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

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Mobile Financial Services Distribution:
Partnerships, Alliances and Joint-Ventures
Symphony Global, Eaton Hotel, Hong Kong...
Some Context
 A few thoughts on banking distribution
 A way to characterise the actors in the mobile transactions
ecosys...
 “Partnership” should be joint-investment to address a
target segment or achieve direct-to-consumer/business
market goals...

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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.

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-Ventures Symphony Global, Eaton Hotel, Hong Kong (18-19 April 2013) Dan Armstrong (dan.armstrong@takashimobile.com)
  2. 2. Some Context  A few thoughts on banking distribution  A way to characterise the actors in the mobile transactions ecosystem  Dynamics in the shifting roles between banks, MNOs and intermediaries Case studies in partnership: 1. Rabo Mobiel: (Netherlands) Bank / MNO partnership to launch GSM and financial services 2. NMB (Tanzania): Bank / MNO partnership to launch correspondent banking 3. TRAVIK (Netherlands): Bank / MNO partnership to launch NFC payments services 4. mBank (Philippines): New bank set up as a partnership between banks / microfinance organisations and the SMART, leveraging respective assets and networks Contents
  3. 3.  “Partnership” should be joint-investment to address a target segment or achieve direct-to-consumer/business market goals  “Partnership” should be risk-sharing to achieve these direct-to-consumer/business market goals  Pushing the notion of “Partnership” too far … ? • Direct-to-consumer/business strategies, and other parties achieving business success by providing services to make this happen (e.g. at commercial rates) • Insight, experience, business development, market research, extra support, or “going the extra mile’ – that is why customers choose one supplier over another. This is more differentiation of suppliers, than partnership A personal thought on “Partnership” .. “A partnership is an arrangement where parties agree to cooperate to advance their mutual interests.” (Wikipedia)
  4. 4. What do we expect from a wallet?  A place to store cash?  A place to store payment tokens?  A place to store other tokens?  A personal object?  A private object?  Something small enough to be portable/mobile?  … but … do we need a physical object?
  5. 5. Then, what do we expect from a transaction device?  Identification of myself, my rights and capabilities, memberships.  Identification of myself, an authentication tool for payment.  Secure, multi-factor  Tamper-resistant/evident  Personal and private  Easy to use  … but … do we need a physical object?
  6. 6. Virtualisation in The Netherlands 0 50 100 150 200 250 300 350 400 450 500 1980 1985 1990 1995 2000 2005 2010 * 1 million Contacts via devices (e.g. web browser/internet, mobile phone, IVR) Total Customer Contacts Contact via a bank advisor, bank branch
  7. 7. A thought on ecosystem players … Player: Category 2 ”I have a pipe and/or network and I want to monetise the investments I made in creating it. I want 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. Enable bank account control, enable payments, provide ticketing, sell ads, credit loyalty points, etc. and I need as many (cost effective) channels and pipes to do it.”
  8. 8. Zooming in on Banking & Payments .. some MNOs offer banking (pass through) services via STK or USSD Agency Banking Current Accounts Savings Accounts Loans E-Wallets Prepaid Airtime Wallets Banks, SACCOs, MFIs MNOs (Remittances) Saving Money, Loans Payments Payments Payments financial services products “transactional’ products Intermediaries Traditionally Bank’s Core Operational Space (Internet/Mobile Banking) Traditionally MNO Core Operational Space (“Prepaid Airtime Storage”) Airtime & Mobile Money Dealers NFC collaborations Banks issuing prepaid 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 & Financing Focusing on partnerships between Banks and MNOs
  10. 10. Expanding Collaboration .. Bank branches as “Super Dealer’ for MNO airtime dealers Integration between bank & MNO Mobile Money systems (incl. MM Agents as cash-in/cash-out locations) Bank branches providing secure storage for MNO airtime vouchers Bank Branches as “Super Agent’ for MNO MM Agents NMO MM Agents as collection points for loan repayments MNO MM Agents as provisioning points for new accounts (sign-up, booking loans, etc.) Bank branches as Dealer for MNO airtime Joint-venture for (new) financial services or NFC ??
