Today during a panel at IFC’s FinNet 2010, CGAP will host a live discussion with some of the world’s leading mobile money providers at 2:00 pm EST / 6:00 pm GMT.
Post your questions here, and we’ll ask them during the session. Follow the discussion on a live webcast at this link starting at 2:00 pm EST / 6:00 pm GMT (Note: link will not be functional until the event begins): mms://wbmswebcast1.worldbank.org/live
Each year, IFC’s Advisory Services’ Access to Finance Business Line organizes an annual networking and knowledge building event. FinNet 2010 will bring together this week more than 400 internal and external people in the area of Financial Inclusion/Access to Financial Services at the World Bank headquarters in Washington D.C. This year’s annual event is titled “Access to Finance 2.0 – Financial Inclusion for Development” and the main events will be held this Tuesday and Wednesday.
On Wednesday, October 20 at 2:00 pm EST, several of CGAP’s technology project partners will be featured on a panel entitled “Accelerating Access to Finance Through Technology: Mobile Banking.” CGAP’s new CEO Tilman Ehrbeck will introduce the session. Steve Rasmussen, the Manager of CGAP’s Technology Program, will then lead an interactive discussion with the following three technology project partners:
Even if you aren’t in Washington for this event, you can still follow the discussion on a live webcast at this link: mms://wbmswebcast1.worldbank.org/live
Access the site to hear mobile banking pioneers discuss their challenges and opportunities on Wednesday at 2:00 pm EST.
Mobile operator MTN Benin and Ecobank Benin have launched MTN Mobile Money, a prepaid money transfers service available throughout the country on mobile phones using the MTN network, reports L’Autre Quotidien. Mobile Money can handle account opening, money transfer, deposits and withdrawals, as reported here.
For mobile banking to prosper in an emerging market several criteria must be present, such as a low internet penetration rate combined with a high mobile phone penetration rate, Lana Strydom, manager of the Mobile Portal section of the Digital Channels Retail Banking division for Absa explained. For one, payment alternatives, such as credit cards must not be well established, which is indeed the case in Egypt. Furthermore, a significantly large segment of the population must be outside of the banking sector. In Egypt, where the population is 80 million, only around 10 million are banked. The geography of the country must be rather large, with a substantial rural population. Again, although 20 plus million live in Cairo, the remaining 60 million lie beyond the capital’s limits.
Africa seems to be the theme of the day and the Daily Monitor reports that Nokia, during the 2010 Mobile Africa Conference recently held in Helsinki, encouraged more European firms to invest in Africa, given the growing demand for mobile phone-driven services.
And sticking with the Nokia theme, Simon Rockman from the GSMA Mobile Money Exchange had an interesting article about how Nokia’s move into the mobile money space is quite a good fit for the company. He writes that the technology piece of mobile money is quite low-tech. So while technology might not be that important, two things really are: brand and distribution. And Nokia is great at both of these:
To a person who has never encountered any kind of payment that wasn’t cash or barter the idea of putting money into an account means you really have to trust the brand associated with it. According to Interbrand, Nokia is the number five brand in the world – one of only two non-American brands in the top 10. The highest financial services company is American Express at 20 and the top bank HSBC at 32. This is a global ranking; in developing markets Nokia is even stronger. It’s the top brand in India.
Mireya has been spending time in Tanzania getting a close-up view on this interesting market. In particular, she’s been there for the recent launch of the newest mobile money service in Tanzania, TigoPesa, which is the latest reminder of the massive potential in this country to expand financial services to the poor.
TigoPesa, created by Tanzania’s fastest-growing mobile network operator, Tigo, is the fourth mobile money service offered in Tanzania. Vodacom Tanzania, a subsidiary of the Vodafone Group, is the leading mobile network operator with a 37% market share. Its M-PESA mobile payment service, which launched in early 2008, is currently the most recognized and widespread in the country. But Tanzania’s other major mobile operators, Zain (with 30% market share), Zanzibar-focused Zantel (with 8% market share), and now Tigo (with 25% market share), are following Vodacom’s lead in offering mobile money services. Zantel launched Z-PESA at roughly the same time as M-PESA, Zain’s Zap mobile money service has been in the market since early 2009, and TigoPesa launched just a few weeks ago.
We estimate that, primarily driven by M-PESA, Tanzania’s overall mobile money market is now approaching 1 million active customers, an important milestone at which economies of scale may start to kick-in. With four operators now aggressively marketing their mobile money services and building up their agent networks, general awareness levels on how to access menus (all but Zap being USSD-based) and how to cash-in/out, as well as the overall benefits of such services, have grown significantly in the last few months.
