The document discusses collaboration between mobile network operators (MNOs) and banks, including potential strengths and weaknesses. It provides examples of current MNO distribution collaboration agreements and discusses partnerships to launch mobile near-field communication (NFC) services. The "trusted services manager" role is described to help manage NFC applications on SIM cards. Integration of MNO mobile money systems with banks is also examined from the perspective of the bank's business and the bank customer.

1. Distribution Approaches & Mobile
Collaboration Trends
Collaboration with MNOs & Other Intermediaries
Excerpts from discussion slides for an interactive session on collaboration (with focus
on MNO collaboration areas).
12 November 2012
Sandton - Johannesburg
South Africa
Dan Armstrong
dan.armstrong@takashimobile.com
+31 652 085 071

2. Contents
 A few types of collaboration, including partner bank case
studies
 Strengths & weaknesses in MNO collaboration, comparison of
business models.
 Developed World Case Study: the proposed “Sixpack” joint-
venture between banks & MNOs to launch NFC services
 Developing World Case Study: MNO & bank collaboration on
agency banking & integration with MNO Mobile Money (MM) e-
value systems
• From a business point of view
• From a customer point of view
Distribution Conference 11/2012 – Dan Armstrong – page 2

3. Some thoughts ..
 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, and in some cases
unprofitable in general.
 New/old players (VISA/MC, switching providers, MNOs,
aggregators) are moving quickly into the payments services
space.
 The question about the value of payments services for banks 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.
Distribution Conference 11/2012 – Dan Armstrong – page 3

4. Some Current MNO Distribution Collaboration Agreements in Place
 Traditional wholesale telco services (leased lines, corporate
products) – but not really “partnership” per se
 National short-codes
 Extra security for mobile banking, e.g. WAP, etc.
 Wholesale access (e.g. GSM service provider like
www.rabomobiel.nl)
 USSD mobile banking (requires connectivity to the SMSC)
 Airtime sales via mobile banking, branches, ATMs, agents, etc.
 etc.
Distribution Conference 11/2012 – Dan Armstrong – page 4

5. USSD (BPR example)
*150# BPR Mobile BPR Mobile Your BPR account
BPR Mobile Banking Please enter your Banking balance is:
BPR Mobile PIN. 1. Balance Enquiry 000,000.00 RWF
1. Balance Enquiry
2. Mini-Statement 2. Mini-Statement
Enter “9” to return
3. Money Transfer 3. Money Transfer
to the main menu.
4. Prepaid Airtime 4. Prepaid Airtime
5. Bill Payments 5. Bill Payments
6. Bank Services
6. Bank Services
7. Help
7. Help
Pease enter the Enter the amount Please confirm Money transfer
recipient BPR of money to be your money successful!
account or phone transferred: transfer: 000,000 RWF was
number registered 000,000 RWF will transferred to
for BPR Mobile be transferred to
you wish to
BPR Mobile Ref.
transfer money to:
No: 12345678
Enter “0” to confirm
transfer and send. Enter “9” to return
to the main menu.
Distribution Conference 11/2012 – Dan Armstrong – page 5

6. Clearly there are strengths associated with MNOs
MNOs are major players in each of our markets and collaborations
with them could be highly beneficial on multiple levels:
 Large networks of influence and activity (airtime sales
dealers, Mobile Money dealers)
 Large customer bases (although restricted to limited product
ranges)
 Substantial marketing power (multiple orders of magnitude
larger than ours normally, very high brand recognition)
 Well-funded (not always, but often have deep pockets)
At the same time, their business model is not the same as other
industries (like banking), so at times there have been issues with
trust, short-term/opportunistic commercial behaviour to get market
share, etc.
Distribution Conference 11/2012 – Dan Armstrong – page 6

7. But, it‟s important to realise ..
“The business interests of MNOs
might not always aligned with
those of the bank.”
Distribution Conference 11/2012 – Dan Armstrong – page 7

8. Thoughts on the 2 sorts of players in collaborations ..
Player: Category 1
”I have stuff I want to do via channels. Enable
Player: Category 2
bank account control, enable payments, provide ”I have a pipe and I want to monetise the
ticketing, sell ads, credit loyalty points, etc. and I investments I made in creating it. I want as much
need as many (cost effective) channels and pipes to get through that pipe and the (mobile) phones
to do it.” accessing it as possible.”
Distribution Conference 11/2012 – Dan Armstrong – page 8

9. Differing Business Models <?>
An MNO Business Model A Bank Business Model
 Invest in assets to realise profits  Invest in assets to realise value-
from activity/transaction-based based profits (there are
fees - exceptions of course). Longer-
minutes/SMS/kb/subscriptions. term/stable revenue from
 Costs: GSM licence, Radio / profitable, loyal customers,
Transmission Networks, Dealer multiple accounts, etc.
Network, Handset Subsidies  Often the most revenue comes
 Substantial revenue required to from high-value products:
cover new and continuing business products, mortgages,
investments, otherwise not really higher-value loans, etc.
worth-while. Especially true for  Key component in addition to
multi-country MNOs. profitability is managing costs over
 The more usage of mobile the long-term and choosing
phones the better, regardless of battles in distribution which don’t
segment, behaviour. bleed.
 The more usage of bank
products might lose the bank
money, depending on the
segment.
Distribution Conference 11/2012 – Dan Armstrong – page 9

