Tata announced the Nano last week as an ultra simple but stylish car costing US$2500, closer to affordable for Indian families than any other new car. To slash prices, Tata engineers questioned everything conventional wisdom said is a “must have”: why not one large windshield wiper instead of two? Why does the beam connecting the wheel to the axle need to be made of solid steel? Today’s steel is far stronger than what Henry Ford started with, but no one had changed it yet. Less steel equals saved expense, and a lower cost in the quest for something rabidly cost-conscious consumers will buy in emerging markets like India.

But critics are bashing the Nano already for not getting close to meeting environmental and car safety standards like those in Europe, Japan and North America. Isn’t the Nano safer than the typical sight of an Indian family of 6 on one motorcycle, dodging trucks in traffic?

The lesson might be instructive for those watching the mobile banking space. Would mobile banking, through a licensed bank or reputable mobile carrier, be safer than the informal mechanisms poor people use now: stuffing cash in the mattress? or saving through poorly regulated cooperatives? sending money through bus drivers and friends, who might not deliver it at all? Research is needed to know.

Like the Nano, mobile phone banking for the unbanking does not get close to the product someone in the UK, US or Japan would accept. There’s no personal relationship with your banker, and few mobile banking pioneersoffer any sort of credit or other products beyond a way to save and send funds.

But like the hollow wheel rod on the Nano, mobile phone banking dramatically slashes costs, for providers that can leverage the phones in people’s pockets and the distribution network of merchants selling airtime to accept deposits and withdrawals. And for customers, who don’t need to put out the cost of traveling to a bank to transact.

Meanwhile, the Reserve Bank of India recently indicated it plans to develop the regulatory framework for mobile banking, though it does have concerns about safety of mobile phone-based channels. Nokia’s new factory in Chennai - the youngest of its 10 manufacturing facilities around the world - churned out 60 million handsets in its first 18 months. Small wonder: India accounted for 31 million, or 1 in every 7 of the 225 million subscribers added around the world in the first half of 2007.

Mexican telecoms sector sees 31.1% growth in Q3
The Mexican telecommunications sector saw 31.1 percent growth in Q3 2007 vs the year-earlier period, according to figures from Cofetel, Mexican telecommunications regulator. The growth is the highest for seven years. The growth is 10 percentage points higher than in Q2 2007 vs the year-earlier.

Full-spectrum dominance - Telecoms in India
India has met its ambitious target, set two years ago, of 250m fixed and mobile-phone connections. But the government is sadly unprepared. It has not given India’s mobile operators enough space on the radio spectrum to carry calls crisply and reliably. India, the operators complain, faces a “spectrum crunch”.

Tanzania reaches 7.7 mln phone subscribers in Q3
The number of mobile phone users in Tanzania reached 7.562 million at the end of September, up from 6.720 million at the end of June. The fixed-line user base at TTCL fell to 160,964 from 169,135 three months earlier, according to figures from the Tanzania Communications Authority.

Indian Bank pacts with NCR for e-ticket, portable ATM¼br> Indian Bank today said it has partnered with NCR Corporation, engaged in design and deployment of portable ATM centres for many Indian banks, for launching its first e-ticket kiosk and portable ATM centre.

Dabbawallas, postmen helping banks extend access to services
Across India, and notably in Mumbai, banks are using “correspondents”, or people who effectively serve as extensions of branches, in an effort to reach out to people who do not have access to banks and banking services. One such bank, the Corporation Bank, is using the city’s famed dabbawallas, the men who ferry hot lunches to office goers across the city, as its correspondents.

Bharti to tie-up with Barclays for mobile banking
Bharti Telesoft, software arm of telecom major Bharti Enterprises, is close to signing a deal with UK-based Barclays Bank for providing mobile banking services to the latter’s customers.

We are dead set on proving a hypothesis: good return to our shareholders can go together with reaching the poor.
-Riza Maniego-Eala, President of G-Xchange, Inc.

Our market research shows that 50% are keen to have mobile banking services made available through local grocery stores, post offices and gas stations. But getting the service out is proving to be a challenge.
-Ganhuyag Chuluun Hutagt, CEO, XacBank

Download the pdf here.

