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Mobile Money


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An overview presentation from 2010 around mobile money

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Mobile Money

  1. 1. CITI MOBILE UPDATE MARCH 24, 2010 Dion F. Lisle Executive Vice President Citi Growth Ventures
  2. 2. Full Disclosure•  I work in Citi Growth Ventures•  I am not a real banker – I just work at a bank•  I worked for Obopay – a mobile payments startup•  I belong to 12 different mobile groups on LinkedIn•  I have worked in technology as a non-technologist for 20 years and the past 10 in startups.•  I love gadgets (my iPad is already on order)2
  3. 3. Time Flies I will There is Google Elapsed Time = 1 Year an app that for that
  4. 4. Mobile Background
  5. 5. Phone Interaction SMS 160 Character limit APPLICATION Download to Phone Not guaranteed delivery Simple Requires Discoverability No download to phone High level of functionality Brand able App Stores changed WAP everything Wireless Internet Covers 60% of phones Not easy to use Doesn’t require Phone Carrier Cooperation 5
  6. 6. Phone OS Wars This is NOT the PC Wars – Eventually you will wish it was6
  7. 7. What Makes a Smartphone Smart ?
  8. 8. Smartphone Vendors
  9. 9. Good Business for Apple Apple’s iPhone is 6% of the market but 32% of profit
  10. 10. Unabashed Commercial for the Greatest Mobile Device EverNo I am not a Paid Spokesperson – just a fan
  11. 11. Thoughts Before Apple Launched the iPhone“We’ve learned and struggled for a few “$500? Fully subsidized,years here figuring out how to make a with a plan? It is thedecent phone. PC guys are not going most expensive phoneto just figure this out. They’re not in the world and itgoing to just walk in.” doesn’t appeal to business customers because it doesn’t have a keyboard…….So, I kinda look at that and I say, well, I like our “”The iPhone is nothing more than a strategy, I like it a lot.” luxury bauble that will appeal to a few gadget freaks.” “Apple is slated to come out with a new phone….And it will largely fail.”
  12. 12. 1 2 3 Fly to NYC Kill Time on Check email for Flight Video Check Weather UAL Alerts Game and for NYC Music Find Train from Take Pictures JFK to Mid- and email to 7 4 Town Family 5 Text Look Up Kids Restaurant on and go LocalEats Recharge Check Into to Bed Hotel 6 iPhone and 8 Listen to Music12
  13. 13. iTunes as an App Delivery MechanismTotal Active Apps (currently available for download): 159,611Number of Active Publishers in the US App Store: 32,183App Submissions This Month (Games): 2,009 ( 84 / day ) This Month (Non-Games): 14,387 ( 599 / day ) This Month (Total): 16,396 ( 683 / day ) Current Average Overall Price: $2.85 Most Popular Categories 1 - Books (28705 active) 2 - Games (24551 active) 3 - Entertainment (20656 active) 4 - Education (11056 active) 5 - Utilities (9788 active)13
  14. 14. iPhone Drives Mobile Web UsageActivity iPhone Smartphone MarketAny news or info via browser 84.8% 58.2% 13.1%Accessed web search 58.6% 37.0% 6.1%Watched mobile TV and/or video 30.9% 14.2% 4.6%Watched on-demand video or TV programming 20.9% 7.0% 1.4%Accessed Social Networking Site or Blog 49.7% 19.4% 4.2%Listened to music on mobile phone 74.1% 27.9% 6.7%Source: M:Metrics
  15. 15. AT&T Investment Pays Off•  30% of US consumers who purchased Apple iPhone 3G in the summer of 2008 switched from other mobile carriers to join AT&T, –  47% switched from Verizon Wireless –  24% switched from T-Mobile –  19% switched from Sprint.•  3G iPhone Impact on the SmartPhone Market –  Pre-3G iPhone – Apple’s share was 11% –  Post-3G iPhone – Apple’s share was 17%15
  16. 16. Not just in the USA Japan has enjoyed the most advanced mobile phones for years – with the exception of Apple – every phone in their top 10 list is made in Japan
  17. 17. What Apple Taught Us A Great User Experience is Key Build a Complete Ecosystem Partner with the Carriers
  18. 18. The Network 2G 2nd Generation GSM or TDMA/CDMA 3G Digitally Encrypted 3rd Generation Digital NOT Analog GSM / EDGE / UMTS and CDMA2000 1G Signal could decay slowly Capable of Data and 4G Voice Simultaneously 100% IP Packet Enabled Being rolled out now Smoother roaming and transitions between networks Still mostly being developed by standards bodies
