Using Mobile Money to Promote Financial Inclusion in Pakistan

Using Mobile Money to Promote Financial Inclusion in Pakistan
Imran Khan and Naeha Rashid

www.karandaaz.com.pk
© 2015 Karandaaz Pakistan. All Rights Reserved.
2
CURRENT STATE OF FINANCIAL INCLUSION
MOBILE MONEY
OTC AND M-WALLETS
AGENTS
OPPORUNITIES: INCREASING M-WALLET UPTAKE

3
Pakistan’s Financial Inclusion numbers are improving according to
most sources
8%
7%
2013 2014
InterMedia
n = 6000 (individuals)
Adults 15+
Financial inclusion is defined as “having a
registered account with a financial
institution that provides a full suite of
financial services.”
World Bank
n = 1000 (individuals)
Adults 15+
Financial Inclusion is defined as “having an
account either by oneself or together with
someone else, at a bank or another type of
financial institution, or having personally
used MM in the past 12 months.”
State Bank of Pakistan
n = 10,000 (households)
Adults 18+
“Formally served”
*To be released In 2015
10%
13%
2011 2012 2013 2014
ACCESS TO FINANCE
10%
23%
2008 2009 2010 2011 2012 2013 2014 2015
FINANCIAL INCLUSION
INSIGHTS
FINDEX

4
Variations in Financial Inclusion numbers can be explained by
definitional differences
8%
1%
0.3%
5.7%
8.7%
5.8%
0%
2%
4%
6%
8%
10%
12%
14%
16%
FII 2014 FINDEX 2014
Bank account (registered) Non-bank Financial Institution Account (registered)
Mobile Money Account (used in the previous 90 days) OTC (used in the previous 90 days)
Financial Institution Account alone or with some else (registered) Mobile Money Service (personally used in the last 12 months)
*Numbers do not account for double counting

5
13%
31%
34% 34%
53%
83%
14%
34%
46%
51%
54%
62%
PAKISTAN BANGLADESH NEPAL BHUTAN INDIA SRI LANKA MIDDLE EAST SUB
SAHARAN
AFRICA
SOUTH ASIA LATIN
AMERICA &
CARRIBEAN
DEVELOPING
COUNTRIES
WORLD
Yet, despite significant progress, Financial Inclusion in Pakistan is low
in comparison to regional and global standards
SHARE OF ADULTS WITH AN ACCOUNT – FINDEX 2014
SOUTH ASIA
23%

6
Some groups are more financially excluded than others
GENDER
LOCATION
%AGE OF POPULATION THAT IS FINANCIALY INCLUDED
7%
13%
23%
20%
Men are 3x more likely to be
financially included than women
Urban dwellers are 1.5x more likely to
be financially included than rural
dwellers

7
While half of all adult Pakistanis took loans in the last year,
only 5% borrowed from formal financial institutions
Family and
friends
46%
Shopkeeper
42%
Bank/MFI
5%
Misc
7%
SOURCE OF BORROWING FOR MOST
RECENT LOAN
46 48 50 52
79
0
10
20
30
40
50
60
70
80
90
India Bangladesh Pakistan Low Income Kenya
BORROWED IN THE PAST YEAR (%)

8
Savings too, remain largely informal
In cash at home
51%
Committees
(ROSCA)
27%
Advance
purchase/deposit
With shopkeeper
6%
Buying Durable
for Dowri
5%
With a family
member
5%
Bank or MFI
3%
Misc
3%
TYPES OF SAVINGS
24
32
38
47
76
7
3
14
10
30
0
10
20
30
40
50
60
70
80
Bangladesh Pakistan India Low Income Kenya
SAVINGS AND FORMAL SAVINGS %
Saved any money in the past year
Saved at a financial institution

Awareness and penetration of insurance remains low
Only 1% of respondents to the
Financial Inclusion Insights
2013 survey had insurance.
90% of this group had life
insurance.
I do not need one
35%
I do not know
what it is
22%
I do not know how
to get one
9%
I do not own
anything valuable
7%
Misc
27%
TOP REASONS FOR NOT HAVING INSURANCE

