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Mobile Financial Services Distribution: Partnerships, Alliances & Joint-Ventures


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Some thoughts and examples on success factors in implementing mobile / electronic payments services in partnerships, alliances, and joint-ventures. This includes varying views on collaboration for mobile payments. Players, financial cases and implementation. Also discussed are mobile network operators, banks, intermediaries and distribution trends.

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Mobile Financial Services Distribution: Partnerships, Alliances & Joint-Ventures

  1. 1. Mobile Financial Services Distribution:Partnerships, Alliances and Joint-VenturesSymphony Global, Eaton Hotel, Hong Kong (18-19 April 2013)Dan Armstrong (
  2. 2. Some Context A few thoughts on banking distribution A way to characterise the actors in the mobile transactionsecosystem Dynamics in the shifting roles between banks, MNOs andintermediariesCase studies in partnership:1. Rabo Mobiel: (Netherlands) Bank / MNO partnership to launch GSMand financial services2. NMB (Tanzania): Bank / MNO partnership to launch correspondentbanking3. TRAVIK (Netherlands): Bank / MNO partnership to launch NFCpayments services4. mBank (Philippines): New bank set up as a partnership betweenbanks / microfinance organisations and the SMART, leveragingrespective assets and networksContents
  3. 3.  “Partnership” should be joint-investment to address atarget segment or achieve direct-to-consumer/businessmarket goals “Partnership” should be risk-sharing to achieve thesedirect-to-consumer/business market goals Pushing the notion of “Partnership” too far … ?• Direct-to-consumer/business strategies, and other parties achievingbusiness success by providing services to make this happen (e.g. atcommercial rates)• Insight, experience, business development, market research, extra support,or “going the extra mile’ – that is why customers choose one supplier overanother. This is more differentiation of suppliers, than partnershipA personal thought on “Partnership” ..“A partnership is an arrangement where parties agree tocooperate to advance their mutual interests.” (Wikipedia)
  4. 4. What do we expect from a wallet? A place to store cash? A place to store paymenttokens? A place to store other tokens? A personal object? A private object? Something small enough tobe portable/mobile? … but … do we need aphysical object?
  5. 5. Then, what do we expect from a transaction device? Identification of myself, myrights and capabilities,memberships. Identification of myself, anauthentication tool forpayment. Secure, multi-factor Tamper-resistant/evident Personal and private Easy to use … but … do we need aphysical object?
  6. 6. Virtualisation in The Netherlands0501001502002503003504004505001980 1985 1990 1995 2000 2005 2010*1millionContacts viadevices (e.g. webbrowser/internet,mobile phone, IVR)Total Customer ContactsContact via abank advisor,bank branch
  7. 7. A thought on ecosystem players …Player: Category 2”I have a pipe and/or network and I want tomonetise the investments I made in creating it. Iwant as much to get through that pipe and the(mobile) phones accessing it as possible.”Player: Category 1”I have stuff I want to do via channels. Enablebank account control, enable payments, provideticketing, sell ads, credit loyalty points, etc. and Ineed as many (cost effective) channels and pipesto do it.”
  8. 8. Zooming in on Banking & Payments ..some MNOs offer banking (passthrough) services via STK orUSSDAgency BankingCurrent AccountsSavings AccountsLoans E-Wallets Prepaid Airtime WalletsBanks,SACCOs,MFIsMNOs(Remittances)Saving Money, Loans Payments Payments Paymentsfinancial services products “transactional’ productsIntermediariesTraditionally Bank‟s Core OperationalSpace (Internet/Mobile Banking)Traditionally MNOCore OperationalSpace (“PrepaidAirtime Storage”)Airtime & MobileMoney DealersNFCcollaborationsBanks issuingprepaid wallets
  9. 9. Traditional “partnerships” or agreements include .. Wholesale Telco Services / National Short-codes USSD Mobile Banking, Airtime Sales via Mobile Banking Extra Security for mobile banking (e.g. WAP) Wholesale Access / GSM Service Provider Business Banking & FinancingFocusing on partnerships between Banks and MNOs
  10. 10. Expanding Collaboration ..Bank branches as “SuperDealer‟ for MNO airtimedealersIntegration between bank& MNO Mobile Moneysystems (incl. MM Agentsas cash-in/cash-outlocations)Bank branches providingsecure storage for MNOairtime vouchersBank Branches as “SuperAgent‟ for MNO MMAgentsNMO MM Agents ascollection points for loanrepaymentsMNO MM Agents asprovisioning points fornew accounts (sign-up,booking loans, etc.)Bank branches as Dealerfor MNO airtimeJoint-venture for (new)financial services or NFC??