These are encouraging developments in a market that has been characterized by slow uptake and usage of mobile money, compared to the glaring success of Safaricom’s M-PESA in neighboring Kenya. Although the mobile banking sector is still at a relatively early stage of development in Tanzania, the potential to expand financial access to underserved populations is significant. The vast majority of Tanzania’s population lives under $2 per day and only 12% has a formal bank account, yet most has access to a mobile phone. Mobile network operators, facing intense competition in a highly fragmented market, have seized on this potential new market by rolling-out payment services and mobile wallets. In fact, the market structure of the mobile industry in Tanzania is one of the most important differentiating characteristics with that of neighboring Kenya. You can’t get much more of a contrast than a market where Safaricom had practically 80% market share when it launched M-PESA 3 years ago, a circumstance which is simply not there in most markets.
It has been clear for some time that the quick success of mobile money in Kenya was not to be easily replicated next door, nor in the over 40 countries that have launched mobile money deployments since 2003. Yet Tanzania appears to be developing its mobile money market at a commendable rate, and can potentially yield multi-player models that we have yet to see elsewhere. This is the partnership model Ignacio Mas blogged about recently, where operators could potentially share the cash merchant network in order to consolidate their transaction volumes at the store level, which can also be leveraged by banks seeking to expand their footprint.
With four MNOs vying for the loyalty and attention of customers, and with less than 500 bank branches serving the entire country, neither MNOs nor banks have the luxury of ignoring mobile money offerings.
Welcome to the last session of our 2-day virtual conference! The conference is taking place right here on the blog, no registration is required. Just post your comments using the “Leave a reply” option at the bottom of each thread.
This conversation is moderated by George Kinyanjui. George is a consultant and supported SMEP (Small and Micro Enterprise Programme), an MFI in Kenya, as they linked to M-PESA for loan repayments.
In the course of the last two days, we’ve heard from a variety of practitioners discussing opportunities and challenges of using m-banking services in different ways. For our last session, we’ll discuss one of the most obvious uses of m-banking – allowing clients to make repayments via an m-banking service.
SMEP’S EXPERIENCE WITH M-PESA
Since 2007, I have been working with SMEP on the introduction of a mobile repayments system. SMEP was the first MFI to link into M-PESA for group loan repayments in 2009. We found that although in some ways m-banking is about new technology, the time and effort we invested in technology was only about 30% of the whole project. The biggest challenge was how to take our customers from their early experimentation with the service to a point where they truly can understand the value it can bring them and feel comfortable operating it.
We knew that allowing groups to repay via M-PESA would impact the group cohesion and we worked carefully to ensure this impact was positive. Although clients repay using M-PESA prior to the group meeting, the meetings themselves are still mandatory. The meetings are much shorter than they used to be since the emphasis is not on collecting cash. Instead, loan officers can focus immediately on any repayment issues or business problems the clients wish to discuss. The officers can now accommodate more groups in one day. Clients are happy since they can make repayments whenever they want, group meetings are shorter and there is more security.
The result for SMEP has been very positive – repayment rates have actually improved since clients started repaying with M-PESA! Today, about 70% of loans are being repaid with M-PESA. SMEP will with time pass on the benefits of reduced expenses and increased efficiency to the clients in the form of cheaper loans.
PRODUCT
For those MFIs who do offer individual loans and deposits, it’s probably easier to start with these products. Since the key relationship is between the individual and the institution, there is no risk that using an m-banking service will negatively impact repayments. SMEP started offering individual loans and is currently transforming into a deposit-taking institution and it will integrate m-banking repayments into these products.
CHALLENGES
There are challenges to loan repayments using an m-banking service. Clients sometimes complain that agents run out of e-float when they are ready to deposit cash. Loan disbursement would be challenging for this reason – the amounts are larger and agents frequently run out of cash. Also, Safaricom does charge for the service (similar to bill pay tariffs) and, in most cases, both the institution and the client pay a small fee that they previously did not have to pay.
I’m happy to answer any questions you may have in the next few hours. I’d also be interested in hearing thoughts from those MFIs who have tried this or are considering it regarding the following questions:
1. Have you made any adjustments to your methodology or product design to adapt to this different channel?
2. How have factors like attendance at group meetings and repayment rate of group loans changed since the introduction of the m-banking repayment channel?
3. How did you first introduce this to your customers? Is the m-banking repayment channel mandatory or offered as an additional option? What has been the reaction of customers and staff?
4. What other challenges have institutions encountered? Have you had any technical difficulties?
The conference is taking place right here on the blog, no registration is required. Just post your comments using the “Leave a reply” option at the bottom of each thread.
This conversation is moderated by Aleksandr-Alain Kalanda, Chief Executive Officer of Opportunity Bank of Malawi. Daryl Skoog, Chief Technology Officer of the Opportunity International Network, will also be participating.
When my team at Opportunity Bank first started considering m-banking back in 2007, there was no other m-banking system in the country. Some banks were considering it, but in a very limited way where current customers could just check balances over their mobile phones. We were very excited about a much bigger vision – a vision to bring our services and products to unbanked people (especially in rural areas) via their phones. We decided to create our own system that was successfully launched in May of this year. We are happy with our system but it took longer and was more expensive and complicated to implement than we had expected.
