How soon can the Arab world accept mPayment? Janti Abdallah STS


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this presentation was delivered during the Media & Telecom conf. 09 in Amman, Jordan

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  • How soon can the Arab world accept mPayment? Janti Abdallah STS

    1. A Leading e-Payment Solution/ Service Provider How soon can the Arab world accept mPayment? Remittance . m/eCommerce . Topup . Bill Payment Janti M. Abdallah, MBA Division Manager, ePayment Solutions (STS) Executive Director, PAYNET (an STS subsidiary)
    2. Outline <ul><li>Introduction </li></ul><ul><li>Market landscape </li></ul><ul><li>Business opportunity </li></ul><ul><li>Involved stakeholders & their needs </li></ul><ul><li>Defining a mobile payment scheme </li></ul><ul><li>Advantages of suggested scheme </li></ul><ul><li>Observations & Conclusion </li></ul><ul><li>Q/A </li></ul>
    3. Introduction <ul><li>The ever-growing number of mobile phone users is a target group that represents an enormous potential for revenue generation </li></ul><ul><li>Number of Mobile Payment (MP) users worldwide is expected to increase 70% in 2009 * </li></ul><ul><ul><li>43.1 million users in 2008 -> 73.4 million in 2009 </li></ul></ul><ul><ul><li>Developing countries are among the most suitable environments for MP </li></ul></ul>* Source: Gartner, Inc 2009
    4. The Market Landscape (Banks & MNOs) <ul><li>Monthly ARPU of MNOs in Jordan decreased to $16.8 in 2007 (from $18.7 in 2006 and $28 in 2004) – source: Arab Advisors Group, 2008 </li></ul><ul><ul><li>Prices are going down due to increased competition </li></ul></ul><ul><ul><li>Need to consider VAS that help increase ARPU & reduce churn </li></ul></ul><ul><li>Banks can’t heavily rely on generating interest on deposits/ loans, as a consequence of global economic crisis </li></ul><ul><ul><li>Banks are seeking to have other revenue streams in the form of service fees/ transaction fees </li></ul></ul>
    5. A sample business opportunity <ul><li>GCC countries host almost an expatriate community of 12.3 million people </li></ul><ul><li>Inbound remittance to Jordan officially exceeded $3.4 bn in 2007 (a 36% growth compared to 2006), mostly from GCC counrtries (source: Central Bank of Jordan, 2008) </li></ul><ul><ul><li>What could/ should our market share be? </li></ul></ul><ul><ul><li>Can we make relevant revenues after funds have been remitted? </li></ul></ul>
    6. Research Problem <ul><li>Finding out the factors affecting the adoption of various MP schemes in Arab world countries by relevant stakeholders </li></ul><ul><li>This will lead to having an answer to our question: “How soon can the Arab World accept mPayment?” </li></ul>
    7. Research Population <ul><li>Providers (e.g. MNOs, Banks, third parties) </li></ul><ul><li>Merchants (e.g. convenience stores, cafeterias, fast-food restaurants, e-tailers) </li></ul><ul><li>Consumers (MNO subscribers) </li></ul>
    8. Variables Affecting MP Adoption <ul><li>The following variables are suggested by academic research (For Merchants) </li></ul><ul><ul><li>Cost </li></ul></ul><ul><ul><li>Customer base </li></ul></ul><ul><ul><li>Ease of use </li></ul></ul><ul><ul><li>Reliability </li></ul></ul><ul><ul><li>Security </li></ul></ul><ul><ul><li>Value proposition improvement </li></ul></ul>
    9. Variables Affecting MP Adoption <ul><li>The following variables are suggested by academic research (For Providers) </li></ul><ul><ul><li>Cost </li></ul></ul><ul><ul><li>Organizational change </li></ul></ul><ul><ul><li>Security </li></ul></ul><ul><ul><li>Standard </li></ul></ul><ul><ul><li>Revenues </li></ul></ul><ul><ul><li>Legal barriers </li></ul></ul>
    10. Variables Affecting MP Adoption <ul><li>The following variables are suggested by academic research (For Consumers) </li></ul><ul><ul><li>Cost </li></ul></ul><ul><ul><li>Ease of use </li></ul></ul><ul><ul><li>Usefulness </li></ul></ul><ul><ul><li>Expressiveness </li></ul></ul><ul><ul><li>Trust </li></ul></ul><ul><ul><li>Universality </li></ul></ul>
    11. Classification of MP (Model 1) Source: ONDRUS and PIGNEUR, 2006
    12. Classification of MP (Model 2) Source: KREYER, POUSTTCHI and TUROWSKI , 2003
    13. Classification of MP (Model 3) Source: MALLAT, ROSSI and TUUNAINEN 2004 Telephone bill credit card offline payment Direct debiting electronic cash/ digital wallet smart cards/ prepaid cards Method for Settlement post-paid instant-paid Prepaid Deduction Time subscription / standing order Pay per product unit pay per time unit Payment Frequency Account based Token based Basis of Payment Operational Special payment software Dual slot/ dual card phone Internet enabled phone Text message exchange Technology Required No Yes Pre-registration Needed? No Body Merchant Bank/ Financial Service Provider MNO Payment service provider Receiver of Customer Data Others Spec intermediary Bank/ Financial Service Provider MNO Payment Service Provider Participants Macro payments (< $50) Macro-payments (< 5$ to $50) Micro-payments (> 10 cents to $5) Pico-payments (≤ 10 cents) Payment Levels C2C Stationary Merchant (Auto) Stationary Merchant (Person) EC MC Payment scenarios Strategic Instances Characteristics
