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Mobile Money Transfer Conference: Dubai 2009

            Addressing the Unbanked in Developed Markets
                 with Mobile Money Transfer Services




                  IMF



Menekse Gencer
Mail: mgencer@mpayconnect.com                                      MMT Conference
Skype: meneks80                                                             Dubai
Company: www.mpayconnect.com                                        October 28, 2009
mPay Connect Consulting

      Menekse Gencer
      • 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

      • Mobile Payments SeriesTM Producer (co-hosted by Harvard & Wharton Alumni Clubs)

      • Linked In Group: Mobile Payments Series – mPay Connect for upcoming panel events

      • Wharton MBA ‘98, Harvard BA Economics ’93

      For more information
      mgencer@mpayconnect.com
      www.mpayconnect.com
      www.twitter.com/mpayconnect
Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                          ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets             2                      mgencer@mpayconnect.com
with Mobile Money Transfer Services
Addressing the Unbanked in Developed Markets
             with Mobile Money Transfer Services


             • Defined
             • Why care?
             • Who are they and why are they unbanked?
             • MMT: How is it different than and similar to emerging markets?
             • Key principles to consider
             • Case study




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009             ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets             3         mgencer@mpayconnect.com
with Mobile Money Transfer Services
Definitions


            Developed Market: 40 countries identified as “Advanced Economies” by IMF (& CIA)
             •   Australia        •   Netherlands       •   Canada           •   Ireland           •   San Marino[20]   •   Finland        • * Andorra
             •   Germany          •   Spain             •   Iceland          •   Portugal          •   United Kingdom   •   Japan          • Faroe Islands
             •   Malta            •   Belgium           •   Norway           •   Taiwan            •   Denmark          •   Slovakia       • Monaco
             •   South Korea      •   Hong Kong         •   Switzerland      •   Czech Republic    •   Italy            •   France         • Bermuda
             •   Austria          •   New Zealand       •   Cyprus           •   Israel            •   Singapore        •   Luxembourg     • Holy See
             •   Greece           •   Sweden            •   Ireland          •   San Marino[20]    •   United States    •   Slovenia       • Liechtenstein




            Unbanked: no checking or savings account with a financial institution (Edgar, Dunn)

            Under-banked: have a checking or savings account with a financial institution, but
            they are still heavy users of non-bank financial products (e.g., check cashers) (Edgar, Dunn)




*The CIA has a modified version of an old version of the IMF's list of Advanced Economies. The CIA notes that the IMF's Advanced Economies list "would presumably also cover"[15] some smaller countries.


 Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                                                                                             ©mPay Connect, Inc.
 Addressing the Unbanked in Developed Markets                                                            4                                                          mgencer@mpayconnect.com
 with Mobile Money Transfer Services
Agenda


             • Defined
             • Why care?
             • Who are they?
             • MMT: How is it different than and similar to emerging markets?
             • Key principles to consider
             • Case study




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009             ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets               5       mgencer@mpayconnect.com
with Mobile Money Transfer Services
Why Care?
                                                                       1. Big Market

                                                                                           EU (25)= 116 mm**

                                    US = 70mm
                                    to 111mm*




Source: Ages 18 and over. Unbanked and Underbanked. * Edgar Dunn & CFSI, ** EU 2008 Financial Exclusion Study

 Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                                         ©mPay Connect, Inc.
 Addressing the Unbanked in Developed Markets                                                     6             mgencer@mpayconnect.com
 with Mobile Money Transfer Services
Why Care?
                    2. Highest Mobile Penetration Rates



       Highest
       Penetration
       Rates



     In US, 65% of
     unbanked have a
     mobile phone
     Source: CFSI




                          Source: ITU


Mobile Money Transfer Conference, Dubai: Oct. 28, 2009       ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets             7   mgencer@mpayconnect.com
with Mobile Money Transfer Services
Why Care?
                                      3. Need financial services

                                           Phases of Financial Services for
                                            (Unbanked) Migrant Workers

                         1. Initial                   2. Savings &               3. Stable                 4.
                        Settlement                      Transfer                Settlement            Consolidation


