Archive for: Highlighted Articles

Back in August, Mark Pickens and I pulled together a pricing table comparing the prices of 6 branchless banking pioneers: GCash and Smart Money in the Philippines, M-PESA in Kenya, WIZZIT and MTN Banking in South Africa, and Tameer Microfinance Bank’s pilot with POS terminals in Pakistan. We did this because it seems that very little was known about the pricing schemes of these early movers, and so a comparison was in order.

Since posting the table, we have heard from many of you, covering a wide range of actors in the mobile banking space (both from comments on this blog and also from direct  interaction with our team). Several of you have used the pricing table to benchmark your own operations. For example, a commercial bank launching an m-banking service for low-income clients’ domestic remittances plugged in its pricing numbers to compare itself with the others. A donor has used the pricing model to analyze the offerings in the Tanzanian market, where m-banking is just taking off. If other organizations are willing to send us their pricing data, we would welcome the opportunity to expand the table for greater comparison.

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Recently we spoke with Naushad Contractor about India’s mobile banking trends. A payments professional with over 12 years experience across geographies, Naushad heads marketing for mobile commerce at Vodafone Essar ltd., India. He is also on the regulatory committee of the Mobile Payments Forum of India.

Part of e-Businesses success stories, he has played a key role in launching India’s first eWallet and was a member of the core team that launched and made Remit2India.com the World’s No.1 Independent Money Transfer Portal for Non Resident Indians.

Q: Is mobile banking popular or hyped?
I think Mobile Banking is increasingly becoming popular but it is much more hyped than it is popular. Everyone says “I Do” but actually not many actually do as they say. However, the factor of sheer convenience for the customer and lower transaction costs for the banks is creating a conducive pull + push environment for increasing understanding and usage of this relatively new concept. As in the early days of internet banking, most people will tend to use mobile banking just as an information tool rather than conducting too many transactions on the mobile. Even the initial transactions will be much lower in value. Once trust in mobile banking increases as a result of good user experience, both usage and transaction values will begin to normalize.

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The promise of mobile web services, including WAP-based banking in developing countries is well established. Mobile banking, simply put, is transactions over a mobile network (via text message or connection to a data service) with a cash-in/cash-out agent (such as a local merchant or post office). This is a core piece of CGAP’s work. We share the belief that increased access to the online world can help transform the offline world (what some inelegantly call Meatspace). That has been true in wealthier nations and it is proving true in emerging markets. The need and the demand seem clear. Last month, Google and HSBC backed a plan to bring broadband backbone connectivity to telecoms and internet service providers in poor places. The venture is called O3b (”Other Three Billion”) and is easier said than done (remember Iridium, the failed satellite phone project?). As the Christian Science Monitor trimly puts it: “Are 16 satellites the answer to reaching 3 billion people?”

But…what if the entire way we get connected will be different in a few years time? Today’s telecom headlines include details of an effort to transmit wireless communications over visible light:

­Boston University’s College of Engineering is launching a program, under a National Science Foundation grant, to develop the next generation of wireless communications technology based on visible light instead of radio waves. Researchers expect to piggyback data communications capabilities on low-power light emitting diodes, or LEDs, to create “Smart Lighting” that would be faster and more secure than current network technology. (via Cellular News)

When it comes to getting connected, there is no shortage of mobile phones on this planet. The part of the UN that deals with telecom issues tells us that by the end of this year there will be some four billion mobile phone connections. Many of the handsets being sold around the world are still the basic, cheap models that do voice and text messaging. One of the more popular models in India even features a flashlight, which makes me think there’s a sales slogan in there somewhere (mobile phones can go where electricity cannot) or something silly like that.

The connectivity story in rural, poor places is changing fast. An increasing share of handset sales in Africa and Asia are capable of fast data speeds, enabling more robust services that are web-based. If O3b gets off the ground, it will enable millions of people to leapfrog copper wires and rudimentary mobile handsets, right to broadband web. If Boston University’s program succeeds, then that’s one more way to close that digital divide.

As promised, here is the video and presentation from today’s webinar that Kabir Kumar and Ignacio Mas lead, based on their recent paper: Banking on Mobiles: Why, How, for Whom?

Thanks to all of you who joined us in person or online.

Presentation: CGAP Mobile Banking Webinar (881kb pdf)

Video: CGAP Mobile Banking Webinar (requires RealPlayer)

Background
The promise of mobile banking is well known; harder to find are examples of solid implementation and mass roll out beyond payments and transfers. In Banking on Mobiles: Why, How, for Whom? CGAP examines the business case and deployment options for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.

Right now, CGAP’s Kabir Kumar and Ignacio Mas are leading a discussion based on their recent paper: Banking on Mobiles: Why, How, for Whom?

