Better Than Cash: How Governments, Donors, & the Private Sector can support Mobile Money & Mobile Banking
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This presentation was given during the 2nd Indian Ocean / South Asia Mobile Payments & Banking Summit in Dhaka, Bangladesh. It provides an update on the Better Than Cash Alliance, how it can benefit those supporting mobile banking, mobile money, and mobile payments as well as the benefits to joining this effort. Note that some slides here came from the Better Than Cash Alliance and the other slides were added by the author and do not necessarily reflect the views or opinions of the Better Than Cash Alliance.
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Better Than Cash: How Governments, Donors, & the Private Sector can support Mobile Money & Mobile Banking
- 2. Relying on cash is Relying on cash is part of what keeps part of what keeps poor people poor poor people poor
- 3. Rationale for the Better Than Cash Alliance • An alliance of Governments, Private Sector, and Development Organizations to create a global movement from cash to electronic payments; • Billions of dollars in cash payments are made every day in emerging and developing economies for salaries, to suppliers, for pensions and social welfare, relief etc. • With appropriate digitization of these payments both payee and payer can have great benefits... 3
- 4. Digital money can bring five main social benefits – Cost Savings: decrease costs of cash or in-kind payments. – Transparency: increase accountability and tracking, reducing corruption and theft. – Security: typically safer and faster delivery. – Financial Inclusion: can accelerate access to financial services. – New Market Access: open doors for new business models for previously excluded people. 4
- 9. USAID’s Kenya Transition Initiative shifted to mobile money payments using M-Pesa’s online bulk payment system & saved almost 60% on disbursement costs 9
- 10. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Better Than Cash: How Governments, Donors, & the Private Sector can support Mobile Money USAID/Philippines - MABS Program •Microenterprise Access to Banking Services (MABS) Program provided technical assistance and training to rural banks to develop their capacity to expand access to banking services starting in 1997. •In an effort to expand outreach & improve efficiency of banking services, work started with mobile money issuers in 2004.
- 11. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Better Than Cash: How Governments, Donors, & the Private Sector can support Mobile Money Benefits of the Collaboration Mobile Money Issuer •Technical assistance and R&D •Work with regulators •Pilot testing of new services USAID (Donor) •Leveraging of resources •Technical platform Project Recipient •Greater Efficiency •Lower Costs •Improved Outreach
- 12. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Better Than Cash: How Governments, Donors, & the Private Sector can support Mobile Money Over 1,100 rural bank agent outlets More than 390,000 new clients served Over PhP 17 Billion ($400 million) in mobile money enabled banking transactions
- 13. Barriers to maximizing the benefits Barriers to maximizing the social benefits of digital money across stakeholders include: A. Building a robust reliable infrastructure, that is standardized and interoperable B. Regulatory barriers to innovation C. Staff capacity to implement digital money 13
- 14. Some additional challenges to maximizing the benefits include E. Govts: Political will – as there is resistance from vested interests and a need for coordination F. Govts & Businesses: Social norms – trust that money is there; habits about how money is used G. Govts & Businesses: Financial education - to manage complex financial lives H. Individuals: Costs – they need to be affordable I. All: Over promising - this is not a silver bullet for poverty reduction 14
- 15. Benefits, Barriers, and Strategies to Stakeholder Benefits Barriers Strategies Governments • • Shift Transparency Financial • • Coordination Communicating to citizens • Understand and monitor payment patterns before shift management • Changing regulation/procedures • Build roadmap for payment system • Security • Clientelism • Support transition • Relevant skills • Coordinate policy messages • Asses cost of cash • Identify opportunities to innovate and monitor results Private • Financial • Costs faced for partial • Participate in national forums Sector/ FSPs management automation • Invest in record-keeping systems • Security • Lack of standardized and • Coordinate with other actors inexpensive interfaces • Absence of legal certainty Development • Transparency • Change costs • Improve donor agency capacity Community/ • Security • Improve recipient capacity • Improve processes and formals new Funders ways of working • Develop codes of conduct for data management and sharing Individuals • Security • Building trust • Building capacity • Privacy • Learning new systems • Speed/timeliness • Ensuring low costs • Cost/convenience 15
- 16. How Better than Cash Alliance Accelerates the Shift Advocacy for shifting government benefits, humanitarian assistance, payroll and supplier payments from cash to electronic payments. Catalyzing policy, technical and financial assistance to identify and implement effective approaches for local market conditions. Development of cutting-edge knowledge products (case studies, good practices manuals and peer learning) to drive the shift to electronic payments globally. 16
- 17. Joining the Better than Cash Alliance Governments, development organizations, and private sector companies must commit to shifting significant volumes of payments and to sharing their learning. Those which join are then: 1.Recognized for leadership in the Better than Cash Alliance publications and media. 2. Invited to participate in learning opportunities. 3. Given access to the latest research and case studies. 4.Eligible for technical assistance and/or funding to support the shift, as appropriate. 17
