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by Sarah Rotman: Tuesday, August 31, 2010
Bill Maurer and Olga Morawczynski’s blog post from a few weeks ago discussed a topic that seems to be on everyone’s mind: innovation in mobile money…or the lack thereof. This has generated a lot of comments and even follow-up blog posts, like one by Bill Barhydt from m-Via. Bill and Olga made some good points about the nimbleness that MNOs and other players have to exercise in order to stay competitive and generate innovation. However, I’m not so convinced that there is a lack of innovation in mobile money because MNOs are partnering with banks. I’d say that there is at least as much of a lack of innovation in mobile money because MNOs are simply trying to copy M-PESA. The link-up between Tameer and Telenor (a bank and an MNO) in Pakistan has received big acclaim for innovation. It’s easy to blame the regulators, as Bill and Olga say, but it’s also quite easy to blame the banks.
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by Claudia McKay: Tuesday, August 3, 2010
Regular readers of this blog are familiar with mobile banking and its potential to bring vast numbers of the unbanked into a more formal financial system and revolutionize the way they manage their money. Yet although microfinance institutions (MFIs) have spent decades serving this clientele with loans and increasingly savings and other financial products, they have not featured prominently in this space. The mobile banking charge has been led by mobile network operators and, to a lesser extent, large banks. Although MFIs understand the potential of mobile banking, they have struggled to see how they can take advantage of it. The core competencies of most MFIs lie in their understanding of low-income customers’ needs and close relationships with these customers, not in complex technology projects or managing large-scale distribution networks. So how can MFIs take advantage of mobile banking?
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 What does mobile money cost for the unbanked and underbanked? CGAP releases pricing study across 16 providers in 10 countries
The conclusion: mobile banking and other forms of branchless banking are cheaper than traditional banking, but the gap between the two may not be as wide as some may think.
On average, branchless banking is 19% cheaper than banks. Why isn’t the pricing gap wider? Mobile money providers might be keeping profits for themselves and not passing them on in lower costs. There could be a good reason.
It is possible that establishing a successful, scaled branchless banking service could be more expensive than expected. Some branchless banking providers want to leave room to come down on prices as more competitors enter the market.
Other highlights:
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The lower the transaction value, the cheaper branchless banking is in comparison with banks. For example, at a transactional value of $23, branchless banking is on average 38% cheaper than commercial banks the study looked at.
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Branchless banking is 54% cheaper than informal options for money transfer.
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Customer usage is influenced not only by absolute prices but by the way a service is priced. For example, in order to encourage trial of money transfers, some services offer free deposits, which make branchless banking an affordable way to save.
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Average branchless banking price is $3.90 per month.
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Informal providers charge double the price for a money transfer than a branchless banking provider.
Services analyzed:
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Afghanistan: M‐Paisa
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Brazil: Bradesco and Caixa
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Cambodia: WING Money
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Cote d’Ivoire: MTN Mobile Money, Orange Money
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India: Eko
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Kenya: M‐PESA and Zap
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Pakistan: easypaisa
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Philippines: GCash and Smart Money
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Tanzania: M‐PESA, Zap
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South Africa: MTN Mobile Money, WIZZIT
The study found that by comparing 26 branchless banking pioneers and traditional banks with products aimed at the same kind of customers, on average, branchless banking is 19% cheaper across eight use cases:
1. Sending Money Transfer
2. Receiving Money Transfer
3. Short‐term safekeeping
4. Medium‐term saving for asset
5. Bill Payments
6. High Usage (as a proxy for financial inclusion)
7. Average monthly transactions per M‐PESA user in 2008
8. Average monthly transactions per Kenyan banking customer in 2008
-Jim Rosenberg
Este estudo examina a precificação de serviços direcionados aos pobres sem ou com pouco acesso a serviços bancários em 10 países. CGAP, um centro de microfinanças sediado no Banco Mundial, realizou um estudo global completo de precificação de serviços bancários direcionados aos pobres - com nenhum ou com pouco acesso a serviços bancários - na África, Ásia e no Brasil. O estudo está sendo lançado no Mobile Money Summit no Rio de Janeiro.