Mobile payments: the burning issue
Conceptually the mobile phone and the act of payment seem a natural match - their combination a good idea. But, as is the case with many of the good ideas this industry has had, material success on a grand scale remains elusive. The problems are familiar: the usecase is difficult to define, there are various technological solutions, which generally lead the demand, and the industry is reaching beyond the bounds of its natural habitat.

Back-Office Support for Busy Microfinanciers
THE microfinance industry — bankers to the poor — faces a paradox of scale, growing large in some ways but remaining small in others. There are more than 3,100 microfinance institutions worldwide, serving 113 million poor people. But even thriving microfinanciers are tiny by banking business standards. They typically make loans of $100 or so to entrepreneurs living on a dollar or two a day.
Using mobile phones as cash is put to the test in Europe
Don’t look now, but the French are in the technology vanguard again. A dozen major
companies have opened the largest trial outside of Asia for the use of cellphones as mobile money - giving consumers the ability to pay for everything from croissants and toothpaste to subway fare and wine with a wave of a handset. And they have global aspirations, hoping to prove that their systems, using the short-range radio technology called “near-field communications,” or NFC, can work securely on a mass scale.

AT&T’s Mobile Banking: A Stepping Stone to a True ‘Digital Wallet?’
Will credit cards, or even cash, ultimately become a thing of the past now that AT&T has dropped the gauntlet by embedding a mobile banking application into its most popular handsets? By partnering with Wachovia Corp., SunTrust Banks Inc., and Firethorn Holdings LLC, AT&T hopes as many as 30 million customers will ultimately use its new mobile application to view account balances and history, transfer funds, and pay bills from AT&T mobile phones. AT&T will pre-load the Firestorm software on approximately 30 of its most popular handsets.

Rural India New Target for Mobile Industry Players
Report Buyer, has added a new report showing that India’s telecommunication sector is  witnessing an explosive growth, as falling tariffs and rising incomes are bringing mobile phones within the reach of millions of new customers. “Emerging Rural Mobile Market in India” shows that mobile industry players are eyeing rural India as their new area of opportunity. The companies are encouraged by the fact that mobile users are expected to cross 230 million by 2007 end and 500 million by 2010.

Japan’s NTT DoCoMo may spend up to $8 bln on overseas investment
DCM is willing to spend between $5 billion and $8 billion to acquire minority stakes in telecommunications operators in emerging markets, a company executive said Tuesday.
“In the Asia-Pacific region, we are having many discussions with many operators,” Toshinari Kunieda, senior vice president and managing editor, told Dow Jones Newswires in an interview on the sidelines of the GSMA Mobile Asia Congress.

India: ‘Smartcard’ facility for 3 million rural poor ¼br> The successful disbursement of payments under the AP Rural Employment Guarantee Scheme (APREGS) and Social Security Pension Scheme (SSP) on pilot basis in Warangal and Karimnagar districts using the ‘Smartcard’ technology has prompted the Government to extend its reach to eight more districts in the coming few months.

Africa calling
IN THE barren surroundings of Kwa Phake in the north-east of South Africa, students from the town once left the families they supported to travel miles to the University of South Africa. Now they study at home, even receiving exam results on their mobile phones. Meanwhile, fishermen in Tanzania use mobiles to get weather reports and a service in the Kenyan capital of Nairobi alerts job seekers about vacancies by SMS.

Citi and mChek Introduce Innovative Mobile Applications
Mumbai, Maharashtra, India, Thursday, November 01, 2007 — (Business Wire India)
Citi India announced today that is has successfully piloted an innovative solution with mChek, a leading application developer in the mobile domain. This unique application significantly enhances convenience for retail investors, who are clients of a large broker, by enabling them to respond to margin calls or enhance their trading limits, even while on the move, by authorizing a transaction simply over their mobile phone.