  11. 11. Some Dynamics for Partnership MNOs  Major players (in most markets)  Large networks (airtime sales dealers, Mobile Money dealers)  Large customer bases (although restricted to limited product ranges)  Substantial marketing power  Often well-funded  Business model supports, at times, short-term/opportunistic commercial behaviour to get market share, etc. Trust issues? Banks  Licenced & regulated for banking (deposit-taking, interest, loans, etc.)  Branch networks  Trust (sometimes)  Lifestyle and multi-channel marketing capabilities, often substantially larger than simply product usage  Profitability and stability requirements often forces “longer term thinking”, higher- value products like mortgages and loans sold differently than transactional banking services.
  12. 12. “The business interests of MNOs might not always aligned with those of the bank.” My thesis …
  13. 13. Differing Business Models? An MNO Business Model  Invest in assets to realise profits from activity/transaction-based fees - minutes/SMS/kb/subscriptions.  High up-front costs: GSM licence, Radio / Transmission Networks, Dealer Network, Handset Subsidies  The more usage of mobile phones the better, often regardless of segment, behaviour. A Bank Business Model  Invest in assets to realise value- based profits (there are exceptions of course). Longer- term/stable revenue from profitable, loyal customers, multiple accounts, etc.  Often the most revenue comes from high-value products: business products, mortgages, higher-value loans, etc.  Key component is managing costs over the long-term & choosing battles in distribution which don’t bleed.  Higher usage of bank products = loss, depending on the
  14. 14.  Customer-Supplier Models: • Rabo Mobiel: (Netherlands) Bank / MNO partnership to launch GSM and financial services • NMB (Tanzania): Bank / MNO partnership to launch Correspondent/Agency banking  Joint-Venture Models (partnership?): • TRAVIK (Netherlands): Bank / MNO partnership to launch NFC payments services • mBank (Philippines): New bank set up as a partnership between banks / microfinance organisations and SMART, leveraging respective assets and networks A 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-Care Value-Added Bank Product - Banking “On the Go” - Premium Product / Combination - Communications Channel for Local Banks, Members and Customers Mobile Incubator - Product/Business Development for Mobile Financial Services and Products - Launch of Remote and Contactless Payments and Partnerships Mobile 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” per se, a customer-supplier relationship  Direct revenue (service costs, calling, SMS, data)  Customer acquisition/marketing, customer service, support, billing – all done by MVNO  2006-2008, Orange held a 10% stake, so a bit of a financial/strategic partnership was in place  10% Orange equity investment in Rabo Mobiel start-up phase MNOs (Orange, then KPN) Rabobank
  20. 20. A few Examples of Collaborations
  21. 21.  Leveraging MNO MM agents for cash-in/cash-out points for banks • Convenience • Outreach • Commission-based costs • Cost-savings in building branch networks • Inter-operability between systems  Customers save time & money going to the bank branch, queuing, etc. during work-day  Customer can access a real bank account (vs. MM wallet), including interest % earned, loans Bank & MNO Partnership for Correspondent Banking
  22. 22. Rationale for using a bank account, and not a MM wallet “I trust banks holding my money more than MNOs (or others)” “I need to use a bank ATM” “I want to make a transfer/bill payment only available via bank systems”
  23. 23. Example Process for Cash-in/Cash-out Account Holder Account Holder Standard MNO Wallet Cash-In Transaction (MPESA) e.g. *150*00# Check if it worked? (MPESA) *150*00# Transfer from MNO Wallet to NMB Account (MPESA) e.g. *150*00# Check if it worked? (BANK) *150*00# Check if it worked? (MPESA) *150*00# Transfer from Bank Account to MNO Wallet (BANK) *150*66# Check if it worked? (MPESA) *150*00# Check if it worked? (BANK) *150*00# Standard MNO Wallet Cash-Out Transaction at Agent (MPESA) e.g. *150*00# Check balance? (MPESA) *150*00# Deposit different confirmation models, per MNO wallet system (no fee) Transfer Fee (MNO-charged) Transfer Fee (NMB-charged) Withdrawal / Cash-Out Fee (MNO-charged)
