© 2009 STS

A Leading e-Payment Solution/ Service Provider

How soon can the Arab world accept mPayment?

Remittance . m/eCommerce . Topup . Bill Payment

Janti M. Abdallah, MBADivision Manager, ePayment Solutions (STS)Executive Director, PAYNET (an STS subsidiary)

© 2009 STS

Outline

• Introduction• Market landscape• Business opportunity• Involved stakeholders & their needs• Defining a mobile payment scheme• Advantages of suggested scheme• Observations & Conclusion• Q/A

© 2009 STS

Introduction

• The ever-growing number of mobile phone users is a target group that represents an enormous potential for revenue generation

• Number of Mobile Payment (MP) users worldwide is expected to increase 70% in 2009*– 43.1 million users in 2008 -> 73.4 million in

2009– Developing countries are among the most

suitable environments for MP* Source: Gartner, Inc 2009

© 2009 STS

The Market Landscape (Banks & MNOs)• Monthly ARPU of MNOs in Jordan decreased to $16.8

in 2007 (from $18.7 in 2006 and $28 in 2004) – source: Arab Advisors Group, 2008

– Prices are going down due to increased competition– Need to consider VAS that help increase ARPU & reduce

churn

• Banks can’t heavily rely on generating interest on deposits/ loans, as a consequence of global economic crisis– Banks are seeking to have other revenue streams in the

form of service fees/ transaction fees

© 2009 STS

A sample business opportunity

• GCC countries host almost an expatriate community of 12.3 million people

• Inbound remittance to Jordan officially exceeded $3.4 bn in 2007 (a 36% growth compared to 2006), mostly from GCC counrtries (source: Central Bank of Jordan, 2008)

– What could/ should our market share be?– Can we make relevant revenues after funds have been

remitted?

© 2009 STS

Research Problem

• Finding out the factors affecting the adoption of various MP schemes in Arab world countries by relevant stakeholders

• This will lead to having an answer to our question: “How soon can the Arab World accept mPayment?”

© 2009 STS

Research Population

• Providers (e.g. MNOs, Banks, third parties)

• Merchants (e.g. convenience stores, cafeterias, fast-food restaurants, e-tailers)

• Consumers (MNO subscribers)

Providers

Merchants

Consumers

© 2009 STS

Variables Affecting MP Adoption

• The following variables are suggested by academic research (For Merchants)

– Cost– Customer base– Ease of use– Reliability– Security– Value proposition

improvement

Providers

Merchants

Consumers

© 2009 STS

Variables Affecting MP Adoption

• The following variables are suggested by academic research (For Providers)

– Cost– Organizational change– Security– Standard– Revenues– Legal barriers

Providers

Merchants

Consumers

© 2009 STS

Variables Affecting MP Adoption

• The following variables are suggested by academic research (For Consumers)

– Cost– Ease of use– Usefulness– Expressiveness– Trust– Universality

Providers

Merchants

Consumers

© 2009 STS

Classification of MP (Model 1)

II

Phone-Based

Operator-Driven(Financial Institutions, MNOs)

Self-Organized(Newcomers, Intermediaries)

I

Card-Based

IVIII

Source: ONDRUS and PIGNEUR, 2006

© 2009 STS

Classification of MP (Model 2)

Small purchases inshops, kiosks andfast food restaurants

Ticketing

POS, Manned

Micro Payments

Macro Payments

Mobile content- ring- logos- information- games

Parking

Remote

RestaurantsRetail shoppingTaxi payments

Internet purchases

- physical goods- digital content/services- Prepaid cardreloads

Vending, self-service- soda- tickets- cigarettes- instant photos- launderetteGasTol

POS, Unmanned

Car wash

-- 10 €/$

Source: KREYER, POUSTTCHI and TUROWSKI, 2003

© 2009 STS

Classification of MP (Model 3)Characteristics Instances

Strategic

Payment scenarios

MC EC Stationary Merchant (Person)

Stationary Merchant (Auto)

C2C

Payment Levels

Pico-payments (≤ 10 cents)

Micro-payments (> 10 cents to $5)

Macro-payments (<

5$ to $50)

Macro payments

(< $50)

Participants

Payment Service

Provider

MNO Bank/ Financial Service Provider

Spec intermediary

Others

Receiver of Customer

Data

Payment service

provider

MNO Bank/ Financial Service Provider

Merchant No Body

Pre-registration

Needed?

