The First Session of the Committee on Development Information Science and Technology CODIST I Innovation ICT applications for economic growth – by j73na6ddmd7f

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									The First Session of the Committee on Development
       Information, Science and Technology
                      CODIST-I




         Innovation ICT applications
     for economic growth – m-Banking,

        Dr. Simon Batchelor, Gamos
The First Session of the Committee on Development
       Information, Science and Technology
                    CODIST-I

                   Introduction
    The role of mobile phones for banking and
     transactions came out of a 6 country study on ICT
     trade and economic growth commissioned by ECA
     under the epol-net initiative.
    M-Banking was flagged in some countries as a way
     for the poor to use ICTs in their economic
     endeavours.
    Given the explosion of mobile telephony across the
     continent, this became an important area of study
     for the ECA, particularly with respect to getting a
     sense of the kind of policy requirements needed to
     sustain this phenomenan.
    The “about to be published” report focuses on the
     emergence, status and the future of m-commerce –
     including mobile phone enabled banking. It draws
     together three country studies of Senegal, Kenya
     and South Africa.
The First Session of the Committee on Development
       Information, Science and Technology
                       CODIST-I


Contribution of ICTs to pro-poor economic growth
     (OECD DAC Good Practice Guidelines on ICT and Economic Growth
The First Session of the Committee on Development
       Information, Science and Technology
                     CODIST-I


      A mobile phone based banking solution would cover at
       least 60% of those currently without bank accounts.
       Such a service would be used for storing cash securely
       and for making money transfers – people currently carry
       cash, use the post office services, and make use of
       airtime transfers. 15 to 20% rural households receive
       money from members living elsewhere
      An international remittances service would benefit a
       relatively small number of people but would bring in
       significant economic support. 15 to 20%% urban
       households receive international remittances. Africa
       receives $40 BILLION a year in international
       remittances.
      “Banking the unbanked: With 11 million Kenyans having
       access to a mobile phone, and only approximately 4.5
       million banked, the new solution offers an avenue to
       push forward the access frontier in Kenya. This effort
       will bring more Kenyans into banking solutions.” at
       launch of Equity Mobile Banking Sept 2008, Prof..
       Njuguna Ndung’’u Governor Central Bank of Kenya
  The First Session of the Committee on Development
         Information, Science and Technology
                               CODIST-I

SWOT analysis for the convergence of the Telecommunication and
                        Financial sectors

                           Mobile Phone environment Financial Services Environment

      Strength/     High penetration rates for mobile Good growth of alternative accounts
      Opportunity                          ownership (indicating demand for simplified low
                                                      cost accounts)
                          Even higher for mobile use High awareness of alternative
                                                      accounts (implying thirst to know
                     Uptake of new phones (allowing about alternative accounts)
                                 for upgraded Sims) Large proportion still unbanked
                                                      Growth of savings clubs (peer to peer
                                                      transactions)

      Weakness/               General high price for Crowded technology (ATM, POS,
      Threat                       communication additive mobile gateways, etc)
                                                     Crowded market place (Many banks,
                                                     established and resistant to new
                                                     players)
                                                     Banks introducing innovations –
                                                     confusing to public)
The First Session of the Committee on Development
       Information, Science and Technology
                                 CODIST-I


