A Leading e-Payment Solution/ Service Provider How soon can the Arab world accept mPayment? Remittance . m/eCommerce . Topup . Bill Payment Janti M. Abdallah, MBA Division Manager, ePayment Solutions (STS) Executive Director, PAYNET (an STS subsidiary)

Outline Introduction Market landscape Business opportunity Involved stakeholders & their needs Defining a mobile payment scheme Advantages of suggested scheme Observations & Conclusion Q/A

Introduction

Market landscape

Business opportunity

Involved stakeholders & their needs

Defining a mobile payment scheme

Advantages of suggested scheme

Observations & Conclusion

Q/A

Introduction The ever-growing number of mobile phone users is a target group that represents an enormous potential for revenue generation Number of Mobile Payment (MP) users worldwide is expected to increase 70% in 2009 * 43.1 million users in 2008 -> 73.4 million in 2009 Developing countries are among the most suitable environments for MP * Source: Gartner, Inc 2009

The ever-growing number of mobile phone users is a target group that represents an enormous potential for revenue generation

Number of Mobile Payment (MP) users worldwide is expected to increase 70% in 2009 *

43.1 million users in 2008 -> 73.4 million in 2009

Developing countries are among the most suitable environments for MP

The Market Landscape (Banks & MNOs) Monthly ARPU of MNOs in Jordan decreased to $16.8 in 2007 (from $18.7 in 2006 and $28 in 2004) – source: Arab Advisors Group, 2008 Prices are going down due to increased competition Need to consider VAS that help increase ARPU & reduce churn Banks can’t heavily rely on generating interest on deposits/ loans, as a consequence of global economic crisis Banks are seeking to have other revenue streams in the form of service fees/ transaction fees

Monthly ARPU of MNOs in Jordan decreased to $16.8 in 2007 (from $18.7 in 2006 and $28 in 2004) – source: Arab Advisors Group, 2008

Prices are going down due to increased competition

Need to consider VAS that help increase ARPU & reduce churn

Banks can’t heavily rely on generating interest on deposits/ loans, as a consequence of global economic crisis

Banks are seeking to have other revenue streams in the form of service fees/ transaction fees

A sample business opportunity GCC countries host almost an expatriate community of 12.3 million people Inbound remittance to Jordan officially exceeded $3.4 bn in 2007 (a 36% growth compared to 2006), mostly from GCC counrtries (source: Central Bank of Jordan, 2008) What could/ should our market share be? Can we make relevant revenues after funds have been remitted?

GCC countries host almost an expatriate community of 12.3 million people

Inbound remittance to Jordan officially exceeded $3.4 bn in 2007 (a 36% growth compared to 2006), mostly from GCC counrtries (source: Central Bank of Jordan, 2008)

What could/ should our market share be?

Can we make relevant revenues after funds have been remitted?

Research Problem Finding out the factors affecting the adoption of various MP schemes in Arab world countries by relevant stakeholders This will lead to having an answer to our question: “How soon can the Arab World accept mPayment?”

Finding out the factors affecting the adoption of various MP schemes in Arab world countries by relevant stakeholders

This will lead to having an answer to our question: “How soon can the Arab World accept mPayment?”

Research Population Providers (e.g. MNOs, Banks, third parties) Merchants (e.g. convenience stores, cafeterias, fast-food restaurants, e-tailers) Consumers (MNO subscribers)

Providers (e.g. MNOs, Banks, third parties)

Merchants (e.g. convenience stores, cafeterias, fast-food restaurants, e-tailers)

Consumers (MNO subscribers)

Variables Affecting MP Adoption The following variables are suggested by academic research (For Merchants) Cost Customer base Ease of use Reliability Security Value proposition improvement

The following variables are suggested by academic research (For Merchants)

Cost

Customer base

Ease of use

Reliability

Security

Value proposition improvement

Variables Affecting MP Adoption The following variables are suggested by academic research (For Providers) Cost Organizational change Security Standard Revenues Legal barriers