10
Compared to peer countries, incidence of domestic money
transfer to relatives and friends is higher in Pakistan
9.8
14.1
24.8 25.6
61.0
9.9 10.4
15.7
18.3
53.0
0
10
20
30
40
50
60
70
India Bangladesh Pakistan Low Income Kenya
REMITTANCES %
Received domestic remittances in the past year
Sent domestic remittances in the past year
Personal delivery
by self
93%
Direct deposit to a
bank
4% Agent's m-money
account
3%
METHODS FOR SENDING MONEY

11
Pakistanis don’t use formal financial services due to a lack of either
awareness or income
15%
31%
41%
41%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Lack information about products/services
Not enough money to open an account
No regular income
Never thought about it
TOP REASONS FOR NOT USING FORMAL FINANCIAL SERVICES

12
MOBILE MONEY
OTC AND M-WALLETS
AGENTS

13
All adults (15+)
59%
Adult Males
80%
Adult Females
38%
%AGE OF ADULTS WHO OWN A
MOBILE PHONE
%AGE OF ADULTS WHO HAVE
ACCESS TO MOBILE PHONES
All adults (15+)
79%
Adult Males
89%
Adult Females
70%
Branchless Banking provides an opportunity to kick start financial
inclusion
The majority of Pakistanis
have access to a mobile
phone…
…which make these devices the most viable channel to enable
financial outreach
93,100
6.5
9.3
47.1
33.9
12.2
473.1
ATMS COMMERCIAL BANK
BRANCHES
POS MOBILE PHONE
SUBSCRIPTIONS
Pakistan Global
58,499
INFRASTRUCTURE OF FINANCIAL
SERVICES DELIVERY CHANNELS

14
In Pakistan, Branchless Banking is characterized by two mobile money
delivery models
OVER THE
COUNTER
MOBILE
WALLET
Register Put money in account Conduct Transactions Directly
Register to provider’s
wallet via BVS.
Add money digitally or
through a CICO point
Conduct transactions from mobile
device without any 3rd party assistance
Convenient, secure,
integrated on- and
offline payments.

15
Currently, fewer than 1 in 10 Pakistanis have full service accounts
that can be accessed digitally
39.3 % of adult
Bangladeshis have
full-service financial
accounts
6.8% of adults
have digital bank
accounts
0.3% of adults
have mobile money accounts
7% have digital
finance
accounts*
*Digital accounts are those that can be accessed through ATM/debt cards, online or through mobile phones
Overlap representing those who have multiple kinds of financial accounts is not shown.
Bank accounts are more
likely to be digitally
accessible vs. non bank
accounts
An additional 8% of adults
are non-registered mobile
money users

16
Pakistan’s Branchless Banking policy environment
has come a long way
2006 2008 2010 2011 20122007 2009 2013
November 2006: First public discussions on branchless banking.
June 2007: SBP released Policy Paper on Regulatory Framework for Mobile Banking.
December 2009: SBP and PTA draft framework for Third Party Solution
Provider system.
2014
2008 : CGAP invested in Easypaisa; catalytic impact on market
2010: CGAP coordinated an exchange between SBP and Mexican regulators on “level 0” accounts.
December 2012: At CGAP workshop, SBP and PTA assured no introduction
of anti-market regulations.
N
E
X
T
?
2015
April 2008: Branchless Banking regulations issued.
2011: KYC requirements relaxed, Level 0 accounts introduced.
April 2015: Pakistan joins BTCA
2015: SBP gave limited
permission for remote wallet
opening (biometric verification)
2014: Daily limit for Level 0 transactions
increased from Rs. 15,000 to Rs. 50,000
November 2014: NADRA
lowered fees.
May 2015: NFIS
launched

17
The market is competitive
 4 different models: 3 telco-owned
MFBs, 3 banks, 1 telco-bank
partnership, 1 third-party
 7 product types: Bill Payments,
P2P Transfers, Airtime Top Ups,
Bulk Payments, Loan Repayments,
Merchant Payments, International
Remittances
 New product innovations in the
market:
 Health Insurance
 Life Insurance
 Alternative energy financing
 8 live mobile money services
To Date
October 2009
November 2012
September 2013
April 2013
January 2014
April 2010
December 2012
2009
2013
2010
2012
TIMELINE
2014
2011
 1 Primary, and 1 Secondary
Regulatory Body: SBP, and PTA

