mobile financial services - cdg

Green Giraffe · Emerging Market Telecoms Analysis · Prepaid Services & Payment Mechanisms

Michèle Scanlon, Principal [email protected]

Mobile Financial ServicesThe role of the mobile phone in emerging markets

Cape Town, 13 March 2008


Introduction to Green Giraffe

History

Focus

Service

Team

• Founded in 2005 as independent telecoms consultancy built on eight years of market coverage with leading London-based research and consultancy firm

• Single office location in Cape Town, South Africa with most projects conducted on client site or in-country.

• Extensive coverage of wireless emerging markets with particular focus on Africa and the Middle East

• Specialist knowledge of global prepaid cellular markets and payment mechanisms

• Commercial Principal has 10 years experience in strategy consulting and research

• Technical Principal has 35 years network and operational experience

• Working with a network of consultants with specialist technical or market knowledge and linguistic skills

• Business intelligence and research based on primary work with operators, vendors, regulators and other industry parties

• Consulting services focus on due diligence, product positioning, strategy compilation, project implementations, vendor selection & other advisory services


Green Giraffe Client Base

Telecom operators

Financial clients

Research & Management Consultants

Prepaid Vendors & Payment Providers

Regular Emerging Market Commentary

Regular Prepaid Market Commentary


Project References

• Commercial & financial assessment of West African CDMA regional player moving to full national mobility status in for debt & equity financing partners.

• Strategic five year vision for incumbent government-owned fixed line operator on vision, mission and wireless CDMA strategy.

• Formulation of initial management team and business plan for national CDMA licensee in East Africa.

• Undertaken projects and research on CDMA markets in Brazil, India and Indonesia

• Member of the African CDMA Forum

• Strategy & implementation of 3rd party payment service provider in West Africa for the sale of electronic prepaid airtime & electricity as well as EFT switching through POS devices.

• Assessing the viability of a mobile-based remittance service for a Middle Eastern mobile operator to leverage off lucrative remittance corridors across its operational footprint.

• Aiding a South African prepaid electronic provider create its international expansion strategy across Africa, South-East Asia and South America.

Prepaid & Payments

CDMA


Agenda

• Defining Mobile Financial Services• The Role of the MNO vs. the Bank• Challenges & Hindrances• Developments in mobile money remittances• African case studies


Mobile Transactions

Mobile Banking Mobile Transfers Mobile Payments

Peer-to-Peer Airtime Credit Transfers

Airtime Airtime Purchases from mobile wallet

Disbursement of funds (government grants; insurance policies etc.)

Transfer between own or other domestic accounts

Money 3rd party purchases

• electricity

• transport

• insurance

•……

Deposits

Account management

International Remittances

Source: Green Giraffe

Mobile Financial Services


The Role of the Bank

• Mobile can only be an extension of existing services to existing customers

• Seeking new revenue streams

• Strong on processes, committees & regulation; Often move slowly

• Often already has degree of trust in market

• Brings compliance & interoperability to rest of banking infrastructure


The Role of the MNO

• More innovative and move faster

• Mobile offers ubiquity & personal proximity

• Offers widest distribution footprint

• Brings customer base

• Seeking increased customer ‘stickiness’


Low Bank Branch & ATM penetration

0.5m bank branches vs. 1.4m ATMs vs. 3bn mobile customers globally.

Bank branches per 100,000 in the UK and USA is 20 and 30 respectively compared to 6 in South Africa, or <1 in other parts of sub-Saharan Africa.


Impact of Prepaid Mobile Services• 98% African customers are prepaid.

• Prepaid is not a customer segment, but a payment means

• Offers lessons on distribution footprint, recharge means, values & spend and customer identification.

• Have created element of trust in consumer-mobile operator relationship that operators are leveraging off for mobile banking and remittance services

• In unbanked markets, mobile operator is often the only contact point to market for financial institutions

Cash is KingCash payments dominate prepaid services in emerging markets.Ability to convert remittances into physical cash is important consideration for mobile-based remittances & agent outlets.


Airtime Distribution Channels Widest Customer Reach

11. Distribution: Accessing the CustomerDistribution systems that reach the BOP are critical for developing this market. Innovations in distribution are as critical as products and process innovations.‘Twelve Principles of Innovation for BOP Markets’ in The Fortune at the Bottom of the Pyramid by CK Prahalad.


Business Model

• No one winning formula, but increasing trend towards collaborative model

• Who owns the customer?

• How is service branded?

• Who is initiating model?

Mobile banking does not necessarily service the unbanked community.


MTN MobileMoney• Aug 2005 launch with >200k

subscribers

• Servers & hardware from Standard Bank; Everything else is MTN-independent

• Regulated as banking division of Standard Bank

• Both parties instrumental in shaping regulation

• SA ID number required to open account

• Plans to launch in Nigeria and other African markets


Hurdles to Deployment

Source: Edgar Dunn & Co, Mobile Financial Services Survey, 11 Feb 2008


What services do m-banking customers want?

1. Balance Enquiry

2. Airtime topup from m-wallet

3. Money transfer

4. Bill payment


Safaricom’s M-PESA

• Launch Mar-2007

• 1.6m reg. subs

• SIM-based closed service

• Average tx value $45 with 3.5 tx per month per user

• Most popular usage is ‘secure cash in transit’


Demographics of the African remitterBased on data from DFID-commissioned survey among different ethnic groups remittance activity in UK:

• Highest propensity to remit, but in smaller values

• Average remittance per annum of GBP 910

• 38% UK remittances sent to Africa

• Ghana & Nigeria are among top five recipients from UK based senders

• Female rather than male remitter for UK-based Africans

• 25% sample born in UK; average age 36 years

• High street agents still most widely used, followed by friends & family

• Transaction costs one hindrance to greater remittance amounts

Source: BME Remittance Survey, ICM Research, May 2006

50% reduction in transaction costs could induce remitter to send 10% more in remittances


GSMA Mobile Money Transfer Programme• Feb 2007: global announcement for mobile operator-led initiative in

partnership with financial community

• Feb 2008: acceleration programme with availability of pilot toolkit

• Aim to reduce transaction costs from 24% to ‘few percent’ for values of approx $50

• MasterCard piloting global hub to provide the financial connectivity

• Western Union developing commercial & technical specifications to connect mobile operators to Western Union’s money transfer network

• Western Union brings brand, agent network and compliance capabilities.


MoneyTextMe Project in Ghana• Mobile wallet for payment of airtime, utility bills, shopping vouchers and

plans for remittances

• Via phone or online access with credit or debit card registration (EU & USA/Canada)

• Cash payments via authorised agents (UK only at moment)

• Registered customers charged via card vs unregistered charged via premium reverse SMS

• Plans to launch to 10 other African markets

• Ghanaian President outlined strategy of mobile banking & financial services in 50th anniversary Independence speech in March 2007


Other Financial Services

• Prepaid funeral insurance

• 6 month instalments

• Deducted monthly from prepaid airtime account

• Prepaid life assurance

• sale of accidental death and permanent disablement insurance through mobile distribution channels


Concluding Comments• Mobile financial services becoming a reality

• Operators need to identify appropriate banking partner

• Provide convenience, security & trust with relevant services

• Take initiative with national regulator to develop model & help drive consumer adoption

“Mobile telephony promises to radically transform the way people use financial services in rich countries and in poor ones.”

Elizabeth Littleford, CEO C-GAP


Thank you. Any questions?

Michèle Scanlon, [email protected]

+27 72 122 6594 (mobile)+27 21 403 6348 (office)

mobile financial services - cdg

Documents