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Mobile Money Transfer Conference: Dubai 2009

            Addressing the Unbanked in Developed Markets
                 wi...
mPay Connect Consulting

      Menekse Gencer
      • 16 years in Wireless, High Tech, and Financial Services

      • Pay...
Addressing the Unbanked in Developed Markets
             with Mobile Money Transfer Services


             • Defined
   ...
Definitions


            Developed Market: 40 countries identified as “Advanced Economies” by IMF (& CIA)
             • ...
Agenda


             • Defined
             • Why care?
             • Who are they?
             • MMT: How is it differ...
Why Care?
                                                                       1. Big Market

                          ...
Why Care?
                    2. Highest Mobile Penetration Rates



       Highest
       Penetration
       Rates



   ...
Why Care?
                                      3. Need financial services

                                           Pha...
Why Care?
              4. Open to non-banks for money matters




         Source: Edgar, Dunn & Company research, August...
Agenda


             • Defined
             • Why care?
             • Who are they?
             • MMT: How is it differ...
Who are they?
             Average American vs. Unbanked American

                   Average American                    ...
Who are they?
                                  Average Unbanked European


                                              ...
Agenda


             • Defined
             • Why care?
             • Who are they?
             • MMT: How is it differ...
Considerations for MMT

                                         Network
              Regulatory                  Effect ...
How is it different?
                                                Regulatory not as much of a hurdle
      Regulatory n...
Customers to use v.s.
                                        Places to use

                          Customers to use   ...
Similar to?
                              Customer: migrant workers




Mobile Money Transfer Conference, Dubai: Oct. 28, ...
Similar to?
                        Customer: Cash-based population




    Source: Edgar, Dunn & Company research, Januar...
Similar to?
      Customer: Skews toward lower income (<50% average)




     Source: Edgar, Dunn & Company research, Janu...
Similar to?
                 Customer: Money Transfer is important

                 Remittance Senders without Bank Accou...
How is it different?
                     Customer: Adoption may be harder
                      Distinguishing between ac...
How is it different?
                              Places to use: Already exist




                                      ...
M
                  F
       Platform   I
   N      Co.
   O



                                How is it different?
     ...
M
                         F
            Platform     I
     N         Co.
     O

                                       ...
Agenda


             • Defined
             • Why care?
             • Who are they?
             • MMT: How is it differ...
Key Principles for MMT for Unbanked
                           in Developed World

                                       ...
Agenda


             • Defined
             • Why care?
             • Who are they?
             • MMT: How is it differ...
Case Study:
                       MMT for the Unbanked in the US




Mobile Money Transfer Conference, Dubai: Oct. 28, 20...
Unbanked market in the US


                                                      Banking Status

                        ...
US = #1 country in remittances sent
                                …and many are unbanked
                               ...
The poorest pay the most


                            Average fees for the Unbanked in U.S.
                            1...
But over 60% have mobile phones




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009        ©mPay Connect, Inc.
Addr...
Summary

                            1. Large opportunity

                            2. Money transfers needed (senders ...
Thank you!
                                                    Questions?




                                            ...
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Mobile Money for the Unbanked in Developed Markets

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This presentation was given by Menekse Gencer of mPay Connect at the Dubai Mobile Money Transfer Conference October 28, 2009. To learn more about mPay Connect, visit: www.mpayconnect.com

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Transcript of "Mobile Money for the Unbanked in Developed Markets"