  24. 24. Example Process for Cash-in/Cash-out Account Holder Account Holder Standard MNO Wallet Cash-In Transaction (MPESA) e.g. *150*00# Check if it worked? (MPESA) *150*00# Transfer from MNO Wallet to NMB Account (MPESA) e.g. *150*00# Check if it worked? (MPESA) *150*00# Standard MNO Wallet Cash-Out Transaction at Agent (MPESA) e.g. *150*00# Check balance? (MPESA) *150*00# Deposit different confirmation models, per MNO wallet system (no fee) Transfer Fee (MNO-charged) Withdrawal / Cash-Out Fee (MNO-charged)
  25. 25. Example Process for Bill Payment Account Holder Deposit different confirmation models, 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 banks holding my money more than MNOs (or others)” “I need to use a bank ATM” “I want to make a transfer/bill payment only available via bank systems” “I want to earn interest” “I want to earn a loan”
  27. 27. Collaboration Strengths & Weaknesses  Leverages existing MM dealer network  Transaction fees (consumer, bank- paid fees)  Usage increases GSM traffic (usage of existing assets, new revenues)  Inter-operability supports payments into MM systems  Potential CIT / liquidity issues  Trust accounts, float from MNOs  No need to build physical branch network (cost-savings, remote locations, etc.)  Interoperability is great for customers  Control of business processes, fraud, etc.  Potential lack of ‘customer ownership’, up-sales capability. MM agents in many markets vastly out- number bank branches  Not “own employees”, reliance on MM network  Number of steps/costs required for customers to move money in & out, verify that transfer occurred MNOs Banks
  28. 28. TRAVIK: Proposed Joint-Venture to manage SIM-based NFC MNO MNO MNO “Category 1 Players” “Category 2 Players”
  29. 29. TRAVIK: The “Trusted Services Manager” Role “Trusted Services Manager” Role MNO MNO MNO “Please ensure that APPLICATION X gets to USER Y on MNO Z.” “Make sure that when there are changes of any sort required, that can be managed securely and 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 were coming in great quantities fast enough.  Many NL retailers had just finalised the upgrade to EMV POS & seemed somewhat reluctant to spend more money on NFC POS (esp. given zero NL NFC card-base)  Normal card payments already relatively cheap TRAVIK: So, why did it fail/is it postponed?
  31. 31. Collaboration Strengths & Weaknesses  PR, innovation, cool factor, payment convenience  No differentiation from other MNOs  SWP SIM rental fees  Handset cost <?>  Mobile NFC a “nice to have” tech right now, but are consumers asking for it? (Hmm, I remember something called ‘Bluetooth’)  Unclear how MNOs will really profit from mobile NFC in the short term. • No direct transaction revenues • Does it reduce churn?  PR, innovation, cool factor, payment convenience  No differentiation from other banks  Great tech for LVP (cards & phones)  Great tech for future Value-Added Services (Loyalty, Couponing, Social media link-ups)  Unclear short-term direct revenue, but clearly a cost for banks (as well as retailers, public transport, loyalty companies) - 10 year 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 a major problem over time  mBank is a new, fully-licensed bank offering loans & savings accounts, accepts deposits, savings, repayments through SMART Money  Beginning with SMART dealers (“known credit entities”) & expanding from there • Leverage SMART Money network, CIT, liquidity management • Independently-operating bank • Channel for new products (savings, current accounts, insurance)  mBank employees are regionally-spread to match SMART Money footprint  USSD • Familiar interface for all SMART customers • Works on all phone, inexpensive
  33. 33. Collaboration Strengths & Weaknesses  Leverages SMART Money network, CIT, liquidity management  Loan capability for agents, supports buying of SMART Money value, airtime, stock  Churn reduction/loyalty by offering financial services without requiring a bank license  No need to build physical branch network  Co-location of mBank employees with SMART Money management teams  Known entities (agents) provide substantially lower credit risk, quick-launch capability  Complete reliance on SMART Money network SMART mBank
  34. 34. Thank You! Dan Armstrong Takashi Mobile | Financial Services Rapenburgerplein 81 1011 VJ Amsterdam The Netherlands www.takashimobile.com dan.armstrong@takashimobile.com +31 652 085 071 skype: dd.armstrong / gtalk: dan.armstrong