Yes No

Technology Required

Text message exchange

Internet enabled

phone

Dual slot/ dual card phone

Special payment software

Operational

Basis of Payment

Token based Account based

Payment Frequency

pay per time unit Pay per product unit subscription / standing order

Deduction Time

Prepaid instant-paid post-paid

Method for Settlement

smart cards/

prepaid cards

electronic cash/

digital wallet

Direct debiting

offline payme

nt

credit card Telephone bill

Source: MALLAT, ROSSI and TUUNAINEN 2004

© 2009 STS

A suggested mPayment Program

• A dedicated third party “Program Manager” shall spearhead a regional program in alliance with 1 MNO and 1 Bank in each country– Issuing and managing m-Wallets; serving

wallet-holders and merchants)

• Rule of thumb: do not reinvent the wheel (work with others)

© 2009 STS

BankingHost

System diagram

mWallet

*12345#

USSDG/W

ePaymentGateway

ATM/ CDM

EFT POS

© 2009 STS

Accepting Deposits?

mWallet n ($10)

mWallet 3 ($50)

mWallet 2 ($15)

mWallet 1 ($10)

Account Z

Account C

Account B ($85)

Account A

vAMS @ Program Manager Core Banking System @ Partner Bank

Neither Program Manager, nor MNO should handle real cash/ funds

© 2009 STS

Supported Dr/ Cr Transaction

mWallet 1 mWallet 2

Bank Account [2,3] GSM airtime? [5]

Transfer [5]

Top-up [3,5]Goods purchase [3,4]

Cash-in [1,2] Credit/ Debit Card [3] Cash-out [1,2] Bill Payment [3,4,5]

[1] Via EFT POS terminals deployed @ post offices, exchange houses

[2] Via Bank ATMs/ CDMs

[3] Via Internet

[4] Via EFT POS terminals deployed participating merchants/ outlets

[5] Via GSM handset - USSD

© 2009 STS

Revenue Streams

•Interest on mWallet balances

•Advertising revenue (on EFT POS paper receipts & auth tokens)

Ancillary*(not borne by any)

Fees/ Transaction(Borne by merchant)

•Good purchase

•Bill payment

•Top-up

Fees/ Transaction(Borne by consumer)

•Cash-in/ Cash-out

•Balance Transfer

•Monthly subscription

* Ancillary revenues shall be used to achieve desired levels of profitability with lower transaction fees (to ensure high competitiveness)

Value for MNOs: Reduce churn and increase VAS ARPU

Value for Banks: Reach users who were previously unreachable (unbanked)

© 2009 STS

3 players = 1 provider (1+1+1 > 3)• Program manager: Issue

mWallets, acquire TXNs, set fees, sign-up merchants

• MNO: Enable user enrollment, conduct marketing/ customer care, provide access channel (USSD, SMS/ MMS, etc)

• Bank: Accept deposits, settle funds, avail channels (e.g. ATM, EFT POS)

Providers

Merchants

Consumers

© 2009 STS

mWallet Advantages

• Real-time cashless payment mechanism

• Risk free, no charge-backs

• Safe - No card/ bank account is required– Also suitable for card/account holders who do not wish to

expose their cards/ banks account numbers to merchants

• Seamless customer enrollment (Wallet ID & PIN) via USSD – prepaid & post paid– Service is immediately usable on ALL GSM devices, no

need for special software nor SIM card

© 2009 STS

Why USSD?

• Session-based• Quick• Free• Roam-able• Centrally manageable• Compatible (with all GSM handsets)• Portable (not bound to a certain GSM handset)• Doesn’t require special SIM card nor special

software• Easy to use• Secure

© 2009 STS

Advantages of suggested approach (for MNOs and Banks)

• Achieving the sought values with low investment/ organizational change

• Leveraging the focus and dedication of the third party (Program Manager)

• Being a part of a bigger regional scheme

© 2009 STS

Program Manager Business Enablers

• Investment in infrastructure (data center & software platform)

• Subject-matter expertise• Commercial/ legal status• Merchant relationships• Market exposure and regional

outreach• Focus and dedication

© 2009 STS

Observations & Conclusion

• Mobile Payment is becoming a buzz word especially for money transfer/ remittance– Big names like Visa, MasterCard, Western Union are

trying not to be left out of the competition– Some MNOs and banks are moving into circles, trying to

attack the opportunity from the right angle– TRCs/ TRAs and Central banks are keeping a closer eye

on relevant initiatives– Huge mobile payment initiatives have already failed

• The Arab World shall start accepting mPayment very soon (2009/ 2010), given that a proper scheme is chosen– Models that have succeeded in other regions might/

might not be suitable for our region

© 2009 STS

ePayment @ STS

Running National Payment platforms in Jordan, Qatar, KSA and UAE..

Contracted to process more than 15 million payment transactions a year (> $1 billion in

value)

Well positioned to undertake a leading role that will help shape a successful MP scheme

© 2009 STS

Thank You!

For more information please contact:

Janti M. Abdallah, MBADivision Manager, ePayment Solutions (STS)Executive Director, PAYNET (an STS subsidiary)

e-mail: janti@sts.com.joMob (JOR): +962 79 697 6771Mob (UAE): +971 50 1577 637