  1. 1. Mobile Money Transfer Conference: Dubai 2009 Addressing the Unbanked in Developed Markets with Mobile Money Transfer Services IMF Menekse Gencer Mail: mgencer@mpayconnect.com MMT Conference Skype: meneks80 Dubai Company: www.mpayconnect.com October 28, 2009
  2. 2. mPay Connect Consulting Menekse Gencer • 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 • Mobile Payments SeriesTM Producer (co-hosted by Harvard & Wharton Alumni Clubs) • Linked In Group: Mobile Payments Series – mPay Connect for upcoming panel events • Wharton MBA ‘98, Harvard BA Economics ’93 For more information mgencer@mpayconnect.com www.mpayconnect.com www.twitter.com/mpayconnect Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 2 mgencer@mpayconnect.com with Mobile Money Transfer Services
  3. 3. Addressing the Unbanked in Developed Markets with Mobile Money Transfer Services • Defined • Why care? • Who are they and why are they unbanked? • MMT: How is it different than and similar to emerging markets? • Key principles to consider • Case study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 3 mgencer@mpayconnect.com with Mobile Money Transfer Services
  4. 4. Definitions Developed Market: 40 countries identified as “Advanced Economies” by IMF (& CIA) • Australia • Netherlands • Canada • Ireland • San Marino[20] • Finland • * Andorra • Germany • Spain • Iceland • Portugal • United Kingdom • Japan • Faroe Islands • Malta • Belgium • Norway • Taiwan • Denmark • Slovakia • Monaco • South Korea • Hong Kong • Switzerland • Czech Republic • Italy • France • Bermuda • Austria • New Zealand • Cyprus • Israel • Singapore • Luxembourg • Holy See • Greece • Sweden • Ireland • San Marino[20] • United States • Slovenia • Liechtenstein Unbanked: no checking or savings account with a financial institution (Edgar, Dunn) Under-banked: have a checking or savings account with a financial institution, but they are still heavy users of non-bank financial products (e.g., check cashers) (Edgar, Dunn) *The CIA has a modified version of an old version of the IMF's list of Advanced Economies. The CIA notes that the IMF's Advanced Economies list "would presumably also cover"[15] some smaller countries. Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 4 mgencer@mpayconnect.com with Mobile Money Transfer Services
  5. 5. Agenda • Defined • Why care? • Who are they? • MMT: How is it different than and similar to emerging markets? • Key principles to consider • Case study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 5 mgencer@mpayconnect.com with Mobile Money Transfer Services
  6. 6. Why Care? 1. Big Market EU (25)= 116 mm** US = 70mm to 111mm* Source: Ages 18 and over. Unbanked and Underbanked. * Edgar Dunn & CFSI, ** EU 2008 Financial Exclusion Study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 6 mgencer@mpayconnect.com with Mobile Money Transfer Services
  7. 7. Why Care? 2. Highest Mobile Penetration Rates Highest Penetration Rates In US, 65% of unbanked have a mobile phone Source: CFSI Source: ITU Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 7 mgencer@mpayconnect.com with Mobile Money Transfer Services
  8. 8. Why Care? 3. Need financial services Phases of Financial Services for (Unbanked) Migrant Workers 1. Initial 2. Savings & 3. Stable 4. Settlement Transfer Settlement Consolidation •Hand-to-Mouth •Accrue savings •Accrue savings •Manage finances (such as •Cash checks •Remit •Accrue credit retirements savings) to build •Receive money generations in new country Source: EU 2008 Financial Services Exclusion Study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 8 mgencer@mpayconnect.com with Mobile Money Transfer Services
  9. 9. Why Care? 4. Open to non-banks for money matters Source: Edgar, Dunn & Company research, August 2007. Data based on U.S. previously banked Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 9 mgencer@mpayconnect.com with Mobile Money Transfer Services
  10. 10. Agenda • Defined • Why care? • Who are they? • MMT: How is it different than and similar to emerging markets? • Key principles to consider • Case study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 10 mgencer@mpayconnect.com with Mobile Money Transfer Services
