mobile la processing hub - exec summary_iw-121008
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IBM GLOBAL SERVICES
© Copyright IBM Corporation 2007
MFI Initiative LA Processing Hub Executive briefing
Oct, 2008
Confidential to IBM
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IBM GLOBAL SERVICES
© Copyright IBM Corporation 2008CONFIDENTIAL TO IBM
$ wealth
Emerging Markets
1.7 billion mobile phone users in BRIC by 2012
Developed Markets
1 Billion Worldwide Mobile Workers by 2011
Secondary Focus:
Enterprises that serve the “top of the pyramid” are targets for business process solutions
Mobile enablement opportunities for distributed workforces and distribution system solutions (Insurance, telecom, etc.)
Real time retail supply chain optimization
Primary Focus:
Enterprises, Government, & NGO’s serve “base of the pyramid”
Micro-Finance, Micro-insurance
Manufacturing / Agriculture
Providing services such as health care, education, government
Our Alliance is primarily focused on the unique opportunities in emerging growth markets, while addressing developed markets opportunities opportunistically.
Cloud-enablement of mobile communications allows enterprises, governments, and NGOs to deliver services to employees, business partners, consumers, and citizens on any device, anywhere
1 Billion Worldwide Mobile Internet Users by 2011
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0
100
200
300
400
500
600
700
2004 2005 2006 2007 2008 2009 2010
Source: Demirguc-Kunt, Beck and Honohan, 2007, Policy Research Report on Access to Finance, World Bank
Households with at least one bank account2007
Num
ber of accounts
Supply and demand of MicrofinanceNumber of accounts, millions
Population in need of Microfinance services (# accounts) 1
Population with access to Microfinance services (# accounts) 2
83%(500+ Million) Accounts Unserved
72%(475+ Million)
Accounts Unserved
Supply
Demand
Over 3 billion people live on less than two dollars a day and only 17% of them have access to formal financial services
20-40%
40-60%
60-80%< 20%
> 80%
Notes: 1 Based on CGAP data and population growth rates from the UN Population Division2 Current and forecasted numbers based on Microcredit Summit Campaign data, 2005Assumption that 1 Account = 1 Family = 5 People
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Daily Income*
Personalized, high touch†
Low touch
US$ 500
US$ 1
Unbanked Segments
Traditional Banking
~ 2 Billion
People
~ 4 Billion
People
Private Banking
Type of Service vs. Daily Income
Global Banking Pyramid
* Log Scale
† Service includes origination, management and collection
Current model in traditional banking
Microfinance innovation + technology required to lower the cost of this high-touch model
Inappropriate microfinance
distribution model
US$ 10
Type of Service
Traditional retail banking model is inappropriate for profitable microfinance operations
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In 2006 Microfinance was selected as one of the top ideas from the Innovation Jam and now we are in the process of establishing five Microfinance Processing hubs over the next three years
Latin America Working with the World Bank and associations of MFIs to establish a 14 million account processing hub to serve the MF market of the region
Russia Working with IBM Russia as the Kremlin announced its decision to use the country’s post office network to deliver financial services to Russia’s unbanked
China Initial conversations with global and local banks to find a partner for a China processing hub
Africa Working with a CARE international to jointly establish hub to serve 10 countries in the sub-Saharan region
IndonesiaSigned an MoU with the government agency with a mandate to strengthen national microfinance sector
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The vast majority of microfinance institutions don’t have access to appropriate back-end technology
77% 76%
33% 36%
54%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
E. Eur
ope/
C. A
sia (2
6)
Latin
Americ
a (25)
SE Asia
(43)
Sub-S
ahar
an Afri
ca (4
4)
All Resp
onden
ts (1
38)
Use of Information ManagementSystems by Region
Type of Information Management System
Source: CGAP
Custom Outsourced
25%
Spreadsheet 35%
Off-the-shelf10%
Manual11%
In-house 19%