                  •Hand-to-Mouth                 •Accrue savings         •Accrue savings     •Manage finances (such as
                  •Cash checks                   •Remit                  •Accrue credit      retirements savings) to build
                  •Receive money                                                             generations in new country




Source: EU 2008 Financial Services Exclusion Study
Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                                ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets                         8                                mgencer@mpayconnect.com
with Mobile Money Transfer Services
Why Care?
              4. Open to non-banks for money matters




         Source: Edgar, Dunn & Company research, August 2007. Data based on U.S. previously banked




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                               ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets                             9                           mgencer@mpayconnect.com
with Mobile Money Transfer Services
Agenda


             • Defined
             • Why care?
             • Who are they?
             • MMT: How is it different than and similar to emerging markets?
             • Key principles to consider
             • Case study




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009             ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets               10      mgencer@mpayconnect.com
with Mobile Money Transfer Services
Who are they?
             Average American vs. Unbanked American

                   Average American                           Unbanked American
                  • Credit / Debit = 56%                      • Cash = 75%
                  • Most = 5.4 credit cards in wallet         • Most = no credit card
                  • Average = $55k / yr                       • Average = $25K / yr
                  • Less likely to remit                      • Share financial resources

                  • Older                                     •   Skews young
                  • Substantial credit history                •   No credit history
                  • 87% non-immigrant                         •   Majority are ethnic
                                                              •   Family in LatAm (Hispanic sub-segment)

                  • Average SMS & Low WAP                     • High SMS & WAP
                  • Fixed Line phones                         • No fixed line phone
                  • PCs at home                               • No PC at home



Source: Edgar Dunn Study

Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                      ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets             11                                 mgencer@mpayconnect.com
with Mobile Money Transfer Services
Who are they?
                                  Average Unbanked European


                                                     Unbanked European
                                                 •    Lower income / Unemployed
                                                 •    Skews young
                                                 •    Single Parent
                                                 •    Migrant workers




Source: EU 2008 Financial Services Exclusion Study

Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                            ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets                     12               mgencer@mpayconnect.com
with Mobile Money Transfer Services
Agenda


             • Defined
             • Why care?
             • Who are they?
             • MMT: How is it different than and similar to emerging markets?
             • Key principles to consider
             • Case study




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009             ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets               13      mgencer@mpayconnect.com
with Mobile Money Transfer Services
Considerations for MMT

                                         Network
              Regulatory                  Effect                      Value Chain              Business
           Environment?               (customers and                     and                Case & Ops?
                                       places to use)                partnership
                                                                       model?
                                      What services to roll
             How will cash in and                                                           Costs and Revenues?
                                     out? What’s needed?
                 cash out be                                           Who are they?          Churn Reduction?
                                         Geography?
                 conducted?                                         Market Share/Power?      Strategic Reasons?
                                     Banked or Unbanked?
              Conducive toward                                        Retail footprint?     Implications toward
                                       Current behavior?
                    MFS?                                             Relationship with          other P&Ls?
                                        Mobile Usage?
              How to work with                                          customer?                Org design?
                                           What UI?
                    bank?                                                 Brand?             Exec commitment?
                                     How to achieve critical
            Limitations of MNOs?                                     Interoperability?
                                     mass/network effect?
                                      Agent Commissions?

                                                                        M
                                                                                        F
                                                                             Platform   I
                                                                        N       Co.
                                                                        O




   ©mPay Connect, Inc.                                               MNO? Platform Co.?