  11. 11. Who are they? Average American vs. Unbanked American Average American Unbanked American • Credit / Debit = 56% • Cash = 75% • Most = 5.4 credit cards in wallet • Most = no credit card • Average = $55k / yr • Average = $25K / yr • Less likely to remit • Share financial resources • Older • Skews young • Substantial credit history • No credit history • 87% non-immigrant • Majority are ethnic • Family in LatAm (Hispanic sub-segment) • Average SMS & Low WAP • High SMS & WAP • Fixed Line phones • No fixed line phone • PCs at home • No PC at home Source: Edgar Dunn Study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 11 mgencer@mpayconnect.com with Mobile Money Transfer Services
  12. 12. Who are they? Average Unbanked European Unbanked European • Lower income / Unemployed • Skews young • Single Parent • Migrant workers Source: EU 2008 Financial Services Exclusion Study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 12 mgencer@mpayconnect.com with Mobile Money Transfer Services
  13. 13. Agenda • Defined • Why care? • Who are they? • MMT: How is it different than and similar to emerging markets? • Key principles to consider • Case study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 13 mgencer@mpayconnect.com with Mobile Money Transfer Services
  14. 14. Considerations for MMT 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 ©mPay Connect, Inc. MNO? Platform Co.? Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 14 mgencer@mpayconnect.com
  15. 15. How is it different? Regulatory not as much of a hurdle Regulatory not as much of a hurdle 30% Mobile Domestic Money Transfers: Hurdles to growth % of Survey Respondents 25% 20% 15% 10% 5% 0% Consumer Regulatory Business Cash in / Cash Security Poor fit Ecosystem Risk Usability Agent acceptance Model Out Model with Onboarding existing banking (1) (2) Source: 2008 EDC/GSMA system in country Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 15 mgencer@mpayconnect.com with Mobile Money Transfer Services
  16. 16. Customers to use v.s. Places to use Customers to use Places to use Banked Unbanked Banked Unbanked • Value Proposition? • Commission structure? • User Interface ? • Speed of settlement? • Data service usage? • Points of presence? ©mPay Connect, Inc. Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 16 mgencer@mpayconnect.com
  17. 17. Similar to? Customer: migrant workers Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 17 mgencer@mpayconnect.com with Mobile Money Transfer Services
  18. 18. Similar to? Customer: Cash-based population Source: Edgar, Dunn & Company research, January & April 2008 (based on 347 unbanked respondents) Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 18 mgencer@mpayconnect.com with Mobile Money Transfer Services
  19. 19. Similar to? Customer: Skews toward lower income (<50% average) Source: Edgar, Dunn & Company research, January & April 2008 (based on 347 unbanked respondents in US) Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 19 mgencer@mpayconnect.com with Mobile Money Transfer Services
  20. 20. Similar to? Customer: Money Transfer is important Remittance Senders without Bank Accounts Do you have a bank No account? 75 % of Mexican Mexico 75.20% remittance Honduras 70.70% senders have no Guatemala 68.80% bank account El Salvador 64.30% Columbia 53.00% Nicaragua 49.30% Cuba 41.70% Dominican Republic 38.00% Source: data reported from survey of immigrants in NY, LA, Miami commission by the author, administered by Emmanuel Sylvestre and Assoc. Partial results reported in Orozco, Manuel (2004), Distant but close: Guyanese transnational communities and their remittances from the U.S., Inter-American Dialogue, Washington DC, January 2004 Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 20 mgencer@mpayconnect.com with Mobile Money Transfer Services
  21. 21. How is it different? Customer: Adoption may be harder Distinguishing between access to finance and use Users of formal financial services No Need Voluntary Self-Exclusion Cultural / religious reasons not to use / indirect access Population Insufficient income / High risk Non-users of formal financial services Discrimination Involuntary exclusion Contractual / Informational framework No access to financial services Price / product features Access to financial services Source: World Bank Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 21 mgencer@mpayconnect.com with Mobile Money Transfer Services
  22. 22. How is it different? Places to use: Already exist Source: Aite Group 2007, United Nations, Western Union Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 22 mgencer@mpayconnect.com with Mobile Money Transfer Services