Access the webcast at: http://webcast-ext.worldbank.org/streaming/live.ram

Submit your questions by commenting on this blog post or just write to me at jrosenberg@worldbank.org.

-Jim

Wed. Oct. 1 from 09:30 to 12:45 from Washington DC | all times US Eastern (GMT -5).

9:30 – 10:30
Why: The logic of branchless banking
How: Developing and managing branchless banking channels

11:00 – 12:45
For whom: choices for banks, operators’ role, customer adoption
The good, the bad, and the ugly of m-banking

Background
The promise of mobile banking is well known; harder to find are examples of solid implementation and mass roll out beyond payments and transfers. In Banking on Mobiles: Why, How, for Whom? CGAP examines the business case and deployment options for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.

We will archive and share the video later.

This is an excerpt from a recent CGAP paper, Banking on Mobiles: Why, How, for Whom? In it, Kabir Kumar and Ignacio Mas examine the business case and deployment options around mobile banking for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.

Mobile phones are ingenious devices, but one thing they cannot do by themselves is convert cash into electronic value or dispense cash. They can be used only to transfer or transform value electronically. A mobile banking platform therefore needs to be supported with a cash conversion platform—whether full-blown bank branches, ATM terminals, or third-party banking agents. Remember, the whole mobile proposition is based on choice and control: if I don’t have a choice of cashing in or out of my electronic wallet, I am not likely to think mobile banking is doing much for me.

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This is an excerpt from a recent CGAP paper, Banking on Mobiles: Why, How, for Whom? In it, Kabir Kumar and Ignacio Mas examine the business case and deployment options around mobile banking for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.

A mobile phone is, and always will be, more limited in its capabilities than either a connected personal computer or a specialized POS. But it has economics on its side. For instance, the high cost of the required dedicated broadband infrastructure and the devices themselves will hinder the spread of Internet banking in developing countries. In rural areas it is further hindered by a vicious circle: low device penetration does not warrant roll-out of appropriate broadband communications infrastructure, and while the infrastructure is not in place few customers will invest in personal computers.

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I attended SWIFT’s SIBOS conference last week. This event couldn’t have been scheduled for a more exciting time – it opened with the fresh news of the turmoil on Wall Street. There was much talk about that.

As for the issues we are focused on, there was a panel discussion on mobile banking. A Western Union representative said that their average remittance size is $350. But in mobile trials (from Hawaii and UAE to the Philippines, using both Philippine telecom services Smart and G-Cash) the average remittance size was less than $100. So that’s evidence that there is demand to send lower amounts, if only the commission structure permits it. A Wells Fargo speaker said their average remittance size is closer to $500.

From India, ICICI explained their mobile remittance product. Essentially, the recipient gets notified by SMS, and then punches the code he gets on his SMS into a specially-enabled ATM to withdraw the cash. So the mobile is used purely for notification purposes, not for fulfillment.

As for some of the more cutting edge technologies, estimates on NFC-capable phones by 2011 or so ranged from 10% to 30% of installed base. So either way, it is not likely to reach poor people in developing markets in sufficient volumes any time soon.

SWIFT is creating a new messaging type especially for international remittances. Their main messaging business is related to inter-bank transactions, whereas they want to support person-to-person transfers. This was deemed by all banks to be essential to make it easier for each bank to set up bilateral relationships with other banks along remittance corridors, without having to agree a separate set of messaging syntax, rules and contracts. SWIFT would standardize all that and carry the messages too, in return for a commission. A dozen or so banks are now piloting this new product.

There’s a limited (if steadily growing) list of pioneers among mobile banking implementations reaching lower income clients…GCash, M-PESA, Wizzit, etc. Most of the buzz focuses on how they differ from traditional banking. But we realized we knew very little about how these pioneers rate against each other. Pricing seemed like a good place to start, since we’ve been itching to better understand that.

Sarah Rotman and Mark Pickens of CGAP’s Technology Program pulled together a pricing table – perhaps the first of its kind publicly available – comparing the prices of 6 branchless banking pioneers: GCash and Smart Money in the Philippines, M-PESA in Kenya, WIZZIT and MTN Banking in South Africa, and Tameer Microfinance Bank’s pilot with POS terminals in Pakistan. We also put them head to head with the “big four” banks in South Africa, where good pricing data was available. We eliminate differences across countries and currencies using the World Bank’s latest purchasing power parity figures.

This is a work in progress, and comments are welcome. What we found was unexpected: at least one freemium mobile banking pricing scheme (read on to find out who). And while our research confirms the common view of these pioneers as cheaper than banks, we discovered some may not be affordable to the poor. This (a) raises some key questions about uptake among lower-income, mass market clients, (b) shows industry is still very early in understanding how to price m-banking, and (c) ought to give regulators pause if they’re considering imposing a price cap.

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