Archive for: M-PESA

It seems like every week there’s a new market study that comes out about mobile banking – but few of those (if any) focus exclusively on the opportunity to be found in serving poor, unbanked people in developing countries.

So, with our friends at the GSMA, we thought we’d share a preview of the upcoming results of the CGAP-GSMA Mobile Money Market Sizing Study, which includes:

• a projection of the unbanked poor who could be reached globally by 2012;
• an in-depth look at unbanked mobile money users in the Philippines today;
• and a survey of more than 40 operators, vendors and other industry actors.

The aim is to help mobile operators drive initial adoption and progress towards more sophisticated offerings, such as savings and credit. Some highlights after the jump….

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Starting today and running through the 2009 Mobile Money Summit, we begin a podcast series with some of the voices we’re listening to this year as part of the CGAP/DFID Branchless Banking in 2020 scenarios work. The process is based on one driving question: How can government and private sector most affect the uptake and usage of branchless banking among the unserved majority by 2020? You can participate directly through this blog,  by joining our prediction market, or posting discussions through our Mobile Banking and Microfinance LinkedIn Group. –Jim

Claire Alexandre has advised Vodafone Group and its subsidiaries on regulatory issues related to mobile payment and money transfer services over the last six years. She has led Vodafone’s contributions to new EU legislation (including on electronic money, anti-money laundering, payment services) and been instrumental in shaping and representing the views of the mobile industry on these subjects. As part of the team leading Vodafone’s effort to launch mobile payment and money transfer services such as M-PESA, Claire is managing Vodafone’s input to financial services regulation to promote the adoption of enabling regulatory frameworks. Prior to joining Vodafone’s Public Policy team in 1999, she managed regulatory affairs for France Telecom in Scandinavia. I spoke with her at a recent scenarios workshop held in Capetown, South Africa.

Interview with Claire Alexandre

Today we welcome Denise Dias as a new blogger for the CGAP Technology Blog. Denise works on policy and technology issues. Before working with CGAP, she was employed by the Central Bank of Brazil most recently as a bank examiner and previously as a senior advisor for the licensing department. –Jim

A meeting at CGAP yesterday made me think about a recent blog from Mr. Hannes von Rensburg, founder and CEO of Fundamo. He believes regulation is not a barrier for mbanking projects around the world and to bank the unbanked. Does he have a point? Yes, he does. First, the “regulatory barrier” is the easiest scapegoat for nonbanks (read mobile network operators) that are not used – or willing – to negotiate with financial services providers and deal with prudential regulators. Regulation will not be an insurmountable barrier to a variety of branchless banking models in many jurisdictions. Providers (banks AND nonbanks) will probably find a workable solution with financial regulators by agreeing upon minor regulatory changes or alterations in the proposed business model. Second, there are other major obstacles for branchless banking to take off, such as finding the balance between profitability, client adoption/usage, and security.

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Last week was the gigantic GSM Mobile World Congress in Barcelona. At the Mobile Money Forum, optimism ran fast and deep. That tone was a refreshing break from the steady tide of gloom and doom in the financial press. Safaricom won another award for its M-PESA mobile money service, which has now signed up over 5 million Kenyans.

There was also lot of congratulations for making it possible for people the world over to buy airtime in amounts as little as 5 cents from literally millions of sellers in the smallest villages. One commentator called it “the cheapest, biggest, most powerful sales channel in human history.” The mobile industry thinks they have a huge advantage in delivering financial services cheaply.

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In May 2010 we updated this research: For the unbanked, is mobile money cheap enough? CGAP releases pricing study across 16 providers in 10 countries

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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I have been tracking the mobile banking/branchless banking space in India for a few years – since the business correspondent guidelines were issued. India drafted those guidelines in the spirit of significantly ramping-up access to finance for poor people. The guidelines put Indians in the lead on branchless banking regulation in the South Asia region. Two years have passed and we have yet to see those guidelines translate into a dramatic change in the access to financial services picture in India. There are new companies and more experimentation with correspondents and innovative solution providers but banks have simply not been aggressive about pursuing branchless channels.

The Reserve Bank of India issued final mobile banking guidelines on Wednesday and banks are again front and center. Should we expect these guidelines to dramatically alter the picture of financial access in India? Are the unbanked winners or losers? Well….