  23. 23. M F Platform I N Co. O How is it different? Less do-it-alone, more FI partnerships Who’s in the Driver’s Seat? MNO- JV or FI- Driven 3rd Party Driven • Market Power, Brand Power, & Footprint • Regulatory environment in geography • Existing infrastructure in region ©mPay Connect, Inc. Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 23 mgencer@mpayconnect.com
  24. 24. M F Platform I N Co. O How is it different? Sophisticated value chain with many players already Transaction Cost of Electronic Wallet Expense and Purchase Provider Revenue “Blended Mix” .25% Interchange to 4% Profit X% Credit & • MNO? Debit Card Recipient Operation • Platform Provider? Gets s • Agent Network for X% Cash-in and Cash-out? (Merchant or Person) Losses x% PIN Debit Transacti ACH on Expense Pre-Paid X% (Cash In) ©mPay Connect, Inc. Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 24 mgencer@mpayconnect.com
  25. 25. Agenda • Defined • Why care? • Who are they? • MMT: How is it different than and similar to emerging markets? • Key principles to consider • Case study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 25 mgencer@mpayconnect.com with Mobile Money Transfer Services
  26. 26. Key Principles for MMT for Unbanked in Developed World Principles 1. Unbanked = sum of sub-segments (may be more similar to emerging markets) 2. May have voluntary exclusion from banks, but pay a lot for services elsewhere 3. Dynamics of market = sophisticated FI infrastructure 4. Alternative competitors and partners 5. Baby steps  customer adoption Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 26 mgencer@mpayconnect.com with Mobile Money Transfer Services
  27. 27. Agenda • Defined • Why care? • Who are they? • MMT: How is it different than and similar to emerging markets? • Key principles to consider • Case study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 27 mgencer@mpayconnect.com with Mobile Money Transfer Services
  28. 28. Case Study: MMT for the Unbanked in the US Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 28 mgencer@mpayconnect.com with Mobile Money Transfer Services
  29. 29. Unbanked market in the US Banking Status Under-banked 56 Mill Banked Unbanked 111 Mill 52 Mill Source: CFSI Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 29 mgencer@mpayconnect.com with Mobile Money Transfer Services
  30. 30. US = #1 country in remittances sent …and many are unbanked (and have mobile phones) U.S. Immigrant Population and Outgoing Flows of Remittances U.S. 2006 Demographics Total in USA 34,860,000 75% Mexico 9,600,000 unbanked 13% China 1,900,000 Philippines 1,700,000 India 1,610,000 87% Vietnam 1,200,000 Cuba 1,100,000 Immigrants Source: United Nations, International Organization for Migration, US Census Source: World Bank. Orozco, Manuel (2004) Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 30 mgencer@mpayconnect.com with Mobile Money Transfer Services
  31. 31. The poorest pay the most Average fees for the Unbanked in U.S. 1. Remittance = $20 fee Domestic Money Transfer = $10 fee Prepaid cards = $4.95 reload fee Prepaid cards = $3.00 cash out 2. Check Cashers = Up to 12% of check value paid in fees 3. Non-bank locations = $2 to $5 convenience fee for bill payment 4. No bank relationship = No way to grow credit 5. No bank account = Resort to cash-in-hand as method to control finances Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 31 mgencer@mpayconnect.com with Mobile Money Transfer Services
  32. 32. But over 60% have mobile phones Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 32 mgencer@mpayconnect.com with Mobile Money Transfer Services
  33. 33. Summary 1. Large opportunity 2. Money transfers needed (senders of remittances) 3. Today’s alternatives costly and inconvenient 4. Unbanked = sum of sub-segments 5. May have voluntary exclusion from bank 6. Dynamics of market = sophisticated FI infrastructure 7. Alternative competitors and partners 8. Baby steps  customer adoption Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 33 mgencer@mpayconnect.com with Mobile Money Transfer Services
  34. 34. Thank you! Questions? mPay Connect Consulting Services Linked In Group: “Mobile Payments Series – mPay Connect” Menekse Gencer mgencer@mpayconnect.com Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 34 mgencer@mpayconnect.com with Mobile Money Transfer Services

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