Este estudo examina a precificação de serviços direcionados aos pobres sem ou com pouco acesso a serviços bancários em 10 países.
A conclusão: os serviços bancários móveis (mobile banking) e outras formas de serviços bancários sem agências são mais baratos que bancos tradicionais, mas a diferença entre os dois pode não ser tão grande quanto muitos imaginam.
Em média, os serviços bancários sem agências são 19% mais baratos que bancos. Por que a diferença de preços não é maior? Os fornecedores de dinheiro móvel podem estar mantendo os lucros para si mesmos e não repassando-os através de preços mais baixos. Deve existir uma boa razão.
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The Globe and Mail uses next month’s World Cup as a good reason to talk about Africa’s economic growth:
For the first time, Africa is becoming a bigger lure for investors than for aid donors. Africa’s poverty rate has been declining by 1 per cent annually since the 1990s, and investment is growing dramatically. A decade ago, Africa was receiving less than $5-billion (U.S.) in foreign investment annually. By 2008, it was attracting nearly $40-billion in direct foreign investment – more than it received in foreign aid. One survey found that 40 per cent of emerging-market equity investors are putting money into Africa today, compared with 4 per cent in 2006.
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by Chris Bold: Monday, March 15, 2010
What can we learn from recent acquisitions of banks by mobile network operators? Over the last year we have seen a number of mobile network operators (MNOs) buying stakes in banks or looking to acquire their own banking licenses. Are these isolated incidents or does this point to an industry trend?
On November 21, 2008 Telenor Pakistan entered into an agreement to acquire 51% of the shares in Tameer Microfinance Bank. A year later, in October 2009, Globe Telecom received permission from the Central Bank of the Philippines to acquire a 40% stake in Pilipinas Savings Bank with their parent company taking a further 20% stake. And, most recently, China Mobile confirmed earlier this month that they are in talks to buy a stake in Shanghai Pudong Development Bank in an explicit strategy to enter the m-payments market.
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Michael Tarazi reported back from Davos on the buzz around mobile banking for the unbanked in Mobile banking at Davos: “we know this train is coming” and considered the so-called “test and see” approach to regulating branchless banking:
…putting in place extensive regulations without first observing and understanding how the market is developing can often result in a regulatory framework that is ill-tailored to the risks involved. A more effective approach is to “test and see” – permitting branchless banking business schemes on an ad hoc basis, conditional on measures addressing identified risks.
Based on field work done with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas), and Planet Finance Brazil, Claudia McKay posed the question and reply: Does branchless banking empower the poor? An answer from the Amazon. As one client put it: “Before the banking agents, life was hard. Those who had money to spend, went to the city. Since the agents have come, everything here has changed.” Staying on the subject of Brazil, Sarah Rotman explored the impact of branchless banking on the merchants/agents themselves.
With “What is Che Guevara doing in this bank?” Mark Pickens took us to Instituto Palmas, a nonprofit working in Brazil’s northeast, the poorest region of the country and later shared a summary presentation of the nationwide impact of agents in Brazil:
Brazilian agents handle 2.4 billion transactions per year. This actually comprises just 7 percent of transactions flowing through the Brazilian banking system. But it includes large flows of transactions which are particularly interesting for financial inclusion.
With “A mobile wallet and the price of money” Chris Bold reported from Pakistan on the exciting developments around easypaisa.
From Bangladesh, Greg Chen reported back on how the birthplace of microcredit is contemplating mobile money:
Could new technologies in Bangladesh enable formal financial services to reach two-thirds of adults by 2020? Conditions in Bangladesh offer scope for some optimism. Famous for high population density, Bangladesh may be able to deliver a larger volume of financial flows over a relatively smaller distribution network; possibly making the business case more tenable.
