Archive for: Philippines: Globe Telecom

This blog post summarizes a quick review of commercial investments in mobile financial services and branchless banking. We focused our review on equity deals between 2005 and 2010 involving mobile payment companies, agent companies, payment platforms and others providers that we knew were targeting the financially excluded in developing countries. We looked at press releases and other publicly-available sources for information on deal sizes and structures. We also included a few notable deals involving banks such as Telenor’s acquisition of Tameer Microfinance Bank in Pakistan and the creation of BanKO by Globe Telecom and others in the Philippines. The dataset is available upon request (technology@cgap.org).

Here are a few basic findings:

• 47 deals with USD 400 M in cumulative volume between 2005 and 2010
• Average deal size of USD 7 M with the largest number of deals under USD 4 M
• Most investments were in technology companies but new opportunities are emerging
• International Finance Corporation (IFC) was the most active investor globally
• India was the most active market

Click on images for clearer view

47 deals with USD 400 M in cumulative volume between 2005 and 2010.  Whether USD 400 M is sizeable or not depends on your perspective. It is sizeable if you consider that grant funding to companies in branchless banking between 2005 and 2010 totaled well below USD 100 M. From the perspective of those of you watching the larger payments or mobile money environment, the total size might be small, but there are a number of additional factors to keep in mind. First, a large share of the USD 400 M is attributed to a single deal – Obopay’s deal at USD 139 M. In fact, investments made into four firms – Obopay, Cointel, FINO, and Monitise – account for 60% of volume. Second, there are roughly 15 deals with an amount that was not publicly available or disclosed to us. Lastly, USD 400 M is not the complete figure of private investments made into mobile financial services or branchless banking. That figure is significantly higher if you consider internal investments made by mobile network operators, banks and others into their implementations.  Read the rest of this page »

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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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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Since the official launch of GCASH in early 2004, Globe Telecom’s subsidiary GXI set-up a number of initiatives to help them arrive at a strategy for mobile banking in the Philippines. As part of those efforts, CGAP and GXI partnered to roll-out GCASH in three predominantly rural and low-income provinces of Bohol, Palawan and Surigao. Our goal was to understand how to expand the reach of GXI’s agent network into smaller towns and how customers would use the service. I am writing to share briefly what we learned in terms of customer usage and preferences in the low-income provinces that we have been working in.

In 18 months, GXI signed up 120,000 new GCASH customers in three low income provinces (Bohol, Surigao del Norte and Palawan) and set-up 200 agents to service those customers (GXI has 1.1 million GCASH customers nationally with 3,000 agents). GXI reached over half of the registered base in the first three quarters of 2009 – roughly 72,000 new GCASH accounts. About 2,000 of those customers (under 3 percent of total) have been conducting one or more GCASH transactions a month. The average transaction size was very low at USD 30, reflecting GCASH’s appeal to those looking to transact at low values. In addition, a very small number of customers have used the wallet for storage. We found a small subset (6-7 customers) maintain a monthly running balance.

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The launch of BanKO, Globe Telecom’s new bank, raises a number of questions. Why a new bank for Globe when it has a mobile commerce outfit, GXI, and why now? For one, they can do it — regulation permits it. Few other regulators would easily permit such a bank. CGAP is aware of a couple of other similar businesses being set-up in Africa but EasyPaisa in Pakistan and now BanKO are the two notable ones to date. For Globe/GXI, it means the possibility of more revenue if they reach Filipinos with a range of financial services. CGAP is not complaining. If they are able to design products and leverage their distribution, then Globe/GXI will help bring even more reliable formal options to low-income Filipinos than they currently face.

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Globe Telecom is a leading mobile network operator in the Philippines and is working with CGAP to create ecosystems or mini-economies with multiple locations for people to transact with GCASH, their mobile banking service, via SMS messaging. Rizza Maniego-Eala, President of G-Xchange, Inc, Globe’s wholly-owned subsidiary running its m-commerce business with its flagship service, GCASH, explains Globe’s strategy to expand financial services using mobile phones.

Our CGAP partnership, together with all the programs we have implemented over the past five years, has given us a much deeper understanding of how our customers use the service and how else we can improve our business model to further open possibilities for GCASH. GXI (Globe’s wholly-owned mobile-commerce subsidiary) explored different options to lay the ground work to further build out our national strategy moving forward.

There are two basic elements of our strategy.