18
Within 5 years, the value of mobile money transactions have
reached 3.5% of GDP
0.98%
2.45%
3.50%
PAKISTAN
2011 2012 2013
VALUE OF MM TRANSACTIONS AS % OF GDP
(reference year)
-
5
10
15
20
25
30
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
Sep-11 Mar-12 Mar-13 Mar-14
Volume(millions)
Bill Pmt Value P2P Value
Gment Pmts value Merchant pmts value
Top-up value Loan repmts value
Bill Pmt Volume P2P Volume
Top-up volume Gment pmts volume
Loan repmts volume Merchant pmts volume
Value(PKRmillions)
VOLUME AND VALUE OF KEY MM
TRANSACTIONS

19
Use of mobile money seems to be increasing
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Dec-11 Dec-12 Dec-13 Dec-14
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Av. Value per Transaction Deposits as of date (PKR in millions) Av. Volume of Transactions (per day)

20
While early entrants had first mover advantage, relative market
share is shifting as new providers enter the market59%
27%
6%
4%
3%
1%
0%
54%
20%
14%
3%
4%
1%
5%
EASYPAISA OMNI MOBICASH TIMEPEY UPAISA HBL EXPRESS MOBILE
PAISA
MCB LITE
SHARE IN NUMBER OF TRANSACTIONS
Dec-13 Dec-14

21
MOBILE MONEY
OTC AND M-WALLETS
AGENTS

22
OTC dominates the market
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
Number of Accounts Deposits as of date
PKRinMillions
M-WALLETS
80%
14%
6%
TRANSACTION TYPE (VOLUME)
OTC M-Wallet Agent Liquidity

23
Pakistan lags behind leading countries in uptake of m-wallets in
comparison to phone ownership
0
50
100
Kenya Tanzania Bangladesh Pakistan India
mobile phone
ownership
mobile wallet
usage (transaction in last 90 days)

24
Many who do open m-wallets do not use the accounts
22
22
29
42
42
43
EAST ASIA
AND
PACIFIC
MIDDLE
EAST AND
NORTH
AFRICA
SOUTH ASIA LATIN
AMERICA
AND THE
CARRIBEAN
SUB
SAHARAN
AFRICA
PAKISTAN
ACTIVE ACCOUNTS AS A % OF TOTAL REGISTERED
ACCOUNTS
This is a common trend, and is seen in mobile markets globally
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
Number of Inactive Accounts
Number of Active Accounts
ACTIVE VS. INACTIVE
ACCOUNTS

25
GENERAL PROFILE OF MOBILE MONEY USERS
.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
15.00
18.00
21.00
24.00
27.00
30.00
33.00
36.00
39.00
42.00
45.00
48.00
51.00
54.00
57.00
60.00
64.00
68.00
73.00
90.00
%AGE
AGE (YEARS)
AGE DISTRIBUTION OF MOBILE MONEY USERS
Who are the users of mobile money in Pakistan?
>35
77% are men
41% live in urban areas
70% have a primary
education
20% already have a bank
account
54% live above the
poverty line
72% are aged 35 and
under

26
A TYPICAL MOBILE MONEY TRANSACTION
AMOUNT
DISTANCE TO AGENT
TRANSPORTATION COSTS
TRANSACTION TIME
TRANSACTION FEE
SUCCESS RATE
OTC
Transaction
Mobile Wallet
Transaction
Rs. 4214
0.75 km
Rs. 21
26 min
3%
89%
Rs. 5181
n/a
Rs. 0
n/a
0% - 5%
100%

27
OTC users are satisfied with the service
I can have all the
services through
an agent, I do
not need
31%
I do not need to, I do not
make any transactions
15%I do not understand the purpose of this account
12%
I never have
money to make a
transaction
12%
Using such
account is
difficult
8%
There is no
point-of-
service/agent
close by
6%
I do not see any
additional
advantages to
registration
4%
Misc
12%
MAIN REASON FOR NOT HAVING AN M-WALLET
47%
40%
21%
6%
RECEIVE MONEY SEND MONEY TO
ANOTHER
PERSON
SEND MONEY TO
ORGANIZATION
OR AGENCY
MISC.
REASONS FOR STARTING TO USE MOBILE
MONEY