  19. 19. The Downside to Success•  AT&T has taken a great deal of grief for their network speed•  Verizon took advantage of the opening with an ad that plays up the weakness of AT&T 3G•  Note: The iPhone accounts for most of the traffic usage on AT&T
  20. 20. Global SMS v 3G - Disparity 120 Singapore Philippines 100 United States Hong KongSMS Usage – SMS Sent per 80 U.K.Subscriber per Month 60 India Canada Spain 40 Mexico 20 Czech Brazil 0 0% 5% 10% 15% 20% 25% 3G Penetration – As a % of All Subscribers 20
  21. 21. Mobile SensitivitiesSensitivities for Each Attribute PERFORMANCE SECURITY FUNCTIONALITY•  Caching •  Encryption •  Business Rules•  Concurrency •  Intrusion Detection •  Expectations•  System Throughput •  Code Security •  User Experience•  Thin Client: Avg,. Web •  Role Based Security page size •  Authentication•  Thick Client: Data refresh •  URL Spoofing rate •  Audit Trail VARIABILITY MODIFIABILITY PORTABILITY•  Product Scalability •  3rd Party Integration •  Hardware Compatibility•  Hardware Scalability •  Change Configuration •  OS Compatibility •  Application Compatibility21
  22. 22. Carriers Want…… New Revenue Sources Avoid being a big dumb pipe Less churn – more customer loyalty Less Regulation Reduction in CapEx – big investment in networks New customers – often at the expense of current customers
  23. 23. Mobile Money
  24. 24. Mobile Money Taxonomy Mobile Commerce Mobile Banking Mobile Mobile Bank Account BillPay By M-CouponsAdvertising Payments Services Phone Proximity Remote Payments Payments NFC or Contactless Transit P2M P2P P2M Money Transfers
  25. 25. A Three Level Basis to Offer Mobile Financial Services Platform Progression Technology Enablers Handset III. Network Capability Development Advanced: location-based Handset Modification services (LBS), Most networks not 5-10% of Phones contactless capability, yet enabled for Equipped to handle full-featured browser, Advanced Services Advanced Services mobile social networking 50-60% coverage II. of wireless data 40-60% of Phones Thick/ Progressive: connections already equipped to Thin Peer-to-peer payments, sufficient to support handle Progressive investments/trading, richer Progressive Services rewards management services I. Most networks ~95% of Phones support Basic SMS Basic Consumer Mobile Financial Services: Equipped to handle Services; SMS is a Account balances, bill presentment/payment, Basic Services standard feature marketing response, basic rewards Service Progression
  26. 26. Mobile today is a cluttered arena with multiple stakeholders Regulators Technology Finance Drivers Mobile Ecosystem Ecosystem Geographies Pvt GTS Cards Retail Bank
  27. 27. Mobile Money Ecosystem Payment Networks Chipset Handset Card Maker Processor Maker Associations Card Issuer SIM Mobile Merchant Card Card Carrier Acquirer Software Consumer POS Developer Mobile Vendor Applications
  28. 28. Around the World
  29. 29. Across the Globe – Mobile Financial Services are Growing The number of consumers using Mobile Financial Services across the world is forecast to grow to nearly 1 Billion by 2014 Market Leader Market Leader 15 MillionMarket Leader U.S. consumers use mobile banking services each month 100% Growth In number of customers using mobile to access Barclays’ banking services in the U.K. in the first 6 months of 2009 3.5 Million Bank of America customers are active users of BofA’s mobile banking services 35 Million Mobile handsets with Osaifu-Keitai NFC payments and eWallet capabilities in Japan $61 MillionMarket Leader Was deposited by USAA Federal Savings Bank customers via mobile $200 Million check capture in only 6 weeks $140 Million Handled per month by GCash and Smart Money in the Philippines by the end of 2008 Value of transactions handled 3 Years by M-Pesa in Q3 2008 Before mobile banking is Market Leader predicted to surpass Internet banking for Banco do Brasil Market Leader
  30. 30. Kenya•  Kenya has a population of 40 million people•  Kenya has 300,000 landlines•  Kenya has nearly 4 million internet subscribers•  Kenya has nearly 20 million mobile phone subscribers•  Kenya has a Per Capita income of $1,400•  Kenya has nearly 9 million mobile money users –  It is estimated that 40% of Kenyan Adults use the MPESA service.•  MPESA has changed the financial lives of millions of Kenyans.