Govt plans law to rein in banks
Harried bank customers could soon breathe easy with the government starting groundwork to provide legal cover to address their grievances and complaints. While the government has already written to RBI expressing concern over the recent incidents of banks using unfair recovery methods and unilaterally deciding interest rates and charges, sources said it has also decided to put in place a lender’s liability law. Centre and RBI had toyed with the idea of a lender liability law a few years ago, but settled on a code of conduct.

‘Lack of awareness hampers e-payment’
Mumbai: Lack of adequate awareness of the payment products is one reason why electronic payment in the country is not picking up. Both the Reserve Bank of India and banks should carry out awareness campaigns through media to promote the products. Banks can also educate customers who approach them for issue of drafts and payments to use the NEFT/RTGS for remittance of payments.

RBI in favour of migration to new payment model
MUMBAI: A change in the regulatory regime to enable a migration to a new payments model featuring the use of mobile phones and pre-paid cards may not be too far off. In its first review of payments and settlements systems in India, the Reserve Bank of India (RBI) has flagged off the need for a new payment model considering the high cost involved in the use of credit and debit cards for small payments. The review report has made out a strong case for raising awareness of payment products, transparency in charges and the need for possible regulatory changes to suit innovative products.

Overseas ATM sales help NCR in the Third Quarter
Strong ATM sales overseas, especially in the world’s hotspot regions, generated a 17% third-quarter increase in revenue for NCR Corp.’s Financial Self Service business, or ATM segment, the company reported Wednesday. Financial Self Service reported third-quarter revenues of US$407 million [281.3 million euros] compared with $349 million for the same three-month period in 2006. United States-based NCR, the world’s largest ATM manufacturer in terms of estimated number of machines shipped last year, attributed the increase to strong sales in the Asia-Pacific, Europe, Middle East and Africa markets. Retail Banking Research Ltd., a London-based strategic-research company and consulting firm, says Central and Eastern Europe is the fastest-growing market for ATM sales behind the Middle East and Africa.

Banamex and Soriana recently launched a partnership making Banamex services available in all 240 Soriana stores, which see an average of 25 million customers per month. “Mi Ahorro Banamex” offers two products: a prepaid MasterCard card, redeemable at all Soriana and affiliated stores, and a savings card. They plan to introduce additional products, such as remittances and savings, in the future.

Wal-Mart’s approach is slightly different. Instead of partnering with a bank, they’ve decided to do it themselves. Banco Wal-Mart de Mexico Adelante is set to begin operations before the end of the year. Wal-Mart is certainly known for its low-cost, high volume business model, but will this carry over into their banking services? With 964 stores covering nearly every region of Mexico, the potential impact on the estimated 80% of unbanked Mexicans is huge.

Without getting into the debate on whether or not consumer credit is better, worse, or in fact the same as what microfinance institutions are offering, the impact of these new entrants will certainly be felt by both the consumer outlets as well as the microfinance institutions. And perhaps that’s not a bad thing, especially if it finally brings about price competition in this notoriously expensive market.

Already in November 2006, Mr. Luis Almandoz, BCP’s man in charge of their agents, had presented the bank’s thorough planning of the network roll out at a conference in Colombia. Last week, newspaper El Comercio, described the bank’s success story installing more than 1,000 banking agents with lightening speed (1.5 agents per day!). Rather than the expected 300,000 transactions, the agents process today 900,000 transactions per month (i.e., around 30 transactions per day per agent).

The planning phase paid off and the bank’s learning curve was steep: “At the beginning it took us 3 days to open a new banking agent, today we need maximum 4 hours. Once we have one agent in a neighborhood, within three months, there will be three more.” said Almandoz.

The new channel, for which BCP won the 2006 Business Creativity Award (Premio Creatividad Empresarial), benefited all actors involved:

• Clients can now transact closer to their home at agents not only in urban Lima, but also in some parts of rural Peru. Almandoz also mentions reduced transaction cost: “mine workers often pay up to S/.30 (US$10) to transact in non-bank establishments.” Whereas bill payments at the BCP agents are free of charge, and account fees are low.
• Seventy percent of the agents were able to increase their sales by around 12% due to the increased foot traffic generated from their work for BCP. In addition, they earn around US$45 – US$200 per month in commissions.
• BCP was able to increase their coverage by 1,000 points and process transactions for over S/. 1m (US$ 330,000) at each agent each month.

