• Save
Mobile Money Overview
Upcoming SlideShare
Loading in...5
×

Like this? Share it with your network

Share

Mobile Money Overview

  • 317 views
Uploaded on

- Overview of the Mobile Money Ecosystem ...

- Overview of the Mobile Money Ecosystem
( What? Who? By Whom? How? )
- The Mobile Money landscape in 2013
- Conclusion and recommendation

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
No Downloads

Views

Total Views
317
On Slideshare
274
From Embeds
43
Number of Embeds
3

Actions

Shares
Downloads
0
Comments
0
Likes
1

Embeds 43

http://localhost 37
http://www.slideee.com 4
https://twitter.com 2

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. BUSINESS CASE: MOBILE MONEY Author: Gabriele Farei Date: 20 March 2014 1/26
  • 2. Overview of the presentation 1.  Overview of the Mobile Money Ecosystem •  What? Mobile Money definition in different markets •  Who? Market characteristics •  By Whom? The Mobile Money ecosystem •  How? Overview of the technologies used to perform transactions •  What can be the role of the client in the ecosystem? 2.  The Mobile Money landscape in 2013 •  Access, Usage & Product offering statistics •  MM Revenues statistics •  Trends and outlook 3.  Conclusion and recommendation 2 ¤ Ÿ Ÿ Ÿ ¤ Ÿ Ÿ Ÿ ¤ Ÿ Ÿ Ÿ 20.03.14
  • 3. Mobile Money in different markets What? Mobile Money •  Electronic money with attributes related to mobility and portability, replicating attributes of traditional money (Liquidity, Acceptability, Anonymity ) Although the concept of Mobile Money stay the same it can take different intrinsic meaning and the strategic position depending on the market: 3 ¤ Ÿ Ÿ Developed world Developing world Mobile Money is one of the alternative channels Characteristics: •  Using disruptive smartphone technologies •  Strategic position of Mobile Money: a convenient alternative to obtain financial services (incentives are needed: ex. Rewards ) Mobile Money can represent the only channel to get financial services for unbanked: Characteristics: •  Using ubiquitous technologies, as mobile phone GSM networks •  Deliver financial services where they are not accessible 20.03.14 Mobile Money
  • 4. Mobile Money in different markets What? Mobile Money demand in different markets 4 ITU-T  Technology  Watch MNO-centric   models   tend   to   be   more   prevalent   in   developing   economies,   where   financial   service infrastructure  is  not  well  developed.  Bank-centric  models  are  more  likely  to  be  prevalent  in  countries  where there  is  a  good  level  of  infrastructure  development  and  regulation  for  such  transactions.  In  the  collaboration phase,  mobile  money  must  integrate  the  financial  infrastructure.  The  partnership  business  model  is  likely  to be  prevalent  in  such  countries,  which  are  mostly  developed  economies. Figure  3:   Mobile  Money  Demand  Curve Source:  World  Bank:  Maximizing  Mobile.  Report  on  Information  and  Communications  for  2012.   http://www.worldbank.org/ict/ic4d2012. In  the  MNO-centric  model,  the  role  of  the  bank/financial  institution  is  limited  in  the  payment  delivery  and settlement.  In  developing  countries,  MNOs  dominate  the  mobile  money  transfer  market  and  handle  the customer  relationship  (e.g.  M-PESA).  MNOs  provide  an  alternative  infrastructure  for  financial  services  (see Figure  5).  MNOs  also  provide  a  network  of  agents  for  payment  and  settlement  functions.  MNO-led  model have   been   successful   in   developing   countries   because   they   have   been   able   to   reach   large   numbers   o Source: World Bank: Maximizing Mobile. Report on Information and Communications for 2012. http://www.worldbank.org/ict/ic4d2012 Different shape of the Mobile Money demand in different market states. How to read it: Black curve: demand for low cost, low-speed, infrequent transactions (left Y-axis) Greet curve: demand for high- speed, high-volume transactions (right Y-axis) ¤ Ÿ Ÿ 20.03.14 Mobile Money