  11. 11. Some Dynamics for PartnershipMNOs Major players (in most markets) Large networks (airtime salesdealers, Mobile Money dealers) Large customer bases (althoughrestricted to limited productranges) Substantial marketing power Often well-funded Business model supports, attimes, short-term/opportunisticcommercial behaviour to getmarket share, etc. Trust issues?Banks Licenced & regulated for banking(deposit-taking, interest, loans,etc.) Branch networks Trust (sometimes) Lifestyle and multi-channelmarketing capabilities, oftensubstantially larger than simplyproduct usage Profitability and stabilityrequirements often forces“longer term thinking”, higher-value products like mortgagesand loans sold differently thantransactional banking services.
  12. 12. “The business interests ofMNOs might not alwaysaligned with those of thebank.”My thesis …
  13. 13. Differing Business Models?An MNO Business Model Invest in assets to realiseprofits fromactivity/transaction-based fees -minutes/SMS/kb/subscriptions. High up-front costs: GSMlicence, Radio / TransmissionNetworks, Dealer Network,Handset Subsidies The more usage of mobilephones the better, oftenregardless of segment,behaviour.A Bank Business Model Invest in assets to realise value-based profits (there areexceptions of course). Longer-term/stable revenue fromprofitable, loyal customers,multiple accounts, etc. Often the most revenue comesfrom high-value products:business products, mortgages,higher-value loans, etc. Key component is managingcosts over the long-term &choosing battles in distributionwhich don‟t bleed. Higher usage of bank products= loss, depending on the
  14. 14.  Customer-Supplier Models:• Rabo Mobiel: (Netherlands) Bank / MNOpartnership to launch GSM and financialservices• NMB (Tanzania): Bank / MNO partnership tolaunch Correspondent/Agency banking Joint-Venture Models(partnership?):• TRAVIK (Netherlands): Bank / MNOpartnership to launch NFC paymentsservices• mBank (Philippines): New bank set up as apartnership between banks / microfinanceorganisations and SMART, leveragingrespective assets and networksA few Examples of Collaborations
  15. 15. A few Examples of Collaborations
  16. 16. Rabo Mobiel
  17. 17. Rabobank GSM MVNO- Telecommunications Services (voice, SMS,VAS, Prepaid/Postpaid, MKB)- Mobile Internet Access (GPRS, UMTS,HSDPA), Portals and Self-CareValue-Added Bank Product- Banking “On the Go”- Premium Product / Combination- Communications Channel for Local Banks,Members and CustomersMobile Incubator- Product/Business Development for MobileFinancial Services and Products- Launch of Remote and ContactlessPayments and PartnershipsMobile Knowledge Centre- NFC, Consumer Behaviour & Usability- Encryption, Mobile Business Rules- Mobile Low-Value Payments- Standards, Retail/Consumer Acceptance,Security, Sustainability
  18. 18. .. but the reality in NL, so …
  19. 19. Collaboration Strengths & Weaknesses Not really a “collaboration” perse, a customer-supplierrelationship Direct revenue (service costs,calling, SMS, data) Customeracquisition/marketing,customer service, support,billing – all done by MVNO 2006-2008, Orange held a 10%stake, so a bit of afinancial/strategic partnershipwas in place 10% Orange equity investmentin Rabo Mobiel start-up phaseMNOs (Orange, then KPN) Rabobank
  20. 20. A few Examples of Collaborations
  21. 21.  Leveraging MNO MM agents for cash-in/cash-out pointsfor banks• Convenience• Outreach• Commission-based costs• Cost-savings in building branch networks• Inter-operability between systems Customers save time & money going to the bankbranch, queuing, etc. during work-day Customer can access a real bank account (vs. MMwallet), including interest % earned, loansBank & MNO Partnership for Correspondent Banking
  22. 22. Rationale for using a bank account, and not a MM wallet“I trust banksholding mymoney more thanMNOs (or others)”“I need to use abank ATM”“I want to make atransfer/billpayment onlyavailable via banksystems”
  23. 23. Example Process for Cash-in/Cash-outAccountHolderAccountHolderStandard MNOWallet Cash-InTransaction(MPESA)e.g. *150*00#Check if itworked?(MPESA)*150*00#Transfer fromMNO Wallet toNMB Account(MPESA)e.g. *150*00#Check if itworked?(BANK)*150*00#Check if itworked?(MPESA)*150*00#Transfer fromBank Account toMNO Wallet(BANK) *150*66#Check if itworked?(MPESA)*150*00#Check if itworked?(BANK)*150*00#Standard MNOWallet Cash-OutTransaction atAgent (MPESA)e.g. *150*00#Checkbalance?(MPESA)*150*00#Deposit different confirmationmodels, per MNO wallet system(no fee)Transfer Fee(MNO-charged)Transfer Fee(NMB-charged)Withdrawal / Cash-OutFee (MNO-charged)