Mobile Payments Series Kickoff                                                               ©mPay Connect, Inc.
Sept. 3, 2009                                                  14                            mgencer@mpayconnect.com
How is it different?
                                                Regulatory not as much of a hurdle
      Regulatory not as much of a hurdle
                                                30%
                                                           Mobile Domestic Money Transfers: Hurdles to growth
            % of Survey Respondents




                                                25%



                                                20%



                                                15%



                                            10%



                                            5%



                                            0%
                                                      Consumer     Regulatory   Business   Cash in / Cash   Security    Poor fit   Ecosystem   Risk   Usability     Agent
                                                      acceptance                 Model      Out Model                    with                                     Onboarding
                                                                                                                        existing
                                                                                                                        banking
                                      (1) (2)   Source: 2008 EDC/GSMA                                                  system in
                                                                                                                        country

Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                                                                                     ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets                                                                15                                             mgencer@mpayconnect.com
with Mobile Money Transfer Services
Customers to use v.s.
                                        Places to use

                          Customers to use             Places to use



                       Banked    Unbanked             Banked        Unbanked
                   • Value Proposition?           • Commission structure?
                   • User Interface ?             • Speed of settlement?
                   • Data service usage?          • Points of presence?




         ©mPay Connect, Inc.


Mobile Payments Series Kickoff                                      ©mPay Connect, Inc.
Sept. 3, 2009                                16                     mgencer@mpayconnect.com
Similar to?
                              Customer: migrant workers




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009        ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets             17   mgencer@mpayconnect.com
with Mobile Money Transfer Services
Similar to?
                        Customer: Cash-based population




    Source: Edgar, Dunn & Company research, January & April 2008 (based on 347 unbanked respondents)




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                                 ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets                            18                             mgencer@mpayconnect.com
with Mobile Money Transfer Services
Similar to?
      Customer: Skews toward lower income (<50% average)




     Source: Edgar, Dunn & Company research, January & April 2008 (based on 347 unbanked respondents in US)




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                                        ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets                            19                                    mgencer@mpayconnect.com
with Mobile Money Transfer Services
Similar to?
                 Customer: Money Transfer is important

                 Remittance Senders without Bank Accounts
                            Do you have a bank                       No
                            account?                                                                                      75 % of Mexican
                            Mexico                                   75.20%                                                 remittance
                            Honduras                                 70.70%                                               senders have no
                            Guatemala                                68.80%
                                                                                                                           bank account
                            El Salvador                              64.30%
                            Columbia                                 53.00%
                            Nicaragua                                49.30%
                            Cuba                                     41.70%
                            Dominican Republic                       38.00%
      Source: data reported from survey of immigrants in NY, LA, Miami commission by the author, administered by Emmanuel Sylvestre and Assoc.
      Partial results reported in Orozco, Manuel (2004), Distant but close: Guyanese transnational communities and their remittances from the U.S.,
      Inter-American Dialogue, Washington DC, January 2004




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                                                                       ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets                                           20                                                    mgencer@mpayconnect.com
with Mobile Money Transfer Services
How is it different?
                     Customer: Adoption may be harder
                      Distinguishing between access to finance and use
                                                    Users of formal
                                                   financial services
                                                                                                         No Need
                                                                                 Voluntary
                                                                               Self-Exclusion
                                                                                                Cultural / religious reasons
                                                                                                not to use / indirect access
                     Population

                                                                                                   Insufficient income /
                                                                                                          High risk
                                                         Non-users of
                                                       formal financial
                                                           services
                                                                                                      Discrimination
                                                                                Involuntary
                                                                                 exclusion
                                                                                                Contractual / Informational
                                                                                                        framework

                        No access to financial services
                                                                                                 Price / product features
                        Access to financial services


Source: World Bank

 Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                                     ©mPay Connect, Inc.
 Addressing the Unbanked in Developed Markets                             21                                mgencer@mpayconnect.com
 with Mobile Money Transfer Services
How is it different?
                              Places to use: Already exist




                                       Source: Aite Group 2007, United Nations, Western Union




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                          ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets                   22                               mgencer@mpayconnect.com
with Mobile Money Transfer Services
M
                  F
       Platform   I
   N      Co.
   O



                                How is it different?
                      Less do-it-alone, more FI partnerships
                                             Who’s in the Driver’s Seat?



                            MNO-                           JV or                       FI-
                            Driven                       3rd Party                   Driven
                                              • Market Power, Brand Power, & Footprint
                                              • Regulatory environment in geography
                                              • Existing infrastructure in region




                       ©mPay Connect, Inc.



