANCE TRACKING SYSTEM USING BLOCKCHAIN TECHNOLOGY

CHAPTER ONE

 GENERAL INTRODUCTION

• BACKGROUND OF THE STUDY

The emergence of Information and Communication Technology (ICT) had completely changed the lives and operations of individuals and organizations respectively. ICT and digital technologies had made great evolutionary development in finance, economics, and other major sectors in the world¹. Accompanying and supporting the dramatic increases in the power and use of new information technologies has been the declining cost of communications as a result of both technological improvements and increased competition². The global proliferation of the internet and its rapid use over the years had contributed much in facilitating electronic commerce in global business environment (FERNANDES, 2013). As transactions among business partners continue to proffer on the e-commerce platform, an electronic payment solution emerged to replace the former cash-based payment systems (DENNIS, 2004). The advent of this development in the global business environment challenged most organizations to automatically switch from the conventional paper-based money transactions to an electronic payment system  which is widely known as the  e-payment system.

Progress in technology has contributed to the development of a new kind of payment instrument – electronic money. This may be in the form of value stored on a technical device such as a chip card or indeed, a computer memory. Electronic money (E- Money) can be best described as a digital form of cash since it has many of the characteristics of cash.

E-money has been made a reality in CEMAC with the use of new payment methods as payment instruments. Regulation n° 01/11/CEMAC/UMAC/CM defines e-money as “monetary value stored in electronic form and purchased with funds of equal value; e-

¹ SLOZKO & PELLO (2015), cited by OLAOYE F.O., and ADEBAYO I. A (October 2017), “Empirical evaluation of Government cashless policy and accountants’ workload in selected higher institutions in Ekiti state, Nigeria”, vol. 6, issue 10, p. 1.

² KONSBRUCK Robert Lee (2009), “Impacts of Information Technology on Society in the new Century”,

Route de Chavannes, 27C, CH-1007 Lausanne-Vidy Switzerland, p. 1.

money may be used to make payments to people other than the issuer without involving bank accounts in the transaction”³.

• THE HISTORICAL DEVELOPMENT OF E-MONEY IN CAMEROON

Mobile money services have spread rapidly in many developing countries. African countries, specifically Sub-Saharan have showed a great and rapid advancement in mobile money services. The first mobile money service was launched in South Africa in the year 2000. In 2007, Safaricom, a Kenyan mobile communication operator launched the first successful mobile money service⁴. In 2012, there were only four countries in which mobile money account exceeded bank account but it increased by 55.6% to the end of 2013. Nine countries – Cameroon, the Democratic Republic of Congo, Gabon, Kenya, Madagascar, Tanzania, Uganda, Zambia and Zimbabwe evidenced to have more mobile money accounts than bank accounts (GSMA, 2013). As of December 2014, over 50% of mobile network operators (MNO) in Sub-Sahara Africa have already launched mobile money services. However, in 2014 there was no significant increment of Mobile Money Service in Sub- Sahara Africa compared to Latin American and Caribbean but a rank still shows that Sub- Sahara Africa accounts for the majority of live service globally (53%), GSMA (2014). ITU (2013) revealed that fewer numbers of people in developing countries, particularly in Africa, hold formal bank account⁵.

Cameroon is now taking advantage of the huge advances of mobile phone services⁶. Mobile money is already reaching huge numbers of low-income and previously unbanked customers, moving millions of households (mostly low-income) from a cash-only economy into the formal financial system⁷. So, the cellular phone is no longer used just to make phone calls as it facilitates financial exchange and trade. In light of its profitability,

³ Cf. The Regulation n° 01/11-CEMAC/UMAC/CM of September 18, 2011, setting the conditions to exercise the activity of e – money issuer, and the roles of the regulatory authorities in Article 2.

⁴ JANG JONG-Moon and PARK Hyunju (January 2015), “Mobile money in sub-Saharan Africa and its

implications”, vol. 6, n° 3, p. 2.

⁵ GWAHULA Raphael (2016), “Risks and Barriers Associated with Mobile Money Transactions in Tanzania”, website: dx.doi.org/10.5296/bms.v7i2.10069, p. 122.

