Gautam Ivatury
Gautam Ivatury is a Strategic Adviser. He joined CGAP in 2003 and until 2008, was manager of CGAP’s Technology Program. Before joining CGAP, Ivatury was vice president of Finance and Administration at SKS Microfinance in India, an investment analyst at International Finance Corporation, and a co-founder of a startup education technology venture. Ivatury also worked as an investment banker at Donaldson, Lufkin & Jenrette (now Credit Suisse First Boston). He has a Master’s degree in International Affairs from Johns Hopkins University. He speaks English and is proficient in French and Hindi.
Nick Hughes and Gautam Ivatury are two of the founding members of Signal Point Partners, a company created in 2009 to build innovative mobile services in emerging markets. Nick was previously at Vodafone, where he started M-PESA, taking it from a concept to a multi-million-dollar business in five years. Gautam’s previous role was leading the technology program at CGAP, where he focused on branchless and mobile banking.
 When we launched Jipange KuSave – a mobile-only savings product – in Kenya in early 2010, our goal was to out-compete the mattress. Back then, Safaricom’s M-PESA service was in hyper-growth phase and ramping up to become the de facto national retail payment system. But even more exciting was M-PESA’s potential as a pervasive and low-cost delivery channel for a wider set of financial services.
With this in mind, we decided to attempt for savings what M-PESA had done for money transfers – get millions of Kenyans to abandon informal mechanisms and instead become our paying customers. But if Kenyans were going to save with us instead of the mattress, we’d need to solve two challenges.
First, a ‘traditional’ bank-type savings proposition would never work. Poor people have never abandoned the convenience and enforced discipline of informal savings services for a couple of percent interest. In Jipange, the combination of micro-loans and savings in a structured program met several customer needs, notably the need for cash when cash flow is low (liquidity) and steady progress towards a lump sum (a savings goal).
Second, our costs would need to be radically low. As ING Direct had shown, “pure” mass-market savings plays can make money, but only at high volumes and low margins. And that was in developed markets with larger account balances. For us to succeed, we would need to “throw out the rulebook” and design from scratch the most efficient and lowest-cost processes to manage relationships and transactions.
With our two “first principles” in mind, we gathered the essential ammunition for an attack on the mattress: a radical product design, drawing heavily from Stuart Rutherford’s work; a set of web-based processes to run the product solely via M-PESA (limited physical contact with customers); a stellar project lead to manage implementation; and passionate, risk-seeking funders in CGAP and FSD Trust Kenya.
Interested readers may find it useful to read more about our product development and trials here in MIT Innovations. Also, this evaluation produced by FSD Kenya. In short, the Jipange KuSave product gave customers small amounts of credit at zero interest, while placing a portion of the credit into a “forced” savings account. As customers repaid the credit at whatever speed and in whatever amounts they wished, they became eligible for a bigger zero-interest loan. By borrowing multiple times and being forced to save a portion of each loan, they gradually accumulated savings.
The short version of our battle report is this:
1. Customers are hungry for better ways to save. They deal with cash flow complexity everyday and use a range of high cost / high risk methods to achieve liquidity. Some product designers would consider blending credit and savings as too complex – that was not our experience. Clear, structured program, yes – but too difficult for customers to grasp, no.
2. Silicon Valley-style discipline and lean startup principles are keys to success. This starts and ends with customers. We quickly acquired a first trial cohort and modified and iterated the ‘offer’ on the back of real evidence from users.
3. A brand-new, mobile-oriented deposit-taking institution has the best chance of beating the mattress. This is perhaps the most difficult stumbling block on the way to scale. Only a regulated institution can take deposits — but hungry, highly innovative regulated institutions are rare beasts.
by Gautam Ivatury : Wednesday, February 18, 2009
Recently I talked about mobile banking and CGAP’s Technology Program at two events in New York. One was the “Innovation to Impact” conference hosted by the Bridge group for social entrepreneurship at the Wager School of Public Service (NYU) and the other was organized by the Financial Women’s Association in New York on mobile banking. For the latter, I was joined by panelists from Nokia, Bank of New York Mellon, and MPower Mobile.
Both sessions ended up tackling the same big question — how can banks, mobile operators, and others change their behavior to develop large-scale mobile banking services for poor people?
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by Gautam Ivatury : Wednesday, August 6, 2008
Last week a group of the world’s 25 leading medical doctors, public health professionals, development agency staff and analysts gathered in Bellagio, Italy to debate the future of mHealth, or the use of mobile phones in health systems.
This emerging field resembles mobile banking circa 2002. There are uncoordinated and relatively small pilot projects, regulators and policymakers have thought precious little about the topic, donors have no organized mechanisms for support, and there is scant public attention to the opportunities to deliver healthcare or track health information with mobiles. In a previous post, Jim Rosenberg characterized this state of play as the “technology trigger,” the first stage in the maturing of a new technology approach.