- 18. Committing Entities to Date Governments Committed Multi-Lateral Development Organizations Republic of Afghanistan UNDP Republic of Colombia (Department USAID of Social Prosperity) World Food Programme Republic of Kenya (Ministry of Finance) Civil Society Organizations/ Republic of Peru (Department of ACDI VOCA Development and Social Inclusion) CARE Republic of the Philippines Chemonics International (Department of Budget and Concern Worldwide Management) Grameen Foundation Mercy Corps 18
- 19. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Better Than Cash: How Governments, Donors, & the Private Sector can support Mobile Money Lessons Learned Win-Win Proposition: Mobile Money Operators can benefit by working with other partners such as donors & governments to support mobile money transfers & mobile payment ecosystems Properly structuring partnerships is key Value propositions need to be worked out between all partners Integrating mobile money with other regular payments as well as is useful to expand take up Communication, education, and marketing using real use cases is key, especially in markets where mobile money is new
- 20. For Better Than Cash see http://betterthancash.org/ For information on Mobile Money for Development see http://mobilemoneyfordevelopment.wordpress.com or my Twitter Feed @jvowens 20
Editor's Notes
- The Better Than Cash Alliance is a partnership of Governments, the Private Sector and Development Organizations – including multilateral, bilateral and NGOs - who are committed to shifting their cash payments to electronic payments, which range from mobile wallets to bank accounts This shift is important because it saves money and increases transparency and accountability for these partners but perhaps more importantly it means that clients for the first time have access to a safe place where they can save and build assets and have access other appropriate financial services. If you have not heard of it before that is not surprising because it was only recently launched! The Founding Members of the Alliance are The Bill and Melinda Gates Foundation, Citi, Ford Foundation, Omidyar Network, USAID, and Visa, with UNCDF as the Secretariat. Join me as we show a brief video that was shown was shown at the launch.
- Why Shift to Electronic Payments Cost Savings : decrease costs of cash or in-kind payments. In Brazil, when Bolsa Familia grants were made through electronic payment cards, administrative costs were cut from 14.7% to 2.6% In Mexico, welfare recipients who got paid electronically saved 77% in travel costs compared to those who were paid at central cash depots. In the Philippines, GCASH Remit mobile money service is used to help the government provide conditional cash transfers to hundreds of thousands of families not able to be serviced in rural areas. Transparency : increase accountability and tracking, reducing corruption and theft. In Afghanistan, when National Police received their salaries via mobile phones, they that they had received a 30% raise—whereas they were just receiving their full wages for the first time. In Argentina, when there was a shift to electronic payment cards, those admitting to paying bribes decreased from 3.6% to 0.3%. Security : typically safer and faster delivery. Following the earthquake in Haiti, electronic vouchers cut aid delivery time by 3 days while mobile money cut aid delivery time by 7 days. In Kenya, people have been voting for electronic with their mobile phones. Now those sending money home to the country from the city send it via M-Pesa rather than bus drivers—getting it there more quickly and with greater certainty. Financial Inclusion : can accelerate access to financial services. In Peru, people receiving social welfare payments electronically now have the opportunity to save and build assets in those accounts established for receipt of these payments. New Market Access: open doors for new business models for previously excluded people. In Ghana, over 300,000 people were able to get access to insurance to help them with cover funeral expenses which are a social obligation—and an expensive one—obtained through the mobile network operator Tigo Mercy Corps is launching Agri-Fin Mobile, which will enable hundreds of thousands of smallholder farmers on two continents greater access to mobile financial services bundled with mobile farm productivity information. In the Philippines, BPI Globe BanKO has opened up more agent locations in one year than any other bank in the country and has opened up more than 200,000 mobile money enabled bank accounts within the first 8 months of operations.
- The USAID/Philippines MABS Program was one of the longest running microfinance projects spanning almost 15 years from 1997 – 2012 and is now continued by the Rural Bankers Association of the Philippines http://www.rbapmabs.org. For a video on the 15 year history of the program go http://www.youtube.com/watch?v=n-Zo2tx1FDo or read the final report online at http://mabs4finalreport.wordpress.com The basic objective was to work with the rural banking sector to expand outreach to microentrepreneurs and low-income households to provide a broader outreach of financial services. During the 15 year history, the rural banking sector provided approximately US$1 billion in microfinance loans to some 1 million microentrepreneurs, opened up over 900,000 savings accounts, and provided microinsurance services to over 350,000 clients and their family members. In 2004, the program began to utilize mobile money platforms in order to expand outreach and improve efficiency of banking services for low income households.
