Mobile Financial Services for the Next Billion Customers - Mobile Payments Series

Mobile Payments Series TM From Afghanistan to Silicon Valley: Mobile Financial Services for the Next Billion Customers Menekse Gencer Mail: mgencer@mpayconnect.com Mobile Payments Skype: meneks80 Series Kickoff Company: www.mpayconnect.com September 3, 2009

Mobile Financial Services (MFS) 101 1. What is it? 2. What’s the opportunity? 3. What are the contributing enablers? 4. What are the complicating factors? 5. Case Study & Questions to Panel Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 2 mgencer@mpayconnect.com

mPay Connect Linked In: Mobile Payment Series – mPay Connect Menekse Gencer Background • 16 years in Wireless, High Tech, and Financial Services • PayPal Mobile: Led Business Development. Closed PP’s first mobile deal (Sprint “Send Money”) • mPay Consulting: US prepaid mobile operator, SKTelecom, Citi, Wells Fargo, EARN • Board Member of Mobile Money Africa, Conference Speaker MMT Dubai, Philippines • Wharton MBA ‘98, Harvard BA Economics ’93 • Triathlete, Bay swimmer, Local singer, Dive Master, Avid traveler For more information mgencer@mpayconnect.com www.mpayconnect.com www.twitter.com/mpayconnect Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 3 mgencer@mpayconnect.com

MFS 101 1. What is it? 2. What’s the opportunity? 3. What are the contributing enablers? 4. What are the complicating factors? 5. Case Study & Questions to Panel Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 4 mgencer@mpayconnect.com

What is: Mobile Financial Services (MFS)? Using the mobile phone as a channel to conduct financial services Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 5 mgencer@mpayconnect.com

What is: MFS? Mobile Financial Services Mobile Payments Mobile Microfinance Microfinance Mobile Banking Mobile Banking P2P C2B B2B Loans Transactional Informational • Mobile Money Transfer • Mobile online • Replace cash in • Disbursement • Mobile bill payment • Alerts • Domestic or International (e.g. eBay or ringtones) supply chain • Repayment • Brokerage • Account balance & Mobile remittances • At store • Savings history (proximity payments) • Insurance Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 6 mgencer@mpayconnect.com

Global Initiatives Banked vs. UnBanked Afghanistan Examples of live or on-going projects in Africa alone • Kenya: Safaricom launched M-Pesa in partnership with Vodafone Kenya • Kenya: Zain is re-launching ZAP, their mobile money product; Telkom is preparing the launch of Orange Money • Uganda: MTN has launched MTN Mobile Money • Uganda: Uganda Telecom is investigating mobile financial services with Redknee • Monitise has received a grant to launch mobile financial services in East Africa • DRC: Celpay (bank) launched an M-banking offering • DRC: Zain is initiating talks with the BCC and has partnered with Citibank Tanzania • Ghana: Flash me cash is a mobile banking solution that has been launched in Source: Edgar Dunn, March 2009 Ghana and Nigeria • Ivory Coast: MTN has launched their mobile money offer, Orange Money was launched as well • Nigeria: Zain, MTN, MoneyBoxAfrica are all active present Source: Edgar Dunn • Tanzania: Vodacom launched the M-Pesa product in the market Source: Amarante Consulting Intelligence Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 7 mgencer@mpayconnect.com

How does the “mobile wallet” work? Money In Money Out At Agent or Cash ATM Customer Mobile Remittance, domestic money transfer & remote topup Account (Mobile Wallet) Credit / Debit / or Mobile & Retail Purchases Prepaid Card Held by Financial Institution or Mobile Operator or 3rd Party Bank Account Alerts Mobile Bill Payment Balance History Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 8 mgencer@mpayconnect.com

Some Key Players World-Wide MNOs Platforms FIs Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 9 mgencer@mpayconnect.com

The Market Opportunity: $150 Billion in Volume by 2012 Mobile Network Operators Direct Rev.: $5 billion/yr $58b Indirect Rev.: $2.5 billion/yr Reduce Churn (no dumb pipe) Source: McKinsey, CGAP $41b $52b Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 11 mgencer@mpayconnect.com

Opportunity: Unbanked = 1 Billion people World Economic Pyramid Reach of 500 Mill Banks *>$20k/yr Reach of Mobile Operators Unbanked 2 Billion Opportunity: *$3260 to $20k/yr Today 1 Billion people today to 2012 1.7 Billion in 4 Billion 2012 *<$3260/yr or <$9/day Source: CGAP 100 countries, unbanked=50% with 40 countries unbanked=80% Source: World Resources Institute * In Volume. Source: Ovum Research (*Individual Annual Income: 2005 USD Purchasing Power Parity) Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 12 mgencer@mpayconnect.com

Contributing Enablers to MFS Investment Payments Mobile Technology Technology Customer Needs Transaction Mobile Types Adoption Cost Advantages Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 14 mgencer@mpayconnect.com

What are the complicating factors? Network Regulatory Effect Value Chain Business Environment? (customers and and Case & Ops? places to use) partnership model? What services to roll How will cash in and Costs and Revenues? out? What’s needed? cash out be Who are they? Churn Reduction? Geography? conducted? Market Share/Power? Strategic Reasons? Banked or Unbanked? Conducive toward Retail footprint? Implications toward Current behavior? MFS? Relationship with other P&Ls? Mobile Usage? How to work with customer? Org design? What UI? bank? Brand? Exec commitment? How to achieve critical Limitations of MNOs? Interoperability? mass/network effect? Agent Commissions? M F Platform I N Co. O MNO? Platform Co.? Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 16 mgencer@mpayconnect.com

