Some thoughts and examples on success factors in implementing mobile / electronic payments services in partnerships, alliances, and joint-ventures. This includes varying views on collaboration for mobile payments. Players, financial cases and implementation. Also discussed are mobile network operators, banks, intermediaries and distribution trends.

1. Mobile Financial Services Distribution:
Partnerships, Alliances and Joint-Ventures
Symphony Global, Eaton Hotel, Hong Kong (18-19 April 2013)
Dan Armstrong (dan.armstrong@takashimobile.com)

2. Some Context
 A few thoughts on banking distribution
 A way to characterise the actors in the mobile transactions
ecosystem
 Dynamics in the shifting roles between banks, MNOs and
intermediaries
Case studies in partnership:
1. Rabo Mobiel: (Netherlands) Bank / MNO partnership to launch GSM
and financial services
2. NMB (Tanzania): Bank / MNO partnership to launch correspondent
banking
3. TRAVIK (Netherlands): Bank / MNO partnership to launch NFC
payments services
4. mBank (Philippines): New bank set up as a partnership between
banks / microfinance organisations and the SMART, leveraging
respective assets and networks
Contents

3.  “Partnership” should be joint-investment to address a
target segment or achieve direct-to-consumer/business
market goals
 “Partnership” should be risk-sharing to achieve these
direct-to-consumer/business market goals
 Pushing the notion of “Partnership” too far … ?
• Direct-to-consumer/business strategies, and other parties achieving
business success by providing services to make this happen (e.g. at
commercial rates)
• Insight, experience, business development, market research, extra support,
or “going the extra mile’ – that is why customers choose one supplier over
another. This is more differentiation of suppliers, than partnership
A personal thought on “Partnership” ..
“A partnership is an arrangement where parties agree to
cooperate to advance their mutual interests.” (Wikipedia)

4. What do we expect from a wallet?
 A place to store cash?
 A place to store payment
tokens?
 A place to store other tokens?
 A personal object?
 A private object?
 Something small enough to
be portable/mobile?
 … but … do we need a
physical object?

5. Then, what do we expect from a transaction device?
 Identification of myself, my
rights and capabilities,
memberships.
 Identification of myself, an
authentication tool for
payment.
 Secure, multi-factor
 Tamper-resistant/evident
 Personal and private
 Easy to use
 … but … do we need a
physical object?

6. Virtualisation in The Netherlands
0
50
100
150
200
250
300
350
400
450
500
1980 1985 1990 1995 2000 2005 2010
*
1
million
Contacts via
devices (e.g. web
browser/internet,
mobile phone, IVR)
Total Customer Contacts
Contact via a
bank advisor,
bank branch

7. A thought on ecosystem players …
Player: Category 2
”I have a pipe and/or network and I want to
monetise the investments I made in creating it. I
want as much to get through that pipe and the
(mobile) phones accessing it as possible.”
Player: Category 1
”I have stuff I want to do via channels. Enable
bank account control, enable payments, provide
ticketing, sell ads, credit loyalty points, etc. and I
need as many (cost effective) channels and pipes
to do it.”

8. Zooming in on Banking & Payments ..
some MNOs offer banking (pass
through) services via STK or
USSD
Agency Banking
Current Accounts
Savings Accounts
Loans E-Wallets Prepaid Airtime Wallets
Banks,
SACCOs,
MFIs
MNOs
(Remittances)
Saving Money, Loans Payments Payments Payments
financial services products “transactional’ products
Intermediaries
Traditionally Bank’s Core Operational
Space (Internet/Mobile Banking)
Traditionally MNO
Core Operational
Space (“Prepaid
Airtime Storage”)
Airtime & Mobile
Money Dealers
NFC
collaborations
Banks issuing
prepaid wallets

9. Traditional “partnerships” or agreements include ..
 Wholesale Telco Services / National Short-codes
 USSD Mobile Banking, Airtime Sales via Mobile Banking
 Extra Security for mobile banking (e.g. WAP)
 Wholesale Access / GSM Service Provider
 Business Banking & Financing
Focusing on partnerships between Banks and MNOs

10. Expanding Collaboration ..
Bank branches as “Super
Dealer’ for MNO airtime
dealers
Integration between bank
& MNO Mobile Money
systems (incl. MM Agents
as cash-in/cash-out
locations)
Bank branches providing
secure storage for MNO
airtime vouchers
Bank Branches as “Super
Agent’ for MNO MM
Agents
NMO MM Agents as
collection points for loan
repayments
MNO MM Agents as
provisioning points for
new accounts (sign-up,
booking loans, etc.)
Bank branches as Dealer
for MNO airtime
Joint-venture for (new)
financial services or NFC
??

