Debbie Watkins, Head, Implementation for SBI’s Alternative Delivery Channels Practice, moderated a panel discussion on “Key Commercial Success Factors and Business Models for developing M-Money initiatives” at EBRD’s inaugural Mobile Money conference held in London on March 14, 2013.
EBRD – the European Bank for Reconstruction and Development – fosters transition to market economies in countries from central and eastern Europe to central Asia and the southern and eastern Mediterranean. The conference was designed as a platform to discuss mobile money and raise awareness for the challenges and opportunities specific to the region. Experts from banks and mobile companies working in the region address topics including: potential business models, regulatory requirements and how to drive consumer adoption.
Results from an EBRD study on mobile money initiatives in the EBRD region were also presented for the first time, and highlighted variations in approaches and country demographics according to the following categories:
Emerging: countries with growing labor migration and a desire for global financial inclusion. They need m-finance in its most basic forms: domestic money transfers, m-wallets and m-remittances. Engaging post offices is a better way to reach rural societies in these countries; brick and mortar financial institutions won’t work as well. Continue reading
Photo credit: bKash
This post is written by Debbie Watkins, Head Implementation, Alternative Delivery Channels at SBI (Zeist/Washington), and reposted from Upsides.
Banks in emerging and developing countries are increasingly recognising the potential of the low-income market segment. However, setting up and running a bank branch is an expensive business. This is where branchless banking comes in. Read the first article in an insightful series of three on how banking beyond conventional branches creates financial inclusion for all.
Low-income and rural populations are often inherently ‘bankable’ – they save for a wide range of different purposes, source both short- and long-term credit for capital purchases and business building, and demonstrate (often very sophisticated) financial management skills. The fact that most of their financial interactions are with informal channels is due to a number of reasons: banks may be far away from their homes or workplaces; may not be open during the hours they are not working; or may have prohibitively high minimum balances or monthly fees.
Banks are increasingly recognising the potential of the low-income market segment. However, setting up and running a bank branch is an expensive business. The net cost to a bank of conducting a single over-the-counter transaction can be more than $1, and understandably banks are somewhat reluctant to have their branches full of clients conducting small transactions – the cost/benefit ratio just does not make sense. Establishing branches in rural areas also causes significant logistical problems – ensuring the branch always has sufficient cash on hand (but not too much), connecting the branch to centralised banking systems, and of course the fact that one branch covering what may be a catchment area of many square kilometres will still result in it being out of the logistical reach of a large number of people. Continue reading
This post is written by Shital Shah, SBI ADC Consultant and Veena Krishnamoorthy, SBI India Country Representative.
The monsoon season in India brings both joy and disturbance. The downpours promise abundant growth in agriculture, while at the same time, come crashing down on weak infrastructure. Muddiness and chaos is a common scene in urban India during and after the rains, and electricity may become even more intermittent, causing further disturbance to daily life. In a very similar way, the business correspondent (BC) industry is pointing its way to both promise and confusion in the Indian financial inclusion sector.
Photo credit: Bangkok Post
This post is written by Jesse Fripp, SBI Vice President.
After initial skepticism, a lot of confusion, and countless false starts, the foundations for the e-money ecosystem – or the “LiFi” world as recently described by David Porteous and Ignacio Mas – are being laid in fits and starts. Following in the pioneering footsteps of early innovators such as GCash, SMART, M-Pesa, WIZZIT, and others, over a hundred mobile and branchless platforms are being developed and rolled out in dozens of developing countries. The dual siren song of serving “the bottom of the pyramid” from an inclusion as well as mass-market commercial perspective is sounding ever more loudly across the world, with implications that are yet to be determined.
Unlike the early days of the microfinance “revolution,” in the alternative delivery revolution, major, multi-national and/or heavily capitalized players are getting involved earlier. The major card services are already moving briskly down this road, with the acquisition by Visa of the dominant back-end mobile banking platform Fundamo, and the launch of virtual pre-paid card services in certain markets. Telcos generally struggle with the challenge of understanding and addressing market demand dynamics outside of their primary air-time business, but are cash-rich, and increasingly well-positioned to transform themselves into “holdings” that can leverage the power of their core channel utilities while keeping the financial benefits “within the family” – including through acquisition of banks and financial services companies in key markets. Banks themselves are finally waking up to the potential, and are working their own angles. Primarily, this is through leveraging their specialized regulatory position and knowledge of financial services and products through the creation or acquisition of third-party service companies that can make use of the telco utilities efficiently, without being slaved (or more importantly, slaving their customers) to any single telco platform or provider. Continue reading
This post is written by Anna Fogel, SBI Associate Consultant.
Photo credit: enrin.grida.no
With more than 215 million people living outside their countries of origin, remittances play a major role in the economic development, GDP and poverty alleviation efforts of many countries. An estimated $350 million in remittances was received by developing countries last year, according to the World Bank, which is three times the amount of official development assistance and exceed foreign direct investment in many countries. The trend of increasing remittances continues to grow and is projected to reach $1.5 trillion by 2016. This impressive volume has attracted attention from mobile banking operators, whose business model depends on high-volume, low-cost transactions. CGAP’s Chris Bold, in December 2010, dubbed remittances the “final frontier” of mobile banking.
