channels methodology: overview of feasibility study findings

Channels Methodology: Overview of Feasibility Study Findings

Use this template to summarize activities completed in the feasibility study phase of potential new channel deployment or channel enhancement, to present results and provide recommendations (for inputs, refer to: Draft Project Charter, Guidelines for Internal/External Analysis, and Template for High-Level Business Case)

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Vision for Channels Strategy in [MFI]

[“vision statement”]

E.g. “Use technology enabled channels to support bank expansion (geographic and customer numbers) in a manner that is both cost

efficient for the bank and convenient for the customer.”

04/09/2018 2 Commercial in Confidence | © Accion International

Deliverable: [Project Name and Objective(s)]

[Place, date of presentation]


Introduction: [MFI] Studied How [Describe Project Goal] Can Contribute to Achieving [XXX] Business Objectives

• [MFI] has multiple business objectives for [YYYY] which include (samples given,

substitute as needed):

• increasing client outreach

• increasing savings mobilization

• Improving customer experience

• improving productivity

• improving operational efficiency

• [MFI] aims to [restate goal] to reach these objectives and therefore, launched a Feasibility Study in order to (samples given, substitute as needed):

• determine market demand, options and best possible solutions that meet [MFI’s] objectives and clients needs: convenient to access, trust-worthy, affordable, impactful and efficient.

• ensure that [new channel] is complementary with [MFI’s] currently available channels: [list]


Outlook: Based on External and Internal Analysis, [MFI] Defined the Best Route for Implementation

• The Feasibility Study commenced in [month] and concluded in [month]. It comprised the following activities (samples given, substitute as needed):

– Analysis of public and [MFI’s] documentation, and regulation

– Conducted focus groups with existing and potential clients in [list locations]

– Strategy sessions with [MFI’s] management and staff

– Business and technical Interviews with potential partners

• The expected outputs are (samples given, substitute as needed):

– Evaluating external environment considerations (regulation/infrastructure/competition) that could affect [MFI’s] business plans and project success

– Providing a better understanding of the existing consumer demand and offerings (solutions, companies, partnerships, consortiums, technologies), limitations, risks and current usage

– Assessing [MFI’s] internal capacity to finance, pilot, launch and operate [new channel]

– Helping [MFI] to make an informed decision on when and how to implement [new channel]


Main Findings From External Analysis: [Summarize main

findings]


• Provide a detailed overview with bullet points of main findings based on External Analysis (refer to that document) of market conditions, competition, regulation, etc.

Lessons Learned From Relevant Activities Conducted (focus groups,

surveys, etc.): [Summarize main lessons learned]

• Status – Provide detailed bullet points on

activities concluded

• Results – Provide detailed bullet points on

findings

– Categorize observations to highlight general trends along with any outliers


• Lessons Learned – Provide detailed bullet points

describing lessons learned

– Develop analysis and recommendations based on customer insights

Recommended Approach Based on Findings: [Summarize strategic recommendations]

• Provide a detailed overview with bullet points of main recommendations and underlying rationale with evidence to support them.


Channels Strategy: [Summarize main objectives of overall strategy and

purpose of each channel]


Cash In Assist for others

Loan disbursement Cash Out, Payment & Transfer

[MFI] will complement existing channels (e.g. branch, ATM) with (e.g. mobile banking, agents using mobile phones (OTC)) to provide access to an extended set of services including airtime recharge, bill and merchant payments, and transfers [samples given, substitute as needed].

Payment & Transfer

Branch ATM Field Officers Agents Client

OTC Assist for others

Implementation Options Based on Requirements, Effort, And Level of Control [Summarize Assessment & Decision]


• Option 1 has been chosen because it opens perspectives for [MFI] to use the service provider’s already existing solutions, marketing efforts and agents, and /or complement with its own staff agents.

• Option 2 has been discarded because: • It would require a licence (unpredictable and time consuming)

• Current mobile payment operators (even the most powerful banks) have had a hard time to put in place this solution with [insert statistics on status of current deployments of other market players]

Option 1:

Use existing Service

Provider

Option 2: Develop its

own mobile / agent

banking

Requirements Implementation

Effort Control

Medium Medium Low to

medium

High High High

Depends on the relationship (partnership or just provider)

[Adjust sample provided below to reflect specific results of Internal & External Analysis (refer to those documents for inputs)]

Potential Partners Reviewed


[Conduct market scan and list potential partners, based on achieved level of client activity and likelihood to meet [MFI] expectations (samples given, substitute as needed)]

Potential partners

Service provider Already partner of [competitor banks]

Shareholder of [MFI]

Already partner of [international money transfer providers, etc.]

