Building scope and fostering inclusion  Broadening adoption and usage of new payment systems                            CL...
Contents Context       Varieties of mobile in financial services       Opportunities to accelerate development       C...
Mobile is being applied in a broad variety of ways to retail banking                                    Varieties of the M...
Mobile and related innovations provide many emerging markets with an opportunityto accelerate the cycle of financial secto...
Adoption of new mobile financial services is growing, but actual usage is lagging    123 mobile money initiatives recorded...
Contents Context Scale & Scope – what’s at stake? Approaches to broadening adoption and usage Challenges and Prospects...
Scale is important for some varieties of mobile, critical for others    Many Business models use a combination of leveragi...
Scope is important in order to encourage clients to reach the tipping point –from cash… to electronic accounts … from occa...
Broadening adoption also usually requires going beyond price competition, tocreate the spill-over effects that generate ec...
Contents Context Scope and Scale – what’s at stake? Approaches to broadening adoption and usage         Include those ...
To gain scale and boost usage, services need to recruit clients across segmentsand income groups to generate network effec...
Key to boosting usage is also to get it into the system from the start, reducing themarginal costs and effort to clients o...
Borrow but don’t beg: Leverage existing systems and networks as steppingstones to scale       Leveraging the market power...
No more “plain vanilla”: focus on the challenges that different users face, andsee how experience, process and networks ca...
One challenge to more frequent use is competition from cash at the point of sale –Adoption requires that we work both side...
Finding the right partnerships: Banks, MNOs, and Retailers need to take a soberlook at each others’ strengths and interest...
Contents Context Scope and Scale – what’s at stake? Approaches to broadening adoption and usage Challenges and Prospec...
So why is this not happening? Its’ hard work and there are many goals that cannotoften be achieved alone           Timing ...
ContactsIvan Mortimer-SchuttsEast Asia Pacific Regional Advisor for payments and retail bankingInternational Finance Corpo...
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121010_Mobile Banking & Payments for Emerging Asia Summit 2012_Building scope and fostering inclusion Broadening adoption and usage of new payment systems

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121010_Mobile Banking & Payments for Emerging Asia Summit 2012_Building scope and fostering inclusion Broadening adoption and usage of new payment systems

