Archive for: Philippines

In this fourth post in our series on interoperability, we describe interoperability at the customer-level. Read the first three posts here.

One agent. Five mobile money services (Photo taken by Ben Lyon of Kopo Kopo near Geomaps Centre in Nairobi)

In our work on interoperability, we find that there are some questions that we are unable to adequately address at the platform and agent levels alone. For instance, the opening of USSD gateways by mobile operators may allow customers of one operator to access services of another operator without either platform interconnection or agent sharing.

We identify two interoperability scenarios related to the mobile handset:

1. Customers can access their account through any SIM on the same network. For instance, one service in East Africa allows its customers to access their service from any handset as long as it is on their network.

2. Customers can access multiple accounts on one SIM. For instance, SMART in the Philippines allows customers to access SMART Money on their SMART SIM, as well as access accounts with various banks through different enabled interfaces.

Allowing customers to access their account via other SIMs or other accounts via one SIM increases the potential size of the market and increases customer convenience. In the latter case, providers may fear that customers will readily switch to another provider. MNOs run the risk that another service accessible to their subscribers will cannibalize their own service. Providers with large market share, in particular, may be less inclined to allow customers of other services to access their accounts. In addition, number portability has made it easier for customers to switch telecom providers.

Mobile money and the link between the mobile phone number and mobile financial services are supposed to help retain customers. Even if providers permit access to other services, they may use pricing, marketing and other features to try to keep customers from churning (e.g., make it hard to find the other service on the menu).

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Our discussions on branchless banking on this blog do not often touch on the role of microfinance institutions (MFIs). The main actors in this space seem to be mobile network operators, commercial banks, larger microfinance banks and technology companies. We have done a bit of thinking on microfinance and mobile banking, notably in this Focus Note and at this Virtual Conference.

In our last post of the year, we bring the discussion squarely back to the role technology can play for MFIs. Our guest author is Leo Tobias, Grameen Foundation’s Technology Program Manager of the Solutions for the Poorest Microsavings Initiative. 

Cashpor Officer processing loan payments on mobile

Grameen Foundation’s Microsavings Initiative is a three-year project funded by the Bill & Melinda Gates Foundation. It was launched in November 2009 with a goal of reaching 1.45 million new savers across 3 MFIs in the Philippines, India and Ethiopia.

Offering voluntary savings is demanding. Financial institutions compete with the alternatives that exist to formal savings accounts (home, relatives, neighbors, etc.). A common theme in our savings market research is the customer’s desire to have easy and convenient access to their funds. To deliver on those desires, our MFI partners face common technology challenges.

Here are two major challenges:

1. Front End Technologies 

To meet customer demands, financial institutions must develop delivery channels that offer accessibility and close proximity to the end client.

Selecting the right technology is an important first step. The 3 MFIs are at various stages of investigating or implementing mobile technology. In India, CASHPOR (CASHPOR Micro Credit) incorporated mobile in both their credit and savings processes. In the Philippines, CARD Bank (Center for Agricultural and Rural Development) implemented an SMS system for an on-demand savings deposit pickup service. The use of mobile phones is clearly a powerful venue for bringing the transaction closer to customers. However, it is not the only technology to be considered.

In Ethiopia, ACSI (Amhara Credit and Saving Institution) is planning to use cards (most likely smart cards) and POS devices as their first front end technology implementation. With only approximately 14% mobile penetration in the country, all indicators point to the fact that the majority of the rural poor will not have access to mobile phones in the next couple of years. In the Philippines, the majority of microfinance customers are in provinces classified as “urban” or “semi-urban”. In many of these areas, ATM machines are accessible. CARD Bank chose to provide access to the national and international network of ATMs as a feature of its voluntary savings product in addition to the use of mobile phones.

Integrating all the sophisticated technology requires the help of external providers who can bring a wide array of specialized expertise to the organization.  However, managing relationships with outside technical providers can be new and difficult since most of the technical needs of MFIs had previously been met by in-house expertise.