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In May 2010 we updated this research: For the unbanked, is mobile money cheap enough? CGAP releases pricing study across 16 providers in 10 countries

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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Olga Morawczynski is a doctoral candidate at the University of Edinburgh. She has spent over 9 months investigating customer adoption and usage in both urban and rural Kenya. Below are some of her observations from the field.

It is early morning in Bukura, a small village in Western Kenya. The shop-keeper and his wife are preparing to open their small store, which sells household commodities such as flour and cooking oil. They also offer M-PESA services. There is already a queue outside. A group of about twenty villagers are crowding the entrance. “It is always like this,” the shop-keeper complains while pointing to the crowd. “Since we have become M-PESA agents we have no time to rest. This thing has even over-run our other business”. He then holds up a packet of sugar. “We have not sold any sugar in months. They only want M-PESA”. Not just the Bukura agent has seen a great demand for M-PESA services. Since its introduction in March of 2007, the M-PESA application has had great success all over Kenya. There are currently over 2.3 million registered users. Over 18 Billion Ksh had been moved through the system, via person-to-person transfers.

Some of the work that I have been doing makes several arguments as to why M-PESA has become so popular. Firstly, it is the young, male, urban migrants who are driving the uptake of services – customer adoption. These migrants are what innovation researchers call ‘early adopters’ of a technology. They are usually better educated and earn higher incomes than those in the village. Because these migrants are the senders, they can choose the channel for money transfer. They then influence recipients in the rural area—who are usually female, less educated and poorer—to also use M-PESA. This segment is referred to as the ‘technology laggards’. They are usually the last, and often the least likely, to adopt an innovation.

This research also notes some barriers to adoption. Both agents and customers complain of cash float problems, especially in the rural areas. Because the majority of transactions in the village are withdrawals, agents must maintain their cash float. They do this by making frequent trips to the bank. This can be problematic if the agent is not close to an urban centre, where most banks in Kenya are located. An agent in Malaha, a small village in Western Kenya, commented, “almost every day I ride my bicycle to Kakamega to top-up my float. This takes me almost three hours. I have to leave at 6am because I want to be there when the bank opens. I must then come back again and serve my customers”. When asked if there was any other means of transport to Kakamega, the agent shook his head. He said that he was several kilometres away from the main road. He also said that he could not afford to pay the 200 ksh fee for the matatu (shared taxi).

Despite these cash float problems, the majority of customers in both the urban and rural areas assert that they prefer M-PESA over other money transfer services. This means that M-PESA must be offering them some kind of substantial benefit. In Bukura, this benefit comes in the form of savings on transport. Customers do not need to travel into Kakamega, the nearest town, to access the service. One elderly farmer commented that “I can just walk from my shamba (farm) and get money. I don’t have to spend and go into town. If the agent does not have cash today, then I will come back tomorrow. It is cheaper to wait”. Finding strategies to manage the cash float problem will undoubtedly be one of the greatest challenges for Safaricom. For now, however, it seems like customers are willing to accept the inefficiencies of the service. It is, after all, cheaper to wait.

Jamii Bora is a rapidly growing Kenyan MFI which is using 200 handheld terminals with their 185,000 members, via 72 branches and 142 outlets in 13 locations across the country. JB staff are adamant that going electronic has allowed their back office to keep up with the rapidly growing numbers of clients coming through the front door. The Sagem-branded POS terminals are equipped with a magnetic stripe reader for debit cards, an alphanumeric keypad, display screen, and thumbprint reader. They connect to the MFI’s core banking system via GPRS over the local mobile networks. Jamii Bora has re-engineered its processes so that nearly all transactions are completed via the POS, the client’s debit card, and their thumbprint as identification.
Clients have more confidence in printed rather than handwritten receipts. This is particularly important for Jamii Bora’s clients, who organize in 5-person groups and usually send 1 member with all of their repayments and deposits. The POS application has been customized to print out itemized receipts which group members can use to verify transactions were correctly completed. The migration to electronic has also radically sped up data processing. Clients can see their money in the account the next day, which is valuable as Jamii Bora ties loan size to the amount of savings on deposit. And the MFI can also see the end of day cash position for its 72 branches, a simple but critical piece of data for management.

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