Mobile 2 Mobile Banking

Nov 7, 2013 AlejandraAneeqMichaelRimpei

Key Terms1. Unbanked 2. Financial inclusion3. Branchless Banking4. Remittance5. Mobile banking6. Adoption7. DFID (Bilateral aid agency of UK)8. Microfinance9. E-Wallet10. Over-the-Counter (OTC)

Agenda Key Concepts Mobile banking Case Study: M-Pesa Case Study: EasyPaisa Guest: Tughral – Regional Mgr. North

Pakistan (EasyPaisa) Innovation in development

Key Concepts Unbanked: population that does not access formal

and/or semi-formal banking services Financial Inclusion: Providing financial services to the

unbanked Remittances: Transfer of money by a foreign worker to

home country (we also use it in domestic terms) Branchless Banking: Delivery of financial services

outside conventional bank branches using agents and 3rd party intermediaries & technologies

Mobile Banking: Branchless banking through mobile phones (simplified)

Need: “Access to finance facilitates entrepreneurial activity” – Nick

Hughes (M-Pesa ideator) Large number of workers away from home (international and

domestic migrants)

Financial Inclusion

Percentage of UnbankedUnbanked

Difficulty in Cash Transfer No bank in a rural area No one has a bank account.

Bring cash by him/herself by bus High cost Ask a bus driver to carry cash High risk

Remittance

Cellphone use in KenyaMobile banking

Source – Economics of M-Pesa

US vs Developing WorldMobile banking

What is M-PESA

Mobile based money transfer and microfinancing service in Kenya & Tanzania (East Africa)

“M” is for mobile &“Pesa” is the Swahili for cash

Operated by Safaricom and owned by Vodacom

Started in 2007

Mobile banking

Kenya, a conducive environment for mobile banking Large market for domestic remittances with

high demand for transfer services High literacy levels Support of the Central Bank of Kenya High Mobile Penetration An entrepreneurial base of micro

entrepreneurs

Mobile banking

Solution: Mobile Banking Transfer money without a bank account Transfer money safely and quickly Low remittance fee – 12% lower than

banks*1

No long bus journey – reduce cost and time

*1 Branchless Banking 2010: Who’s Served? At What Price? What’s Next?, CGAP, Sep., 2010

Remittance

Bank Account

M-Pesam-money Account

Urban

Agent

Urban

Agent

LinkRuralAgent

RuralAgent

Scheme of M-Pesa

1

2

34: Buy m-money

9

7

6: Withdrawal operation

8: W

ithd

raw

cas

h

Urban M-PesaAgent

RuralM-PesaAgent

ReceiverSender

*1 M-PESA: Mobile Money for the “Unbanked” Turning Cellphones into 24-Hour Tellers In Kenya

5: Transfer m-money

Remittance

Need for Over-The-CounterSituation & Problem Neither a sender or a recipient have mobile banking account

but they want to send money.

Solution – Over-The-Counter A mobile banking agent of a sender transfers e-money by

mobile banking on behalf of the sender, charges commission. A mobile banking agent of a recipient receives e-money on

behalf of the recipient. The recipient gets money.

Benefit of Over-The-Counter Relieve of account opening requirements Eliminate technical limitations

*1 http://www.cgap.org/blog/mobile-money-otc-versus-wallets

Over-the-Counter

e-Wallet (account) vs Over-The-CounterE-Wallet OTC

Mobility

Customer retention

Company Revenue

Need ? ?

*1 http://www.cgap.org/blog/mobile-money-otc-versus-wallets

e-Wallet

M-PESA – urban to rural money transfer

http://www.economist.com/node/16319635

Remittance

Socioeconomic profile of users

Users Non-users

Users Non-users

Change

Annual Household Expenditure (USD)

3,600 2,000 2,900 1,400

Household with at least one cell phone

92% 52% 92% 39%

Unbanked 25% 75% 50% 50%

Rural Population 29% 71% 59% 41%

Urban Population 53% 47% 76% 24%

2008 2009

** Source: Jack, Willian & Suri Tavneet. Mobile Money: The economics of M-PESA

Financial Inclusion

Socioeconomic profile of users Consumption and Education Level

Early Adopters > Late Adopters > Non User Banked

Early Adopters > Late Adopters > Non User Earliest users Wealthier and most educated Over time, M-PESA is being adopted by people

of more varied socioeconomic levels

Adoption

Individual’s reasons for not using M-PESA

Reason 2008 2009Don’t own a mobile phone

28% 60%

Don’t know about it 18% 3%Don’t need it 14% 21%Don’t understand it 5% 5%

Adoption

Success Factors Built Trust by good Branding

- Investing on a national marketing launch- Aggressive advertisement on television and radio- Road shows and tents that travelled around the

country User experience

- Offering a product that is simple to use- Building an extensive channel of retail agent

Robust network- Attracting customers and stores at the same time- Creating an attractive pricing scheme for

customers and stores

Adoption

Factor in commonKenya Brazil Pakistan

Great number of unbanked people

Use of informal means to get cash, send remittances, make withdrawal, etc.

Low-income population

Many people that live on rural areas

Financial inclusion

** Source: McKay, Claudia & Pickens Marks. Branchless Banking 2010: Who’s served? At what price? What’s next?

Branchless Banking

Started in 2009 in Pakistan Telenor (Mobile operator) bought 51% of

Tameer Microfinance Bank before launch Expected to serve international remittances Over-the-counter transaction main activity

Mobile banking

Challenges for EasyPaisa: Slow adoption of mobile wallets / e-wallets E-wallets still require significant Know Your

Customer requirements which cannot be met at the 30,000 agent level

Businesses are also not accepting EasyPaisa as mode of payment

Mobile banking

Adoption Comparison KenyaM-Pesa

PakistanEasyPaisa

Wallets 13 M (Aug ’13)**

2.4 M (12%)(Aug ‘13)

Transactions a day 6,000,000 ~320,000*

Market Share 98% of all mobile banking transaction

50% of all mobile banking transaction

*State Bank of Pakistan http://www.sbp.org.pk/publications/acd/BranchlessBanking-Apr-Jun-2013.pdf**DFID Kenya Blog

Adoption