28
MOBILE MONEY
OTC AND M-WALLETS
AGENTS

29
0
100
200
300
400
500
600
700
800
900
0
50,000
100,000
150,000
200,000
250,000
Number of Active Agent Outlets Number of Inactive Agent Outlets
Transactions/Active Agents (in a quarter)
The agent network is growing…
Kenya Bangladesh Pakistan
Exclusivity 87% 44% 34%
Dedication 36% 4% 23%
LOW LEVELS OF EXCLUSIVITY AND
DEDICATION
 66% of agents are non-exclusive and are
shared by a median of 3 providers
 58% of exclusive agents are in rural areas
 Agents are profitable due to non
exclusivity and low operating expenses,
however, transactions per day remain low
at a median of 8 in comparison to
countries like Kenya (46) and Bangladesh
(15)Number of Unique Active Agent Outlets (ANA 2014)
Total: 204, 073
97,642

30
Customer satisfaction with agents is high
52%
46%
1% 0%
0%
10%
20%
30%
40%
50%
60%
Very
satisfied
Somewhat
satisfied
Somewhat
dissatisfied
Very
Dissatisfied
SATISFACTION WITH MM AGENTS
(n=85)
40%
34%
32%
22%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Agent was absent
GSM or mobile network was down
Agent system was down
I did not get a receipt
PROBLEMS WITH AGENTS

31
However, the agent network still lags behind regional and global
counterparts
18
2
209
28
42
309
84
124
441
PAKISTAN BANGLADESH KENYA
ACTIVE AGENT OUTLETS PER 100,000 ADULTS
2011 2012 2013
27
20
89
42
347
135
131
1,047
199
PAKISTAN BANGLADESH KENYA
ACTIVE AGENT OUTLETS PER 1000 KM2
2011 2012 2013

32
MOBILE MONEY
OTC AND M-WALLETS
AGENTS
OPPORTUNITIES: INCREASING M-WALLET UPTAKE

33
New regulations have made it increasingly easy to open a m-wallet
account
LEVEL 0 LEVEL 1 LEVEL 2
HOW TO OPEN
ACCOUNT LIMIT
• BVS verified customers can
open their MA by dialing string
• Non BVS customers have to
visit Franchise
• Instant Registration
• Only CNIC required
• No KYC fields are required for
account opening
• Instant Registration
• CNIC along with other supporting
documents required
• Transaction Limits defined
according to customer needs and
documentation
• KYC fields must be filled by the
customer
• Account instantly registered with
level-1 transaction limits, and
upgraded within 3 days of
document verification
• Day: 50,000
• Month: 80,000
• Year: 800,000
• Day: 25,000
• Month: 60,000
• Year: 500,000
• Day: 50,000 – 500,000
• Month: 100,000 – 1,000,000
• Year: 600,000 – 6,000,000
• Max Balance: 300,000 –
3,000,000

34
While only 1 in 4 agents are able to help customers open accounts…
25%
75%
ABILITY TO REGISTER CUSTOMERS FOR
ACCOUNTS
Can register accounts Can not register accounts
Only 26% of those who don’t
open accounts, view mobile
wallets as a threat to their
business
84% of agents who are
capable, do open accounts

35
…Biometric verification technology has overcome this hurdle for Level 0
account opening
In Q4 of CY 2014 701,510 new M-Wallet accounts were opened
95%
5%
NEW ACCOUNTS IN Q4
Level 0 Accounts Other Accounts
63%
37%
METHOD OF ACCOUNT OPENING
BVS Other
The Jan-April 2015
SIM re-verification
drive spurred
providers to start
remote account sign
ups; the results of this
push will be seen in
the coming months

36
Opportunity 1: Improving Customer Awareness and
Understanding

37
Brand awareness about MM providers is increasing but low, and
few people have a full understanding of MM
41%
36%
16%
12%
6%
5%
5%
10%
SEND
MONEY
TO
OTHER
PEOPLE
RECEIVE
MONEY
FROM
OTHER
PEOPLE
PAY
BILLS
BUY
AIRTIME
TOP-UPS
SAVING G2P P2G MISC
MOBILE MONEY AS PEOPLE SEE ITAWARENESS OF MOBILE MONEY BRANDS
61%
32%
30%
22%
22%
13%
0%
n/a
73%
46%
33%
31%
29%
15%
25%
14%
EASYPAISA MOBICASH OMNI UPAISA TIMEPEY MCB LITE MOBILE
PAISA
HBL
EXPRESS
2013 2014