⁶ Beyond the usual communication tools that now connect people from the four corners of the Earth, cellular phone service providers have just made a big splash in the profitable remittance sector and are now claiming a part of a rapidly growing market that accounts for 80% of the money sent among Cameroon, Europe, the Americas and Asia and 75% of domestic financial trading by creating new specialized modules for telephone messaging.

⁷ Simone DI CASTRI (February 2013), “Mobile Money: Enabling regulatory solutions” GSMA.

the Orange group created Orange Money and MTN created MTN Mobile Money⁸. Mobile Money is a modern means of transferring money via a cellular phone⁹. The device has become a sort of electronic wallet which enables customers to do various types of financial transactions using their cellular phones. Available in thirteen countries in Africa and the Middle East, Mobile Money has more than 15 million customers today. In Cameroon, this service has been available since September 2011. The bank account ownership rate is around 20% (higher than the CEMAC average) in Cameroon. Regarding mobile phone use, also in Cameroon, the penetration rate increased from 9.8% in 2004 to 71% in 2014, with 18.6 million people holding subscriptions in total and a potential market of almost 15 million for mobile money¹⁰, in partnership with commercial banks that provide regulatory supervision in its usage. The phenomenon has been growing since 2014.

• EVOLUTION OF MOBILE MONEY IN CAMEROON

According to Media Intelligence’s tracked data on the Cameroon Remittance Market, Mobile money was introduced in 2008, by Express Union¹¹. After the launch of

⁸ Since its inception in the early 1990s in Cameroon, MTN has evolved from simply connecting people by mobile communications network to facilitating money transfers and mobile money. Cf. NYAMNJOH and FUH Final report, Njangi Sociality: Mobility, ICTs and Mobile Money Usages and Practices amongst Poor Rural Farmers in the Cameroon Grassfields, (Overview Report), Langaa Research & Publishing Common Initiative Group (Langaa RPCIG), Bamenda, North West Region Cameroon, website: www.langaa- rpcig.net, p. 29.

⁹ Yasmine BAHRI-DOMON (June 2015), Cameroon and the era of mobile money, Business in Cameroon, n° 28, p.3.

¹⁰ GABAC REPORT (August 2017), “New methods of payment facing the challenges of the fight against money laundering and terrorism financing in the CEMAC area”, website: www.spgabac.org, p. 12.

¹¹ Express Union is the most widely electronic money transfer agency amongst both rural and urban dwellers in the Cameroon Grassfields. Express Union (EU) is an approved electronic transfer service provider created in 1997 with head offices in Yaoundé, Cameroon. It began with two main branches and gradually expanded to all corners of Cameroon, numbering up to 465 branches in 2014. In 2007 through the approval of COBAC, Express Union extended its service to all countries within the CEMAC Zone and today also operates branches in France and Switzerland. The company sees itself as “The Number 1 Money transfer Company” in Cameroon as its logo carries. According to the company’s management, Express Union is: “an answer to the need of Cameroonian people always encountering the problem of choice of reliable financial structure able to efficiently respond to their expectations concerning transfer of funds in security and preserving confidentiality of operations”. Cf. NYAMNJOH and FUH Final report, Ibid, pp. 24-25.

Express Union Mobile, MTN Cameroon launched MTN Mobile Money in 2010¹². MTN introduces mobile money in Cameroon, through a partnership with Afri-land Bank. A first memorandum of understanding was signed in June 2011 and the service became operational in 2012. MTN Mobile Money offers money transfer services and the payment of bills (water and electricity). Clients open an account with MTN and not the bank itself, though Afri-land is in charge of making sure the accounts opened respect banking regulations. A year later, Orange Cameroun joined the digital market with Orange Money in 2011. Société Générale du Cameroun (SGC) later launched Monifone in 2012.

