Will Mobile Payments Ever Replace Cash in the Last Mile? Where, when, and how?

Mobile Payments SeriesTM
Will Mobile Money ever replace cash in the Last Mile?
Where, When, and How?

Menekse Gencer
Mail: mgencer@mpayconnect.com
Skype: meneks80 January 7, 2010
Company: www.mpayconnect.com

mPay Connect Consulting
Linked In: Mobile Payment Series – mPay Connect

Menekse Gencer Background
• 16 years in Wireless, High Tech, and Financial Services

• PayPal Mobile: Led Business Development. Closed PP’s first mobile deal (Sprint “Send Money”)

• mPay Consulting: US prepaid mobile operator, SKTelecom, Citi, Wells Fargo, EARN

• Board Member of Mobile Money Africa, Conference Speaker MMT Dubai, Philippines

• Wharton MBA ‘98, Harvard BA Economics ’93

• Triathlete, Bay swimmer, Local singer, Dive Master, Avid traveler

For more information
mgencer@mpayconnect.com
www.mpayconnect.com
www.twitter.com/mpayconnect
Mobile Payments SeriesTM ©mPay Connect, Inc.
January 2010 2 mgencer@mpayconnect.com

Agenda

1. Landscape of Mobile Financial Services &
“The Last Mile”
2. Developed World: Lessons from cards
3. Emerging Markets: Opportunities and
challenges
4. G-Cash Example
5. Panel


What are the “First” and the “Last” Miles?
Money In Money Out
“First Mile” “Last Mile”

Customer Mobile Money Transfer
(P2P & Remittances)
Account
Salary
Pensions (Mobile Wallet)
Remittance
Mobile & Retail Purchases
Credit/Loans
Held by
Financial Institution
or Mobile Operator
or 3rd Party

Alerts Mobile Bill Payment
Balance
History
©mPay Connect, Inc.


Agenda

“The Last Mile”
challenges
4. G-Cash Example
5. Panel


What does it take to replace cash?
Card History (100+ years)
1800 1850 1900 1950 2000 2010

Company Money Travelers’ Charge 1 mill Profitable
Amex is formed orders checks Cards Card
Holders

First BankAmerica Visa Global 1 bill
Visa Revolving Card Brand ATM Visa
Credit (retail) (later Visa) Network cards

Visa: 44% credit market share
48% debit market share Non-Cash retail
payments in US =
Over 1 billion card holders, millions of merchants 15% in 1979
to 40% in 2000
Visa Annual Opex: $3.4 bill
Sales, Marketing, and promotions: ~ $1 billion
Source: Slideshare.net “Credit Card History”, Form 10K Visa, Nov. 20, 2009

The U.S.: #1 in credit and debit card usage

• By 2010, US cardholders = 181 million
(Source: Census Bureau)

• Average American = 5.4 cards. 1:10 > 10 credit cards
(Source: Experian marketing insight snapshot, March 2009)

• In 15 years, debit card 1%  50% non-cash transactions
(Source: Tower Group, August 2009)

• 84% of students have credit cards
(Source: Sallie Mae, April 2009)

• Today, 50% of college undergraduates have 4 or more credit cards
(Source: Sallie Mae, April 2009)

…and we still have 116 billion cash transactions in the US!!!!
Or nearly half of all payments transactions
Mobile Payments SeriesTM mPay Connect, Inc.

Agenda

“The Last Mile”
challenges
4. G-Cash Example
5. Panel


Mobile Money Transfer (P2P)
1.7 Billion unbanked mobile users (2012)
In 2 years, mPesa Kenya went
from 0 to 8+ million users!!!!