38
Generally banks are perceived as being more trustworthy than
mobile money
37%
19%
16%
10%
9%
31%
36%
26%
29%
28%
14%
22%
29%
27%
27%
7%
13%
18%
19%
20%
10%
10%
11%
15%
17%
STATE OWNED BANKS PRIVATE BANKS FOREIGN BANKS M-MONEY SERVICES M-MONEY AGENTS
Fully trust Rather trust Rather do not trust Do not trust at all Neither trust nor distrust

39
Being a subscriber to a provider’s parent company, doesn’t mean
that people recognize its MM brand
EASYPAISA MOBICASH UPAISA MOBILE PAISA TIMEPEY
TELENOR
89% 58% 43% 31% 36%
UPHONE
85% 60% 52% 37% 42%
WARID
89% 62% 53% 48% 50%
ZONG
84% 63% 51% 44% 53%
MOBILINK
85% 61% 37% 29% 32%
Most
recognized
MM service
CELLPHONEPROVIDEROF
CUSTOMER
RECOGNITION OF DIFFERENT MM BRANDS
Second most
recognized
MM service

40
Even awareness levels of OTC users regarding product mix is low…96%
95%
81%
45%
29%
28%
25%
25%
17%
16%
12%
5%
1%
1%
PAY BILLS SAVE BUY
AIRTIME
TOP-UPS
RECEIVE
MONEY
FROM
OTHER
PEOPLE
P2G G2P SEND
MONEY TO
OTHER
PEOPLE
PAY FOR
GOODS IN A
SHOP
MAKE
PAYMENTS
ON CREDITS
AND LOANS
INSURANCE RECEIVE
WAGES
DON'T
KNOW
NONE NO
RESPONSE
AWARENESS LEVELS OF OTC USERS

41
Unaware
Awareness of
what m-wallet is
Understanding
of how m-wallet
could be useful
personally
Knowledge of
how to conduct
transactions via
m-wallet
Trial of m-wallet
service
Regular use of
m-wallet
TIGO IN DRC
• Developed a song in partnership with a popular singer explaining MM, how it could be used in different
situations, and how to access the service
• Drove up registration 50%
EASYPAISA IN PAKISTAN
• Launched an ad campaign explaining mobile money
in 2010
• Low uptake of wallets, but continued uptake of OTC
M-PESA IN KENYA
• Launched a send money campaign
• Only 3% of non-users did not recognize the campaign
after 21 months
TRUE MONEY IN THAILAND
• Launched a national ad
attractive only to high
income earners
• Alienated a number of
potential low income
customers
PRODUCT
CAMPAIGN
AWARENESS
CAMPAIGN
KNOWLEDGE
CAMPAIGN
(UNTARGETED)
USECASE
CAMPAIGN
Communication is needed throughout the m-wallet adoption
process
WALLET
ADOPTION
PROCESS

42
Opportunity 2: Circumventing Customer Skill Deficits

43
Mobile phone ownership and capabilities affect m-wallet uptake
80%
9%
12%
38%
32%
30%
MOBILE OWNERS ACCESS TO
SOMEONE ELSE'S
MOBILE
NO ACCESS
ACCESS TO MOBILE PHONES
Male Female
Make
Calls
Receive
Calls
Send/Receive
Text
Messages
Do everything myself 62% 63% 34%
Somebody helps me with part
of the activity
4% 3% 2%
Somebody helps me with entire
activity
3% 3% 1%
During FGDs, women revealed key details about mobile ownership:
 Most do not see their mobiles as personal devices; mobiles are shared with husbands and children
 Women have to justify calls and messages to family members
ABILITY WITH MOBILE PHONES