  1. 1. Building scope and fostering inclusion Broadening adoption and usage of new payment systems CLARIDEN Conference on Mobile Banking & Payments for Emerging Asia Bali, October 2012 Ivan Mortimer-Schutts
  2. 2. Contents Context  Varieties of mobile in financial services  Opportunities to accelerate development  Current state of use of mobile money Scope and Scale – what’s at stake? Approaches to broadening adoption and usage Challenges and Prospects 2
  3. 3. Mobile is being applied in a broad variety of ways to retail banking Varieties of the Mobile Experience Non-payment usage of mobile… Disruptive blog & browse •Shop non-bank Transfers and pay payment and bill on-line transport & payment via the mobile …generating agent solutions demand for banking relate models banking services Virtual navigate •Get Cards on NFC Complementary coupons & targeted the mobile payments offers on your Mobile Mobile mobile •Browse products, banking transaction Mobile scan and compare channels security marketing prices non-financial Banking Payments marketing Selected elements of financial services One day “mobile” will be an everyday part of all retail financial services 3
  4. 4. Mobile and related innovations provide many emerging markets with an opportunityto accelerate the cycle of financial sector development Development slowed by a vicious circle…  Expanding the number of service points  Providing services to previously unbanked persons  Adapting products to new types of customers …and eventually..  Reducing the cost to serve them with other products 4
  5. 5. Adoption of new mobile financial services is growing, but actual usage is lagging 123 mobile money initiatives recorded in April 2012 … …but with low usage  High rates of inactivity  Focus on airtime top-ups, P2P and bill payments  Only beginning to expand beyond payments and services towards banking * Source: GSMA Mobile Money Report 2011 Meanwhile most banks are still searching for their role in this evolving phenomena 5
  6. 6. Contents Context Scale & Scope – what’s at stake? Approaches to broadening adoption and usage Challenges and Prospects 6
  7. 7. Scale is important for some varieties of mobile, critical for others Many Business models use a combination of leveraging existing and building new network value Complementing existing networks… …to building new ones Some value comes from For others, starting afresh opens leveraging an existing base new possibilities.. of users… ATM …but demand depends crucially on network …fixed set-up and variable costs need to be size covered, but demand does not critically depend on first creating a base of new users New payment systems can leverage strengths from old to build new 7
  8. 8. Scope is important in order to encourage clients to reach the tipping point –from cash… to electronic accounts … from occasional to a part of daily banking •TELCO •Cash-in •Salary payment Indirect benefits  Aggregate savings from keeping m-$ the money in the system  Information value / profiling •Customer  Contact and distribution savings •P2P •Retail payments •Cash-out •Bill Payment •TELCO 8
  9. 9. Broadening adoption also usually requires going beyond price competition, tocreate the spill-over effects that generate economic value “below the line” Price Competition many new services now start here where competition is weak Improving on price over cash & alternatives Bill “One sided” Payments Multi-party Payments Payments Daily Banking Generating indirect Retail economic value Payments “below the line” B2B Broader adoption requires more specific, compelling Non-price offers competing with cash Competition 9
  10. 10. Contents Context Scope and Scale – what’s at stake? Approaches to broadening adoption and usage  Include those who have purchasing power  Get value in the system and keep it there  Use the stepping stones available to borrow scale  Try to create value beyond price competition  Example of retail payments  Partnerships Challenges and Prospects 10
  11. 11. To gain scale and boost usage, services need to recruit clients across segmentsand income groups to generate network effects and volume Boost the scale of new inclusive payment systems by encouraging broader use between different segments and Individuals & Households Businesses & Public Sector users in the economy Complementary access and payment services Mobile Approach More appropriate services for growing mass market New services competing with cash The business model and product approach needs to be adapted to the segment 11
  12. 12. Key to boosting usage is also to get it into the system from the start, reducing themarginal costs and effort to clients of further cash-in’s Flow of funds 12
  13. 13. Borrow but don’t beg: Leverage existing systems and networks as steppingstones to scale  Leveraging the market power of existing networks to go into new niches by making improvements to specific elements of the payments chain.  Adding volume to new networks by making them compatible tools used by populations that are already banked Examples  Square brings card networks further than banks have managed to penetrate by focusing on the barriers to adoption by small retailers / sole traders  PayPal leverages existing bank account holders and infrastructure to be of use in new circumstances (scale is critical) Stepping Stones to Scale  Enabling retailers to efficiently support multiple consumer payment processes 13
  14. 14. No more “plain vanilla”: focus on the challenges that different users face, andsee how experience, process and networks can generate D value for them Areas in which well-designed payments services can create extra value: • inventory finance and supplier payments “Time is money” • Bill payments and shoe leather • Cleaning up after failed payments • DvP: Delivery versus Payment “Cash is king” • Seamless connections between different stores of value • Customer risk management “Knowledge is • Customer profiling power” • Contact and acquisition 14
  15. 15. One challenge to more frequent use is competition from cash at the point of sale –Adoption requires that we work both sides of the market ? Focus on Focus on ? ? Cash or Halo effect? Providers Consumers electronic? ? ? Above the line Cash has a perceived cash has clear zero cost for the advantages for Cash has immediacy for consumer the consumer the retailer m-$ SHOP Customer What benefits for banks, MNOs,..? Focus on the How does the retailer pay for supplies? “other half” Who finances inventory? Below the line, Is the retailer credit constrained? other improvements in services could Does the distributor extend credit? incentive retailers Is a bank involved? to pay the necessary fees How strong is the competition? Distributor/Wholesaler … 15
  16. 16. Finding the right partnerships: Banks, MNOs, and Retailers need to take a soberlook at each others’ strengths and interests to find agreements that work for all Mobile operator strengths Value for banks  A communication and distribution  Access to potential new clients network reaching millions of  Lower cost basis for basic transaction services consumers  Broader networks for payments to achieve  Sales and product oriented culture economies of scale  Innovative payment product and tools  Intelligent interactive banking platforms Value for operators Bank strengths  Complementary product and sales  Financial product expertise expertise and skills  Payment management & interoperability  Additional commercial power to  Production and distribution synergies with promote mobile to other users other segments and financial services  Integration with broader ecosystem to  Regulatory expertise and status reach critical mass Partnerships need to focus on creating value beyond fee revenue for all members:  Transaction fees cannot be the sole revenue source that makes the business case work  The other sources of value for banks, for MNOs and retailers need to be developed 16
  17. 17. Contents Context Scope and Scale – what’s at stake? Approaches to broadening adoption and usage Challenges and Prospects 17
  18. 18. So why is this not happening? Its’ hard work and there are many goals that cannotoften be achieved alone Timing and sequencing  Value of new services build on an established client base Client knowledge Firm level  Needs and expectations of clients are specific – but knowledge and expertise of new issues payment providers is not competitive everywhere Cost, complexity of doing more in-house  Doing everything can distract from core business; requires significant expansion of scope Many challenges derive from the difficulties in aligning interests - over time and between actors – as needed to ensure coordination and collaboration Sector  When building a network, the longer you wait the more value you get when you open it? level issue  Standardisation – but on whose terms ?  Fragmenting the value chain, “partnerships” and impact on the “customer ownership” 18
  19. 19. ContactsIvan Mortimer-SchuttsEast Asia Pacific Regional Advisor for payments and retail bankingInternational Finance CorporationEmail: imortimerschutts@ifc.orgAnastassiya MarinaSenior Operations Officer,Access to Finance Advisory Services, IndonesiaInternational Finance CorporationEmail: amarina@ifc.org 19

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