Why (sample reasons)

Active with agriculture value chain and in 8 other countries

Solution provider Leader in payment processing Current provider of [MFI’s] [cards, etc.]

41%

15%

11%

7%

6%

5%

4%

3%

2%

6%

0% 10% 20% 30% 40% 50%

service provider 1

service provider 2

service provider 3

other

other

other

other

other

other

other

% Registered clients, per service provider [samples given, input actual market data]:

Registered

Service provider Present in [region]

B2B Service provider

Short List of Potential Partners: Assessment Based on Questionnaires and Interviews Resulted in a Short List


[Summarize parameters assessed and rank potential partners according to suitability]

Potential partner Selling Points Parameters assessed (samples given,

substitute as needed):

• Interest / Credibility to serve [MFI’s] focus

areas and segments

• Market reputation

• Technical solution and support services

• Flexibility (rapid decision making and IT development to support [MFI’s] needs)

• Agent network strength

• Openness to co-branded commercial efforts

Business Case Components

• The following slides provide sections to detail drivers of cost savings and revenue generation, respectively, based on inputs to High-Level Business Case template (refer to that document). Next is a summary of estimated costs, followed by a calculation of net benefits.

Cost Savings: [List, Describe, and Quantify Main Drivers Based on High-Level

Business Case Developed]


•Reduced opportunity cost of servicing customers for simple transactions.

Reduce branch

congestion

•Fewer trips by customers to the branches means reduced strain on the branch staff and resources, which frees them up for higher value transactions.

Increase Transaction

Revenue

•Increasing the number of self-service channels decreases the branch office resources required

Improve Operational Efficiency

Expected Cost Savings Year 1 Year 2 Average number of transactions saved per year at a branch per customer 6 12 Cost of branch service per transaction

600 600

Average savings per user per annum

3,600 7,200

Savings due to Agent Network 36,000,000 180,000,000

Savings due to m-banking channels 63,000,000 270,000,000

Total Savings* 99,000,000 450,000,000

*The cost saved can be estimated, roughly, as follows: the average cost to serve a customer in a branch is between $3 and $4. For simplicity, we can assume 1 branch visit per active (agent and/or mobile) customer per month is saved due to access to the alternative channels.

[Graphics are for illustration only; update based on High-Level Business Case template (refer to that document) completed with inputs specific to MFI]

Revenue Drivers: [List and Describe Main Drivers Based on High-Level

Business Case Developed]


•Due to accessibility of account and flexibility of payments, customers will be able to make more frequent transactions (deposits/ withdrawals/ transfers/ bill payment)

Increase Customer Activity

•When performing transactions at Agents, the customer pays a Commission (motivated by the economy made on transportation and the time to travel to the Branch, e.g. proximity & comfort)

Increase Transaction Revenue

•Clients will leave more money in account: (1) deposit will be made easier by efficient officers & agents, (2) withdrawal can be done at anytime through ATMs & agents and (3) important VAS (airtime, payments & transfers) can be done 24/7 through own phone

Increase Savings Mobilization

•By increasing the number of self-service channels, the workload per Field Officer decreases proportionally

Improve Operational Efficiency


Revenue Forecasts: [Quantify Based on High-Level Business Case

Developed]


24,983

72,920

112,782

156,533

205,162

(100,000)

(50,000)

-

50,000

100,000

150,000

200,000

250,000

2014 2015 2016 2017 2018

Tho

usa

nd

s N

GN

Commissions Paid to Partners

Income from Accrued Deposits

Customers Transactions

Field Officers Transactions

Agent Transactions

ATM Transactions

Net Revenue

Profit & Loss 2014 2015 2016 2017 2018

Gross Revenue K NGN 26,012 90,977 142,827 201,354 285,014

Fees & Commissions K NGN 26,012 90,977 123,920 163,272 232,725

Monthly Fee on A/C K NGN 13,464 35,154 44,827 53,616 61,781

ATM Transactions K NGN 2,584 9,195 17,505 30,185 55,344

Agent Transactions K NGN 811 22,908 33,663 44,831 68,930

Field Officers Transactions K NGN 9,009 21,933 23,949 27,399 30,185

Customers Transactions K NGN 144 1,786 3,976 7,241 16,485

Commissions Paid to Partners K NGN (1,030) (18,057) (30,045) (44,821) (79,852)

