The success of mobile money services such as M-PESA has raised the question of how to regulate nonbanks—most notably mobile network operators, which are often well-placed to reach customers with affordable financial services due to their existing customer base, marketing capabilities, network of agents, physical distribution infrastructure, and experience with high-volume, low-value transactions. Yet regulators are often reluctant to permit operators to directly contract with customers for the provision of financial services. Chief among regulator concerns is how to protect customer funds.
Do you feel close to the people who send you text messages? Banks seem to think so. Juniper predicts a global surge in text messages from financial institutions, to 90 billion texts per year by 2015. From Finextra:
Juniper analyst Howard Wilcox says: “Our research found that messaging is a ‘win-win’ for banks. They can improve customer service significantly, whilst simultaneously eliminating the cost of servicing customer enquiries placed with call centres.”
Though many say it will be years (or never) by the time near-field communication (NFC) technology gets into the hands of the mass market customer, at least one very notable handset maker appears to be making moves towards integrating NFC into its future products. From the New York Times:
There are a number of reasons Apple could decide to integrate NFC into its line of mobile phones and music players. The company could try to replace cash or credit cards, allowing iPhone owners to swipe their phones at a terminal to pay for products or services.
I don’t know about you, but the customer count for M-PESA in Kenya gives me whiplash (or is it vertigo?). As of the end of July, M-PESA in Kenya reached a new milestone – nearly 12 million subscribers. And Vodacom in South Africa plans to launch the service in that competitive market at the end of August, as Nairobi’s Daily Nation tells us:
Safaricom says M-Pesa subscribers have grown by 61 per cent to 11.89 million by July 2010 from 7.38 million the same period last year. It has transferred Sh525.84 billion since its inception in 2007 and the monthly average has increased by 30 per cent. Last month, Sh33 billion was transfered compared to Sh20 billion in July last year.
There were 19,500 agents by July. The money transfer system has become globally acclaimed with other countries adopting the model. South Africa’s Vodacom, teaming up with local banking group Nedbank, is set to launch its service by August 31.
If you need a refresher (or introduction) as to why M-PESA has done so well in Kenya, watch this and read this.
We write a lot about M-PESA. That’s because it is the most successful mobile money service launched (so far). This new CGAP video by my colleague Jeanette Thomas explains.
On Monday, Aug. 2 CGAP’s own Kabir Kumar will take the stage at “Tech@State: Mobile Money,” an event hosted by the U.S. State Department in Washington with an exciting line-up of mobile money practitioners from around the globe. Questions to tackle include:
-How do we scale the mobile frontier, leveraging technology and partnership for sustainable development and financial inclusion?
-What do case studies reveal about success and failure?
-What are the applications of mobile money and its implications for U.S. foreign policy?
We kicked off July in China, with my interview with Wokai founder Casey Wilson:
One interesting challenge that we navigate on a daily basis operating in China is the regulatory landscape. Microfinance was late to develop in China, only starting in 1994, in contrast to 1976 in Bangladesh. Regulations prohibit MFIs from accessing debt and equity investment, leaving them completely reliant on donor funding which is decreasing rapidly as the outside world sees China as an economic superpower rather than a country in need of aid.
When we first started Wokai, we aimed to create a Kiva-like model in which lenders from all over the world could lend no interest capital that when then go to our MFI Field Partners, and, finally, be lent out to the end borrowers on the ground. Once the borrowers repaid their loans to our Field Partners, the capital would then be repaid to lenders online.
Casey Wilson is the Co-founder and CEO of Wokai, the first person-to-person microfinance platform for China. Wokai – 我开 – means “I start” in Mandarin.
What’s happening in China?
China has the second largest potential microcredit demand in the world, next to India. Yet the total loan portfolio of China’s non-government microfinance sector is only $200 million, in contrast to India, whose microfinance sector is projected to reach $3 billion by the beginning of 2010.
Founded in 2007, Wokai aims to create a sustainable source of capital to grow China’s microfinance sector by connecting individual contributors around the world with borrowers in rural China. Our website offers users a transparent and secure way to give as little as $10 dollars to support the loans of micro-entrepreneurs in China to start small businesses and lift themselves out of poverty.
Virtual conference: Getting past the technology hurdles at MFIs: Why do MFIs struggle with technology and what can MFIs, donors, investors, software vendors and others do to improve the situation? Join us for a virtual conference to discuss these issues (7-8 July 2010).
You want proof mobile money can make money? Look to M-PESA, which according to Safaricom’s annual financial statements released just a few days ago accounted for 9 percent of company revenues in the last fiscal year, for a total contribution of USD 94.4 mil (Ksh 7.56 bil). M-PESA revenues grew 158% over last year’s figure of USD 36.6 bil (Ksh 2.93 bil).
…mobile money providers in many markets will need a more sophisticated suite of products to attract (a) an attractively large number of customers who (b) will be active and do a number of transactions per month. To do this, providers need fresh thinking about mobile money products that will work with the mass market.
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.
Related to that, Claudia blogged about how different products are priced, and we shared a spreadsheet so that you can try this at home:
…these high-level numbers mask significant differences between providers, use cases and transaction values and volumes. Providers make numerous pricing decisions that impact the end price for different customer segments. For example, I’ve blogged before about the pros and cons of offering discounts for airtime purchased via a mobile banking service. Four of the 16 providers in the study offer airtime discounts of between 5 – 10%. As a group, their average price across eight use cases is 25% lower with the discounts than without and the discounts more than offset the prices of transfers and bill payments in several cases.
Between the morning and evening sessions at the branch, a typical loan officer might spend 25% or more of their time on data entry and other administrative tasks related to managing their portfolio. What if you could reduce or even eliminate these tasks from the loan officer job description?
There are two challenges for all mobile money services. The biggest challenge to launching a new service is understanding and adapting to local regulations. As we know, and have seen, these services can have large consumer benefits. However, not all markets have the same regulatory framework and the step change required in terms of meeting the local regulations can sometimes slow down implementation times.
The biggest challenge to making an existing service successful is customer education. The concept is new and we have to help people learn about it and understand how it could benefit them.
Tell us a bit about your work and whom you’re trying to serve.
I head up Mobile Payment Solutions which includes the development and deployment of the Vodafone Money Transfer service, which is locally branded as M-PESA or M-Paisa. The service is operational in Kenya, Tanzania, Afghanistan and Fiji. It will be launching soon in other markets. When we look at selecting new markets there must be an un-met need for basic financial services within a large sub-section of the population.
The M-PESA product is aimed at the mass market within the country, as both banked and unbanked will benefit from the increase convenience M-PESA offers for transferring money, buying airtime and paying bills. This is important as M-PESA is all about financial inclusion so providing service to both the rich and poor and often connecting the two!
Amid the flurry of news coming out of Toronto, you’d be forgiven for missing this important development:
The G20 Leadership Summit in Toronto this past weekend highlighted the importance of the work being done by the G20’s Financial Inclusion Experts Group (FIEG). The group released nine “Principles for Innovative Financial Inclusion” formed through the efforts of the Access through Innovation Sub-Group (ATISG). “We have developed a set of principles for innovative financial inclusion, which will form the basis of a concrete and pragmatic action plan for improving access to financial services amongst the poor. This action plan will be released at the Seoul Summit,” the Toronto declaration said.
Want the backstory? Check out an interview I did in March with Paul Flanagan, co-chair of the G-20 Financial Inclusion Experts Group and General Manager, International Finance Division, Australian Treasury: “The G-20 eyes financial inclusion using mobile phones, other ICTs.”