In Europe and Central Asia, remittances have a particularly prominent role in the regional economy. Many of the top remittance recipients in the world, measured as a percentage of GDP, are in this region, including Tajikistan where remittances were equal to more than 35% of GDP in 2009 and Moldova where remittances equaled 23% of GDP in 2009. According to World Bank calculations, which measure official flows and therefore are generally undercounting, remittances equal more than ten percent of GDP in six countries in the region (Tajikistan, Moldova, Kyrgyz Republic, Bosnia and Herzegovina, Serbia and Albania). IFAD estimates than 30% to 40% of remittances flow to rural areas, critical in many Eastern European and Central Asian countries which have agrarian-dominated economies and high percentages of rural populations. Continue reading
This post is written by Ryan Falvey, an SBI Consultant
We’ve all read the stories about how telecom-based mobile money services – such as M-PESA – are allowing new
Photo credit: WhyGo Business
players to shake up financial services in developing countries, besting banks and providing a superior alternative to cash. While there is certainly some truth to this, there is also a lot of hype. After all, with the exception of M-PESA, no telecom based offering has come close to achieving either the scale or the penetration of Safaricom’s mobile offering. A question that many in the space have been asking is why. I propose that part of the reason may have to do with the fact that it isn’t mobile money that people want; it’s efficient, useful and inexpensive financial services. Unfortunately, most MNO solutions are built on extremely expensive, awkward and limiting technologies: SMS and USSD.
SMS might be both the world’s most expensive way to send data and one of the least efficient. An SMS costs, on average about $0.10 per message, yet it only allows an individual to send 140 bits of data. USSD can transmit a bit more data and the costs are, usually, a bit lower. However, both technologies are absurdly expensive when compared to the cost data plans. In most countries, these are between $10-$50 for 2GB of data. 2 GB of data on SMS at 10 cents a message would cost a user $3,072,000. Even if USSD cost 1/10 of the price of SMS (which it doesn’t usually) it’s clear that both technologies are completely inappropriate for sending and receiving data. They’re the equivalent of the compact disc: an expensive, awkward, and, eventually, obsolete technology for transmitting and storing data. As such, mobile money platforms built on SMS and USSD are expensive, awkward and limiting. Continue reading
Posted in Practitioner Perspectives, SBI Posts
Tagged data, ecosystem, financial inclusion, financial services, Internet banking, M-PESA, mobile banking, sms, unbanked, ussd
This post is written by Ryan Falvey, an SBI Consultant based in San Francisco, CA.
Mobile money practitioners are a diverse lot. We hail from dozens of countries – both developed and developing – some of us are older, with decades of experience, while others are fresh out of school. Some practitioners believe in the power of markets and are distrustful of government regulation, while others view the market as a force that must be closely regulated. Some practitioners think that conventional banks are the problem, while many believe they are the solution. However, what all of us share is a core belief that improving access to financial services, improves lives. We believe that a safe places to save, improved access to credit, and secure means of transferring funds allows people to live more comfortable, secure and productive lives.
Most of us also believe that the financial system, as it’s currently configured, doesn’t do this – especially in emerging economies. While there are nearly as many bank accounts in the world as people – 6.2 billion – there is in unequal penetration of these accounts. With nearly 3.2 accounts per adult in developed countries – equating to 81% of the population – but only .9 accounts per adult in developing countries — and only 28% banked. Since we know that bank accounts are positively associated with development and physical infrastructure, improving access to the formal financial sector is a priority. (http://bit.ly/qLYZtd) Continue reading
This post is written by Jesse Fripp, SBI Vice President.
Mobile banking has come to refer to everything from texting account balance updates, conducting bill payment, money transfer and even mobile top-ups – in short, just about everything short of actual financial intermediation. In the thick of the frenzy and excitement around the promise and potential of mobile technologies, it might be easy to miss one area that mobile banking does not yet reliably cover – the core activities of value-adding and the regulated financial intermediation that truly drives financial inclusion. Allowing middle-income and poor families to make payments faster, more safely, and more conveniently certainly is a significant social and economic benefit, and these successes should be celebrated. However, payment facilitation is only the most basic function of banking services – and does comparatively little to expand economies or build assets and employment.
MNOs have brilliantly identified the low-hanging fruit of mobile payment facilitation as a powerful marketing tool to reinforce and strengthen their core business model of selling commoditized airtime. Mobile payments are truly the “killer app” of the MNO business model – building brand and customer loyalty, reducing churn, smoothing liquidity management for agents, and even potentially building a marginal but profitable sideline business line that leverages the sunk cost of their core telco infrastructure. This is a brilliant example of private sector innovation, driven by commercial incentives, and with a tangible social benefit, and should be applauded as it has been. Continue reading
Posted in Ecosystem, Practitioner Perspectives, SBI Posts
Tagged alternative delivery channels, beyond payments, bill payment, financial inclusion, financial institution, MNO, mobile banking, mobile top up, money transfer, practitioner perspectives, unbanked