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Current back office alternatives for Microfinance Institutions limit the ability to grow and compete with larger Financial Institutions
Costs vs. Functionality
Source: Based on a sample of MFIs in LA
Functionality Spectrum
Co
st P
er A
cco
un
t P
er Y
ear
$5
$10
$15
Pen and paper,
Spreadsheet
Off-the-shelf or custom built
traditional Core Banking with high
costs and very limited support of MF requirements
Full support of MF requirements, access to international payments networks, automated
reporting, flexibility and cost efficiency of traditional
banks
$20
Majority of MFIs globally, high costs and lack of flexibility limit growth
Hub environment reaches cost
efficiencies of traditional banks
Small MFIs but still common in some markets
Goal of Processing Hub*
* Indicative price, not actual
Size of MFIsCosts per Accounts
Very Large MFIs (+250,000 accounts) $50-$60
Large MFIs (50,000 –2 50,000 accounts) $20-$30
Medium MFIs (10,000 – 50,000 accounts) $15-$25
Small MFIs (2,000-10,000 accounts) $5-$12
Very Small MFIs (less than 2,000 accounts) $2-$5
Annualized cost per account
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The Processing Hub provides an end-to-end technology solution for low-income retail banking institutions to increase productivity and business opportunities
Microfinance Processing Hub
Service Oriented Architecture
Microfinance Institutions
Underbanked/ rural population
Products and Funding
Agent/reseller operations
Core BankingFS
Ap
plic
atio
ns
Liquidity Management
Collections and Recoveries
Risk Management
Payroll
Cro
ss in
du
stry
Customer Management
Accounting
Reporting (i.e. MIX, regulatory)
ATMs Networks/ Switches
Proprietary Applications
Credit Bureaus
Remittances Networks
Payment Networks
Applications Interfaces Infrastructure Management
Performance Monitoring
Storage
Infr
astr
uct
ure
Business Recovery Services
Connectivity
DB Management
Data Center
Help Desk Levels 1, 2 and 3
National Banking Networks
Mobile Devices/ Carriers
Sec
uri
ty Firewalls
Redundancy
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The Processing Hub also helps to integrate MFIs with other key participants from across the economy to create a more efficient and vibrant financial ecosystem
IBM Processing Hub Established BanksInt’l Payment Networks
Regulators
Credit Bureaus Telcos
1. Lend funds to MFIs at commercial rates. MFI performance reports available thru the Grid.
2. Sell products through the Grid, leveraging MFIs as distribution networks
3. Banks can also use online banking software of the Grid to expand into MF activities themselves
The Grid delivers automated, accurate, and transparent regulatory reporting & compliance
IBM can negotiate cost-effective deals with payment or ATM networks, giving MFIs global payments capabilities
The Grid can read from, and provide data back to, credit bureaus. This helps end customers establish an identity and get larger and cheaper loans over time
The Grid can integrate with one or more telcos offering mobile banking, allowing customers to repay loans or transfer money on their cell phone
Microfinance Institutions
NGOs / Donors
Greater transparency from MFIs, accurate & custom reports, and electronic funds transfer
Smartcard / POS Vendors
ATM or debit cards, payment terminals, and transaction routing
Agent/reseller operations
Core BankingFS
Ap
plic
atio
ns
Liquidity Management
Collections and Recoveries
Risk Management
PayrollC
ross
ind
ust
ry
Customer Management
Accounting
Applications Infrastructure Management
Performance Monitoring
Storage
Infr
astr
uct
ure
Business Recovery Services
Connectivity
DB Management
Data Center
Sec
uri
ty
Firewalls
Redundancy
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The LA Processing Hub will be accessed through different channels to allow many-to-many interactions
MFIs (central office)The Hub End Users
Agent/reseller operations
Core BankingFS
Ap
pli
cati
on
s
Liquidity Management
Collections and Recoveries
Risk Management
Payroll
Cro
ss
ind
us
try
Customer Management
Accounting
Applications Infrastructure Management
Performance Monitoring
Storage
Infr
astr
uct
ure
Business Recovery Services
Connectivity
DB Management
Data Center
Sec
uri
ty
Firewalls
Redundancy
Smaller MFIs or Branches
VPN
VPN VPN Physical
Physical
PhysicalMobile loan
officer
MB
an
kin
g