Afghanistan

Examples of live or on-going projects in Africa (MMT)
• Kenya: Safaricom launched M-Pesa in partnership with Vodafone Kenya
• Kenya: Zain is re-launching ZAP, their mobile money product; Telkom is preparing
the launch of Orange Money
• Uganda: MTN has launched MTN Mobile Money
• Uganda: Uganda Telecom is investigating mobile financial services with Redknee
• Monitise has received a grant to launch mobile financial services in East Africa
• DRC: Celpay (bank) launched an M-banking offering
• DRC: Zain is initiating talks with the BCC and has partnered with Citibank
Tanzania
• Ghana: Flash me cash is a mobile banking solution that has been launched in
Source: Edgar Dunn, March 2009
Ghana and Nigeria
• Ivory Coast: MTN has launched their mobile money offer, Orange Money was
launched as well
• Nigeria: Zain, MTN, MoneyBoxAfrica are all active present
• Tanzania: Vodacom launched the M-Pesa product in the market
Source: Amarante Consulting Intelligence


Mobile Money Transfer systems

Cash Agent Sender Mobile Money Transfer Receiver Cash Agent
Converts cash to mMoney From one mobile subscriber to another Converts mMoney to Cash



What’s the problem with cash-in and cash-out?
The economics issue
Share of operating expenses
for a mobile [bank] (illustrative)

. .
90%
Agent Commissions

.
80%

70%

. .
60%
Share of opex

50%

40%

. . . .
. . . . .
30%
Registrations Costs for

. .
20%
Marketing New Customers
Costs SIM Card Costs/Agent
10%
Acquisition, Call Center /
0% Licensing
1 2 3 4 5
years Consumers pay fee

MNO gives 30% to cash-in agent
Mobile banking and new business models (some additional thoughts) and 30% to cash-out agent
by Kabir Kumar: Thursday, November 12, 2009


Attacking the cash-out problem by replacing
cash with mobile payments in “The Last Mile”

“The Last Mile”
Cash Agent Sender Mobile Money Transfer Receiver
Converts cash to mMoney… OR From one mobile subscriber to another
Salary deposited directly to account

In traditional card models,
“The Last Mile” Merchant pays 1% to 2% to card network


Turning the “last mile” from a
cost to a revenue
MMT Revenue from Electronic Wallet
Revenue Payment Provider Revenue
.25%
to 3% Interchange
Profit
Cash Out X%
Mobile Payment
Commissions

Merchant Operations
X%
Cash In Receives
Commissions

Losses x%

Platform
Costs, Opex Transaction
Expense
X%
Profit


For mobile operators and remittance co’s,
there’s a white elephant in the room…

Agents = Mobile Payments =
Commissions paid out Free to Payment provider

MMT mPayments
Cash-in/Cash-out Cash out no longer needed

TopUp at Agent location TopUp remotely over phone



For merchants and consumers,
old habits die hard unless there’s a real reason to change!

Fees
Lack of Ubiquity
Liquidity issues
Behavioral change
Challenges Anonymity
MNO Agent (channel) conflict

Safety / Security
Faster/ More Convenient Opportunities
Privacy
Better management &
tracking



Agenda

“The Last Mile”
challenges
4. G-Cash Example
5. Panel


Recent experience with G-Cash

One of the oldest mobile payments systems (started in Oct. 2004),
but few merchants accept


Agenda

“The Last Mile”
challenges
4. G-Cash Example
5. Panel


Will mobile payments ever replace cash in the “last mile”?
Our Panelists

Thor Hauge Toffene B Kama Ben Lyon
Vice President President, Willstream Exec. Director
Western Union Frontline SMS: Credit
Digital Ventures (Mobile) Mobile money initiative for formal financial services to the 'last mile‘
remittances in 160 characters or less

Menekse Gencer, Moderator
President
mPay Connect Consulting
©mPay Connect, Inc. Bus. Dev. & Product Strategy


Thank you!

Linked In Group: “Mobile Payments Series – mPay Connect”

Menekse Gencer: mgencer@mpayconnect.com
www.mpayconnect.com
www.twitter.com/mpayconnect

www.mpayconnect.com


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