The question is what are BCP’s secrets of success….. one is definitely their marketing (the bank’s anual marketing budget is around US$300-450k) and definitely their commitment and thorough planning. But how are they managing cash? We hope to find out….

Other banks like Interbank, Scotiabank, and Mibanco are also gearing up in Peru and the network of agents is expected to increase massively next year.

“This could completely change the way banking is done, and what’s interesting is that this is happening in the developing world, where 80 percent of people don’t have access to banking,” says Mark Pickens, a microfinance analyst at the Washington-based Consultative Group to Assist the Poor. “M-PESA is the kind of thing that can move the frontier for access to finance…. This is something that can actually change people’s lives.”

Read the full story here: Christian Science Monitor: Unserved by banks, poor Kenyans now just use a cellphone

Our project partner, Credibanco VISA in Colombia, is using a georeferencing tool to advise banks as to where large numbers of their target clients are located, and also which retail outlets in that area might make good “corresponsales no bancarios”, as the Colombians call their banking agents.

The process is easy. Based on the bank’s target clientele (e.g., income up to COP 250,000 per month [US$122] and “estrato 2″ reflecting the Colombian economic classification of 0-6, where 0 is poorest and 6 highest income) and preferred location (e.g. high population density, no financial infrastructure, etc.), VISA uses census data, financial infrastructure coverage, and retail information from yellow pages to develop heatmaps which combine the following:

• poverty and income levels 
• population density
• postcode boundaries
• existing financial infrastructure (e.g. branches, ATMs, etc.) and card holders
• stores and other commercial activity
• areas that generate a lot of foot traffic (e.g. bus stations, markets, hospitals, etc.)

Based on the resulting maps, the bank can see in which areas their agent would be most effective. Factors like poverty and income level, population density, and existing financial infrastructure will impact the agent’s future transaction volume; placing agents near bus stops and market areas will make them more visible and increase the likelihood that clients will repeatedly use the agent to conduct transactions.

On the picture you see the final heatmap. Red areas show neighborhoods with great opportunity to reach the bank’s target clients; the mountains refer to population density. If you would like more detail, please send me an email and I can forward you VISA’s complete analysis of Ciudad Bolivar, a poor neighborhood of Bogota, Colombia.

The opening sessions covered the opportunities that technology provides, but also helped identify the areas we jointly need to tackle to unleash the power of technology to deliver financial services to people who are too poor, live too far from a traditional bank branch, or do not have a formal credit history.

Viability of technology approaches and business models. Mobile-phone banking for low-income clients, agent-based distribution networks for banks, outsourced information technology (IT) platforms for microfinance institutions (MFIs) are tested by only a few pioneers around the world. The viability and sustainability of these emerging business models will depend greatly on how well services and products are adapted to clients needs and wants to ensure uptake.

Infrastructure alone will not do the trick. In Brazil where 75 banks are currently operating 90,000 agent points and reach 98% of the country’s municipalities, access to finance is not a problem anymore. However, low-income populations are using their local banking agents only to pay their bills. In CGAP research in 2006, just 6% of the 750 surveyed actually deposit money at their pharmacy, bakery, or supermarket. Using technology is not only about developing infrastructure, but also about acquiring new clients in these often remote locations.

Regulation to foster innovation while protecting customers. The use of non-bank entities to deliver financial services, e-signatures, payment system and competition laws, telecom regulation, etc. are all issues which come into play when using a mobile phone or a retail outlet as the interface between the bank (and sometimes not even the bank!) and the client. Certain and conducive regulatory environments are the fundamental issue that can make or break the use of technology for microfinance.

A transactional channel cannot replace microfinance. Microfinance’s fundamental element is the strong relationship between the credit officer and the client. This strong link helps microfinance institutions make credit decisions, but also provides social integration for many customers, training, and empowerment. Can the use of a mobile phone or local merchant replace microfinance? Or what are the operational set ups to ensure that we do not lose the personal element which has been so powerful for microfinance’s impact?

Stay tuned.