  31. 31. The Secret to MPESA’s success in Kenya•  Nearly 14,000 Agents –  By the time you read this it has probably grown by 5%•  A Human ATM Network across Kenya – Rural and Urban Reality – Mom goes Brochure – Send Mom to an agent to pick up Money Anywhere the Money
  32. 32. Be an MPESA Agent Research by: Mark Pickens, Sarah Rotman, Ignacio Mas, Olga Morawczynski
  33. 33. Mobile Payments in ME and Africa to Rise to $5 + Billion in2013
  34. 34. The Philippines•  The Philippines has 2 successful mobile money systems –  Gcash – offered by Globe Communications –  Smart Money – offered by SMART Communications•  Like MPESA in Kenya – the Philippines relies on a network of incented and trained agents•  Unlike Kenya – the central bank was very involved in the design and rollout of Mobile Payments in the Philippines. –  In accordance with BSP Circular 471, which was issued in January 2005, non-bank agents must first attain a Remittance Agent license to perform cash in/out.•  The Philippines has been a Texting country since the advent of their mobile phones – this Texting literacy made the transition much easier.
  35. 35. India – The RBI Weighs In•  Mobile Payment in India - Operative Guidelines for Banks•  2.1 Only such banks which are licensed and supervised in India and have a physical presence in India will be permitted to offer mobile payment services to residents of India.•  2.2 The services should be restricted to only to bank accounts/ credit card accounts in India which are KYC/AML compliant.•  2.3 Only Indian Rupee based services should be provided.The RBI only took 12 pages to outline what can and can’t be done with mobile payments in India.
  36. 36. Osaifu-Keitai (Mobile Wallet)•  Japan is the most advanced Mobile Money Market in the World !•  NTT DoCoMo drove the entire ecosystem to deliver a complete Mobile Wallet –  Get on a train, buy a soda, pay at a store………•  It is the unique dynamics of the Japanese Market that allowed such a complete solution to be delivered•  Even with NTT driving – it took 10 years•  30 million users out of a subscriber base of 60 million•  Osaifu Keitai is accepted at 700,000 retail locations
  37. 37. Felica Market in Japan30% 27% 2007 200825% 22% 22% Prepaid (plastic)20% 17% Ministry of Internal Affaires, 200915% Prepaid and eMoney usage (to total10% 9% population)! 7% 5% 0% eMoney Prepaid eMoney (mobile) eMoney Holder IC card Mobile (mobile) (plastic) 60 Suica, Pasmo… Edy Others Total 56 50 50 45 14 39 13 40 36 4 34 12 Felica Market Size 4 12 both Prepaid 30 12 3 12 (plastic) and 2 1 2 eMoney (mobile)! 20 38 33 30 22 25 10 21 0 2005 2006 2007 2008 2009 2010 B USD Yano Institute, 2008 C Media, 2006
  38. 38. eMoney Usage in Japan Successful – Yes Complex - Definitely Monthly Issued (in mobile, Service type Vendor #shop (M) transaction Charging touch point (pre- (MM) MM) (MM) paid) Negative points note Credit card, Bank, POS, Charger, 5000 websites accept Edy for Bitwallet Point exchange payment. Rakuten obtained over Edy Pre-paid (Rakuten 48.4 8.0 132.0 22.5 50% of Bitwallet shares in Nov. Group) 2009. Creditcard, Bank, POS, Ticket Suica (Kanto area), Icoca (Kansai area), Mobile Suica requires 10USD for vending machine, Point exchange, and other e-money issued by train annual service fee. Suica Pre-paid JREast 27.5 1.5 63.2 USB Reader/Writer with JRE credit companies are becoming interoperable card, Auto top up with JRE credit interoperatable. 