the challenge of ‘co-opetition’ and partnerships: what...
TRANSCRIPT
The challenge of ‘co-opetition’ and partnerships:
what makes them work?David Porteous
BFA
6th African Microfinance ConferenceDurban, RSA
2v1
Outline
• A tale of two partnerships and two countries
• Leading to four propositions
• Some observations on platforms and co-opetition: an evolving space
3v1
Spot the difference!
2009
2012
4v1
Comparing structures: 1
M-Kesho(2009)
Partners Safaricom Equity Bank
Market positioning #1 #1 (retail clients)
Regulated entities? Yes Yes
New brand? Yes
Risk/ revenue shared?
No
New entity setup? No
Cannibalization risk?
No Yes
5v1
Comparing structures: 2
M-Shwari (2012)
Partners Safaricom CBA
Market positioning #1 #5 (assets)
Regulated entities? Yes Yes
New brand? Yes
Risk/ revenue shared?
No?
New entity setup? No
Cannibalization risk?
No No
6v1
Comparing structures: summary
M-Kesho (2009)
M-Shwari (2012)
Partners Safaricom Equity Bank Safaricom CBA
Market positioning #1 #1 (retail clients)
#1 #5 (assets)
Regulated entities? Yes Yes Yes Yes
New brand? Yes Yes
Risk/ revenue shared?
No No?
New entity setup? No No
Cannibalization risk?
No Yes No No
7v1
What’s in it for: clients
M-Kesho (2009)
M-Shwari (2012)
Safaricom Equity Safaricom CBA
WIFM factor—clients
Weak: Additional
place to keep funds for larger
customers
Weak: Quick load to M-Pesa; but
clunky signup
Medium/ strong:
Easy signup; credit from
start
Medium: Credit added
Nobody ‘owns’ the client! Partnership is instead about defining who takes
liability for which actions and who can do what with the client
8v1
M-Kesho (2009)
M-Shwari (2012)
Safaricom Equity Safaricom CBA
WIFM—’partners’
Weak: Extra
transactions as result of larger
balances?
Weak: Depends on
attracting new non-Equity customers
Strong:Cements role
in financial eco-system
Strong: Adds to float
and adds additional revenue streams
What’s in it for: partners
9v1
‘Adjacencies’ needed to make a transactional model viable
9
ARPU--Bank
Note: Source: Estimates based on Safaricom Annual Report 2013; BFA Gafis Focus Note No.3 2012
Bank account Mobile money0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
0.8
1.46
$ p
er u
ser
p.m
.
Interest income
$0.13
Churn reduction,
commission saving
ARPU--MNO
10v1
Comparing outcomes
M-Kesho (2009)
M-Shwari (2012)
Safaricom Equity Safaricom CBA
Outcome (2013) 829,000 accounts opened; marketing stopped
1.2m in 6 months; heavy marketing underway
11v1
Haven’t we seen this before? …Country #2: South Africa
• JV created by #2 telco and bank in South Africa
• Own JV entity and platform• Launched in 2005• Extensive marketing spend—
estimated $60m• Closed down in 2011 with barely
any active clients
• JV agreement by #1 telco and #4 retail bank
• Launched in 2010• Extensive marketing spend;
2000 outlets• Due to re-launch in 2013 due
to disappointing takeup
So…it is not sufficient to have different positioning; complementarity with core business matters
12v1
Propositions: partnerships work best when…
1. The parties have complementary, not similar, positioning in their own core markets
2. There is no conflict with partners’ core business
– Or if there is, they create clear ways to address this
3. Each party has strong well defined WIFMs
13v1
And retailers want to join the financial services party…
MNOsWant VAS to
hedge against ARPU decline
RetailersWant loyalty
and information
BanksNeed low
cost distribution
to grow
14v1
Retailer #1: PEP-Hollard funeral insurance JV (RSA, 2008)
See: Finmark/ Cenfri case study (2010) http://www.cenfri.org/documents/microinsurance/2010/Update%20on%20innovation%202010/CaseStudy_Pep%20Hollard.pdfNishid Dosa, Hollard, “How to create inclusive insurance offerings using a retail channel”
15v1
Retailer #2:Walmart & Amex pre-paid card (USA, 2012)
Walmart USALargest retailer
American ExpressUpper end branded
card association
Pre-paid card (2012)• No regular fee
• Allows 4 sub-accounts • Cash in/out at stores
16v1
In new areas, stability sometimes comes through one party taking control
Retailer: setup your own bank
Mexico 2010
Bank: buy control of a
MVNOColombia 2012
MNO: buy control of a bank
Pakistan 2008
Add: Proposition 4. A clear control hierarchy is established
17v1
What about the role of 3rd parties?
Smartypig (USA)• Product & platform management
company which manages branded savings product in USA (2009) and Australia
• Insured bank account as store of value
• Internet enhanced interface:
– Savings goals in sub-wallets
– Reminders
– Social network
– Rewards
Tyme Capital (SA)• Product management co.
with agreements with PnP retailer (cash in/out) and MTN (channel); and alliance banking (SABA)
• Mobile only at present• Launched 2012
?
18v1
Platforms and co-opetition
• Traditional payment paradigm:
– Cooperate on infrastructure; compete on services
– Visa scheme example
• Dominant platforms raise new competition questions about role of platforms in service and price
– Content & platform? Apple and e-books (2013)
–With limited interchange? EC & Visa & Mastercard
19v1
Conclusions
• Partnership is a abused and misused term:
– True partnership is still rare
– “Culture” of partnering matters
• Propositions undergirding partnerships:1. The parties have complementary, not similar, positioning in
their own core markets
2. There is no conflict with partners’ core business
3. Each party has strong well defined WIFMs
4. In new markets, control by one may resolve uncertainties