44
0%
10%
20%
30%
40%
50%
60%
70%
80%
Dial a number Add contacts to phone Send a text
DO YOU NEED HELP IN DOING THESE TASKS?
I never do this on my phone Very poorly, always need help Somewhat poorly, often need help
Somewhat well, occasionally need help Very well, never need help
Sending a text message is a relatively more difficult task for
individuals

45
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Very Easy Easy Difficult Very difficult
UNDERSTANDING TEXT MESSAGES
Friends and Family Cellphone providers
Pakistanis find it relatively more difficult to understand messages
from Cellphone Providers, vs. Family and Friends
During an HBL experiment with BISP
beneficiaries, it became clear that the
beneficiaries did not understand HBL
messages which contained both text and
numeric information about their
transaction
This phone receipt
was not understood
by recipients

46
Moving towards human centered design can circumvent the skills gap
Business
Viability
Technology
Feasibility
Business
Viability
Technology
Feasibility
People
Desirability
PRODUCT
CENTERED
HUMAN
CENTERED
These are examples
of communication of
amount paid that are
more transparent
because illiterate BISP
recipients are more likely
to understand them.
One of the findings of the HBL HCD experiment, was that
redesigning products like receipts, can significantly improve
illiterate people’s understanding

47
New User Interface Design innovations may revolutionize the mobile
wallet experience and encourage uptake
76.0
28.4
3.3
2.2
Basic Phone
Feature Phone
Smart Phone
Don't Know/Refused
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0
TYPES OF MOBILE PHONES USED IN PAKISTAN
Globally, smartphone penetration
will increase 1.7fold by 2017
GRAPHICS
Use icons or imagery to overcome
literacy barriers
CONVENIENCE
Leverage smartphone capabilities to
move away from complicated USSD
menus
ENGAGEMENT
Leverage social networks and/or
gamification to keep customers
engaged, and minimize trust barriers
BEFORE AFTER Smartphone
applications, and new
products for MM are
already present and
can be adapted to the
Pakistani context.
Some key examples
are:
 Globe’s Gcash
(application -
Philippines)
 Zuum (application -
Brazil)
 pesaDroid
(product)
 Mledger (product)
1 2 3
4
7
5 6
8 9
THE MOVE TO SMARTPHONES OPENS UP THE POSSIBILITY OF IMPROVED UI DESIGN BASED ON HCD

48
Opportunity 3: Diversifying Product Mix

49
More Pakistanis have borrowed and saved in the last year, than
those who have received or sent remittances
50%
32%
25%
16%
BORROW SAVE RECEIVED REMITTANCES SENT REMITTANCES
%AGE OF PAKISTANIS WHO HAVE ENGAGED IN THIS FINANCIAL BEHAVIOUR
(LAST 12 MONTHS)

50
Yet the product mix offered by all providers remains skewed towards
payments
Bill Payments * * * * * * * *
Airtime Purchase * * * * * * *
Money Transfer through Agents * * * * * *
Formal Account * * * * *
Money Transfer to Bank Accounts * * * * *
Donations * * * * *
Salary Disbursement * * *
Life Insurance * * *
ATM Card * * *
Retail Payments * *
International Remittance Transfer *
Ticketing (Airlines, railway etc.) *
Savings Account *
Health Insurance *
Corporate Services other than Salary Disbursement *
Internet Banking *

USING WALLETS ALLOWS PEOPLE TO EFFICIENTLY ACCESS A WIDER PRODUCT MIX
OTC
Product Mix
Mobile Wallet
Product Mix
Bill Payments
Airtime Purchase
Money Transfer through Agents
International Remittance Transfer
Formal Account*
Money Transfer to Bank Accounts
Donations
Salary Disbursement
Life Insurance*
ATM Card
Retail Payments
Ticketing (Airlines, railway etc.)
Savings Account*
Health Insurance*
Corporate Services other than Salary
Disbursement
Internet Banking
AVERAGE COSTS
Rs. 21
26 min
3%
AVERAGE COSTS
Rs. 0
n/a
0% - 5%

52
Opportunity 4: Promoting Interoperability

53
Success in achieving interoperability remains limited across the
globe
Interoperability is defined as “the possibility to transfer money between
customer accounts at different mobile money schemes and between accounts at
mobile money schemes and accounts at banks”
- GSMA report on Implementing Mobile Money Interoperability, 2013
INTEROPERABILITY IN PAKISTAN
 OTC services are available to all customers
 Mobile accounts are “closed loops” meaning that they are restricted to customers of a particular mobile
operator
o IBFT (Inter Bank Funds Transfer) through 1-Link offers significant potential but is not yet live on all
mobile wallets