42.9 card Charger, Ticket vending machine ICOCA Pre-paid JRWest 4.7 unavailable 49.2 0.9 Charger, Auto top up with credit card No mobile service is provided so far. Convertible with Suica. PASMO Pre-paid Pasmo 13.5 unavailable 50.0 POS, Seven BK ATM, Charger, IY Charging/accept point is limited in Seven Transaction number is the largest nanaco Pre-paid Seven I 7.9 0.9 23.5 26.0 Card (credit card) group shops and cards. among eMoney. Aeon BK ATM, POS, Charger, Auto Available at McDonalds WAON Pre-paid Aeon 10.0 n.a. 29.0 25.3 top up from Aeon bank account - Currently other carriers dont implement *Shows # of available terminal Docomo, iD in their handsets. One handset can instead of # of shop. iD Credit 10.0 6.4 390* n.a. SMVC.. have 2 card numbers of iD. Railway companies in - No mobile service is provided so far. PiTaPa Credit Western Japan 1.1 unavailable 18.0 0.9 - AU pre-loads this into some handsets.QUICPay Credit JCB, Toyota 4.6 n.a. n.a. n.a. One handset can have only 1 cardVISATOUCH - One handset can have 5 card numbers. /SmartPlus Credit MUFJ Nicos 0.8 n.a. 12.8 n.a. Total 128.5 16.8 377.7 118.5
  39. 39. Felica Types in JapanPre-paid (cost reduction) Pre-paid - Edy (SONY, Rakuten). Transaction fee at Transportation companiespayment. Not profitable. Rakuten got 50% ofBitwallet (Edy issuer) shares in Nov. 2009. JR group JR compatibleRakuten also bought eBank in Feb. 2009.-  Suica (JR East), PASMO and ICOCA (Bus,Subway). Reduce maintenance cost of autoticket gate and ticket itself. Now JRE isleveraging it to payments (plastic & mobile). Pitapa is Post-paid- Nanako and Waon (merchants). Fast cashingand reward points to loyal customers Other MerchantsPost-paid (not widely accepted)•  NTT Docomo launched iD on Docomohandsets. Fee at transaction. They became anissuer of credit card and network provider for Post-Paid other credit card companies.•  JCB provides its electronic credit, called QuickPay. Available on all 3 carriers.•  VISA and MUFJ also provide its scheme called Pay pass is still trial in JapanSmart Plus and its convertible with VISA Touch.
  40. 40. Overseas Lessons So Far……•  Carriers offer successful services – so far no banks have been successful•  Regulators have been both active (Philippines) and nearly invisible (Kenya)•  Texting based services rule the day… far –  This is self-selecting as Smartphones have not yet proliferated in underbanked countries. –  Except Japan•  Low ATM penetration combined with high mobile penetration –  Except Japan•  Domestic remittances is the best use case so far. –  Except Japan
  41. 41. At Citi
  42. 42. Primary Bank Relationship Primary Bank RelationshipThe five Money Transferpillars of Debit Card Regular Savings Auto deposit PayrollRetail Bill PayPayments andDeposits aresupported bythe 3 keytechnologychannels ATM Mobile Internet ATM, Mobile and Internet channels allow Citibank to maintain stickiness with customers through their primary bank relationship
  43. 43. Citi Mobile – Current Banking Suite Building on our 2007 head start, this year is seeing an unprecedented push forward Downloadable Downloadable Mobile Browser Text Banking Citi Mobile (Original) Citi Mobile iPhone app (aka “Thin Client” or (aka “SMS” for Short-Message Service, or (aka “Thick Client”) Bank launched February 2009; “Citi Mobile for smart phones”) “MyCiti On Demand”) Bank launched April 2007 Cards-only access coming 4Q09 Bank launched June 2009; Cards launched March, 2009; Cards-only access coming 4Q09, Bank support coming 1H10•  First major U.S. bank to offer a behind joint “front door” with Bank •  Adapted the original Citi Mobile downloadable banking app for use as a native app on iPhone; •  Cards customers can request •  For Cards-only customers, support for Cards-only users is •  Built on Citibank Online and AO balances, recent activity, locationsCards opened access Oct 2008 being added 4Q09 behind a joint technology, but optimized for mobile •  Bank accounts coming 1H10, on same through Firethorn app “front door” with Bank browsers short