Mobile banking has clearly moved beyond that phase – indeed, with regular appearances in publications like the Financial Times, Economist, Wall Street Journal, New York Times, and trade press such as The Banker, mbanking is now farther along the lifecycle towards the “peak of inflated expectations.” (See Jim’s post)
What caused this maturing of mbanking during the past 5-6 years? For one, “mobile financial services” isn’t a new topic and has been hyped before, so we may just be following a pattern. But I’d like to share one theory that I discussed this week with the mHealth experts as they think through how to advance their field. My argument consists of six different reasons.
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by Gautam Ivatury : Wednesday, June 25, 2008
What functions are involved in the ASP or SaaS model for microfinance IS/CBS?
We are looking into the different pieces of the value chain for delivering information and core banking systems through an application service provider (ASP) OR software as a service (SaaS) model. These functions may be performed by a microfinance institution (MFI), a national or regional microfinance association (MFI-A), a local IT service provider (ITSP), the ASP or SaaS vendor (Vendor), or another, new party.
ASP or SaaS models would seem particularly likely to fall short of customer expectations when it comes to support functions. One reason that MFIs are so dissatisfied with existing microfinance software vendors is that they provide poor quality support after the sale – and in particular that most of these vendors do not have local support providers in the countries in which their MFI customers operate. For example, a vendor from Ecuador may have customers in Peru but no on-the-ground support staff in that country.
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Much has been written about how innovations go from being extraordinary and untested to becoming commonplace (Everett Rogers, Diffusion of Innovations, 2003). How can we apply the thinking that “innovation diffusion” research has come up with to mobile banking?
First, let’s identify what the innovations are in mobile banking. For someone who has a mobile phone, but doesn’t have any bank account, I would see three:
- a new concept of value – electronic, not cash or in kind
- a new financial provider – not manual exchange or through hawala or through bus driver or friends/family, but unknown / untrusted organization or some bank
- a new use of device – use existing device for new purpose (idea that phone can be used for finance is a new idea)
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by Gautam Ivatury : Friday, August 31, 2007
Putting in place a cost-effective, efficient, scalable core banking system (or information system) is a tough job for any business. For many small and medium microfinance institutions (MFIs), it’s proven to be virtually impossible. Strong IT staff are hard to come by and retain, managers have limited training in making IT decisions, and getting loan officers and accountants to buy into a new system is no piece of cake.
When are these MFIs going to learn to stick to their knitting and outsource their IT systems, just like the rest of the financial services world? … Well, maybe it’s not so easy…
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 Vodafone’s M-Pesa mobile phone payments and transfer service in Kenya has signed up an impressive 140,000 customers in just 3 and a half months, according to Vodafone’s head of mobile payments. Although there are anecdotal reports of customers who are confused by the service, glitches in the sign up process, etc., it’s a good start. With this in mind, one wonders about India.
India’s cell phone user population doubled during the past year to 150 million at the end of 2006. That’s amazing growth and helps explain Vodafone’s recent purchase of most of the shares of Essar, India’s fourth-largest mobile operator.
So what about mobile phone banking? The Reserve Bank of India has so far been less open to allowing a mobile operator to issue e-money, at least in comparison to the central bank of Kenya.
One strategy an operator might take would be to partner with a financial institution that could hold customer accounts. If Vodafone could partner with a bank to make sure customers have accounts at a licensed financial instution rather than offering virtual accounts as it does in Kenya, then the regulatory hurdle becomes much more manageable. However, the business arrangements naturally grow in complexity.
A second major regulatory question, also dealt with in CGAP’s recent diagnostic on the regulatory framework in India, concerns agents. Key to a successful m-banking model is the ability to use agents such as airtime resellers to open accounts and take in and give out cash.
“Slow down the future.”
This is how a former head of strategy for Vodafone Europe described to me what mobile operators try to do. Theirs is essentially a fixed-asset business, in which networks have been built and the aim is to maximize the return from customers. In that sense operators are not about innovation around new technologies, because they’re trying to recoup their investments in technologies they’ve already deployed.
Does this mean operators aren’t interested in mobile banking? So far, quite the opposite.
Mobile banking and payments are two potential revenue sources from existing customers. They may be particularly useful in increasing average revenue per user or ARPU of low-income customers who generate low revenue and low margins. Payment and banking products that are fee-based and reduce customer turnover might be just what’s needed to make these customers more profitable.
Where do handset makers like Nokia and Motorola come out on m-banking? They make money when they sell phones, so adding new features and functions is essential. Building new payment capabilities into phones is just the kind of differentiator that will make the next generation of models sell.
Will handset makers build in this capability even if there are few places where you can tap your phone and make a payment? Which standard will they use, if any? And how can combining the motivations of operators and handset makers increase mobile banking services for poor people? A few questions we’ll continue to explore.
by Gautam Ivatury : Saturday, April 15, 2006
by Gautam Ivatury : Sunday, January 29, 2006
Some of the innovations commercial banks need to service poor clients may be found in information and communications technologies (ICTs).This Focus Note addresses the following questions: Can banking technologies, applied innovatively in developing countries, make microfinance profitable for formal financial institutions? Will they reduce costs to such an extent that banks could profitably serve even those whom MFIs have mostly excluded to date, such as very poor and remote rural customers? Will these customers be comfortable using technology?
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