Mobile Payments Series Kickoff                                                            ©mPay Connect, Inc.
Sept. 3, 2009                                                23                           mgencer@mpayconnect.com
M
                         F
            Platform     I
     N         Co.
     O

                                            How is it different?
                                       Sophisticated value chain with
                                           many players already
                                                         Transaction
                        Cost of     Electronic Wallet    Expense and
                       Purchase     Provider Revenue    “Blended Mix”
         .25%
                   Interchange
         to
         4%                               Profit
                                           X%

                                                          Credit &
                                                                        • MNO?
                                                         Debit Card
                       Recipient        Operation                       • Platform Provider?
                         Gets               s                           • Agent Network for
                                           X%                           Cash-in and Cash-out?
                       (Merchant
                       or Person)
                                        Losses x%        PIN Debit
                                        Transacti           ACH
                                           on
                                        Expense           Pre-Paid
                                           X%             (Cash In)




©mPay Connect, Inc.

 Mobile Payments Series Kickoff                                                                 ©mPay Connect, Inc.
 Sept. 3, 2009                                              24                                  mgencer@mpayconnect.com
Agenda


             • Defined
             • Why care?
             • Who are they?
             • MMT: How is it different than and similar to emerging markets?
             • Key principles to consider
             • Case study




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009             ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets               25      mgencer@mpayconnect.com
with Mobile Money Transfer Services
Key Principles for MMT for Unbanked
                           in Developed World

                                                    Principles
      1. Unbanked = sum of sub-segments (may be more similar to emerging markets)

      2. May have voluntary exclusion from banks, but pay a lot for services elsewhere

      3. Dynamics of market = sophisticated FI infrastructure

      4. Alternative competitors and partners

      5. Baby steps  customer adoption




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                 ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets             26            mgencer@mpayconnect.com
with Mobile Money Transfer Services
Agenda


             • Defined
             • Why care?
             • Who are they?
             • MMT: How is it different than and similar to emerging markets?
             • Key principles to consider
             • Case study




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009             ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets               27      mgencer@mpayconnect.com
with Mobile Money Transfer Services
Case Study:
                       MMT for the Unbanked in the US




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009        ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets             28   mgencer@mpayconnect.com
with Mobile Money Transfer Services
Unbanked market in the US


                                                      Banking Status

                                                  Under-banked
                                                   56 Mill             Banked

                                                  Unbanked
                                                                      111 Mill
                                                  52 Mill




                                   Source: CFSI




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                           ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets                     29              mgencer@mpayconnect.com
with Mobile Money Transfer Services
US = #1 country in remittances sent
                                …and many are unbanked
                                                  (and have mobile phones)


           U.S. Immigrant Population and Outgoing Flows of Remittances


                   U.S. 2006 Demographics                                          Total in USA                            34,860,000
                                                                                                         75%
                                                                                      Mexico                                9,600,000
                                                                                                       unbanked
                                13%                                                    China                                1,900,000
                                                                                    Philippines                             1,700,000
                                                                                        India                               1,610,000
                 87%                                                                 Vietnam                                1,200,000
                                                                                        Cuba                                1,100,000
                                                  Immigrants        Source: United Nations, International Organization for Migration, US Census


      Source: World Bank. Orozco, Manuel (2004)




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                                    ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets                   30                                         mgencer@mpayconnect.com
with Mobile Money Transfer Services
The poorest pay the most


                            Average fees for the Unbanked in U.S.
                            1. Remittance = $20 fee
                               Domestic Money Transfer = $10 fee
                               Prepaid cards = $4.95 reload fee
                               Prepaid cards = $3.00 cash out

                            2. Check Cashers = Up to 12% of check value paid in fees

                            3. Non-bank locations = $2 to $5 convenience fee for bill payment

                            4. No bank relationship = No way to grow credit

                            5. No bank account = Resort to cash-in-hand as method to control finances




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                     ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets               31                              mgencer@mpayconnect.com
with Mobile Money Transfer Services
But over 60% have mobile phones