10. A Few Types of Collaboration
Entity Provides Party treats the Partners Using
No Special Distribution other as a Assets as Joint-Ventures
Collaboration Services
(branded/white-labelled)
“supplier” „Partners‟
SIXPACK
MNOs
(airtime)
all Polish
banks
Distribution Conference 11/2012 – Dan Armstrong – page 10

11. Some Distribution Collaboration Discussions with MNOs
Integration between bank &
Bank branches as “Super
Bank branches as Dealer for MNO Mobile Money systems
Dealer’ for MNO airtime
MNO airtime (can include MM Agents as
dealers
cash-in/cash-out locations)
Bank branches providing
Bank Branches as “Super NMO MM Agents as collection
secure storage for MNO
Agent’ for MNO MM Agents points for loan repayments
airtime vouchers
MNO MM Agents as
provisioning points for new Joint-venture for (new)
??
accounts (sign-up, booking financial services or NFC
loans, etc.)
Distribution Conference 11/2012 – Dan Armstrong – page 11

12. Partnerships between MNOs & Banks to Launch Mobile NFC
Distribution Conference 11/2012 – Dan Armstrong – page 12

13. Partnerships between MNOs & Banks to Launch Mobile NFC
 Given the “natural fit’ between financial and telco services
required to deliver mobile NFC, there have been a large
number of partnerships discussed between banks and mobile
operators about how to jointly deliver / support this ecosystem.
Sixpack
 However, how many of these partnerships will survive
commercial launch?
• MNOs control the handset market in most countries
• Banks, other transaction brokers face higher costs in the near-term
• Retailers/loyalty/other VAS parties love the technology, but find it hard
to derive tangible business value (cost savings or increased sales or
loyalty) to-date.
Distribution Conference 11/2012 – Dan Armstrong – page 13

14. Elements of the SIM-based mobile NFC ecosystem
 NFC (SWP) Handsets
 NFC (SWP) UICC (SIM Card)
 NFC Mobile Payment Applications TSM
Role
 NFC Mobile Wallet Applications
 TSM Role (TRAVIK/Sixpack)
• Bank/SP Management, New Banks/SPs
• Life-Cycle & Memory Management
• OTA Capability & MNO Interface Management
• Certification & Compliance
 NFC POS, Other NFC Readers for NFC VAS
 NFC Customer Experience
• Other Value-Added NFC Handset Applications
• NFC POS Formulas & Combinations
 Brand & Marketing, Launch & Continuing Campaigns
Distribution Conference 11/2012 – Dan Armstrong – page 14

15. So many apps on SIM cards ... how to eliminate point-to-point chaos?
MNO
MNO
MNO
Distribution Conference 11/2012 – Dan Armstrong – page 15

16. The “Trusted Services Manager” Role
“Please ensure that
APPLICATION X gets
to USER Y on MNO Z.” MNO
“Trusted
Services
Manager”
MNO
Role
“Make sure that when
there are changes of any
sort required, that can be
managed securely MNO
and easily.”
Distribution Conference 11/2012 – Dan Armstrong – page 16

17. TRAVIK / Sixpack
Distribution Conference 11/2012 – Dan Armstrong – page 17

18. However, some hurdles ..
MNOs Banks
 Not clear how MNOs profit  Mobile NFC represents
from mobile NFC in the more cost for banks,
short term. retailers, public transport,
 No direct transaction loyalty companies in the
revenues short-term:
 More expensive handsets  More “cards” per customer
to manage, until whole world
 PR, innovation & (in the is 100% contactless
case of SIM usage) renting
SIM space …  Cost of acceptance
infrastructure
Distribution Conference 11/2012 – Dan Armstrong – page 18

19. Banks Integrating with Mobile Money Systems
 GSM operator “Mobile Money” systems (like M-PESA, Smart
Money, MTN Money and Airtel Money) provides some great
benefits to banks, but also perhaps some hidden risks.
Distribution Conference 11/2012 – Dan Armstrong – page 19

20. Strengths & weaknesses of MNO MM integration
Some Potential Positives Some Potential Negatives
Customers save time & money going to the Possible trust issues with MNO MM Agents
branch, queuing
Short-cut to building up full agency network Bank control of business processes, fraud, etc.
Helps secure MNO float deposit Higher number of steps to move money in & out,
as well as verify that transfer occurred
Can help support in locations where customers Transaction costs (bank & MNO wallet fees),
presently have cash availability issues presumably passed on to customer, not cheap
Great for currently salaried workers with bank
accounts more convenient cash-out points
 However, assessing the opportunities becomes clearer when
the two points of view are assessed separately:
1 2
MNO MM Integration MNO MM Integration
Bank Business Point-of-View Bank Customer Point-of-View
Distribution Conference 11/2012 – Dan Armstrong – page 20