  • 5. Developing Markets Who? Focus: Why developing markets? 5 1.  High penetration of mobile •  Population is comfortable with mobile technology •  Low fixed line penetration •  Mobile operator is trusted brand 2.  Limited access to financial services •  Low banking penetration •  Financial services mainly available in urban areas •  Limited credit and debit facilities available to mass 3.  Migrant population •  High need to transfer money from urban to rural areas 4.  Poor infrastructure/security •  Limited public transport •  Traditional money transfer services are costly •  Security concerns associated with carrying or transporting cash ¤ Ÿ Ÿ 20.03.14 Mobile Money
  • 6. Developing Markets Who? Mobile users vs. Access to financial services •  Low-moderate income markets: less likely to have home internet access •  BUT, Mobile phone viewed as a necessity and trust and dependence to mobile network operators is already very high in those markets. 6 •  2.7 billion people worldwide have no access to financial services (Asia, Africa, Latin America and Middle- east = 90% of unbanked people) •  1 billion of these people have a mobile phone The elephant in the room Mobile phone are used among people without access to financial services (in Billion) Sources:SNCR Symposium – Prof. Igrid Sturgis 4.451 1 1.7 2.7 Access to financial services No access to financial services Mobile phone No Mobile phone ¤ Ÿ Ÿ 20.03.14 Mobile Money
  • 7. Actors in the ecosystem 7 By Whom? Defining and understanding the actors in MM Definition Expectations Mobile Network Operators (MNO) •  Can act as intermediaries or providers of financial services. •  These services may or may not be linked directly to a bank account. •  Potential to add value to existing services •  Increase customer loyalty •  New revenue channels •  Increase average revenue per user •  Reduce airtime distribution cost Bank •  A bank can be the provider of financial services or just an intermediary for some financials services offered by the MNOs. •  Branding and customer loyalty •  New customers •  Ownership or co-ownership of the new payment application •  Secure and trusted payment service •  Anti-money laundering requirements •  Integration/use of existing infrastructure and payment methods Distribution: Agents and Agent network •  Physicals point in the network •  Facilitate the important cash-in and cash-out transactions by converting physical money to eMoney and vice-versa (OTC Transactions). •  They also perform registration of users. •  Earns commission on transactions •  New revenue streams (for already existing businesses) •  Increase traffic and sales Subscribers •  Mobile phone owner that through the agent network subscribe to the service and potentially buy eMoney. •  Reduced risk of carrying cash •  Minimal learning curve •  Low or zero additional cost of usage •  Security of transactions •  Person-to-person transactions •  Able to send and receive money ¤ Ÿ Ÿ 20.03.14 Mobile Money
  • 8. Example: P2P Transaction 8 Provider: MNO / Bank Partner Bank/ MNO Agent 1 Subscriber 1 Subscriber 2 Agent 2 Subscriber 1 Agent 1 Subscriber 1 Subscriber 2 Agent 1 Agent 2 Step 1: The provider partner with a Bank or a MNO to offer the service, additionally the provider selects agents for the MM network Step 2: Subscriber 1 register for the service Step 3: Subscriber 1 converts cash to eMoney with Agent 1 (Cash-in) - OTC Step 4: Subscriber 1 can now perform a transaction to Subscriber 2 – Via MNO Step 5: Subscriber 2 receives the message from Subscriber 1 and can perform a Cash- out at Agent 2 - OTC ¤ Ÿ Ÿ 20.03.14 Mobile Money