The MFIs are ultimately responsible for the relationship with their customers.  The MFIs therefore have to provide the training and support needed to make sure members are comfortable with and trust the technology. A component of our holistic program has been to recognize this need and to develop educational programs to introduce not only the savings products but the technology associated with them.

2. Core Infrastructure Upgrades

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This is the second in a five-part series on product innovation in branchless banking. In the first we described how developing products beyond payments is one part of driving scale for providers, and ultimately boosting financial inclusion.

Henry Ford famously said, “If I’d asked people what they wanted, they would have said faster horses.”

There’s two ways to understand what he meant. One is customers don’t know what they want, so why bother asking. But for every Henry Ford or Steve Jobs (Who said “It’s not the customer’s job to know what they want.”) there are 1000 businesspeople who thought they knew the next brilliant product and are now staring at a cash flow statement soaked in red. Genius is in short supply.

The rest of us mere mortals must subscribe to a second interpretation: customers often can’t or won’t tell you what they want, so you must work to dig down to what they really need. To understand this requires knowledge about not only their current use of substitute products, but also their broader life context: their household situation, their aspirations, and their worries.

A prime example of this need for deeper customer understanding is the vastly different levels of success which very similar mobile money products have encountered across markets. M-PESA Kenya’s success has spurred providers across the globe to launch services with similar functionality: a liquid wallet with an emphasis on P2P transfers (“send money home”) and bill pay functionality. As we highlighted in the first post in this series, the “send money home” proposition has not yielded as much success outside Kenya where just 1 in 15 services launched since 2007 have accumulated more than 250,000 active users. This can be explained by differences between markets that have profound effects on how consumers perceive the value of otherwise similar services.

A truly valuable service would meet two criteria: they must fill both a deeply felt and a poorly met need (see figure): Read the rest of this page »

Summer is now officially over here in Washington and the busy fall season is off to a quick start. If you are just getting back into high gear, maybe this is a good time for us to recap some of the things we’ve been discussing on the blog over the last couple months, some of the latest news that’s caught our attention, and some things to keep your eye on in the coming weeks.

The South African bank FNB has recently launched its latest mobile banking offering Pay2Cell which allows FNB account holders to make payments to other FNB clients using only the recipient’s mobile phone number. This is a different product offering from FNB’s eWallet which allows FNB account holders to send money to anybody with a mobile phone. The recipient does not need a bank account and can withdraw the cash at any FNB ATM.

South Africa is one of the 7 markets that we covered in our recently released branchless banking country notes. The other countries include India, Pakistan, Mexico, Brazil, Ghana, and WAEMU in West Africa. The report for WAEMU is now also available in French – la version en français UEMOA.

An active branchless banking provider in West Africa, Orange has recently launched the Orange African Social Venture Prize. This initiative aims to reward innovative projects using ICT for social and economic development in Africa. In this contest, 3 winners will be selected and will receive financial grants along with 6-months of mentoring support from management and ICT experts. The project should target at least one country where Orange has a footprint and the prizes will be announced during the AfricaCom Awards in Cape Town in November. The deadline for applications is the end of September. Read more about it here.

Staying in West Africa, Nigeria continues to buzz with branchless banking activity. The Central Bank of Nigeria recently issued operating licenses to 11 mobile money firms. As this article explains:

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Fiji G2P payments (courtesy of UNCDF's Pacific Financial Inclusion Programme)

Over the last couple months, we’ve run a series profiling different government payments programs that have innovated on their payment mechanisms and in some cases linked payments to financial services. We looked at the case of UBL in Pakistan making payments to flood victims. We profiled GCASH using GCASH REMIT to make payments on behalf of LandBank to rural beneficiaries of the 4Ps program in the Philippines. We featured Colombia’s Familias en Accion program that has contributed to the build out of banking correspondents in the country and is testing interesting ways to incentivize savings. We discussed the HSN Programme in Kenya and how Equity Bank is making payments to a very rural area in northern Kenya via smart cards and agents. Finally, we looked at the new G2P program in Fiji offering payments to beneficiaries through accounts offered by Westpac. Of course, we could have profiled many more schemes in countries like India, Mexico, South Africa, Dominican Republic, and others.

