Encouraging transformational m-banking in developing countries

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					Encouraging transformational
  m-banking in developing
         countries
            David Porteous
       Asobancaria Regional Seminar
                  Cartagena
             6-7 September 2007




                                      1
                                     The m-banking proposition
                               97%
                             100%
% mobile phone penetration




                                                                                         Finland


                              50%                                                       •2.6bn cell phone
                                                                                        subscribers vs. +/-1.6bn
                                                                                        bank account holders
                                                                                        globally
                                                                                        •>50% of world‘s
                                                               South Africa             population within
                                                                                        wireless coverage
                             10%
                                                 Philippines Colombia                   (2005)
                                   Kenya
                                           10%                  50%                            100%
                                                           % banked      Sources: Numbers: % Banked Honohan 2007; 2
                                                                         % m-penetration: ITU; WireIess Intelligence 4:2002,
                                                                         4:2006
                 The hype?
“Mobile phones revolutionize African banking”
                             Yahoo News, May 23 2007

―Mobile payments poised to reach critical mass in
  Singapore‖
                                         ZD Net Asia, May 22 2007


“Mobiles begin calling the shots on banking and
  payments”
                                         The Banker, 1 Feb 2007


“GSMA links with Mastercard in global pilot”
                             Mobile Payments World, February 2007

“Cell phones bring banks to the poor”
                             Business Day, South Africa, 19 March 2007




                                                                         3
             CONTENT

1. What is happening with m-payments and m-
   banking?

2. Which models are emerging?

3. Will m-payments accelerate expansion of
   access to financial services?



                                              4
 1. Developed country experience:
           M-payments
• Asia:
   • Japan: DoCoMo: Osaifu-Keitai 16m users in 2006
•Europe:
   • Fragmentation; limited use outside of micro-payments
   and in Nordic countries, Austria
• US:
   • Limited due to internet pervasiveness;
   • Now various services e.g. PayPal Mobile; Obopay
   with niche markets such as youth


                                                        5
   Developing world m-banking
            models
• Philippines
  – SmartMoney (Smart): 2000-    (2.4m)
  – G-Cash (GXI): 2004- (0.8m)
• South Africa: (total: 0.5m 2006)
  - MTN Mobile Banking: 2005-
    Wizzit: 2005-
• Kenya:
   • M-Pesa (Safaricom): 3/2007: National
   rollout; 200 000+


                                            6
     Current reality: m-payments


Users/
total
adults




         1     2     3      4


                                   7
2. Categorizing the models
A. Target clients: Who is targeted?
B. Functionality: How is it used?
C. Roles: Which party does what?
D. Business model: What drivers?
E. Technical specification: Which bearer
  channels? What security element?


                                           8
2. Categorizing the models
A. Target clients: Who is targeted?
B. Functionality: How is it used?
C. Roles: Which party does what?
D. Business model: What drivers?
E. Technical specification: Which bearer
  channels? What security element?


                                           9
              2A. Target clients
• Additive:
  • Add on to existing bank channels for banked
    customers

• Transformational:
  • Client is not required to have a bank account; and
  • Marketing intentionally targets unbanked.
  Features likely to appeal to unbanked:
     • Safe & trusted
     • Transaction-related fees & no min. balance
     • Ability to transfer P2P
                                                         10
     Target group: ‗unbanked‘ with
8% adults use an
                 mobile
ATM card; 21%
have transferred
    airtime
          Kenya     1 2.4   2.4             12.2

                                                              % of adults;
                                                              numbers are in m

              SA    4.2         11.5      4.8      10.4



                   0%     20%      40%    60%      80%    100%

                   Banked--No cell       Banked--cell        Source: FinScope 2006;
                                                             FinAccess 2006
                   Unbanked-cell         Unbanked--no cell


                                                                               11
                  2C. Roles

                       Who is legally responsible for the
Legal liability
                                   deposit?
                       Whose brand is most prominently
Brand
                            displayed to clients?

