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Mobile Money Business Models


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Payment Innovations Working Group, April 2012, NetHope; For more information, e-mail hamiliton.mcnutt at

Published in: Business, Economy & Finance
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Mobile Money Business Models

  1. 1. MOBILE MONEY Payment Innovations Working GroupBUSINESS MODELS April 2012
  2. 2. WHY DISCUSS BUSINESS MODELS?!  Better understand the different roles NGOs can plan in the mobile money field. !  Apart from being a consumer of the service, NGOs also play other roles in the role out and development of mobile money services!  Forging strong partnerships with private sector stakeholders !  Understanding private sector’s motives in mobile money, in order to better align your own organization’s priorities with potential partners !  Due diligence when selecting a partner is key!  Business models vary in each case !  We will discuss the three core business models for mobile money, but as the field develops, joint ventures are becoming more common
  3. 3. THREE CORE BUSINESS MODELS!  MNO-Led Model !  Mobile network operator acts as de facto “bank”. This model places most of the regulatory responsibility on the MNO.!  Bank-Led Model !  Financial services offered from a bank to their account holders through a network of agents!  Independent Model !  Independent companies that often times establish a joint venture with MNO or Bank to meet a specific demand not currently being met
  5. 5. MNO–LED MODELS And how NGOs can engage
  6. 6. WHY? MNO-LED BUSINESS DRIVERS!  MNO incentives for offering mobile money services !  Reduced costumer churn (product differentiation) !  Better brand positioning !  Reduced distribution costs (ex. Printing of airtime scratch cards) !  Additional revenues from mobile transactions !  Providing evidence of good citizenship (In the eyes of regulators and clients)!  MNO barriers to entry into mobile money !  MNO product cycles are traditionally 3-6 months, mobile money products can be cash flow positive in three years (M-Pesa) !  MNOs face uphill regulatory process with central banks !  CEO of company is not interested. Leadership from the executive suite is crucial for mobile money success !  Segmented market share !  Achieving scale and active accounts
  7. 7. WHO? PROFILE OF MNOS WHO TAKE A PRODUCT TO MARKET! MNOs who decided to enter the mobile money market ! Had no less than 30% of the voice market ! Existed in markets that had 20-60% mobile penetration ! Already had an extensive air time merchant network ! Were willing to take on big up front investments and often times “leave money on the table” in the short term ! Had strong and positive executive leadership ! Made a strong marketing push for the product ! Wanted to reduce their churn through product differentiation
  8. 8. FIRST MOVERS– MARKET SHARE AND MOBILE PENETRATIONCGAP, April 2011, Five Business Case Insights on Mobile Money
  9. 9. WHAT? MNO-LED MODEL TRAITS!  MNOs manage any and all relationships with formal financial institutions, and are responsible for regulator y compliance!  A gent approval is done through the MNO!  Client Know Your Costumer (KYC) is of ten times done through an agent.!  Range of products, including P2P (ex. remittances), B2P (ex. salaries) and P2B (ex. Bill Pay)!  MNO is required to hold mobile money float in a regulated financial institution Mobile Money Transfer Value Chain Receive Move Hold Data Network cash in/out Money deposits MNO
  10. 10. ADVANTAGES AND CHALLENGES FOR MNO-LED MODEL!  Advantages !  Challenges !  Brand recognition and trust !  Lack of familiarity to !  Very well developed financial services sector distribution market through !  Regulatory barriers voice clientele !  Heavy upfront investment !  Self funded model !  Lack of short term profits !  Flexibility in KYC process !  AML/ATF issues !  Familiar market segments !  Establishing scale !  Extensive agent networks !  Heavy agent and end user provide better access capacity building costs
  11. 11. HOW? NGO ENGAGEMENT !  Linking MNO needs to NGO program goals !  MNO Needs !  NGO Engagement !  Innovative NGO products that !  Product differentiation offer new services to clients !  Better understanding markets !  NGOs have a strong rural !  Risk mitigation through pilots footprint and understand that and testing of models market well !  NGOs are often times !  Agent and end user training implementing partners for pilots !  Repetitive payment streams !  Training agents can also help that provide scale and improve financial services access consistency !  NGO programs that disburse !  Meeting CSR goals funds on a regular basis to beneficiaries is of interest to MNOs !  NGOs can provide MNOs a more socially responsible imageExamples: Juhudi Kilmo MFI, PACT governance program
  12. 12. BANK–LED MODELS And how NGOs can engage
  13. 13. TRAITS OF AGENT BANKING MODELS! Bank as a driver of the service! Path to full financial inclusion and financial footprint! Service linked to a bank account at financial institution (may mean interest-bearing deposits, possibility for more sophisticated financial services, etc.).! Real-time settlement of transactions linked to bank account! May use POS, mobile as device– innovation here is the economics related to the agent model and new financial products! Deposit insurance