Income from Accrued Deposits K NGN - - 18,906 38,082 52,289

Net Revenue K NGN 24,983 72,920 112,782 156,533 205,162

[Graphics are for illustration only (sample assumes revenue driven by commissions on transactions & interest on accrued deposits) – replace with inputs specific to MFI]

Costs Structure: Capital Expenditures [early estimates]


The CapEx include [list approximate costs,

sample categories given, substitute as needed]:

• Equipment for Agents

– Signage (Branding) @ $

– Card readers to connect to their phones @

• Equipment for Field Officers

– Mobile Phones @

• IT Equipment for Regional Staff

– PC & Accessories @ p.u.

• IT Equipment for Interconnection with Technical Provider

– Server @

– VPN Link @

– Router @

• Software Development for Interconnection with Technical Provider

• Planning, monitoring and evaluation @

• Bridge: @

• Integration costs: @

• IT project manager: @

• Agent management system: @

• Partner monitoring: @

• TOTAL Technical Capex: @

• Partner IT costs: @

Amortization must also be calculated.

CapEx 2014 2015 2016 2017 2018

Equipment for Agents/ Field Officers 1 860 1 107 918 3 525 4 158

IT Equipment & Software development 39 619 200 100 700 600

Depreciation & Amortization 10 370 14 044 14 432 4 936 2 759

Total CapEx 41 479 1 307 1 018 4 225 4 758

Costs Structure: Operational Expenditures [early estimates]

The OpEx include [list approximate costs,

sample categories given, substitute as needed]:

• Commissions paid for Transactions (ATM, Agent, Field Officers, Customers) @ $

• Human Resources Cost

– Salaries (for Agent Banking dedicated HR) @

– Recruitment (staff @ / agents @)

– Training (staff @ / agents @)

• Marketing & Promotion

– Launching Campaign @

– Annual Promotion @

– Customer related expenses (Cards + Packaging) @ per customer


• Travelling & Communication

– Monitoring & Travel @ / Agent/ month

– Communications for A-reps and Field Officers @ / Ind./ month

– Subscription fee for devices @/device/year

• Other OpEx

– IT Annual Maintenance Fee @

– VPN Connectivity: @

– Integration bridge annual costs: @

– Agent management system: @

OpEx 2014 2015 2016 2017 2018

Commission Paid to Partners 1 030 18 057 30 045 44 821 79 852

Human Resources 17 358 23 371 27 888 35 643 54 714

Marketing & Promotion 24 275 21 793 22 893 24 236 27 258

Travelling & Communication 1 515 10 546 17 390 26 440 47 696

Other OpEx 6 338 6 877 7 461 8 095 8 784

Total OpEX 50 516 80 643 105 677 139 235 218 304

High-Level Business Case: Net Benefit


• The project is

expected to turn

positive by QQ YYYY

• The investment shall

be recovered

(payback period) by

QQ YYYY


Agency Banking Services Year 1 Year 2

Net Bank revenues from agency banking services (A) (3,491,400) (22,587,600)

Mobile Banking (self-service) Year 1 Year 2

Transaction Revenues from Self-Serve Customers (B) 6,473,880 22,345,200

Interest Earned

… from agents 9,750 69,300

… from additional float due to liabilities -

-

Total interest earned (C) 9,750 69,300

Costs

Agent network technology cost (D) (10,250,000) (1,485,000)

Agent network costs (E) (8,145,000) (5,953,333)

Net benefit (A+B+C-D-E) (15,402,770) (7,611,433)

Savings (F) 99,000,000 450,000,000

Net benefit including savings (A+B+C-D-E+F) 83,597,230 442,388,567

Roadmap Based on Findings: [Summarize Recommended Sequence

of Project Activities Going Forward]


Product & Services

Brand

Q1 - YYYY Q2 - YYYY Q3 - YYYY Q4 - YYYY

Distribution

Customer Service

Q1 – YYYY2

Other

Q1 - YYYY

Offers

Project Areas

• [Adjust project areas and timing as needed]

Next Steps


• Provide a detailed list of concrete actions to take, assign responsibilities and decide on timeline.

Activity Person Responsible (List who else needs to be: Accountable, Consulted, Informed)

Date Started Date Completed Status

channels methodology: overview of feasibility study findings

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