Editor's Notes

  • Critical Success Factors in Implementing Mobile Payments Services – Partnerships, Alliances, and Joint-Ventures

    Varying views on collaboration for mobile payments. Players, financial cases and implementation
    Mobile network operators, banks, intermediaries and distribution trends
    Show-case partnerships in launching NFC (Near Field Communications) payments in Western Europe, Asia and North America
    Show-case distribution partnerships for mobile payments in developing countries
  • Questions –
    Are local IT services and integration suppliers ‘partners’ or ‘suppliers’ in providing services or platforms that banks use at commercial terms?
    Are mobile operators ‘partners’ or ‘suppliers’ in providing network access and bulk SMS services at commercial rates?
    Is Microsoft a ‘partner’ or a ‘supplier’ in providing the operating systems or business software suites that allow us to run computers or create documents (Windows)?
    Are trees “partners” in supplying oxygen?
  • MNOs tend to generate their revenues from “transaction-based business” (sale of SMS, data, voice calls), whereas margins on actual “transactions” for banks are thinning in most markets, and in some cases unprofitable in general.
    For banks, the question about the value of payments services is a burning one these days – especially for developed world banks, but also for the developing world as well.
    Deposit-taking and lending are major differentiating business lines of banks, although some MNOs and other parties are starting to make moves in this direction.
  • Physical Banking Channels
    Branch Networks
    Self-Service Machines (ATMs, teller machines)
    Partnership Models & Agency Banking
    “Branchless” Banking with Bank-Owned Channels/Personnel
    Vehicle Banks
    Container Banking
    Flash and Capacity-Management Service Channels

    Virtual Service Channels
    IVR Banking and Call-Centre Support / Banking
    Internet Banking (incl. Internet Banking Kiosks)
    Mobile Banking
    SMS Banking and Information Services for Consumers, Farmers, Business
    Merchant and Retail Payments, Support for the Supply-Chain
    Email Banking
    Physical Mail
    Television Banking
    Other Value-Added Services
  • Physical Banking Channels
    Branch Networks
    Self-Service Machines (ATMs, teller machines)
    Partnership Models & Agency Banking
    “Branchless” Banking with Bank-Owned Channels/Personnel
    Vehicle Banks
    Container Banking
    Flash and Capacity-Management Service Channels

    Virtual Service Channels
    IVR Banking and Call-Centre Support / Banking
    Internet Banking (incl. Internet Banking Kiosks)
    Mobile Banking
    SMS Banking and Information Services for Consumers, Farmers, Business
    Merchant and Retail Payments, Support for the Supply-Chain
    Email Banking
    Physical Mail
    Television Banking
    Other Value-Added Services
  • Physical Banking Channels
    Branch Networks
    Self-Service Machines (ATMs, teller machines)
    Partnership Models & Agency Banking
    “Branchless” Banking with Bank-Owned Channels/Personnel
    Vehicle Banks
    Container Banking
    Flash and Capacity-Management Service Channels

    Virtual Service Channels
    IVR Banking and Call-Centre Support / Banking
    Internet Banking (incl. Internet Banking Kiosks)
    Mobile Banking
    SMS Banking and Information Services for Consumers, Farmers, Business
    Merchant and Retail Payments, Support for the Supply-Chain
    Email Banking
    Physical Mail
    Television Banking
    Other Value-Added Services
  • ×