As at now, there were about 6.8 million Mobile money subscribers and close to 1.5 million active users in Cameroon. MTN Mobile Money by the end of June 2016 registered

2.4 million subscribers with about 220, 000 active users whereas by December 2015, Orange Money registered 2.2 million subscribers and 200, 000 active users and Express Union Mobile registered 500, 000 subscribers and 300, 000 active accounts. There is also a new product which is Nextell Possa which is introduced in the market whereby Viettel Cameroon joined mobile money in partnership with the bank UBA.

In 2018, there are over 10.4 million Mobile Money account with many subscribers on MTN Mobile Money. These numbers will grow substantially for the fact that Mobile money is now imposing itself as the faster and secured mean of paying electricity bills and school fees¹³.

• DEFINITION OF KEY WORDS
  • ELECTRONIC MONEY

Electronic money (e-money) is broadly defined as an electronic store of monetary value on a technical device that may be widely used for making payments to entities other than the e-money issuer¹⁴. The device acts as a prepaid bearer instrument which does not necessarily involve bank accounts in transactions. E-money products can be hardware-

¹² Cf. M.E. DE BRUIJN, I.C. BUTTER & A.S. FALL (March 2017), “An ethnographic study on mobile money attitudes, perceptions and usages in Cameroon, Congo DRC, Senegal and Zambia”, Final report, p. 29.

¹³ This system of payment was already implemented in higher education like in University of Buea, University of Ngaoundere. Now Cameroon ministry adopts MTN mobile money for school fee payments through a Memorandum of understanding signed with the Ministry of Secondary education to enhance transparency and traceability in the collection of fees by secondary schools.

¹⁴ Cf. The Regulation n° 01/11-CEMAC/UMAC/CM of September 18, 2011, setting the conditions to exercise the activity of e – money issuer, and the roles of the regulatory authorities in his Article 1.

based or software-based, depending on the technology used to store the monetary value. Monetary transactions can be divided into two broad categories: those that require the use of cash and transactions that do not. Non-cash transactions, in turn, are of two types: paper- based and electronic. Also e-money is an electronic means of payment. There currently exist two main types of e-money:

• E-money based on cards (multifunction pre-paid cards bought by buyers);
• E-money based on some type of software that allows buyers and sellers to transfer funds through an electronic

In the CEMAC, for the last several years, the use of new payment methods (NPMs) have been growing: prepaid cards, online payment and mobile money.

• PRE-PAID CARDS

In the CEMAC area, pre-paid cards are electronic payment instruments within the meaning set out by Regulation 01/11-CEMAC/UMAC/CM of September 18, 2011. This refers to a set of “signals recorded in a computer memory included in a personal card provided by an issuer to a cardholder”. Pre-paid cards work like traditional debit cards. Cardholders can only make payments and/or withdrawals up to the monetary value stored on the card. However, unlike a debit card, owning a pre-paid card is not subject to bank account ownership. Nonetheless, pre-paid cards are linked to an e-money account or e- money wallet, and can only be issued by an institution that has received express authorisation to do so. In Central Africa, only credit institutions are permitted to issue e- money¹⁵.

• ONLINE PAYMENTS

Online payments in the CEMAC began in the early 2000s. The main parties involved in online payment offerings are the online payment gateway, websites and banks. The online payment gateway is the provider of online payment products. To carry out an online payment transaction, a customer space is created on the website where purchases are made. The customer space is authenticated by the internet service provider every time customers attempt to use the site to make a purchase. To make online payments, customers

¹⁵ The vast majority of banks in the CEMAC sub-region have not yet adopted pre-paid cards for the products they offer to their customers, and thus continue to offer debit cards only, whose growth is proportional to beneficiaries’ bank account ownership rate. Cf. GABAC (August 2017), “New methods of payment face of the challenges of the fight against money laundering and terrorism financing in the CEMAC Area”, Libreville Gabon, E-mail: secretariat@spgabac.org website: www.spgabac.org, p. 19.

are required to register with a retailer site, sign a contract, and have a username and password. Customers must also access their own space and hold an electronic wallet or a card linked to an international payment system. Online payments are mainly used for the purchase of goods and services, but some banks offer an online transfer service. The main users of online payments are companies and individuals, the majority of whom have previously travelled abroad¹⁶.