  • 9. Technologies enabling Mobile Money 9 How? Technology in all pockets 1.  USSD (Unstructured Supplementary Service Data) •  A protocol that is used by GSM cellphones to communicate with the MNO systems and servers. It is available on all cellphones and is commonly used for balance enquiries or for airtime top- ups. An example command is *101# 2.  STK: SIM Toolkit •  Menu that resides on the SIM card within the phone that users can access directly from the handset. When in use, it communicates with the MNO systems and servers generally using SMS. •  Requires SIM Swap 3.  Others 1.  APP/Mobile Internet - WAP (Wireless Application Protocol) •  Need a smartphone and a good data connection 2.  NFC •  Uses an internal CHIP to activate the money transfer to other NFC enable devices •  Need a last generation smartphone as well as an hardware enabled counterpart ¤ Ÿ Ÿ 20.03.14 Mobile Money
  • 10. What is the role of a Bank in the MM Ecosystem? 10 Client X in the MM Ecosystem Different business models have emerged, depending on regulatory regime, culture, and population size: Bank have sole control on the accounts offered to individuals which can be managed through other channels such as mobile phones. Banks offer accounts to individuals through non-bank (MNO) agents and/or technological platforms online. Banks issue e- money which is purchased from the bank and redistributed by non banks to customers. Non-bank issues e-money and keeps equivalent asset value in pooled accounts in regulated bank. Bank-centric model MNO-centric model Source: CGAP: Nonbank E-Money Issuers: Regulatory Approaches to Protecting Customer Funds. CGAP Focus note No. 63, July 2010, http://www.cgap.org/sites/default/files/CGAP-Focus-Note-Nonbank-E-Money-Issuers- Regulatory-Approaches-to-Protecting-Customer-Funds-Jul-2010.pdf ¤ Ÿ Ÿ This model has seen slow uptake because of low perceived value proposition vis-à-vis traditional payment services and its limited ability to reach the unbanked. Examples: CAIXA (Brazil), Barclays, Xac Bank (Mongolia). In this model, the role of the bank/financial institution, if any, is limited in the payment delivery and settlement. Examples: Safaricom and M-PESA (Appendix 2), GCash. 20.03.14 Mobile Money
  • 11. What is the role of a Bank in the MM Ecosystem? 11 The contenders in the Mobile Money era are many: •  Mobile Carriers (MNO) •  Technology/Internet firms (Google, Facebook, Apple, Paypal,…) •  Retailers (Starbucks, Amazon,…) •  Credit cards processors •  Other Banks New contenders, new challenges ¤ Ÿ Ÿ 20.03.14 Mobile Money
  • 12. Overview of the market statistics 12 Source: Report of GSMA – Mobile Money for the Unbanked State of the industry 2013 (June) Global Adoption Survey of Mobile Financial Services is an annual survey conducted by MMU which captures quantitative information about the performance of mobile financial services. 2013: 110 respondents from 56 countries.1 Ÿ ¤ Ÿ GSM services (Global System for Mobile Communication) •  Standard collection of applications and features available to mobile phone subscribers all over the world. •  The common standard makes it possible to use the same phones with different companies' services, or even roam into different countries. •  GSM is the world's most dominant mobile phone standard. GSMA Mobile for Development A pool of initiatives bringing together mobile operator members, the wider mobile industry and the development community to drive commercial mobile services for underserved people in emerging markets. MMU Programme : GSMA Mobile Money for the Unbanked (MMU) A project to accelerate the availability of mobile money services to the unbanked or under banked population in developing countries Objectives of the program: •  Accelerate to scale •  Extend the digital ecosystem •  Create enabling regulation •  Build industry intelligence What is GSM, GSMA, and MMU? 1 Sample Informations: http://www.gsma.com/mobilefordevelopment/wp-content/ uploads/2014/02/MMU_Adoption-Survey_Participants-2013.png 20.03.14 Mobile Money