11. Some Dynamics for Partnership
MNOs
 Major players (in most markets)
 Large networks (airtime sales
dealers, Mobile Money dealers)
 Large customer bases (although
restricted to limited product
ranges)
 Substantial marketing power
 Often well-funded
 Business model supports, at
times, short-term/opportunistic
commercial behaviour to get
market share, etc. Trust issues?
Banks
 Licenced & regulated for banking
(deposit-taking, interest, loans,
etc.)
 Branch networks
 Trust (sometimes)
 Lifestyle and multi-channel
marketing capabilities, often
substantially larger than simply
product usage
 Profitability and stability
requirements often forces
“longer term thinking”, higher-
value products like mortgages
and loans sold differently than
transactional banking services.

12. “The business interests of
MNOs might not always
aligned with those of the
bank.”
My thesis …

13. Differing Business Models?
An MNO Business Model
 Invest in assets to realise
profits from
activity/transaction-based fees -
minutes/SMS/kb/subscriptions.
 High up-front costs: GSM
licence, Radio / Transmission
Networks, Dealer Network,
Handset Subsidies
 The more usage of mobile
phones the better, often
regardless of segment,
behaviour.
A Bank Business Model
 Invest in assets to realise value-
based profits (there are
exceptions of course). Longer-
term/stable revenue from
profitable, loyal customers,
multiple accounts, etc.
 Often the most revenue comes
from high-value products:
business products, mortgages,
higher-value loans, etc.
 Key component is managing
costs over the long-term &
choosing battles in distribution
which don’t bleed.
 Higher usage of bank products
= loss, depending on the

14.  Customer-Supplier Models:
• Rabo Mobiel: (Netherlands) Bank / MNO
partnership to launch GSM and financial
services
• NMB (Tanzania): Bank / MNO partnership to
launch Correspondent/Agency banking
 Joint-Venture Models
(partnership?):
• TRAVIK (Netherlands): Bank / MNO
partnership to launch NFC payments
services
• mBank (Philippines): New bank set up as a
partnership between banks / microfinance
organisations and SMART, leveraging
respective assets and networks
A few Examples of Collaborations

15. A few Examples of Collaborations

16. Rabo Mobiel

17. Rabobank GSM MVNO
- Telecommunications Services (voice, SMS,
VAS, Prepaid/Postpaid, MKB)
- Mobile Internet Access (GPRS, UMTS,
HSDPA), Portals and Self-Care
Value-Added Bank Product
- Banking “On the Go”
- Premium Product / Combination
- Communications Channel for Local Banks,
Members and Customers
Mobile Incubator
- Product/Business Development for Mobile
Financial Services and Products
- Launch of Remote and Contactless
Payments and Partnerships
Mobile Knowledge Centre
- NFC, Consumer Behaviour & Usability
- Encryption, Mobile Business Rules
- Mobile Low-Value Payments
- Standards, Retail/Consumer Acceptance,
Security, Sustainability

18. .. but the reality in NL, so …

19. Collaboration Strengths & Weaknesses
 Not really a “collaboration” per
se, a customer-supplier
relationship
 Direct revenue (service costs,
calling, SMS, data)
 Customer
acquisition/marketing,
customer service, support,
billing – all done by MVNO
 2006-2008, Orange held a 10%
stake, so a bit of a
financial/strategic partnership
was in place
 10% Orange equity investment
in Rabo Mobiel start-up phase
MNOs (Orange, then KPN) Rabobank

20. A few Examples of Collaborations

21.  Leveraging MNO MM agents for cash-in/cash-out points
for banks
• Convenience
• Outreach
• Commission-based costs
• Cost-savings in building branch networks
• Inter-operability between systems
 Customers save time & money going to the bank
branch, queuing, etc. during work-day
 Customer can access a real bank account (vs. MM
wallet), including interest % earned, loans
Bank & MNO Partnership for Correspondent Banking

22. Rationale for using a bank account, and not a MM wallet
“I trust banks
holding my
money more than
MNOs (or others)”
“I need to use a
bank ATM”
“I want to make a
transfer/bill
payment only
available via bank
systems”

23. Example Process for Cash-in/Cash-out
Account
Holder
Account
Holder
Standard MNO
Wallet Cash-In
Transaction
(MPESA)
e.g. *150*00#
Check if it
worked?
(MPESA)
*150*00#
Transfer from
MNO Wallet to
NMB Account
(MPESA)
e.g. *150*00#
Check if it
worked?
(BANK)
*150*00#
Check if it
worked?
(MPESA)
*150*00#
Transfer from
Bank Account to
MNO Wallet
(BANK) *150*66#
Check if it
worked?
(MPESA)
*150*00#
Check if it
worked?
(BANK)
*150*00#
Standard MNO
Wallet Cash-Out
Transaction at
Agent (MPESA)
e.g. *150*00#
Check
balance?
(MPESA)
*150*00#
Deposit different confirmation
models, per MNO wallet system
(no fee)
Transfer Fee
(MNO-charged)
Transfer Fee
(NMB-charged)
Withdrawal / Cash-Out
Fee (MNO-charged)