  24. 24. Example Process for Cash-in/Cash-outAccountHolderAccountHolderStandard MNOWallet Cash-InTransaction(MPESA)e.g. *150*00#Check if itworked?(MPESA)*150*00#Transfer fromMNO Wallet toNMB Account(MPESA)e.g. *150*00#Check if itworked?(MPESA)*150*00#Standard MNOWallet Cash-OutTransaction atAgent (MPESA)e.g. *150*00#Checkbalance?(MPESA)*150*00#Deposit different confirmationmodels, per MNO wallet system(no fee)Transfer Fee(MNO-charged)Withdrawal / Cash-OutFee (MNO-charged)
  25. 25. Example Process for Bill PaymentAccountHolderDeposit different confirmationmodels, per MNO wallet system(no fee)Transfer Fee(MNO-charged)Transfer Fee(NMB-charged)
  26. 26. But, why would I use a bank INSTEAD of an MM wallet?“I trust banksholding mymoney more thanMNOs (or others)”“I need to use abank ATM”“I want to make atransfer/billpayment onlyavailable via banksystems”“I want to earninterest”“I want to earn aloan”
  27. 27. Collaboration Strengths & Weaknesses Leverages existing MM dealernetwork Transaction fees (consumer, bank-paid fees) Usage increases GSM traffic (usageof existing assets, new revenues) Inter-operability supports paymentsinto MM systems Potential CIT / liquidity issues Trust accounts, float from MNOs No need to build physical branchnetwork (cost-savings, remotelocations, etc.) Interoperability is great forcustomers Control of business processes, fraud,etc. Potential lack of „customerownership‟, up-sales capability. MMagents in many markets vastly out-number bank branches Not “own employees”, reliance onMM network Number of steps/costs required forcustomers to move money in & out,verify that transfer occurredMNOs Banks
  28. 28. TRAVIK: Proposed Joint-Venture to manage SIM-basedNFCMNOMNOMNO“Category 1Players”“Category 2Players”
  29. 29. TRAVIK: The “Trusted Services Manager” Role“TrustedServicesManager”RoleMNOMNOMNO“Please ensure thatAPPLICATION X getsto USER Y on MNO Z.”“Make sure that whenthere are changes of anysort required, that can bemanaged securelyand easily.”
  30. 30.  ”We will still work together, but we won’t need a joint-venture.”and … SWP NFC phones weren‟t readily available yet, nor werecoming in great quantities fast enough. Many NL retailers had just finalised the upgrade to EMVPOS & seemed somewhat reluctant to spend moremoney on NFC POS (esp. given zero NL NFC card-base) Normal card payments already relatively cheapTRAVIK: So, why did it fail/is it postponed?
  31. 31. Collaboration Strengths & Weaknesses PR, innovation, cool factor,payment convenience No differentiation from otherMNOs SWP SIM rental fees Handset cost <?> Mobile NFC a “nice to have” techright now, but are consumersasking for it? (Hmm, I remembersomething called „Bluetooth‟) Unclear how MNOs will reallyprofit from mobile NFC in theshort term.• No direct transaction revenues• Does it reduce churn? PR, innovation, cool factor,payment convenience No differentiation from otherbanks Great tech for LVP (cards &phones) Great tech for future Value-AddedServices (Loyalty, Couponing,Social media link-ups) Unclear short-term directrevenue, but clearly a cost forbanks (as well as retailers, publictransport, loyalty companies) - 10year transition to phone-only NFC ,if ever <?>MNOs Banks
  32. 32. mBank (Philippines) With 7.107 islands in The Philippines,distribution of financial services has been amajor problem over time mBank is a new, fully-licensed bank offeringloans & savings accounts, accepts deposits,savings, repayments through SMART Money Beginning with SMART dealers (“knowncredit entities”) & expanding from there• Leverage SMART Money network, CIT, liquiditymanagement• Independently-operating bank• Channel for new products (savings, current accounts,insurance) mBank employees are regionally-spread tomatch SMART Money footprint USSD• Familiar interface for all SMART customers• Works on all phone, inexpensive
  33. 33. Collaboration Strengths & Weaknesses Leverages SMART Moneynetwork, CIT, liquiditymanagement Loan capability for agents,supports buying of SMARTMoney value, airtime, stock Churn reduction/loyalty byoffering financial serviceswithout requiring a banklicense No need to build physicalbranch network Co-location of mBankemployees with SMART Moneymanagement teams Known entities (agents) providesubstantially lower credit risk,quick-launch capability Complete reliance on SMARTMoney networkSMART mBank
  34. 34. Thank You!Dan ArmstrongTakashi Mobile | Financial ServicesRapenburgerplein 811011 VJ AmsterdamThe 652 085 071skype: dd.armstrong / gtalk: dan.armstrong