  • 13. Mobile Money Access 13 •  The distribution channel has significantly increased in 2013. •  In developing markets the Agents network is 6 times more present then the Banking network. •  We observe also a large increase in the average Agent network for each service provider. 2013 2012 Agents 886’000 252’510 AVG Network of Agents 2’000 1’000 2013 2012 Countries 84 75 Services 219 179 •  Growth of 20% in both countries and services (it is the first decrease in growth acceleration since the 2001) •  28.4 agent outlets per 100,000 adults globally. (6x) •  4.6 banks per 100,000 adults. •  Only 52% of the Agents where active in 2013 Ÿ ¤ Ÿ Source: Report of GSMA MMU – State of the Industry 2013 Distribution channel Services providers 20.03.14 Mobile Money
  • 14. Mobile Money Access 14 PART 1 - MOBILE MONEY 250 200 150 100 50 0 2001 2002 2003 2004 5221 6 7 11 16 38 64 116 179 219 2005 2006 2007 2008 2009 2010 2011 2012 2013 FIGURE 1 NUMBER OF LIVE MOBILE MONEY SERVICES FOR THE UNBANKED BY REGION (2001-2013; YEAR END) EUROPE AND CENTRAL ASIA MIDDLE EAST AND NORTH AFRICA EAST ASIA AND PACIFIC LATIN AMERICA AND CARIBBEAN SOUTH ASIA SUB-SAHARAN AFRICA TABLE 2 PERCENTAGES OF LIVE AND PLANNED MOBILE MONEY SERVICES FOR THE UNBANKED BY REGION (DECEMBER 2013) Number of live mobile money services for the unbanked by region (2001-2013; year end) Rest of the World APAC Europe & Central Asia Latin America & Caribbean Middle east & North Africa South Asia Sub- Saharan Africa June 2011   9.3% 6.5% 0.4% 1.9% 5.6% 3.5% 72.8% June 2012   9.4% 5.6% 0.3% 3.6% 11.1% 5.9% 64.2% June 2013   8.4% 3.2% 0.8% 4.2% 29.2% 6.7% 47.5% The market share is heavily concentrated in Sub-Saharan Africa and Middle east & North Africa. Ÿ ¤ Ÿ Source: Report of GSMA MMU – State of the Industry 2013 20.03.14 Mobile Money
  • 15. Mobile Money Usage 15 Number of registered customer accounts and active customer accounts by region by region (June 2013) Ÿ ¤ Ÿ Source: Report of GSMA MMU – State of the Industry 2013 Globally, only 29.9% of registered accounts were active in June 2013 and only one third of respondents had more than 100,000 active accounts. 20.03.14 Mobile Money
  • 16. Mobile Money Usage 16 Number of active (90 days) and registered mobile money accounts globally (June 2013) 19 already have more than 1 million active users, seven of which passed this threshold between June 2012 and June 2013 (see figures 6 and 7). However, despite the growth, activating customers remains a challenge for a large number of services. Globally, only 29.9% of registered accounts were active in June 2013 and only one third of respondents had more than 100,000 active accounts. A customer’s journey from awareness of mobile money, to registration, and finally to regular usage, is quite complex. Even when customers are aware of the service, they may not necessarily understand how they would benefit from using it. Using mobile money represents a significant behavioural change in economies where almost all payment transactions are conducted in cash (read the text box for examples of customer activation strategies). money accounts FIGURE 6 NUMBER OF ACTIVE (90 DAYS) AND REGISTERED MOBILE MONEY ACCOUNTS GLOBALLY (JUNE 2013) Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 250 203 61 200 150 100 50 0 REGISTERED MOBILE MONEY ACCOUNTS ACTIVE MOBILE MONEY ACCOUNTS (90 DAYS) MILLIONS 12. Population data from the IMF Financial Access Survey Database, available at http://fas.imf.org and regions defined by World Bank, available at http://www.worldbank.org/en/country 13. 37m active users on a 30-day basis “A customer’s journey from awareness of mobile money, to registration, and finally to regular usage, is quite complex. “ Ÿ ¤ Ÿ Source: Report of GSMA MMU – State of the Industry 2013 20.03.14 Mobile Money