The following variables are suggested by academic research (For Providers)

Cost

Organizational change

Security

Standard

Revenues

Legal barriers

Variables Affecting MP Adoption The following variables are suggested by academic research (For Consumers) Cost Ease of use Usefulness Expressiveness Trust Universality

The following variables are suggested by academic research (For Consumers)

Cost

Ease of use

Usefulness

Expressiveness

Trust

Universality

Classification of MP (Model 1) Source: ONDRUS and PIGNEUR, 2006

Classification of MP (Model 2) Source: KREYER, POUSTTCHI and TUROWSKI , 2003

Classification of MP (Model 3) Source: MALLAT, ROSSI and TUUNAINEN 2004 Telephone bill credit card offline payment Direct debiting electronic cash/ digital wallet smart cards/ prepaid cards Method for Settlement post-paid instant-paid Prepaid Deduction Time subscription / standing order Pay per product unit pay per time unit Payment Frequency Account based Token based Basis of Payment Operational Special payment software Dual slot/ dual card phone Internet enabled phone Text message exchange Technology Required No Yes Pre-registration Needed? No Body Merchant Bank/ Financial Service Provider MNO Payment service provider Receiver of Customer Data Others Spec intermediary Bank/ Financial Service Provider MNO Payment Service Provider Participants Macro payments (< $50) Macro-payments (< 5$ to $50) Micro-payments (> 10 cents to $5) Pico-payments (≤ 10 cents) Payment Levels C2C Stationary Merchant (Auto) Stationary Merchant (Person) EC MC Payment scenarios Strategic Instances Characteristics

A suggested mPayment Program A dedicated third party “Program Manager” shall spearhead a regional program in alliance with 1 MNO and 1 Bank in each country Issuing and managing m-Wallets; serving wallet-holders and merchants) Rule of thumb: do not reinvent the wheel (work with others)

A dedicated third party “Program Manager” shall spearhead a regional program in alliance with 1 MNO and 1 Bank in each country

Issuing and managing m-Wallets; serving wallet-holders and merchants)

Rule of thumb: do not reinvent the wheel (work with others)

System diagram Banking Host mWallet *12345# USSD G/W ePayment Gateway ATM/ CDM EFT POS

Accepting Deposits? mWallet n ($10) mWallet 3 ($50) mWallet 2 ($15) mWallet 1 ($10) Account Z Account C Account B ($85) Account A vAMS @ Program Manager Core Banking System @ Partner Bank Neither Program Manager, nor MNO should handle real cash/ funds

Supported Dr/ Cr Transaction mWallet 1 mWallet 2 [1] Via EFT POS terminals deployed @ post offices, exchange houses [2] Via Bank ATMs/ CDMs [3] Via Internet [4] Via EFT POS terminals deployed participating merchants/ outlets [5] Via GSM handset - USSD Bank Account [2,3] GSM airtime? [5] Transfer [5] Top-up [3,5] Goods purchase [3,4] Cash-in [1,2] Credit/ Debit Card [3] Cash-out [1,2] Bill Payment [3,4,5]

Revenue Streams * Ancillary revenues shall be used to achieve desired levels of profitability with lower transaction fees (to ensure high competitiveness) Value for MNOs: Reduce churn and increase VAS ARPU Value for Banks: Reach users who were previously unreachable (unbanked) Interest on mWallet balances Advertising revenue (on EFT POS paper receipts & auth tokens) Ancillary * (not borne by any) Fees/ Transaction (Borne by merchant) Good purchase Bill payment Top-up Fees/ Transaction (Borne by consumer) Cash-in/ Cash-out Balance Transfer Monthly subscription

Interest on mWallet balances

Advertising revenue (on EFT POS paper receipts & auth tokens)