    14. A suggested mPayment Program <ul><li>A dedicated third party “Program Manager” shall spearhead a regional program in alliance with 1 MNO and 1 Bank in each country </li></ul><ul><ul><li>Issuing and managing m-Wallets; serving wallet-holders and merchants) </li></ul></ul><ul><li>Rule of thumb: do not reinvent the wheel (work with others) </li></ul>
    15. System diagram Banking Host mWallet *12345# USSD G/W ePayment Gateway ATM/ CDM EFT POS
    16. Accepting Deposits? mWallet n ($10) mWallet 3 ($50) mWallet 2 ($15) mWallet 1 ($10) Account Z Account C Account B ($85) Account A vAMS @ Program Manager Core Banking System @ Partner Bank Neither Program Manager, nor MNO should handle real cash/ funds
    17. Supported Dr/ Cr Transaction mWallet 1 mWallet 2 [1] Via EFT POS terminals deployed @ post offices, exchange houses [2] Via Bank ATMs/ CDMs [3] Via Internet [4] Via EFT POS terminals deployed participating merchants/ outlets [5] Via GSM handset - USSD Bank Account [2,3] GSM airtime? [5] Transfer [5] Top-up [3,5] Goods purchase [3,4] Cash-in [1,2] Credit/ Debit Card [3] Cash-out [1,2] Bill Payment [3,4,5]
    18. Revenue Streams * Ancillary revenues shall be used to achieve desired levels of profitability with lower transaction fees (to ensure high competitiveness) Value for MNOs: Reduce churn and increase VAS ARPU Value for Banks: Reach users who were previously unreachable (unbanked) <ul><li>Interest on mWallet balances </li></ul><ul><li>Advertising revenue (on EFT POS paper receipts & auth tokens) </li></ul>Ancillary * (not borne by any) Fees/ Transaction (Borne by merchant) <ul><li>Good purchase </li></ul><ul><li>Bill payment </li></ul><ul><li>Top-up </li></ul>Fees/ Transaction (Borne by consumer) <ul><li>Cash-in/ Cash-out </li></ul><ul><li>Balance Transfer </li></ul><ul><li>Monthly subscription </li></ul>
    19. 3 players = 1 provider (1+1+1 > 3) <ul><li>Program manager: Issue mWallets, acquire TXNs, set fees, sign-up merchants </li></ul><ul><li>MNO: Enable user enrollment, conduct marketing/ customer care, provide access channel (USSD, SMS/ MMS, etc) </li></ul><ul><li>Bank: Accept deposits, settle funds, avail channels (e.g. ATM, EFT POS) </li></ul>
    20. mWallet Advantages <ul><li>Real-time cashless payment mechanism </li></ul><ul><li>Risk free, no charge-backs </li></ul><ul><li>Safe - No card/ bank account is required </li></ul><ul><ul><li>Also suitable for card/account holders who do not wish to expose their cards/ banks account numbers to merchants </li></ul></ul><ul><li>Seamless customer enrollment (Wallet ID & PIN) via USSD – prepaid & post paid </li></ul><ul><ul><li>Service is immediately usable on ALL GSM devices, no need for special software nor SIM card </li></ul></ul>
    21. Why USSD? <ul><li>Session-based </li></ul><ul><li>Quick </li></ul><ul><li>Free </li></ul><ul><li>Roam-able </li></ul><ul><li>Centrally manageable </li></ul><ul><li>Compatible (with all GSM handsets) </li></ul><ul><li>Portable (not bound to a certain GSM handset) </li></ul><ul><li>Doesn’t require special SIM card nor special software </li></ul><ul><li>Easy to use </li></ul><ul><li>Secure </li></ul>
    22. Advantages of suggested approach (for MNOs and Banks) <ul><li>Achieving the sought values with low investment/ organizational change </li></ul><ul><li>Leveraging the focus and dedication of the third party (Program Manager) </li></ul><ul><li>Being a part of a bigger regional scheme </li></ul>
    23. Program Manager Business Enablers <ul><li>Investment in infrastructure (data center & software platform) </li></ul><ul><li>Subject-matter expertise </li></ul><ul><li>Commercial/ legal status </li></ul><ul><li>Merchant relationships </li></ul><ul><li>Market exposure and regional outreach </li></ul><ul><li>Focus and dedication </li></ul>
    24. Observations & Conclusion <ul><li>Mobile Payment is becoming a buzz word especially for money transfer/ remittance </li></ul><ul><ul><li>Big names like Visa, MasterCard, Western Union are trying not to be left out of the competition </li></ul></ul><ul><ul><li>Some MNOs and banks are moving into circles, trying to attack the opportunity from the right angle </li></ul></ul><ul><ul><li>TRCs/ TRAs and Central banks are keeping a closer eye on relevant initiatives </li></ul></ul><ul><ul><li>Huge mobile payment initiatives have already failed </li></ul></ul><ul><li>The Arab World shall start accepting mPayment very soon (2009/ 2010), given that a proper scheme is chosen </li></ul><ul><ul><li>Models that have succeeded in other regions might/ might not be suitable for our region </li></ul></ul>
    25. ePayment @ STS Running National Payment platforms in Jordan, Qatar, KSA and UAE.. Contracted to process more than 15 million payment transactions a year (> $1 billion in value) Well positioned to undertake a leading role that will help shape a successful MP scheme
    26. Thank You! For more information please contact: Janti M. Abdallah, MBA Division Manager, ePayment Solutions (STS) Executive Director, PAYNET (an STS subsidiary) e-mail: [email_address] Mob (JOR): +962 79 697 6771 Mob (UAE): +971 50 1577 637