  • 17. Mobile Money Product Offering 17 33 With the growing willingness of the different entities within the financial ecosystem to interconnect, and innovations like Ripple being developed in parallel, we seem to at the beginning of a long path towards healthy global interconnected systems. P2P TRANSFER BILL PAYM ENT M ERCHANT PAYM ENT BULK PAYM ENT INTERNATIO NAL REM ITTANCE CASH-IN CASH-O UT FIGURE 8 PRODUCT OFFERING (JUNE 2013) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1.0% 2.1% 4.1% 5.3% 94.9% 92.6% DO NOT OFFER THE PRODUCT BUT ARE PLANNING TO LAUNCH IT NEXT YEAR OFFER THE PRODUCT DO NOT OFFER THE PRODUCT AND NOT PLANNING TO LAUNCH IT NEXT YEAR AIRTIM E TO P-UP 0.0% 4.1% 95.9% 2.1% 2.1% 95.8% 2.1% 11.7% 86.2% 10.2% 28.5% 61.3% 6.0% 28.5% 65.5% 11.0% 45.2% 43.8% * This text box is based on a blog post by Claire Pénicaud (MMU) that was published on MMU website on November 7, 2013 Product offering (June 2013) Ÿ ¤ Ÿ Source: Report of GSMA MMU – State of the Industry 2013 20.03.14 Mobile Money
  • 18. Mobile Money Product Offering 18 Product mix (June 2013) E INDUSTRY 2013 17.8% 4.0% 1.8% 1.6% 0.0% 74.8% FIGURE 9 GLOBAL PRODUCT MIX BY VOLUME (JUNE 2013) INTERNATIONAL REMITTANCE BULK PAYMENT MERCHANT PAYMENT BILL PAYMENT P2P TRANSFER AIRTIME TOP-UP FIGURE 10 74.8% INTERNATIONAL REMITTANCE INTERNATIONAL REMITTANCE BULK PAYMENT MERCHANT PAYMENT MERCHANT PAYMENT BILL PAYMENT P2P TRANSFER P2P TRANSFER AIRTIME TOP-UP 10.8% 6.7% 4.0% 0.8% 9.4% 68.3% FIGURE 10 GLOBAL PRODUCT MIX BY VALUE (JUNE 2013) INTERNATIONAL REMITTANCE BULK PAYMENT MERCHANT PAYMENT BILL PAYMENT P2P TRANSFER AIRTIME TOP-UP 10.8% 6.7% 4.0% 0.8% 9.4% 68.3% FIGURE 10 GLOBAL PRODUCT MIX BY VALUE (JUNE 2013) Volume Value Ÿ ¤ Ÿ Source: Report of GSMA MMU – State of the Industry 2013 20.03.14 Mobile Money
  • 19. Mobile Money Product Offering 19 Financial services Ÿ ¤ Ÿ Source: Report of GSMA MMU – State of the Industry 2013 Potentially more then just payments •  Mobile Insurance •  Credit •  Savings However, these additional services rely on the infrastructure created by mobile money deployments and therefore depend on the growth of mobile money to succeed. (A reality in already successful markets: Kenya) 20.03.14 Mobile Money
  • 20. Mobile Money Revenues 20 •  MM is rewarding for deployments that have reached scale (8 MM services represent the 86% revenue of the total revenue of the MM services) •  A large part of the MNOs have less than 5 % of their revenue generated by Mobile Money. •  Small compared to MNO’s total revenue but could be important for future revenue growth, strategic channel. PART 1 - MOBILE MONEY FIGURE 17 PERCENTAGE OF TOTAL REVENUES GENERATED BY MOBILE MONEY FOR MNOS (JUNE 2013) FIGURE 18 PERCENTAGE OF TOTAL REVENUES GENERATED BY MOBILE MONEY 30 31 32 60% 50% 40% 30% 20% 10% 0% LESS THAN 1% 1% TO 5% 5% TO 10% ABOVE 10% 50% 32% 7% 11% Ÿ ¤ Ÿ Source: Report of GSMA MMU – State of the Industry 2013 20.03.14 Mobile Money
  • 21. Outlook and Trends 21 •  Mobile technology are expected to be as disruptive as the Internet. •  Mobile use now exceeds PC Internet Access •  Mobile phones outnumber ATMs, cell phones operator have virtually a greater reach than banks. •  Trust in mobile devices is increasing •  In developing markets, MM has the potential to lift low- income people out of poverty. •  Financial services access is one of the key factor for economic growth, increases money circulation in the economy and creating wealth across all actors in the value chain •  National Bureau of Economic Research (2013): “the M-Pesa1 phenomenon has improved economic activity among families by making money transfer safe, easy and inexpensive” Ÿ ¤ Ÿ 1 see Appendix 1 20.03.14 Mobile Money