code of MYCITI (692484)•  Bank and Cards apps available • Available on iTunes and on the •  No downloads, installation, updates •  Phase 2 (2H10): to AT&T and Sprint customers App Store or enrollment—sign on with CBOL or “Actionable Alerts” (e.g.. “Minimum as well as to Verizon, T-Mobile AO User ID and Password •  View bank/cards account info, payment of $10.00 is due 2/7/09 on loan and Alltel BlackBerry users make transfers, pay bills, find •  View more account info (bank / 574. Reply PAY to make payment.”) •  View account info, make branch/ATM automatically, one- cards / brokerage), transfer funds,transfers, pay bills, find branch/ touch to reach Customer Service add payees, pay bills, self-service ATM, connect to Customer options, find branch/ATM and Service connect to Customer Service Citibank Online Business: Citi Mobile Citi Internal Copyright © 2009 43 Citigroup Inc.
  44. 44. SMS versus Application Be Honest – which do you prefer ?44
  45. 45. Citi Mobile – What’s Next3 Strategic Initiatives: 1 2 3Location Based Services (LBS) Near-Field Communication (NFC) Peer to Peer Payments (P2P) Tap &Pay : World’s largest NFC trail in Obopay: A Silicon Valley P2P service that Bangalore, India. Goal is to validate customer allows clients and customers to send and acceptance of technology, pioneer definition of receive money using their mobile phones. Citi and business model for contactless payment made a strategic equity investment in the ecosystems, and capitalize on resulting brand- company in 2007 (3.1% equity stake) and shift partnered with Obopay to bring Citi-Obopay ventures to market in the US. Citi wants to be a leader in being Ubiquitous for our customer’s and client’s financial needs
  46. 46. Tradeoffs•  Customers require Easy to •  Money transfer products are Use Services under attack from external fraudsters•  Customers demand convenience from their banks •  Mobile is an unknown dimension to a bank’s security•  The average bank customer is teams NOT an 18 year old heavy mobile user, but a 38 year old •  Banks can not afford negative light mobile user headlines in regards to mobile payments. Easy & Secure46
  47. 47. Mobile Risk Management•  New Risk – most banks don’t have true mobile expertise, but it is growing•  Old rules don’t always work –  Citibank required a 6 digit alphanumeric PIN as compared to Obopay’s 4 digit PIN. •  Go Ahead – Try Alphanumeric on your non-QWERTY phone InfoSec View Business View47
  48. 48. Weekly Mobile Money Project Meetings•  Weekly project call had over 50 participants from INSIDE of Citibank•  To ensure compliance, the team included –  ARR – Audit Risk Review –  Compliance •  Two groups – legal and internal policy –  Information Security •  Two groups – Business and IT –  Financial Accounting –  Legal – 2-3 lawyers every week –  Financial Risk –  Operations –  Marketing of many kinds –  And more…………………………………
  49. 49. LBS Fraud Prevention•  Imagine that you have a payment service, such as a benefit card that can only operate when you are near it. LBS Based Fraud Prevention 2 Miles Rules Away 500 Feet Radius The system sees a Transaction out of your Geographic Range You get a Text requesting Authorization
  50. 50. Amazing….but True•  A carrier in Mozambique issued tokens for airtime that became accepted as Currency because their national currency was devaluing so quickly. –  There are other examples of airtime as currency•  Nokia says “Nokia should get a percentage of every transaction carried on one of it’s devices.”•  The MPESA service failed in Afghanistan due to illiteracy –  No one could read the text messages•  A mobile payment service in Latin America claimed 1 million users –  1 million registrations led to less than 30,000 users