And finally, a dispatch from Planet of the Apps: a brave new world for mobile money:
How fast is the world changing? The event keynote was not done by a mobile operator but by Google’s CEO Eric Schmidt, who noted that people under 30 don’t say “mobile phone,” they just say “phone” (fixed line service, what?). In this context, mobile money has become a mainstream driver for reducing customer defections. Operators are seeking to create “experiences” and “relationships” with customers, and not simply become dumb pipes through which services flow.
-Jim Rosenberg
by Chris Bold: Thursday, February 4, 2010
 I would be pretty annoyed if my bank started to charge me for putting money in to my bank account. What strategy would CGAP’s partner in Pakistan, Tameer Microfinance Bank consider with their “mobile wallet”? I spent a week in Pakistan with Ali Abbas Sikander and the Easypaisa team who have been thinking about their pricing strategy for the past three months.
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by Jim Rosenberg: Monday, November 30, 2009
Were you on the road? New to our blog? Spending some time with family? Here’s a recap of what we’ve been blogging about this past month.
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-Jim Rosenberg
by Kabir Kumar: Monday, November 23, 2009
EasyPaisa, the m-banking service by Telenor and Tameer, went live on Oct 14. They call it the “largest branchless banking service in Pakistan” on their website where you can watch a couple of the ads that people may have been discovering on You Tube.
 Photo courtesy Patrick Cooks 3000 agents have been set-up to handle both bill payments and remittances. They aim to have many more trained and branded by Jan. They have covered the country with marketing, promoting the brand everywhere and pushing people to the agent network. The advertising has generated a lot of buzz and interest and their two call centers are fielding over 5000 calls a day. As of two weeks ago, they had all the major billers signed up and those previously not interested were now calling them (see here about a minor scuffulle in the media about billers which seems to have passed).
They are seeing modest success. Within the first few days, they handled 20,000 bill payments ranging from very large to small at an average ticket size of $13.
Why is this launch any more interesting than what we are seeing in other markets?
First, it is true that even in Pakistan, m-banking services have been live for a while. Mobilink partnered with the post office chain and has been in the market for almost a year. But what is unique about EasyPaisa is the business model. Telenor owns part of Tameer and that provides for unique advantages on the cost side and benefits in terms of product design.
Second, the partnership illustrates the possible tie-ups between a MF provider and a MNO. In this case, the MNO bought the MFI. In other cases, the MNO could strike a revenue sharing arrangement with the MFI in exchange for access to its distribution.
Third, the partnership illustrates how regulation and policy decisions from both the banking and telecom side can add up to produce impact. On the banking side, regulation opened up the market for the use of retail stores as agents (CGAP has been involved with branchless banking regulation in Pakistan from the beginning). Regulation made it possible for a bank and telecom operator to enter into unique partnership arrangements.
On the telecom side, MNOs are in a race to the bottom in their core business. Prepaid ARPUs are half of what they were three years ago. This race to the bottom has been precipitated by new licenses (there are seven operators in the market today) and number portability. MNOs had to climb the value chain of services faster than what you might see in the other markets.
The EasyPaisa service is within the bounds of the vision and strategy CGAP set out with Tameer Bank originally: it is both bill payments and remittances (our original financial model was with bill payments); people have the option of opening a savings account; KYC is automated using the national ID which now covers over 50 million people.
We have a lot to be optimistic about but one of our main concerns right now is that account opening is possible only at a subset of agents, roughly a third of the network. This is because of SBP requirements over account opening. While EasyPaisa locations where you can open an account are still sizeable in number, we know from the M-pesa experience (and common sense) that you want to make it as easy as possible to get people to start transacting. People will be able to do cash-only transactions (cash to cash or cash to account) at all EasyPaisa locations; so that helps. But we are figuring out a way to make account opening possible at all agents - possibly a specialized device or a document management system or something else.
-Kabir Kumar
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