  • 22. Outlook and Trends 22 •  The Mobile Money ecosystem is expected to increase: 93% of the MM services in the survey said to want to increase investments in 2014, one third of them says they want to invest 50% more than 2013. •  GSM deployment tracker2 has identified 113 mobile money services that are planning to launch. APAC Europe & Central Asia Latin America & Caribbean Middle east & North Africa South Asia Sub- Saharan Africa TOT % of Live deployments   12% 1% 13% 6% 16% 52% 219 % of Planned deployments   9% 7% 19% 13% 11% 42% 113 Regional share of the live and planned deployments Ÿ ¤ Ÿ 2 http://www.mobileworldlive.com/mobile-money-tracker Source: Report of GSMA MMU – State of the Industry 2013 20.03.14 Mobile Money
  • 23. Conclusion and recommendation 23 Ÿ Ÿ ¤ •  Opportunity: As cash transactions are still the vast majority in emerging markets, Mobile Money could potentially reach a multi billion dollar industry. •  Banks are not there •  But Non-banks like MNO could be strategically positioned to dramatically expand the reach •  Potential movement from e-payments to a full service banking channel •  The key element of success of Mobile Money are: 1.  Network effect (Kenya example): the value of joining a network is directly proportional to the number of people already on it. 2.  Chicken-and-egg trap: To work, the system must attract both Agents and Subscribers. 3.  Trust: Hard trust barrier in using non-banking channels to meet their cash-in/out needs and initiating transactions through their mobile phones. Source: Scaling mobile money, Ignacio Mas, Bill & Melinda Gates Foundation 20.03.14 Mobile Money
  • 24. Conclusion and recommendation 24 Ÿ Ÿ ¤ •  Challenge and Rewards: For a bank it is critical to be part of the mobile era, but it requires flexibility as MM is changing the traditional economics of retail banking •  Mobile money turns fixed costs (banking infrastructure, staff salaries) into variable costs ( commissions through the value chain) by using an already existing infrastructure (Agent Network and MNOs) •  With MM a bank is not using float-based revenue model anymore (collecting and reinvesting deposits) but it is using an usage revenue model. 20.03.14 Mobile Money
  • 25. Appendix 1 : examples of MM M-PESA •  In 2007, Safaricom and Vodafone launched a mobile money transfer service called M-PESA. •  Five years later M-PESA provides services to 15 million Kenyans (more than a third of the country’s population) •  Serves as a conduit for a fifth of the country's GDP. M-PESA9 now processes more transactions domestically within Kenya than Western Union does globally and provides mobile banking facilities to more than 70 per cent of the country’s adult population. •  However, the service cannot function without the presence of the formal financial sector. Bank branches are a vital part of the cash management operation of an M-PESA agent. Moreover, the early adopters of the service in Kenya were more likely to be banked than non-users. •  The M-PESA application has also served as a platform for innovations in other areas such as insurance, savings and banking in Kenya. 25 Source: The Mobile Money Revolution – ITU-T Techonology Watch Report 2013 20.03.14 Mobile Money
  • 26. Appendix 2 : Interesting readings 2620.03.14 •  Scaling mobile money - Ignacio Mas •  GSMA Mobile Money for the Unbanked - Fionán McGrath •  Mobile Banking and Mobile Money in Asia and Africa - Vairavan Ramanathan •  Mobile Money - Igrid Sturgis •  Developing Mobile Money Ecosystems - Beth Jenkins •  State of the Industry 2013 - GSMA MMU •  The Mobile Money Revolution 2013 - ITU-T Technology Watch Report Mobile Money