Access points           Where can cash be accessed?

                       Is offering linked to users of one
One or any carriers?
                               MNO in particular?




                                                            12
             Model 1: Bank driven

Legal liability   Bank


Brand             Bank

Access
                  Bank
points
One or any
                  Any
carriers?

Examples          Many




                                    13
    Model 2: Joint venture (NB/B)
Legal
               Bank          Bank
liability

                          Joint—non-
Brand          Bank
                             bank

Access                    Bank + new
               Bank
points                      agents
One or any
                Any        One/ Any
carriers?
                           MTN Mobile
Examples     Many banks
                          Money, Wizzit



                                          14
      Model 3: Payment platform

Legal                              Multiple
             Bank     Bank
liability                           banks

                    Joint—non-
Brand        Bank                Shared/NB
                       bank

Access              Bank + new   Bank + new
             Bank
points                agents       agents
One or any
             Any     One/any     One or any
carriers?
                    MTN Mobile   SMART Money;
Examples     Many
                      Money      PayPal mobile


                                                 15
       Model 4: Non-bank driven
Legal                                       Multiple
               Bank          Bank                         Non Bank
liability                                   banks

                          Joint—non-
Brand          Bank                       Shared/NB       Non Bank
                             bank

Access                    Bank + new      Bank + new
               Bank                                        Agents
points                      agents          agents
One or any
                Any        One/any        One or any        One
carriers?
                          MTN Mobile      SMART Money;     G Cash;
Examples     Many banks
                          Money, Wizzit   PayPal mobile    MPesa



                                                                     16
                        Summary
                                              3. M-
              1. Bank                                     4. Non-bank
                             2. JV          payment
               driven                                        driven
                                            platform
Legal                                       Multiple
               Bank          Bank                          Non Bank
liability                                   banks

                          Joint—non-
Brand          Bank                       Shared/NB        Non Bank
                             bank

Access                    Bank + new      Bank + new
               Bank                                         Agents
points                      agents          agents
One or any
                Any        One/any        One or any         One
carriers?
                          MTN Mobile      SMART Money;      G Cash;
Examples     Many banks
                          Money, Wizzit   PayPal mobile     MPesa
                                                                      17
  3. Which model/s are most
      transformational?
This will depend on:
  • Which regulation allows
  • Customer proposition  adoption
    • Trust  security perception?
    • Convenience  simplicity; pervasiveness
    • Price
  • Business model
    • All need scale
    • What additional services can be sold?


                                                18
                                  Fee comparison:
                Send $100 P2P (cash to cash)

       Service                    Cost/trans-    Cost (nearest        Differ-
                                    action        competitor)         ence
GCASH--intl                        Approx. $2   $4.80 (MTO courier)   -58%
( 03/07)



MPESA--                              Av. $2      $6.50 (Postapay)     -69%
domestic
(domestic; 03/07)

WIZZIT--                             $2.50*     $4.40 (SB Mzansi      -43%
domestic                                         Money Transfer)
(cash deposit, transferred, ATM
not on us w/d; banked Wizzit
only)




                                                                             19
        Business model drivers
• Banks
  – New customer adoption on lower cost platform
       • Fee revenue from transactions & float
  – But concerns about cannibalizing customers
   Primarily defensive niche channel strategy
• Telcos    (e.g. 16 GSMA MMT members)
  –   At first: facilitate sale of pre-paid airtime
  –   Increase ARPU through VAS on data
  –   Decrease churn on pre-paid voice customers
  –   Leverage airtime distribution channels
                                                      20
             Conclusions
  Additive models of m-banking are fast
emerging in many developing countries, in
 line with growth of e-payment channels

 However, the extent to which new models
  will have a transformational impact on
access will depend on the regulatory space
and business incentives to harness existing
   and create new distribution channels
                                            22
            Conclusion: M-banking
              Which trajectory?
                                    Enabled




No of
consumers
                                Not enabled




                                              23

				
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