• MOBILE MONEY

Mobile money for the majority of the institutions with mobile money offerings, this payment method was introduced to the sub-region after 2010.

The definition of “mobile money” varies across the communication industry as it covers a wide scope of overlapping applications¹⁷. In general, mobile money is a term describing electronic financial services performed via a mobile phone. There are three major mobile money services: “mobile banking”, “mobile payments” and “mobile transfers”¹⁸. It is worth nothing that the term “mobile banking” is often confused and used interchangeably with the overall category of “mobile money” in research and literature. However, mobile banking is one type of mobile money service which allows customers of a financial institution who possess a formal bank account to access their accounts and to perform transfers and payments.

Mobile payment (also known as “m-commerce”) is a service allowing unbanked people to purchase or sell goods and services at a merchant shop/store (or remotely) using their mobile wallet through their mobile phone, instead of cash. Unbanked mobile phone users can also pay utility bills via their mobile wallet.

Mobile transfer (also known as money transfer “person-to-person” – “P2P”- or “mobile remittances”) is a service that allows unbanked people to send or receive small sums of money to/from any other mobile phone user (even if they are subscribed to different telephone service providers) across the country, from urban to remote rural areas, and across international borders.

Mobile-Money is a new financial service resulting from technologically neutral approach of the law on E-Money. In the simplest terms, Mobile-Money is a form of E-

¹⁶ Op cit. p. 30.

¹⁷ DERMISH et al. (2011), “Branchless and mobile banking solutions for the poor: A survey of the literature, Innovations: Technology, Governance, and Globalization”, 6 (4), pp. 81-98.

¹⁸ See the explanation below.

Money. More generally, Mobile-Money exists when the mobile phone with or without the help of a Mobile Network Operator acts either as an E–money access device or as the hardware on which e–monetary value is stored (i.e. it acts as a Stored Value Card). A complete definition for Mobile Money would be services that connect consumers financially through mobile phones. Mobile-Money allows for any mobile phone subscriber whether banked or un-banked to deposit value into their mobile account, send value via a simple handset to another mobile subscriber and allow the recipient to turn that value back into cash easily and cheaply¹⁹.

Mobile money allows users to make transactions through a system of monetary units using mobile telephones. Mobile money transactions require an electronic account to be opened. Approval to offer mobile money products is granted financial institution which partners with mobile telephone operators. By a partner bank, which creates a guarantee fund that covers all of the e-money? The financial institution or partner bank issues electronic money through an account in its books that holds the scriptural equivalence of all virtual money in circulation. As such, banks are the issuers of mobile money. In the CEMAC, the following mobile money products are offered:

• National payments: money transfers between two people living in the same country (also called (P2P).
• Money storage: in certain systems, the account is used to store money securely, whether through an account opened with a bank or, more commonly, an account opened with a mobile
• Retail payments: payments to participating These retailers can be supermarkets, consumer goods retailers, or the mobile operator itself (for users to purchase airtime for making calls or other services). Payment for bills or other services: for paying bills for essential services such as water and electricity in a convenient and effective way, paying for school costs, taxes20.
  • CONSUMER/CUSTOMER

Consumer protection laws are designed to protect and promote consumer interest, but who is the consumer for whom the law seeks to protect and what is consumer interest?

¹⁹GSM World, (2009), p.7 see also ALAMPAY, Erwin (2010), “Mobile banking, mobile money and

telecommunication regulations, website: www.academia.edu, pp. 6-9.

²⁰ Cf. GABAC (August 2017), op cit, p. 24.

The first point to note is that there is no universally agreed definition of the term ‘consumer’, although a number of statutes, both criminal and civil, attempt to define it for their own purposes. A consumer can be defined as a private individual acting otherwise than in a course of a business²¹. Another definition of the consumer is that consumers are those who act outside their profession, trade, business for private purposes²².

The law on consumer protection of 2011 defines a consumer as any person who uses products to meet his own needs and those of his dependents rather than to resell process or use them within the context of his profession, or any person enjoying the services provided²³.