MFS 101 1. What is it? 2. What’s the opportunity? 3. What are the contributing factors? 4. What are the complicating factors? 5. Case Study & Questions to Panel Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 17 mgencer@mpayconnect.com

Case Study: Kenya’s mPesa takes off like Wildfire Mobile money transfers (via SMS) mPesa money out services: – Mobile payment system built using SMS messaging – Send money (Agent) – Receive money (Agent) – Pay for things (Merchant, Bills, etc.) Registered Customers 8,000,000 7,000,000 7,000,000 6,000,000 (~50% Safaricom 5,000,000 base) 4,000,000 3,367,192 3,000,000 2,000,000 1,000,000 0 268,499 July 2007 July 2008 July 2009 $2 billion moved since launch Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 18 mgencer@mpayconnect.com

Today’s Panel Monica Brand Aiaze Mitha Camille Busette, PhD Naeem Zafar, PhD Investment Expert Implementation Expert Regulatory Expert Startup Expert Base of the Pyramid Afghanistan m-Paisa Formerly PayPal Gov. Relations Advisor, Pakistani startup Microfinance 15 MFS Deployments to central banks abroad Haas Professor Menekse Gencer, Moderator Business Development Expert mPay Connect, Consulting PayPal Mobile Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 19 mgencer@mpayconnect.com

Final Thoughts: Big Opportunity = Get Involved Bay Area World Economic Pyramid • Technology Know-How • FI and Business Expertise • Entrepreneurial Spirit 500 Mill *>$20k/yr 2 Billion *$3260 to $20k/yr Think “Mobile” 4 Billion *<$3260/yr or <$9/day Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 20 mgencer@mpayconnect.com

Panelist Presentation Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 21 mgencer@mpayconnect.com

Camille M. Busette, PhD Presented to Wharton West Series on Mobile Financial Services September 3, 2009 © Camille M. Busette, 2009 22

Regulation of mobile financial services varies significantly across jurisdictions Predictors of regulatory action • Degree of decentralization of regulatory oversight of financial services and telecommunications – U.S. FCC; Financial Services Regulators; EU –Payment Services Directive • Political power of wireless carriers vis à vis financial services sector – U.S.; Mexico; India • Presence of significant domestic political or policy initiatives which are relevant to the remote movement of money – EU- SEPA; Mexico –Anti-money Laundering; greater financial liberalization, consumer protection • Significance and profile of remittances – Philippines (GDP); Mexico (regionally, hard currency); India (counter example) • Depth of financial services sector throughout the country – Low penetration tends to favor mobile financial services; South Africa • Reach of land lines throughout the country – Kenya (TKL-2006: <1%; SafariCom; Celtel) © Camille M. Busette, 2009 23

Navigating Regulatory Environments is an ART Factors to consider • What is the profile of the regulator you are dealing with? Are they political appointees? Do they represent a particular ideological viewpoint? • How entrenched are wireless carriers; what is the competitive landscape? • How powerful is the traditional banking sector with regulators? And how is power distributed among various national regulators? • Does the regulator or government have a particular set of policy goals: i.e. liberalizing the financial sector, decreasing rural poverty, etc • How central is the country to international flows of illicit money? • What key international relationships are significant for the country –and how have they tried to use regulatory stature to influence those relationships? © Camille M. Busette, 2009 24

Naeem Zafar www.NaeemZafar.com Haas Business School at University of California Berkeley

Huge Need – Slow Deployment • Telco-led or bank-led models – Philippines: • Remittances from CA, Globe with 60% market share – Kenya: M-Paisa • Safaricom with 80% market share • Did not work in other countries 27

We Need a 3rd Option • Intermediary models when: – Three or more mobile operator – 12+ banks – Vast distances – Illiterate population • Each country is different 28

Base Case: Pakistan • Most exciting branchless banking market in world – 6th most populous country: 170M – Worst banked: 5% have bank accounts – Bets mobile penetration: 50%+ have mobile phones – 50M people have mobile phone, digitized national ID card, no bank account – Dozens of banks, 5 mobile operators – Lowest call rates in the world! 29

Enabling Payments Between Users (With or Without Bank Accounts) Make P2P Users pay bills, send payments money to others, and shop through their amaana account Shop at amaana POS merchants Users add money to their amaana account through an agent Pay bill and make purchases

Amaana: Branchless Banking • First viral service: SMS based • 200K users in 6 months – These people never used anything but cash before • New branchless banking regulations • Secured mobile operator partner • Company founded in 2006 31

Thank you! To get a copy of this presentation & to be notified of future events, join Linked In Group: “Mobile Payments Series – mPay Connect” or drop a card or email: Menekse Gencer: mgencer@mpayconnect.com www.mpayconnect.com www.twitter.com/mpayconnect Mobile Financial Services Event #2: October (@Google) hosted by Harvard Business School Tech Club Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 32 mgencer@mpayconnect.com

Mobile Financial Services for the Next Billion Customers - Mobile Payments Series

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