These examples are diverse as much as they are similar. Some of them are still in a pilot phase (such as GCCASH), while others are at a national scale (such as Familias en Accion). Some of them are using card-based solutions (such as the HSN Programme and Familias en Accion), while others are experimenting with mobile phones (such as GCASH). Some of them are distributing a payment based on certain conditionalities (such as the 4Ps program in the Philippines and Familias en Accion), while others are distributing unconditional cash transfers (such as in Fiji and the HSN Programme). What are some observations and lessons we can gather from these examples and from others around the world?

1. The link to financial inclusion is one that can often get forgotten in the quest for payment efficiency. Social protection programs rightly have the objective of making payments in a timely, efficient and cost-effective manner. While they often appreciate the link that financial services can offer to the beneficiaries, when push comes to shove, this will get sidelined if it becomes too complicated or costly to implement. Therefore we see that while the schemes in Pakistan and the Philippines have done an excellent job getting payments (and in Pakistan emergency payments no less) to poor beneficiaries, there is not yet a link to financial services. While this may be an added feature in the future, these examples should encourage all of us with a specific interest in financial inclusion to be deliberate and clear in our interaction with G2P partners about our real goals. Read the rest of this page »

In previous blogs Mark Pickens has lamented the lack of innovation by branchless banking providers in products that go beyond payments. But there are some green-shoots of innovation. In this blog we take a look at some examples of early experiments that we have seen involving in micro-insurance.

It could be argued that micro-insurance is the ideal financial product to be offered via branchless banking. Insurance requires a large base of customers: the larger the base, the more diversified the risk for the insurer, and the cheaper the insurer is able to offer the product. And branchless banking, we have long argued, is a business built on high volumes and low margins.

It seems that several others share this view. Here’s a quick summary of three of the most exciting examples that we have come across around the world that pair micro-insurance with branchless banking channels:

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This is the second post in our series on G2P, branchless banking and financial inclusion. Our first post on Pakistan can be found here.

A mother receives her family’s CCT cash grant from a GCASH REMIT representative in Burdeos, Quezon

Globe Telecom is a leading telecommunications company in the Philippines that runs the GCASH mobile money service. We asked Paolo Baltao, the newly appointed President of G-Xchange, Globe’s wholly-owned subsidiary running its m-commerce business, to tell us about Globe’s recent efforts to support the Philippine government’s poverty alleviation programs using the GCASH REMIT platform.

1. Can you explain a little about how the pilot works?

The Conditional Cash Transfer (CCT) Program, also known as Pantawid Pamilyang Pilipino Program (4Ps), is a vital component of the Philippine government’s poverty alleviation agenda. It aims to help the country’s poorest families through cash assistance in order to enable family members to pay for health care, nutrition and education, provided they comply with certain conditions such as keeping children in school, attending regular health check-ups, and vaccinating their children. Grants are currently delivered by the LandBank of the Philippines as over-the-counter payments via cash cards that can be used at ATMs or through off-site payments.

Previously, the Department of Social Welfare and Development (DSWD) and LandBank had to hire helicopters to physically bring the cash to participating beneficiaries in especially remote areas. This was of course very costly. The program organizers looked for means to bring down the cost of grant distribution.

GCASH REMIT, the domestic cash pick-up remittance service of GXI was initially tapped to distribute CCT grants to 10,000 beneficiries in 3 areas. GCASH REMIT partner outlets are already part of the community and these partner outlets need only a mobile phone to process and validate the disbursements. DSWD and LandBank in turn can monitor all these disbursements online and in real-time through the GCASH platform.