I’ve spoken with many of my colleagues in microfinance around the world about this topic and many find themselves in the same position I was in a few years ago. They are very excited about the potential of m-banking but there is currently no service in their country that they can easily link into. Based on my experience, I would recommend that MFIs make sure they have substantial financial, technical and human resources before going down this path. Specifically, some of the pre-requisites should be:
• Proven track record to implement complex technology-based projects
• A strong core banking IT infrastructure that is able to handle large volumes of data flow
• Substantial financial resources to pay not only for the technological solution but also for the human resources, the agent network and a significant marketing campaign.
In order to start the discussion, here are some questions I’m interested in hearing your thoughts on:
1. For all those MFIs like us who are in countries without an existing m-banking service, what approaches are you considering?
2. Have any other MFIs started building an m-banking service on their own? What have your experiences been?
3. The paper discussed some alternatives to MFIs building a service on their own, especially the option of working as a group with other MFIs to combine financial and technical resources to launch a service. Is anyone interested in pursuing this approach?
4. For those MFIs who have decided not to build an m-banking service on their own, are you considering other ways of using phones to improve customer service (e.g., for clients to receive information, loan officers to track info, etc.)?
Welcome to the CGAP Virtual Conference on microfinance and mobile banking! This conference is taking place right here on the blog, no registration is required. Just post your comments using the “Leave a reply” option at the bottom of each thread.
Mobile banking has become a subject of debate within the microfinance community largely because most MFIs believe that there are certain benefits m-banking can bring to their institutions. But what is the reality on the ground? We asked this question focused on three specific benefits:
1. Can m-banking help MFIs serve existing customers better? The case studies of SMEP in Kenya and XacBank in Mongolia show that m-banking can help existing MFI customers save time and money, experience greater security, and manage their cash flows with more flexibility. For example, at any time during the repayment period when a SMEP customer has the cash flow to make her repayment (or even a portion of the repayment), she can use M-PESA to send the electronic value to the SMEP account directly. Meetings with loan officers now involve a quick verification of the transaction. Obviously, customer willingness to pay a transaction fee depends on the previous cash collection method used. If customers were responsible for transporting cash to make their repayment, they may be willing to pay an M-PESA-like transaction fee. But if MFI loan officers collect cash, customers may want to protect their “free” cash collection rather than pay a fee to make the repayment.
2. Can m-banking help MFIs reach new customer segments? We found little evidence to suggest that m-banking has helped MFIs reach new customer segments largely due to the fact that microcredit methodology relies heavily on human interaction. The case study of Kenya Women’s Finance Trust (KWFT) shows that this particular MFI does not expect M-PESA to help it expand its loan customer base significantly since loan officers still need to have face-to-face interaction with groups. However, KWFT does see M-PESA as a way to mobilize new deposits easily and cheaply.
3. Can m-banking reduce costs for MFIs and for customers? Early evidence suggests that m-banking can reduce operational costs for MFIs and that these costs can be passed on to customers in the form of lower interest rates. The case study of Green Bank in the Philippines shows that once customers began using GCash for loan repayments, there was less need to send collectors to gather repayments directly. As a result, Green Bank agreed to reduce interest rates from a flat monthly rate of 2.5% to 2%, as well as reduce its service charges from 3% to 2.5%.
What do you think?
• Do these benefits outweigh the costs associated with linking into a mobile banking system?
• Do you think that new customer segments will eventually be reached through m-banking or will the group accountability of microfinance prevent this?
• Will both customers and MFIs see significant cost savings thanks to the use of m-banking technology?
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.
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!
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).
It’s not just the gross revenue amount that is surprising. Two more things caught my eye.
First, Safaricom is lauding 78% growth in data revenue as the main engine behind the overall 37 percent growth in company profits (to USD 261.9 mil). And M-PESA now accounts for 48% of all data revenues, and 70% of the total growth in data revenue last year. In other words, this year M-PESA was the single biggest driver of new profits for Safaricom. Goodbye SMS as the #2 revenue source, at least for this mobile network operator.
Second, M-PESA may be delivering even more to the bottom line. A little guesswork is involved. The service is 3+ years old. Safaricom still incurs variable costs of agent commissions, marketing, HQ staff. But if they’ve paid off the original large, lumpy front-end investments in the M-PESA platform, the huge initial marketing blitz and no doubt a few high-priced lawyers to help sort out regulatory treatment… well, it would not surprise me if a substantial portion of M-PESA revenues now flows directly through to profits. Let’s say it’s half; in other words, USD 47.2 mil in profits from M-PESA. And we know Safaricom’s overall profits for 2010 were USD 261.9 mil. In this scenario M-PESA is generating 18% of all Safaricom profits.