Mobile Money Transfer Conference, Dubai: Oct. 28, 2009        ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets             32   mgencer@mpayconnect.com
with Mobile Money Transfer Services
Summary

                            1. Large opportunity

                            2. Money transfers needed (senders of remittances)

                            3. Today’s alternatives costly and inconvenient

                            4. Unbanked = sum of sub-segments

                            5. May have voluntary exclusion from bank

                            6. Dynamics of market = sophisticated FI infrastructure

                            7. Alternative competitors and partners

                            8. Baby steps  customer adoption



Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                                ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets               33                         mgencer@mpayconnect.com
with Mobile Money Transfer Services
Thank you!
                                                    Questions?




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

                                                   Menekse Gencer
                                              mgencer@mpayconnect.com


Mobile Money Transfer Conference, Dubai: Oct. 28, 2009                    ©mPay Connect, Inc.
Addressing the Unbanked in Developed Markets             34               mgencer@mpayconnect.com
with Mobile Money Transfer Services

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Mobile Money for the Unbanked in Developed Markets

  • 1. Mobile Money Transfer Conference: Dubai 2009 Addressing the Unbanked in Developed Markets with Mobile Money Transfer Services IMF Menekse Gencer Mail: mgencer@mpayconnect.com MMT Conference Skype: meneks80 Dubai Company: www.mpayconnect.com October 28, 2009
  • 2. mPay Connect Consulting Menekse Gencer • 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 • Mobile Payments SeriesTM Producer (co-hosted by Harvard & Wharton Alumni Clubs) • Linked In Group: Mobile Payments Series – mPay Connect for upcoming panel events • Wharton MBA ‘98, Harvard BA Economics ’93 For more information mgencer@mpayconnect.com www.mpayconnect.com www.twitter.com/mpayconnect Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 2 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 3. Addressing the Unbanked in Developed Markets with Mobile Money Transfer Services • Defined • Why care? • Who are they and why are they unbanked? • MMT: How is it different than and similar to emerging markets? • Key principles to consider • Case study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 3 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 4. Definitions Developed Market: 40 countries identified as “Advanced Economies” by IMF (& CIA) • Australia • Netherlands • Canada • Ireland • San Marino[20] • Finland • * Andorra • Germany • Spain • Iceland • Portugal • United Kingdom • Japan • Faroe Islands • Malta • Belgium • Norway • Taiwan • Denmark • Slovakia • Monaco • South Korea • Hong Kong • Switzerland • Czech Republic • Italy • France • Bermuda • Austria • New Zealand • Cyprus • Israel • Singapore • Luxembourg • Holy See • Greece • Sweden • Ireland • San Marino[20] • United States • Slovenia • Liechtenstein Unbanked: no checking or savings account with a financial institution (Edgar, Dunn) Under-banked: have a checking or savings account with a financial institution, but they are still heavy users of non-bank financial products (e.g., check cashers) (Edgar, Dunn) *The CIA has a modified version of an old version of the IMF's list of Advanced Economies. The CIA notes that the IMF's Advanced Economies list "would presumably also cover"[15] some smaller countries. Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 4 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 5. Agenda • Defined • Why care? • Who are they? • MMT: How is it different than and similar to emerging markets? • Key principles to consider • Case study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 5 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 6. Why Care? 1. Big Market EU (25)= 116 mm** US = 70mm to 111mm* Source: Ages 18 and over. Unbanked and Underbanked. * Edgar Dunn & CFSI, ** EU 2008 Financial Exclusion Study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 6 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 7. Why Care? 2. Highest Mobile Penetration Rates Highest Penetration Rates In US, 65% of unbanked have a mobile phone Source: CFSI Source: ITU Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 7 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 8. Why Care? 3. Need financial services Phases of Financial Services for (Unbanked) Migrant Workers 1. Initial 2. Savings & 3. Stable 4. Settlement Transfer Settlement Consolidation •Hand-to-Mouth •Accrue savings •Accrue savings •Manage finances (such as •Cash checks •Remit •Accrue credit retirements savings) to build •Receive money generations in new country Source: EU 2008 Financial