First, in relation to any goods, a consumer means any person who might wish to be supplied with the goods for his own private use or consumption;

secondly, in relation to any services or facilities, a consumer means any person who might wish to be provided with the services or facilities otherwise than for the purposes of any business of his; and

thirdly, in relation to any accommodation, a consumer means any person who might wish to occupy the accommodation otherwise than for the purposes of any business of his.

Consumer as ‘a natural person who, in making a contract to which these Regulations apply, is acting for purposes which are outside his business’.

These definitions suggest that the consumer is an individual acting in a private capacity. A further paradigm of consumer protection statutes is that the defendant must act in the course of a trade or business. Indeed, it is possible to develop a much wider concept of the consumer than has traditionally been envisaged. A private individual who receives services from a non-commercial state authority, such as the user of National Health Service facilities or even the recipient of state benefit, might be aptly described as a consumer. As

²¹ KINGA HELEN KIMAH (2016), “Mobile telecommunication operator and the protection of consumer in Cameroon”, Master thesis, Faculty of Law and Political Sciences, University of Dschang, who cited MARTIN Elizabeth (2003), A Dictionary of Law, 5^th Edition, Oxford University Press, website: www.oxfordreference.com., p. 110.

²² Another definition of the consumer is that consumers is under the Guideline 3 of the UNGCP which sets out a conventional definition while recognizing the need for flexibility: “the term ‘consumer’ generally refers to a natural person, regardless of nationality, acting primarily for personal, family or household purposes, while recognizing that Member States may adopt differing definitions to address specific domestic needs.” See also the definition of consumer by EU Consumer Rights Directive (effective June 2014) in Article 2.1. ²³ Law n° 2011/012 of May 06, 2011, Framework on consumer protection in Cameroon.

Kennedy has stated, ‘consumerism is just as concerned with the supply of services as with goods. The consumer merely becomes the client, or patient, or whatever rather than the shopper²⁴. The Molony committee on the consumer protection defines the consumer as one who purchases goods for private use or consumption. This definition includes anyone who consumes goods or services at the end of the chain of production²⁵. Customers are thus the end users who credit and debit mobile money accounts across the network of distributors, and are able to carry out mobile money transactions. In MoMopay – terms & conditions in UGANDA, “Customer” means a Mobile Money user who uses the MTN Mobile Money System to make Payments or perform Payments to the Merchant and “Customers” shall be construed accordingly; and therefore “Customer Mobile Money Account” means the Mobile Money account operated by the Customer whose access is through the Mobile Money menu on the Customer’s mobile phone and through which the Customer may effect Payment instructions to the Merchant.

• ELECTRONIC MONEY INSTITUTION

The Regulation n° 01/11-CEMAC/UMAC/CM of September 18, 2011, setting the conditions to exercise the activity of e – money issuer, and the roles of the regulatory authorities in his Article 1 (1) (f) makes reference to an “electronic money institution²⁶” which is defined as a legal person that has been granted authorization to issue e-money. Credit institutions, as well as other financial and non-financial institutions, may issue e- money²⁷. In today‘s digitally advanced era, mobile network operator (MNOs) hold a significant part in a payment systems mechanism in that they no longer act solely as providers of telecommunication services but also as providers and operators of mobile payment system (“m-payment”).

²⁴ Peter CARTWRIGHT, Consumer Protection and the Criminal Law: Law, Theory, and Policy in the UK, Cambridge University Press.

²⁵ NZALIE Joseph EBI (2014-2015), “Lecture notes on the Law of consumer protection”, p.2, FLPS,

University of Dschang, (unpublished) cited by KINGA Helen KIMAH (2016), op cit, p. 14.

²⁶ An e-money institution is a supplier of the financial product ‘electronic money’. An e-money institution is not a bank and make its business is to receive funds and issue e-money in exchange (e.g. as a balance on an electronic purse). An important criterion is that the electronic money can be used to make payments to parties others than the issuer.

²⁷ Cf. the Directive 2009/110/EC of the European Parliament and Council of September 16, 2009 in his Article 2.

The BEAC has regulated mobile money by authorising a partnership between banks, the only parties permitted to issue e-money and mobile telephone operators to make the service accessible to their customers.