Good purchase

Bill payment

Top-up

Cash-in/ Cash-out

Balance Transfer

Monthly subscription

3 players = 1 provider (1+1+1 > 3) Program manager: Issue mWallets, acquire TXNs, set fees, sign-up merchants MNO: Enable user enrollment, conduct marketing/ customer care, provide access channel (USSD, SMS/ MMS, etc) Bank: Accept deposits, settle funds, avail channels (e.g. ATM, EFT POS)

Program manager: Issue mWallets, acquire TXNs, set fees, sign-up merchants

MNO: Enable user enrollment, conduct marketing/ customer care, provide access channel (USSD, SMS/ MMS, etc)

Bank: Accept deposits, settle funds, avail channels (e.g. ATM, EFT POS)

mWallet Advantages Real-time cashless payment mechanism Risk free, no charge-backs Safe - No card/ bank account is required Also suitable for card/account holders who do not wish to expose their cards/ banks account numbers to merchants Seamless customer enrollment (Wallet ID & PIN) via USSD – prepaid & post paid Service is immediately usable on ALL GSM devices, no need for special software nor SIM card

Real-time cashless payment mechanism

Risk free, no charge-backs

Safe - No card/ bank account is required

Also suitable for card/account holders who do not wish to expose their cards/ banks account numbers to merchants

Seamless customer enrollment (Wallet ID & PIN) via USSD – prepaid & post paid

Service is immediately usable on ALL GSM devices, no need for special software nor SIM card

Why USSD? Session-based Quick Free Roam-able Centrally manageable Compatible (with all GSM handsets) Portable (not bound to a certain GSM handset) Doesn’t require special SIM card nor special software Easy to use Secure

Session-based

Quick

Free

Roam-able

Centrally manageable

Compatible (with all GSM handsets)

Portable (not bound to a certain GSM handset)

Doesn’t require special SIM card nor special software

Easy to use

Secure

Advantages of suggested approach (for MNOs and Banks) Achieving the sought values with low investment/ organizational change Leveraging the focus and dedication of the third party (Program Manager) Being a part of a bigger regional scheme

Achieving the sought values with low investment/ organizational change

Leveraging the focus and dedication of the third party (Program Manager)

Being a part of a bigger regional scheme

Program Manager Business Enablers Investment in infrastructure (data center & software platform) Subject-matter expertise Commercial/ legal status Merchant relationships Market exposure and regional outreach Focus and dedication

Investment in infrastructure (data center & software platform)

Subject-matter expertise

Commercial/ legal status

Merchant relationships

Market exposure and regional outreach

Focus and dedication

Observations & Conclusion Mobile Payment is becoming a buzz word especially for money transfer/ remittance Big names like Visa, MasterCard, Western Union are trying not to be left out of the competition Some MNOs and banks are moving into circles, trying to attack the opportunity from the right angle TRCs/ TRAs and Central banks are keeping a closer eye on relevant initiatives Huge mobile payment initiatives have already failed The Arab World shall start accepting mPayment very soon (2009/ 2010), given that a proper scheme is chosen Models that have succeeded in other regions might/ might not be suitable for our region

Mobile Payment is becoming a buzz word especially for money transfer/ remittance

Big names like Visa, MasterCard, Western Union are trying not to be left out of the competition

Some MNOs and banks are moving into circles, trying to attack the opportunity from the right angle

TRCs/ TRAs and Central banks are keeping a closer eye on relevant initiatives

Huge mobile payment initiatives have already failed

The Arab World shall start accepting mPayment very soon (2009/ 2010), given that a proper scheme is chosen

Models that have succeeded in other regions might/ might not be suitable for our region

ePayment @ STS Running National Payment platforms in Jordan, Qatar, KSA and UAE.. Contracted to process more than 15 million payment transactions a year (> $1 billion in value) Well positioned to undertake a leading role that will help shape a successful MP scheme

Thank You! For more information please contact: Janti M. Abdallah, MBA Division Manager, ePayment Solutions (STS) Executive Director, PAYNET (an STS subsidiary) e-mail: [email_address] Mob (JOR): +962 79 697 6771 Mob (UAE): +971 50 1577 637