21. Summary MNO MM Integration
Bank Business Point-of-View
 The bank getting trust accounts is great.
 Interoperability is great for bank customers (freedom to move
money where they’d like to), and can generate new
transaction revenues.
 Having loads of cash-in/cash-out Agents instantly available
without huge cost for the bank is great.
Distribution Conference 11/2012 – Dan Armstrong – page 21

22. MNO MM Integration Basic Components MNO MM Integration
Bank Business Point-of-View
 Accounts:
• Bank establishes a trust account (funded by MNO).
• Bank buys e-value and maintains an e-value ledger in the MNO system
• Bank maintains a collection account to reconcile each transaction
 Account set-up can be more complicated, based on MNO
requirements, etc.
 Each party provides (real-time) statements for the collection account
and the MNO e-value and will notify the other party of any
debit/credit to the collection account and/or e-value ledger.
Trust Acc Collection Acc E-value
Distribution Conference 11/2012 – Dan Armstrong – page 22

23. MNO MM Integration: Super Agency MNO MM Integration
Bank Business Point-of-View
 MNO MM Agent can buy e-value from bank branch staff, with the
cash credited to the collections account. e-value is then credited
to the individual MNO MM Agent e-value account by the bank.
 MNO MM Agent can sell e-value (request cash) from bank branch
staff, with the cash debited from the collections account.
 Fees for this service can be charged. (e.g. % charged to MNO MM
Agent for cash-in/cash-out)
 Requirements: training, devices in bank branches to effect transfers,
MNO needs real-time access to bank systems, reconciliation, etc.
Trust Acc Collection Acc E-value E-value
Distribution Conference 11/2012 – Dan Armstrong – page 23

24. MNO MM Integration: Interoperability MNO MM Integration
Bank Business Point-of-View
 Customers can transfer value from the bank account to their
MNO MM Wallet, and vice versa. This forms core functionality for
an MNO MM Agent cash-in/cash-out capability.
 Fees can be charged by MNOs for cash-out @ Agents,
transfers/payments, but cash-in is usually free. Fees charged by
banks for transfers, cash-out (teller, ATM), subscriptions, etc.
Trust Acc Customer Acc Collection Acc E-value E-value
Distribution Conference 11/2012 – Dan Armstrong – page 24

25. Cash-In & Cash-Out MNO Wallet Integration
Bank Customer Point-of-View
 Great for bank customers and can encourage people that do
not live near branches or ATMs to get an account.
 Resulting cash-in/cash-out opportunities for bank customers:
• MNO Wallet Systems: cash deposit/withdrawal
• ATMs: cash withdrawal
• Branches: cash deposit/withdrawal
• Other Agency Banking relationships
 Given the total amount of MNO MM Agents vs. bank branches
in many countries, it seems likely that remote customers will
more likely have opportunity to use MNO MM Agents.
Distribution Conference 11/2012 – Dan Armstrong – page 25

26. Why use a bank account over an MM wallet? MNO Wallet Integration
Bank Customer Point-of-View
I trust banks I want to make a
I want to earn a
holding my bill payment
I need to use a I want to earn loan, and the
money more only available
bank ATM interest bank offers me
than MNOs (or via bank
credit scoring
others) systems
Current Bank Customer New Bank Customer
• More convenient cash-out points nation- • Real bank account (vs. MNO MM wallet),
wide.  including interest % earned, loans. 
• Bank customers save time & money going • More convenient cash-out points nation-
to the bank branch, queuing.  wide. Saves time & money vs. branches.
• No need to begin a new relationship, build 
trust. (e.g. salaried workers)  • Question of trust in MNO MM wallet
system agents, business processes,
fraud, etc. 
• Relatively high no. of steps & transaction
costs to move money in & out, verify that
transfer occurred, similar transactions
possible. 
Distribution Conference 11/2012 – Dan Armstrong – page 26

27. Some Benefits & Drawbacks MNO Wallet Integration
Bank Customer Point-of-View
 Cash-in model to MNO MM wallets might be somewhat
cumbersome and more expensive.
 Multiple Apps, USSD menus, etc., short-codes, transaction
types (e.g. bank and individual menus for all MNOs, different
transaction steps, balance-checking models, callcentre support
for this, etc.)
 Motivation to move the funds, if customers can pay bills, make
transfers directly from MNO MM wallets
 Various fees to get the cash in/out of bank accounts
Distribution Conference 11/2012 – Dan Armstrong – page 27

28. Paying Bills Not the Key MNO Wallet Integration
Bank Customer Point-of-View
 In many developed markets electronic bill payments and
automatic payment schemes are in place for most channels
already.
 In many developing markets, usually the same bill payments
are available with a CA as with MNO MM systems. Other banks
offer similar bill payment services, or will soon.
 Core services are usually enjoyed by all players: money
transfer
 Some MNOs and bank competitors are leading in these bill
payment services anyway. Intermediaries (e.g. switches) also
sort payments for many banks at the same time.
Distribution Conference 11/2012 – Dan Armstrong – page 28

29. Thank You
Distribution Conference 11/2012 – Dan Armstrong – page 30