The use of mobile money involves a number of stakeholders:

• THE BANK, which keeps a deposit equal to all of the virtual funds in circulation on the mobile money The partner bank manages an equivalent sum of money to the total amount circulating in mobile money accounts. Banks do not always have their own platform and are responsible for and guarantees the issuance of e-money28.
• THE MOBILE TELEPHONE OPERATOR29, which is responsible for developing the mobile money network, providing SIM cards to customers, and generally managing the mobile money platform;
• THE MOBILE MONEY AGENT, who obtains virtual money by depositing the equivalent in physical money with the bank;
• THE RETAILER who receives mobile money payments from customers;

The regulator does not have real-time access to the platforms. Nonetheless, the platforms are certified, which ensures reliable account management from the regulator’s viewpoint. However, banks have real-time access to the information on the platforms. Mobile telephone companies manage the transaction platform, including the virtual money³⁰.

²⁸ A number of countries have issued enabling regulation, and in others, financial sector authorities have allowed non-bank providers to operate within an enabling monitoring framework (covering prudential, reporting, and market conduct requirements). These countries include Bolivia, Burundi, Democratic Republic of Congo, Fiji, Kenya, Madagascar, Malawi, Malaysia, Morocco, Namibia, Paraguay, Peru, the Philippines, Rwanda, Somaliland, Sri Lanka, Tanzania, Tonga, Uganda, Zambia and Zimbabwe, the eight countries of the West African Economic and Monetary Union (WAEMU), and others. Cf. Simone DI CASTRI (February 2013), Mobile Money: Enabling regulatory solutions GSMA.

²⁹ Mobile Money (mobile phones): which is relatively recent (the first authorization granted in 2011); and there exist a partnership between banks and mobile network operators.

³⁰ There are a number of reasons why MNOs are particularly well suited to mobile money services:

• MNOs have a number of assets they can leverage to offer mobile money services. In addition to their experience with airtime distribution, the SIM card and data channel on customer handsets give users and third parties an interactive interface at a very low cost. An important intangible asset is the brand recognition and confidence that MNOs have established among customers in many
• MNOs bring a number of skills that are both central to their core business and necessary for mobile money, including expertise in mass marketing and building and managing a broad distribution

Distributors receive the money created and distribute it. They make deposits in the guarantee fund in order to make mobile money available.

Table 1: Mobile Network Operators and their partner Banks SOURCE: BEAC

• STATEMENT OF THE PROBLEM

The general rule in the framework law on consumer protection is that every consumer has the right to safe and good quality of service³¹. Also, according to the principle of equity, consumers have the right to fair, non-discriminatory treatment by suppliers of technology, goods and services. The worry of this work is to know if the legal framework governing electronic money institutions adequately protects the consumer of mobile money service.

• RESEARCH HYPOTHESIS

The regulation of mobile money institutions for the purpose of consumer satisfaction is inadequate.

• RESEARCH QUESTION

Does the legal framework provide a real protection for consumers vis à vis of mobile money operators?

• MNOs use mobile money to cross-sell new services to customers they already serve (their own subscribers) and to compete for customers on other networks. They are able to generate some unique forms of indirect revenue from mobile money, which should make it easier for them to launch and sustain These include savings from airtime distribution, reduced churn, and increased share of wallet for voice and SMS. Ibid.

³¹ The law n° 2011/012 of May 06, 2011, framework on consumer protection in Cameroon, section 3.

The main question of this study is to know if the rights of consumers of mobile money services in Cameroon are promoted and protected by the existing law.

• OBJECTIVES OF THE STUDY

This study intended to:

• identify the problems of customers of mobile money
• Investigate the causes of the problems facing by customers of mobile money
• Another concern is to know how these challenges can be

The findings, evaluations and recommendations from the study are useful to the Cameroonian telecommunications and financial regulatory authorities. It is also useful to financial institutions, especially mobile companies and banks which offer Mobile Money Services, as it gives a clear picture about the risks and barriers in mobile financial services. Therefore, it has a contribution in decision making as well the area of policy and regulatory framework.