                           So what is happening
   Name of proposition       What the case                     Key Features
                             illustrates
   COMMERCIAL BANK OF        A conservative, additive          Eases customer access to account information, but
   AFRICA (Kenya)            approach.                         not to financial transactions
   Sonatel Multimedia        Offering bank alerts as part of   An MNO offers an information service independent
   (Senegal)                 an information service            of any one bank.
   Equity Bank LTD (Kenya)   An innovative bank exploring      Offers financial transactions by phone, to existing
                             frontiers                         customers
   MTN (South Africa)        A Mobile Network operator         Offers financial transactions, encourages non bank
                             enters the convergence            account holders to register, branded by the MNO,
                             space.                            and with reduced registration requirements
   JAMII BORA (Kenya)        A microfinance institution        Uses magnetic srip card and biometrics to
                             adds mobile phone access          decrease fraud, increase efficiency of microfinance.
                             through “Point of Sale” .          Uses GSM network to enable POS devices to
                                                               update.
   Wizzit (South Africa)     Entrepreneurs take the lead       Phone and card combination, branded
                                                               independently of a known Bank, although with Bank
                                                               backup. Agent network and marketing from
                                                               scratch.
   M-PESA (Kenya)            A Mobile Network Operator         An innovative model – phone to phone financial
                             introduces an innovative          services, using MNO agents for cash in and cash
                             transformative proposition.       out. Branded as MNO, with Trust Fund to
                                                               safeguard customer funds.
   Sokotele (Kenya)          A Mobile operator co-             Belated attempt to compete with M-Pesa by rival
                             operates with microfinance        MNO, has higher costs, and low take up.
 The First Session of the Committee on Development
        Information, Science and Technology
                      CODIST-I


But life moves rapidly when you have the right
                   solution
        Within the first month Safaricom had registered over
         20,000 M-PESA customers, well ahead of the targeted
         business plan. Within the first 8 months, 900,000
         customers had registered, 1,200 Agents had signed up
         nationwide and a cumulative KShs. 4 Billion had been
         transferred. The average amount of money sent per
         month was KShs. 41 Million by October 2007. The
         average transaction value was below KShs. 5000 (US$
         80). By July 2008, there were over 2.5 Million
         customers, over 3000 Agents and Mpesa made a deal
         with PesaPoint which manages a network of some 140
         ATMs thus moving closer to being integrated with the
         banking system.
        And by April 09 – over 6 million users! 8000 Agents!
The First Session of the Committee on Development
       Information, Science and Technology
                    CODIST-I




                                           A conservative,
                                           additive approach.
                                           A secondary
                                           survey of the 25
                                           banks in Kenya
                                           showed that four
                                           of them have
                                           introduced SMS-
                                           based services.
                                           The most
                                           common SMS-
                                           based services
                                           are balance
                                           inquiry, statement
                                           requests, and
                                           money transfer.
The First Session of the Committee on Development
       Information, Science and Technology
                          CODIST-I




   Offering bank alerts as part of an information service
The First Session of the Committee on Development
       Information, Science and Technology
                    CODIST-I




                                        An innovative bank
                                        exploring frontiers
                                        Focuses on the poor, by
                                        offering Kenya’s poor
                                        people savings accounts
                                        and microloans, has
                                        captured 50 percent of the
                                        Kenyan bank market. It
                                        now has more than 3
                                        million customers and
                                        opens 4,000 new accounts
                                        a day.

                                        But despite launching
                                        mobile banking in Sept 08
                                        makes no mention of it at
                                        Shareholders AGM in
                                        March 09?
The First Session of the Committee on Development
       Information, Science and Technology
                            CODIST-I
    A Mobile Network
    operator enters the
    convergence space.
    MTN Banking South
    Africa is a mobile
    banking joint venture
    between MTN
    (Africa’s largest
    mobile
    telecommunications
    company) and
    Standard Bank
    (Africa’s largest
    banking group), and
    offers an additive
    service.
   The website states: “The mobile banking application implemented is one of the
   most advanced in the world today, offering a full feature banking suite with many
   additional innovative offerings. The service achieved 80,000+ subscribers in its
   first year of launching.” The service now provides access to about 200,000
   subscribers.
The First Session of the Committee on Development
       Information, Science and Technology
                             CODIST-I


    A microfinance institution adds mobile                                            Jamii Bora Customers
    phone access through “Point of Sale”.
    The leading microfinance institutions in                          180000




                                                Number of customers
                                                                      160000
    Kenya have also introduced SMS-based
                                                                      140000
    services. This includes Jamii Bora, K-                            120000
    REP bank and Faulu Kenya                                          100000                                        customers
    microfinance institutions.                                         80000
                                                                       60000
    The average loan size in 2003 was Ksh                              40000
    7,209 (US$ 90). The members are                                    20000
    organized in credit groups with five                                   0
                                                                               2001 2002 2003 2004 2005 2006 2007
    members in each group. The group
    members guarantee each other’s loans                                                     Years

    and provide important moral and social
    support to each other.