2. How did you get involved in the pilot?

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The news wires have been busy with the recent announcement of partnerships and joint ventures in the Indian branchless banking market.  India’s largest public sector bank, the State Bank of India, announced a joint venture with the mobile operator Bharti Airtel to offer mobile banking. Meanwhile, India’s largest private sector bank, ICICI Bank Ltd, announced its tie-up with Vodafone Essar to bank the unbanked via the mobile phone. As the Hindu Business Line writes:

These two initiatives take mobile banking services to a whole new level. While Vodafone manages over 1.5 million retail points for acquiring customers and servicing them, Airtel is present across 5,101 towns and more than 500,000 villages.  That’s a big deal considering that The National Sample Survey data reveal that 51.4% of nearly 89.3 million farmer households do not have access to any credit from institutional or non-institutional sources…Only 13% are availing loans from the banks in the income bracket of less than Rs 50,000.

The Pakistani media was also abuzz with the pronouncement of the State Bank of Pakistan Governor that:

Branchless banking is the future of the country’s financial sector as it opens up opportunities for bringing unbanked segments of society into the financial system.

Governor Kardar made this address at the signing ceremony between United Bank Limited (UBL) and Shore Bank International for UBL’s branchless banking initiative, Omni banking. Meanwhile, easypaisa, launched by Tameer Microfinance Bank and Telenor in October 2009, reports carrying out 10 million transactions valuing Rs. 17 billion in 15 months since launch.

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Last week, my colleague Claudia McKay continued our blog series on our new CGAP Focus Note which tries to answer the question: “Is the hype around branchless banking justified?”  To dig into some answers, we gathered data on more than 16,000 clients of branchless banking institutions in 10 countries. Today, I’ll discuss the third and final finding from the study.

How do we meet demand for products that go beyond payments?

Most branchless banking services help clients move money over distance : a money transfer to a family member in the countryside, a bill payment to the utility company, a social benefit from the government. Clients also want products that move money over time  – i.e. savings and insurance paid out today to use in the future, credit to be used today and repaid in the future.

We know the poor are very active money managers. Financial diaries used by Collins, Morduch, Rutherford, and Ruthven show low-income families in Bangladesh, India, and South Africa used an average of eight different financial instruments primarily to move money over time, and quite intensively: the average household moved more than US$1,000 through the instruments over the course of a year.

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Safaricom’s M-Pesa is now so well known in the mobile banking world that it has come to be accepted by some as a blueprint for mobile financial services. The service relies on the phone in the hands of the customer (now more than 12 million) to perform transactions and the phone in the hands of the agent (all 20,000 of them) to credit and debit accounts. But in markets that have either lower penetration of mobiles or higher fragmentation among operators, offering over-the-counter (OTC) payment services may be an important alternative, or additional, strategy.

In Pakistan, CGAP’s partners Tameer and Telenor deliberately decided to take a two phase approach in the roll out of EasyPaisa. They gave agents the phone first and trained them to process OTC transactions, so that they would become comfortable with the service. The customer didn’t need to have a phone at all to transact at the agent, but they would get an SMS receipt if they did. Six months later they launched the mobile wallet which allowed customers with a Telenor phone to have their own account hosted on their personal phone. But one year after launch the OTC service has been such a huge success that it accounts for the vast majority of transactions and revenues.

In the Philippines where Globe’s GCASH service is approaching its sixth year of operations, Globe has taken almost the reverse approach. In the early years they focused on the mobile wallet to drive usage among “early adaptors”.  Later they offered OTC “cash pick-up” for the “laggards” and they are now heavily marketing the domestic remittance service – GCASH Remit. With the recent approval of a network based license, allowing e-money issuers to be fully responsible for ensuring customer protection and compliance with the regulations, GCASH has scaled their agent network to 18,000 CICOs (cash-in and cash-out points) where OTC transactions can be carried out. GCASH Remit is available to the whole population including their competitors’ customers and those that don’t have a phone at all (not to mention people that have a phone, but are just not confident in using it for complex new services). 

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