- Over the 8 years working with mobile money issuers, donors and project recipients, we learned a lot about what works and the benefits and value propositions to all parties. First, you need to ensure that there are economies of scale between the development effort and the mobile money issuer. In the case of the Philippines, the USAID project was working to support the Rural Bankers Association of the Philippines (RBAP). An organization that supported over 500 rural banks that provided services to over 6 million Filipinos. Globe Telecom on the other hand was providing services to over 25 million Filipinos and had recently started to provide the GCASH mobile money platform. At the time, they were not focusing on the unbanked sector and were focusing initially on competing with credit card companies for payments at merchants and international remittances. Benefits to the Mobile Money Issuer - Working alongside the MABS program, they received free guidance and research and development as they tested this new platform in a new market. RBAP and its MABS program also had a long track record with the Central Bank working on financial inclusion. The regulator was very open to expanding this service to expand access to the unbanked, especially since RBAP proposed the idea to the regulators. Pilot testing was implemented with the support of all parties but it was much easier for the mobile money issuer to work with an experienced team that knew the banking sector well, understood how to work with the sector, and closely supported compliance standards. USAID’s MABS program likewise benefited from leveraging scarce project resources in a true public-private partnership. The program also benefited from having access to a platform that the project was able to work on modifying. With guidance from the MABS program, Globe GCASH made several key changes that made it easier to access to provide banking services in a more secure fashion. The rural banks and their clients also benefited from lower cots, greater efficiency, and in certain cases, imrpoved outreach.
- From 2005 until mid-2012, the MABS program worked closely with rural banks and Globe’s GCASH to accredit 73 rural banks with over 1,100 rural bank branches and other banking offices to provide a range of mobile money enabled banking services including Text-A-Payment, Text-A-Deposit, Text-A-Withdrawal, Text-A-Remittance, and Text- A-Salary and started work on Text-A-Bill Payment. The project also supported GXI to facilitate greater access to G2P payments using the GCASH Remit service through accredited rural banks. Almost 400,000 clients were reached during the 7 year period and these banks transacted over PhP 17 billion (US$400 Million) in mobile money enabled banking transactions.
- Advocacy for shifting includes engagement at conferences, high level meetings, closed-door meetings. The policy, technical, and financial assistance will be made available primarily through a Technical Assistance Facility that is under development. It will also include support for peer learning, so that lessons learned can be shared, enabling shifts to be made more quickly and easily. The BTCA is about to launch its action research programme that will generate in the next 18 months case studies and diagnostic tools. The first research product is available in the form of a white paper which can be downloaded from the website www.betterthancash.org.
- Although launched in September, BTCA already has commitments to make the shift to electronic payments from the governments of Afghanistan, Peru, Colombia, Kenya, and the Philippines. Other stakeholders too have made their commitments: from bi- and multi-lateral organizations, commitments have come in from USAID, UNDP and the WFP. From the non-government organizations and the private sector, ACDI VOVA, CARE, Mercy Corps, Concern Worldwide, Grameen Foundation and Chemonics International Inc. have led the way
- The overall lessons we have learned working with over seven mobile money operators and providing training to dozens of mobile money issuers, banks and donor projects are the following: If structured properly, collaboration between mobile money operators, banks, donors, governments, and project partners can all benefit with a real win-win proposition. Donors and governments can expand their outreach, reduce costs, and provide more secure services. Mobile money issuers can likewise benefit from greater support and fast tracking of mobile money ecosystems. To do this, properly structured partnerships with clear guidelines for all parties are essential. In the case of the Philippines and in Afghanistan, the projects both benefited from clearly defined agreements that were properly supported and monitored by all parties. Value propositions for all partners along the value chain are important since everyone must benefit. Clients must have greater access at overall reduced costs (including full transaction costs), development partners must see clear benefits, and mobile money providers should learn some valuable lessons and see progress in terms of clientele and increased active usage. We all learned that mobile money cannot survive in most places just on one or two use cases but should also be integrated and accepted in places where people make regular payments such as utility bills. This was the one area that most clients usually mention is quite useful to include. In the Philippines, we see the number and amount of transactions changing over time as more billers are added as people keep more money in their wallets and handle larger and more numerous regular transactions. For all of us, we have learned the importance of financial education and the importance of communication and marketing these services. Aside from MPESA, the importance of regular marketing by demonstrating and sharing real use cases is key.