Services Exclusion Study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 8 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 9. Why Care? 4. Open to non-banks for money matters Source: Edgar, Dunn & Company research, August 2007. Data based on U.S. previously banked Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 9 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 10. Agenda • Defined • Why care? • Who are they? • MMT: How is it different than and similar to emerging markets? • Key principles to consider • Case study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 10 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 11. Who are they? Average American vs. Unbanked American Average American Unbanked American • Credit / Debit = 56% • Cash = 75% • Most = 5.4 credit cards in wallet • Most = no credit card • Average = $55k / yr • Average = $25K / yr • Less likely to remit • Share financial resources • Older • Skews young • Substantial credit history • No credit history • 87% non-immigrant • Majority are ethnic • Family in LatAm (Hispanic sub-segment) • Average SMS & Low WAP • High SMS & WAP • Fixed Line phones • No fixed line phone • PCs at home • No PC at home Source: Edgar Dunn Study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 11 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 12. Who are they? Average Unbanked European Unbanked European • Lower income / Unemployed • Skews young • Single Parent • Migrant workers Source: EU 2008 Financial Services Exclusion Study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 12 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 13. Agenda • Defined • Why care? • Who are they? • MMT: How is it different than and similar to emerging markets? • Key principles to consider • Case study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 13 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 14. Considerations for MMT Network Regulatory Effect Value Chain Business Environment? (customers and and Case & Ops? places to use) partnership model? What services to roll How will cash in and Costs and Revenues? out? What’s needed? cash out be Who are they? Churn Reduction? Geography? conducted? Market Share/Power? Strategic Reasons? Banked or Unbanked? Conducive toward Retail footprint? Implications toward Current behavior? MFS? Relationship with other P&Ls? Mobile Usage? How to work with customer? Org design? What UI? bank? Brand? Exec commitment? How to achieve critical Limitations of MNOs? Interoperability? mass/network effect? Agent Commissions? M F Platform I N Co. O ©mPay Connect, Inc. MNO? Platform Co.? Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 14 mgencer@mpayconnect.com
  • 15. How is it different? Regulatory not as much of a hurdle Regulatory not as much of a hurdle 30% Mobile Domestic Money Transfers: Hurdles to growth % of Survey Respondents 25% 20% 15% 10% 5% 0% Consumer Regulatory Business Cash in / Cash Security Poor fit Ecosystem Risk Usability Agent acceptance Model Out Model with Onboarding existing banking (1) (2) Source: 2008 EDC/GSMA system in country Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 15 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 16. Customers to use v.s. Places to use Customers to use Places to use Banked Unbanked Banked Unbanked • Value Proposition? • Commission structure? • User Interface ? • Speed of settlement? • Data service usage? • Points of presence? ©mPay Connect, Inc. Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 16 mgencer@mpayconnect.com
  • 17. Similar to? Customer: migrant workers Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 17 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 18. Similar to? Customer: Cash-based population Source: Edgar, Dunn & Company research, January & April 2008 (based on 347 unbanked respondents) Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 18 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 19. Similar to? Customer: Skews toward lower income (<50% average) Source: Edgar, Dunn & Company research, January & April 2008 (based on 347 unbanked respondents in US) Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 19 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 20. Similar to? Customer: Money Transfer is important Remittance Senders without Bank Accounts Do you have a bank No account? 