Role and potential of mobile technologies for postal financial inclusion

© UPU 2011 – Tous droits réservés
© UPU 2014 – All rights reserved
Role and potential of Mobile
technologies for Postal
Financial Inclusion
Alexandre Berthaud – «Financial Inclusion Program Manager» (DCDEV.PARFISD)

Digitize or die?

Options to digitize
• Prepaid
• Debit/Credit
• Closed circuit
• Visa/Mastercard
Cards
• Agent for an operator
• Joint-venture
• Own e-wallet
Mobile

Options to digitize

8
Mobile payments grow exponentially
Source: UNCDF, 2013

Moving to a digital, cash-light model fundamentally shifts the cost curve
1 Assuming medium balance, medium transaction volume archetype = 78 transactions/year
2 Assumes a bank agent product delivery and service model
Source: FSP Modeling, team analysis
Total cost 10.1
Other 1.3
Payment
processing
0.2
Statementing 0.9
Account
maintenance
0.9
MIS 2.0
Cash handling 4.8
Current run rate costs2
Potential
cash-light
future state
0.2
4.8
1.3
0.4
0.2
1.7
1.0
The cost of an account and transactions1
USD $, run rate costs p.a. to serve a household
vs
Source: Bill & Melinda Gates Foundation

1
Digitization dramatically reduces costs for the provider
Source: CGAP

1
1
Mobiles are having an effect not only on payments…

1
2
Stages of market development toward an inclusive
‘cash-lite’ society
Stage 1
• Basic Connectivity
• Critical mass of mobile coverage and penetration among rural
poor
Stage 2
• Digital Remote Payments
• Poor people adopt and use digital for P2P transfers and
government payments
Stage 3
• Full range of digital financial services
• Poor people adopt and use digital for savings, credit, and
insurance products
Stage 4
• Digital in-store purchases
• Poor people conduct a majority of transactions (including small
in-store purchases) digitally
Source: Bill & Melinda Gates Foundation

Mobile money and the Post

The provision of mobile financial services addresses
specific strategic issues
– For banks, it is a way to reach new customers that are currently out of
reach.
– For mobile money operators (MNOs), it is not an opportunity to reach
a new market segment. It allows to cross-sell a new service,
differentiate from competition, reduce churn and increase revenues.
– For post offices, it might be to counter a threat to your domestic
remittance service, increase foot traffic for retail sales, provide a public
service
Source: UNCDF, 2013

Float holding
License acquisition, regulatory engagement and compliance
Product and business development
Technology Agent network Marketing Customer
Care
Platform
Access to handset
Training
Liquidity
Monitoring
Branding
Communication
Front End
Back End
Value chain for MFS: what role can post offices play?
Source: mapping and effectively structuring Operator-Bank relationship to
offer mobile money for the unbanked, Neil Davidson, MMU, GSMA

Where does the Post fit in?
Strengths:
Cash in / Cash out network (rural areas)
Experience in managing agents
Cash management experience
Trust and proximity to clients
Experience in financial transactions
Support from the government
Many DOs have the required licenses
Threats:
A declining traditional market
Exponential growth of mobile money
operators
Price structure (don’t price poor out of the
service)
Weaknesses:
Lack of technological innovation
Lack of customer orientation
Weak connectivity of the postal network
Lack of resources needed to invest in
development of a mobile money service
Opportunities:
Super agent
Strategic partnerships / J.V.
Launch own mobile money service

What happened to our key advantage?

Business Models for
Mobile Postal Financial Inclusion

• Use mobile technologies to modernize domestic money orders and
connect post offices in rural areas
Business Model A : Connecting POs with Mobiles

West Africa: IFS on mobile/tablets

• The Post acts as a cash-merchant for an MNO who wants to
leverage the postal network
• Issue: low fees, high cost
Business Model B : Cash-merchant for mobile
money

• First mobile money operator in the country
(2009)
• In 2011, 49,000 transactions performed
• Available in post offices + Ecocash agents
• High level of financial exclusion
• 130 post offices (biggest network in the
country)
Burundi: ECOCASH (Partnership between Econet
and Burundi Post)

• The Post teams up with a mobile operator by bringing the network
and people’s trust
• Shared revenues
Business Model C : Partnership with one/several
Mobile Network Operator

Service launched in partnership with Tunisiana, Tunisie Telecom, and
Orange launched in 2012 for e-Dinar SMART card holders and mobile
subscribers of the partners
Tunisia: multiple partners

• The Post builds its own platform that uses MNOs only as pipelines
• Independence to develop its own products
Business Model D : Own Platform independent of
Mobile Network Operators

• The Post develops its own MNO by leveraging the network of the
Operator
• Allows to link it to Postal financial services
Business Model E :

• First DO to become an MVNO
(Poste Mobile)
• In 3 years, more than 2.2 million SIM
cards sold
• 75% of mobile clients also use their
phone for postal financial services
Poste Mobile clients can:
• Access their BancoPosta
account (postal savings)
• Pay bills
• Reload prepaid cards
• Send international remittances
(with Moneygram)
• Top up phone
Italy: Poste Mobile (MVNO)

What are the challenges?

- 1. A limiting Legal and Regulatory Framework
- 2. Finding a technical solution or partner
- 3. Finding or developing internally the skills to manage new products
- 3. Develop an agent network closer to people to compete with MMOs
- 4. Manage liquidity in the network
- 5. Fraud and Security Issues
- 6. Customer relations
- 7. Downtime
Key Challenges for Posts in the mobile sphere

- Lack of internal competencies to
manage the system
- Cannibalization of traditional money
orders by mobile product
- Inability to manage the relationship with
software and hardware providers
- High investment cost (1.8 Million USD)
- Cash management costs are high and
could not be eliminated
- Fraud by operational staff
- Competition of banks
An example: The case of Papua New Guinea

Conclusions
 Mobile money is a growing force that needs to be reckoned with
 Postal operators have to carefully consider their strategy to enter
this market
 Partnerships have to be developed: balance needs to be
established between sticking to one’s core competencies and the
expected profitability
 Coordination between telecoms/postal regulators and central
banks is fundamental to ensure growth of the service

Role and potential of mobile technologies for postal financial inclusion

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