54
Recent developments prove that interoperability can spur mobile
money use
• “Exponential increase post launch
• Widespread acceptance and awareness
• High visibility due to press release
• Exponentially faster adoption than that of Voucher
transaction”
- GSMA report on Operator’s Journey, Nov 2014
2012 2013 2014
2011/2012: Tigo
starts
conversations
about
interoperability
Nov 2013: First
bilateral
interoperability
agreement between
Tigo and Airtel signed
Jun 2014: Tigo,
Airtel and Zantel
announce
interoperability
agreement
Aug 2014: Tigo and Airtel
launch W2W interoperability
using ATL campaigns
TIGO/AIRTEL: COMBINED VOLUME AND VALUE OF P2P TRANSACTIONS
2014: Tanzania becomes the “first country to
successfully develop and implement standard
business rules for interoperable MFS
transactions”
- IFC case study on Achieving Interoperability, 2015
In Tanzania…

55
The Tanzanian case reveals some key ingredients for achieving
interoperability
Allow all industry players a voice in
creating interoperability rules and
regulations
Have an industry champion
Identify a neutral broker to act as a
facilitator
Ensure clarity of definitions across
parties
Pilot the initiative prior to
commercial launch
Market the new initiative to
increases customer awareness
Successful execution based on
foundation built in Phase I and II
PHASE I:
COLLABORATION
PHASE II:
DEVELOPMENT
PHASE III:
IMPLEMENTATION

56
Opportunity 5: Digitizing Government to Person (G2P)
Transfers

57
Global comparisons reveal the scope for G2P digitization
“G2P payments have the most potential to accelerate
financial inclusion in the short to medium term as it is
easier for government to dictate how it pays recipients than
to influence how other parties transact.”
- McKinsey & Company report on Government Payments in Nigeria, 2014
The Kenyan Government
has been a huge
proponent of going
“cash lite” since 2008. As
of 2013 the value of
mobile money
transactions equaled
50.03% of Kenya’s
GDP in the same year.
0.4%
1%
1.8%
3.6%
6.4%
1.3%
3.2%
1.4%
4%
18%
BANGLADESH LOW INOCME PAKISTAN INDIA KENYA
USING ACCOUNTS FOR OFFICIAL TRANSFERS (%)
Used an account to receive government transfer
Used an account to receive wages

58
100%
70%
100% 100% 100% 100% 100% 100% 100%
94%
30%
100% 100% 100%
6%
B U M U N I C E F B I S P C D C P A R M Y J A W A N S &
J C O S S A L A R I E S
A G P R S A L A R I E S P U N J A B P R O V
S A L A R I E S
A R M Y J A W A N S &
J C O S P E N S I O N S
A G P R P E N S I O N S P U N J A B P R O V
P E N S I O N S
N A V Y P E N S I O N S A I R F O R C E
P E N S I O N S
F R O N T I E R
C O N S T A B U L A R Y
P E N S I O N S
E O B I P E N S I O N S
Cash Digital
A large proportion of G2P payments in Pakistan can be digitized
LEVEL OF DIGITIZATION OF KEY GOVERNMENT PAYORS 2013
Social Protection Cash Transfer
7 million beneficiaries
Government Payroll
Government Pension

59
The benefits of G2P digitalization include and extend beyond
Financial Inclusion
A 2014 McKinsey study on
G2P payments in Nigeria
revealed that 3 distinct
groups will benefit from
G2P digitization
20 million direct
beneficiaries
US$10-20 million p.a.
in additional benefits
US$600-800 million
p.a. in additional taxes
US$150-160 million
p.a. in additional
revenue
BENEFICIARIESGOVERNMENTBANKS
2
important lessons for
those using G2P
digitization as a way to
also spur digital account
adoption
i iiEnsure a value
proposition for
customers
Communicate
sufficiently with
customers

60
THANK YOU

Using Mobile Money to Promote Financial Inclusion in Pakistan

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