    Jamii Bora owns and manages the mobile application. It has installed application
    servers at its headquarters in Nairobi. The mobile application was developed in order
    to cope with the rapid growth that made it difficult for the staff to provide acceptable
    customer service.
    The services offered currently include checking balances, mini statements, withdrawals
    and loan repayment. There has been a tremendous improvement in funds collection
    since the adoption of the technology.
The First Session of the Committee on Development
       Information, Science and Technology
                           CODIST-I


    Entrepreneurs take the lead.

    Wizzit is a startup mobile banking provider in
    South Africa that offers a transaction banking
    account accessible via mobile phone and debit
    card. The company operates as a division of
    the South African Bank of Athens (which has
    almost no branches).
    Since its launch in December 2004, Wizzit has
    acquired more than 150,000 customers.
    Wizzit bills itself as a “virtual bank” and has no
    branches of its own. Customers can use their
    mobile phone to make person-to-person
    payments, transfer money, purchase prepaid
    electricity, and buy airtime for a prepaid mobile
    phone subscription.
                             In April 09 Wizzit received funds from CGAP to expand – is
                             this good news or bad. A good market product tends to
                             expand by itself?
The First Session of the Committee on Development
       Information, Science and Technology
                    CODIST-I
The First Session of the Committee on Development
       Information, Science and Technology
                      CODIST-I




                                                    Zain has
   Zain
                                                    overcome
   announced
                                                    regulatory
   plans in Feb 09
                                                    hurdles in to
   to bring its
                                                    launch the Zap
   mobile banking
                                                    M-banking
   service Zap, to
                                                    service Kenya,
   all of its 22
                                                    and will
   operations
                                                    compete with
   across Middle
                                                    Safaricom’s M-
   East and Africa,
                                                    Pesa service
   with the initial
                                                    which has six
   programme
                                                    million
   being launched
                                                    registered
   in Kenya,
                                                    users
   Tanzania and
   Uganda.
The First Session of the Committee on Development
       Information, Science and Technology
                    CODIST-I
The First Session of the Committee on Development
       Information, Science and Technology
                    CODIST-I


            Africa ahead of the game?

     Safricom doing a quiet pilot UK Kenya
     Links being made with Western Union and GSMA
     What about elsewhere?
     Philippines the famous one – Gcash, Smart
     Brazil, the agent network
     American not that into Mobile phones – internet
     Europeans – Eastern Europe it is happening, but
      mainland Europe......
     Of course Japan and Korea both have integrated
      systems now – but additive.
The First Session of the Committee on Development
       Information, Science and Technology
                           CODIST-I


                          Where 2 nxt?

     As “always on”
      becomes
      increasingly popular
      we can move away
      from SMS.
    “Always on” will
      become broader and
      broader.
    Near Field Communication technology is a key part of the future mobile phone
       enabled payment landscape. Nokia estimate that by 2012, 30% of all
       phones will have NFC built in.
       While NFC may seem to demand new infrastructure, it has many peer to peer
         capabilities, and requires less literacy than current USSD menu based
         propositions..
The First Session of the Committee on Development
       Information, Science and Technology
                        CODIST-I


                  Regulatory issues
      Inclusion - Regulatory and policy “prompts” so that commercial
       propositions reach financial services to the poor
      Branchless Banking and Agents; tied to the above, is the need for
       agents to act on behalf of the institution to cash in and cash out.
      Customer protection – including regulating deposits, and tracking
       financial transactions
      Additional barriers, some of which relate simply to mobile
       communications
         high cost of calls, and IP and SMS services in particular;
         revenue sharing for value added services – balance in favour
          of operators tends to inhibit content development;
         legal framework (and enforcement) – need to refine laws
          related to intellectual property
The First Session of the Committee on Development
       Information, Science and Technology
                    CODIST-I

								
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