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Just over a year ago in Cairo, we convened the first Mobile Money Summit with our friends at the GSMA, DFID and IFC. The diversity of the crowd was fantastic – people from all over the world and all sorts of business – from mobile network operators to vendors to financial institutions. It might sound corny, but Hannes Van Rensburg captured the mood quite well: “A general spirit of: ‘Let’s build the industry’ rather than criticise each other prevailed.” (Mobile Payments have arrived)

Today’s the second and final day of this year’s Mobile Money Summit, and the key words here are data and partnerships:

Data - around the market opportunity for mobile money – by the year 2012 CGAP and GSMA estimate there will be 1.7 billion people with a mobile phone but not a bank account and as many as 364 million unbanked people could be reached by agent-networked banking through mobile phones;

Partnerships - a slew of deals announced yesterday illustrate the momentum around mobile banking services, notably: Visa Launches First Commercial Mobile Payment Service in Latin America. Read the rest of this page »

Globe Telecom is a leading mobile network operator in the Philippines and is working with CGAP to create ecosystems or mini-economies with multiple locations for people to transact with GCASH, their mobile banking service, via SMS messaging. Through intensive marketing, targeted customer education, and rapid sign-up and accreditation of retailers, the project will bring mobile phone-based payments and money transfer services for the first time to three predominantly low-income rural provinces. A total of 80,000 GCASH users in the three pilot provinces are expected to be reached, with greater success than would otherwise be possible without CGAP’s support. Rizza Maniego-Eala, President of G-Xchange, Inc, Globe’s wholly-owned subsidiary running its m-commerce business with its flagship service, GCASH, explained in a recent interview that this is just the latest in a series of innovative efforts by Globe to expand financial services using mobile phones.

How far would you say GCASH has evolved in terms of developing ecosystems for mobile commerce?
Today, GCASH has over 6,000 domestic outlets in the Philippines servicing our 1.9 million GCASH subscribers.  Recently we renewed our partnership with The Rural Bankers Association of the Philippines (RBAP) to further expand existing mobile phone banking services of rural banks.  Using the GCASH payment platform and developed with RBAP’s Micro-enterprise Access to Banking Services (MABS) program, the convenience of mobile banking, many rural banks are using GCASH integrated into their operations benefiting the bank by being able to reach more clients and provide an additional channel for accessing the various financial services offered.  

We’ve also begun a pilot transfer program for Filipinos in Hawaii, Singapore, Hong Kong and the United Arab Emirates that allows them to send Western Union mobile money transfers directly to friends and family who are GCASH subscribers in the Philippines. The cross-border service supports low-principal and high-frequency remittances at much lower rates. 

Describe the importance of pricing for the lower income segment of the market.
In the Philippines, the greater portion of the population lives at or below poverty line.  In spite of this, there are over 60 million mobile phone subscribers and around 98% are on prepaid services.  GCASH benefits the lower income segments because it reduces the transaction fees and costs to send and receive money.   GCASH requires only a mobile phone and a one-time SMS-based registration, with a minimal charge of U$0.02 (P1.00) per transaction.  Subscribers can do their transactions at home instead of traveling several kilometers to rural banks to pay or do their banking transactions.

For those of us who are less familiar with the Philippines, describe the importance of remittances to the country, as well as to your business.
The Philippines received international remittances worth an estimated $16 billion (this year alone) constituting about 13% of our GDP. The continued growth of remittances to the Philippines plays an integral role in the strength of the financial sector and our economy as a whole.  The Philippine domestic remittance profile is also growing although it is quite tough to find third party data estimating the size of this market. As both international and domestic remittances form a large part of our country’s economy, we continue to look ways in which GCASH can provide low-priced, secure and easily accessible solutions for our growing merchant partner-base and various consumer segments.

What are the benefits of GCASH to your partners on the ground – banking agents?
GCASH is all about convenience and lower transaction costs.  For partner establishments, GCASH has the potential of reducing costs and promoting efficiency.  Since transactions are electronic, their processing capabilities are automated thereby reducing manual handling and potential reducing back office costs.  The reduction of operating cost could translate to increased margins, better value passed on to our partners’ customers, or both.   Utilizing GCASH to help in our partners’ automation and increased access to more customers requires almost zero capital expenditure on their part.

Mobile operators have notched some high profile successes in offering financial services to the poor. Think M-PESA in Kenya or GCash and Smart Money in the Philippines. They’ve have logged several million users for their mobile money transfer services which appear cheaper and more convenient than traditional banking products.

Will banks respond by emulating their new competitors from the mobile world? Banks have an appetite for offering multiple products to their clients, so it would be a boon to the poor if banks wanted to ramp up their offerings via new electronic channels. But the emerging picture is not always rosy.

Many banks see mobile as merely a threat, according to IFC’s Andi Dervishi, who leads investments in alternative-payments systems for the IFC. “Banks remain conservative. They don’t see this as a big opportunity. They are taking a more defensive position, rather than offensive, and not really going after the customer. Their business model needs to be changed.” Countries like India, China, Brazil and Russia now have more mobile phones than ATMs, giving rise to the notion that mobile will support the next wave of innovation in banking in emerging markets where low-revenue customers means banks need to find low-cost channels. But instead of jumping to explore, most banks are playing defense.

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FMO’s UPsides magazine this month has a whole set of stories that look at how branchless banking (such as mobile banking) and remittances can help fight poverty. Two CGAP partners, G-Xchange Inc. (Philippines) and XacBank (Mongolia) are featured in this issue:

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.