24. Example Process for Cash-in/Cash-out
Account
Holder
Account
Holder
Standard MNO
Wallet Cash-In
Transaction
(MPESA)
e.g. *150*00#
Check if it
worked?
(MPESA)
*150*00#
Transfer from
MNO Wallet to
NMB Account
(MPESA)
e.g. *150*00#
Check if it
worked?
(MPESA)
*150*00#
Standard MNO
Wallet Cash-Out
Transaction at
Agent (MPESA)
e.g. *150*00#
Check
balance?
(MPESA)
*150*00#
Deposit different confirmation
models, per MNO wallet system
(no fee)
Transfer Fee
(MNO-charged)
Withdrawal / Cash-Out
Fee (MNO-charged)

25. Example Process for Bill Payment
Account
Holder
Deposit different confirmation
models, per MNO wallet system
(no fee)
Transfer Fee
(MNO-charged)
Transfer Fee
(NMB-charged)

26. But, why would I use a bank INSTEAD of an MM wallet?
“I trust banks
holding my
money more than
MNOs (or others)”
“I need to use a
bank ATM”
“I want to make a
transfer/bill
payment only
available via bank
systems”
“I want to earn
interest”
“I want to earn a
loan”

27. Collaboration Strengths & Weaknesses
 Leverages existing MM dealer
network
 Transaction fees (consumer, bank-
paid fees)
 Usage increases GSM traffic (usage
of existing assets, new revenues)
 Inter-operability supports payments
into MM systems
 Potential CIT / liquidity issues
 Trust accounts, float from MNOs
 No need to build physical branch
network (cost-savings, remote
locations, etc.)
 Interoperability is great for
customers
 Control of business processes, fraud,
etc.
 Potential lack of ‘customer
ownership’, up-sales capability. MM
agents in many markets vastly out-
number bank branches
 Not “own employees”, reliance on
MM network
 Number of steps/costs required for
customers to move money in & out,
verify that transfer occurred
MNOs Banks

28. TRAVIK: Proposed Joint-Venture to manage SIM-based
NFC
MNO
MNO
MNO
“Category 1
Players”
“Category 2
Players”

29. TRAVIK: The “Trusted Services Manager” Role
“Trusted
Services
Manager”
Role
MNO
MNO
MNO
“Please ensure that
APPLICATION X gets
to USER Y on MNO Z.”
“Make sure that when
there are changes of any
sort required, that can be
managed securely
and easily.”

30.  ”We will still work together, but we won’t need a joint-
venture.”
and …
 SWP NFC phones weren’t readily available yet, nor were
coming in great quantities fast enough.
 Many NL retailers had just finalised the upgrade to EMV
POS & seemed somewhat reluctant to spend more
money on NFC POS (esp. given zero NL NFC card-base)
 Normal card payments already relatively cheap
TRAVIK: So, why did it fail/is it postponed?

31. Collaboration Strengths & Weaknesses
 PR, innovation, cool factor,
payment convenience
 No differentiation from other
MNOs
 SWP SIM rental fees
 Handset cost <?>
 Mobile NFC a “nice to have” tech
right now, but are consumers
asking for it? (Hmm, I remember
something called ‘Bluetooth’)
 Unclear how MNOs will really
profit from mobile NFC in the
short term.
• No direct transaction revenues
• Does it reduce churn?
 PR, innovation, cool factor,
payment convenience
 No differentiation from other
banks
 Great tech for LVP (cards &
phones)
 Great tech for future Value-Added
Services (Loyalty, Couponing,
Social media link-ups)
 Unclear short-term direct
revenue, but clearly a cost for
banks (as well as retailers, public
transport, loyalty companies) - 10
year transition to phone-only NFC ,
if ever <?>
MNOs Banks

32. mBank (Philippines)
 With 7.107 islands in The Philippines,
distribution of financial services has been a
major problem over time
 mBank is a new, fully-licensed bank offering
loans & savings accounts, accepts deposits,
savings, repayments through SMART Money
 Beginning with SMART dealers (“known
credit entities”) & expanding from there
• Leverage SMART Money network, CIT, liquidity
management
• Independently-operating bank
• Channel for new products (savings, current accounts,
insurance)
 mBank employees are regionally-spread to
match SMART Money footprint
 USSD
• Familiar interface for all SMART customers
• Works on all phone, inexpensive

34. Collaboration Strengths & Weaknesses
 Leverages SMART Money
network, CIT, liquidity
management
 Loan capability for agents,
supports buying of SMART
Money value, airtime, stock
 Churn reduction/loyalty by
offering financial services
without requiring a bank
license
 No need to build physical
branch network
 Co-location of mBank
employees with SMART Money
management teams
 Known entities (agents) provide
substantially lower credit risk,
quick-launch capability
 Complete reliance on SMART
Money network
SMART mBank

35. Thank You!
Dan Armstrong
Takashi Mobile | Financial Services
Rapenburgerplein 81
1011 VJ Amsterdam
The Netherlands
www.takashimobile.com
dan.armstrong@takashimobile.com
+31 652 085 071
skype: dd.armstrong / gtalk: dan.armstrong