75 % of Mexican Mexico 75.20% remittance Honduras 70.70% senders have no Guatemala 68.80% bank account El Salvador 64.30% Columbia 53.00% Nicaragua 49.30% Cuba 41.70% Dominican Republic 38.00% Source: data reported from survey of immigrants in NY, LA, Miami commission by the author, administered by Emmanuel Sylvestre and Assoc. Partial results reported in Orozco, Manuel (2004), Distant but close: Guyanese transnational communities and their remittances from the U.S., Inter-American Dialogue, Washington DC, January 2004 Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 20 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 21. How is it different? Customer: Adoption may be harder Distinguishing between access to finance and use Users of formal financial services No Need Voluntary Self-Exclusion Cultural / religious reasons not to use / indirect access Population Insufficient income / High risk Non-users of formal financial services Discrimination Involuntary exclusion Contractual / Informational framework No access to financial services Price / product features Access to financial services Source: World Bank Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 21 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 22. How is it different? Places to use: Already exist Source: Aite Group 2007, United Nations, Western Union Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 22 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 23. M F Platform I N Co. O How is it different? Less do-it-alone, more FI partnerships Who’s in the Driver’s Seat? MNO- JV or FI- Driven 3rd Party Driven • Market Power, Brand Power, & Footprint • Regulatory environment in geography • Existing infrastructure in region ©mPay Connect, Inc. Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 23 mgencer@mpayconnect.com
  • 24. M F Platform I N Co. O How is it different? Sophisticated value chain with many players already Transaction Cost of Electronic Wallet Expense and Purchase Provider Revenue “Blended Mix” .25% Interchange to 4% Profit X% Credit & • MNO? Debit Card Recipient Operation • Platform Provider? Gets s • Agent Network for X% Cash-in and Cash-out? (Merchant or Person) Losses x% PIN Debit Transacti ACH on Expense Pre-Paid X% (Cash In) ©mPay Connect, Inc. Mobile Payments Series Kickoff ©mPay Connect, Inc. Sept. 3, 2009 24 mgencer@mpayconnect.com
  • 25. Agenda • Defined • Why care? • Who are they? • MMT: How is it different than and similar to emerging markets? • Key principles to consider • Case study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 25 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 26. Key Principles for MMT for Unbanked in Developed World Principles 1. Unbanked = sum of sub-segments (may be more similar to emerging markets) 2. May have voluntary exclusion from banks, but pay a lot for services elsewhere 3. Dynamics of market = sophisticated FI infrastructure 4. Alternative competitors and partners 5. Baby steps  customer adoption Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 26 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 27. Agenda • Defined • Why care? • Who are they? • MMT: How is it different than and similar to emerging markets? • Key principles to consider • Case study Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 27 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 28. Case Study: MMT for the Unbanked in the US Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 28 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 29. Unbanked market in the US Banking Status Under-banked 56 Mill Banked Unbanked 111 Mill 52 Mill Source: CFSI Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 29 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 30. US = #1 country in remittances sent …and many are unbanked (and have mobile phones) U.S. Immigrant Population and Outgoing Flows of Remittances U.S. 2006 Demographics Total in USA 34,860,000 75% Mexico 9,600,000 unbanked 13% China 1,900,000 Philippines 1,700,000 India 1,610,000 87% Vietnam 1,200,000 Cuba 1,100,000 Immigrants Source: United Nations, International Organization for Migration, US Census Source: World Bank. Orozco, Manuel (2004) Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 30 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 31. The poorest pay the most Average fees for the Unbanked in U.S. 1. Remittance = $20 fee Domestic Money Transfer = $10 fee Prepaid cards = $4.95 reload fee Prepaid cards = $3.00 cash out 2. Check Cashers = Up to 12% of check value paid in fees 3. Non-bank locations = $2 to $5 convenience fee for bill payment 4. No bank relationship = No way to grow credit 5. No bank account = Resort to cash-in-hand as method to control finances Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 31 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 32. But over 60% have mobile phones Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 32 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 33. Summary 1. Large opportunity 2. Money transfers needed (senders of remittances) 3. Today’s alternatives costly and inconvenient 4. Unbanked = sum of sub-segments 5. May have voluntary exclusion from bank 6. Dynamics of market = sophisticated FI infrastructure 7. Alternative competitors and partners 8. Baby steps  customer adoption Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 33 mgencer@mpayconnect.com with Mobile Money Transfer Services
  • 34. Thank you! Questions? mPay Connect Consulting Services Linked In Group: “Mobile Payments Series – mPay Connect” Menekse Gencer mgencer@mpayconnect.com Mobile Money Transfer Conference, Dubai: Oct. 28, 2009 ©mPay Connect, Inc. Addressing the Unbanked in Developed Markets 34 mgencer@mpayconnect.com with Mobile Money Transfer Services