  14. 14. PLAYERS IN AGENT BANKING! F inancial institution (commercial bank, MFI, etc.)! A gents: typically look like MNO-led models– small mom and pops, pharmacies, etc. May also use third parties. Typically proprietary. May also use “roving agents! C lients– linked to bank account or special accounts for low-income groups! M NOs in many cases
  15. 15. ACTIVITIES! Transactional account most common (bill pay, loan repayment, etc.)! Depending on regulation, may do account opening at agent level. Typically will be a lower- value account! Increasingly, services such as insurance, loans are offered through mobile! May enable B2B activities such as salary or bill payments for businesses! Increasing value for banks related to G2P payments! In addition to transactions, may drive potential clients to sign up in branch! Airtime top ups
  16. 16. BUSINESS DRIVERS! Accessing new markets (client segments and geographies)! New revenue streams (bill pay, G2P, transactions, cross-selling etc.)! Decongesting bank branches! Cost savings (particularly compared to ATMs)! Additional motivations for linking with existing mobile money systems (although not traditionally bank-led): new service for clients, operational efficiency, fraud reduction, etc.! Many banks are also doing this as a competitive and reactive measure, although sustainability of this as a motivator is limited
  17. 17. ADVANTAGES & CHALLENGES!  Lower cost than brick and mor tar branches!  Potential revenue driver, competitive posturing!  Unlocking future customer segments!  Retain advantage in financial ser vices space vs. MNOs!  May not have experience managing agents!  Loss of brand control and building trust!  May be completely new, unfamiliar client segments—training, product development, etc.!  Not in line with banks’ traditional business models (low value, high volume transactions)!  KYC and registration in some countries!  Large, upfront costs!  Perception of banks!  Managing customer experience!  Potential for increase in fraud!  Maintaining active accounts
  18. 18. NGO ENGAGEMENT!  Programming to link up with formal accounts!  G2P payments!  Additional financial ser vices such as insurance and loans!  Can be card based, which helps in areas of low mobile penetration, low literacy, etc.!  It remains to be seen whether bank-led models "outlive” MNO- led, but financial ser vices is within the core business of banks and reflects their expertise!  Examples:!  Mercy Corps and BanKO in Philippines!  MEDA in Nicaragua!  Save the Children and UBL in Pakistan!  What are some other areas to engage?
  19. 19. New BusinessINDEPENDENT MODELS Models for Mobile Money
  20. 20. WHY?!  Business Drivers !  MNO- and Bank-led models have strengths but also weaknesses, as we have seen !  Other players see business opportunity to fill existing gaps in the market !  Gaps include: !  Interoperability !  Product Development !  Demand for customized services!  Regulation !  Often requires a bank partner
  21. 21. /Credit: Ben Lyon Source:
  22. 22. WHO?!  Often call 3 r d party or Hybrid Models!  Joint Ventures !  Eko India ( !  MobiPay, Georgia!  Start-ups !  Mobile Transactions Limited, Zambia !  Splash, Sierra Leona !  M-Peso, Nicaragua !  Beam India (pre-paid)
  23. 23. WHAT?!  Often look like MNO-led models !  Rely on agent network (often independent, rather than retail outlets)!  May or may not partner with existing MNO or bank!  Range of products including P2P and B2B!  Outside funding from investors!  Smaller reach than MNO or bank models (not always)!  Value-added services!  Starting to blur the line completely between MNO & Bank-led !  Ex: Telenor Pakistan investment in!Tameer Microfinance Bank
  24. 24. PROS & CONS! A dvantages ! D isadvantages ! Independence ! Lack of Brand ! Creative products recognition ! Flexible partner ! Lack of Distribution ! Clear mission network ! Fewer partners to split ! Funding revenue (could mean lower ! Regulation prices and/or higher commissions)
  25. 25. HOW? NGO ENGAGEMENT!  Need to carefully access the capability of an independent company (which may be less clear than established bank or MNO) !  Ex: M-Peso in Nicaragua!  Worth considering, especially for smaller projects not of interest to large MNOs!  Workforce development & Livelihoods programs !  Ex. Splash/IFC!  Private Sector development programs !  Increase competition and support for SMEs!  Not an option in every country!  Good for voucher programs !  Ex: Mobile Transactions Limited Zambia
  26. 26. NGO ENGAGEMENT Process and Roles OVERVIEW
  27. 27. NGOS–TIPS FOR ENGAGING MOBILE MONEY PARTNERSHIPS!  Not everyone will be a good partner– often times your market may not be their traditional market.!  Understand the gaps NGOs will need to fill to complete this program– KYC registration, training, etc…!  Understand the partner gaps that will need to be filled!  Understand that partners have commercial motivations, and try to align them with your own!  Personality and connection are important!  Look to promote/ suggest engagement that is familiar to them– i.e., cash for work payments may equate to salary payments!  Determine what data you can receive from technology platform, and gage your partner’s willingness to share it!  In the end, make absolutely sure everything fits within your program’s goals.!  Sometimes more traditional methods of disbursing funds will be best, mobile money is not a silver bullet
  28. 28. ROLES OF NGO! Roles:!  Consumer!  Advisory (including product development and market knowledge)!  Training and education!  Deployment accelerator!  Facilitator/Broker!  Contribute to private sector CSR goals
  29. 29. QUESTIONS AND ANSWERS Thank You Cameron Peake Chrissy Martin Hamilton McNutt