Archive for: Mobile Banking
by Claudia McKay : Friday, February 3, 2012
“Cash is easy.” “Cash is what I know most.” “There are no charges when I use cash.”
 Ghana Market Seller (Photo Taken by Adam Jones) I was sitting in a little room in the outskirts of Accra listening to a group of tomato sellers talk about the financial tools they use to manage their finances. As a part of CGAP’s work in Ghana, we have commissioned Bankable Frontiers Associates (working with Easy Errands, a Ghanaian market research firm) to conduct a market research study on the financial needs of low-income customers in Ghana. One of the first steps was to conduct focus groups throughout the country and listen to diverse groups of Ghanaians, including farmers, taxi drivers, traders and students, talk about their strategies for moving and storing money. They discussed bank transfers and drivers and the use of family and friends but more than anything, they talked about cash.
The trite expression ‘Cash is King’ is over-used in our line of work, but as I sat in that little room listening to these people whom mobile money services have spent millions of dollars trying to woo, I realized yet again that the biggest competition we face in scaling branchless banking is not a rival MNO or bank or even the expensive money transfer operators – it’s cash. (Read some recent posts on our blog about this topic here and here.)
Cash is far and away the preferred method for storing and sending money in Ghana, no matter how inconvenient. One tomato seller, Charity, wraps her cash in no less than six black plastic bags and hides it in the back of her refrigerator, underneath her tomatoes and meats, so that the rest of her family does not suspect it is there. A timber seller, Emmanuel, told us he keeps his cash under the carpet in his living room. When asked whether the cash does not form a noticeable bulk, he replied with a big grin, ‘That’s why I spread it all around so that people walk all over my cash but have no idea it is beneath their feet!’
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This is the third post in our series on interoperability and related issues in branchless banking and mobile money. Read the first post that presented the overall framework for the discussion and the second post that looked at the interconnection of mobile money platforms. Today, we discuss interoperability at the agent level as it relates to agent exclusivity. We include agent exclusivity in the topic of interoperability because it raises many of the same issues as platform interoperability.
Agent exclusivity revolves around the ability of a customer of one provider to use the agent of another provider for cash-in and cash-out services related to that customer’s account. Non-exclusive agents can expand financial access by providing more access points to a greater number of customers, while limiting the rise of a dominant actor which could ultimately reduce competition. But as with platform interoperability, regulators are cognizant that prohibiting exclusive agents could deter private actors from entering the market. What service provider would invest in identifying, training, and equipping agents if competitors can piggyback off their investment?
To be clear, when we speak of agent exclusivity, we are only referring to the cash-in and cash-out services performed by agents – not other services (where permitted) such as customer enrollment, related KYC, and processing of loan documents. Agents providing only cash-in and cash-out services are often called “cash merchants”. We distinguish the cash merchant services from other services because cash merchant functions arguably present less risk to the financial service provider since agents typically transact against their own accounts. Think human ATMs.
We identify at least four different ways to share cash merchants:
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To commemorate the 2nd anniversary of the Haitian earthquake, we are running a few blogs on the mobile money industry that has developed in Haiti over the past two years. The consulting firm Dalberg has recently completed three pieces of research on the Haitian market as part of Haiti Mobile Money Initiative (HMMI). You can read their Haiti mobile money case study here and their research on the NGO experience of plugging into mobile money here.
Today they release the third piece of research on the payments market, specifically on the topic of market segmentation. Our guest authors are Vicky Hausman, Yana Watson, Matt Shakhovskoy and Lorenzo Bernasconi from Dalberg.
 With a year of operations under their belts, providers of mobile money services in Haiti are looking to move from a push for rapid expansion to a strategic pursuit of profitable markets. The industry’s kick-start came from a $10 million prize pool supplied by the Bill & Melinda Gates Foundation. Now as the prize mechanism nears its completion, the focus is shifting to sustainability based on supply and demand. For providers of mobile money services, we believe that a successful strategy will depend in large part on market segmentation.
The Haitian economy, though poor, is dynamic and resilient, and mobile money could fit into it in many different ways. Establishing possible uses through research and then offering a mix of services to suit distinct groups of customers will be key to the industry’s long-term viability. Studying and prioritizing these groups through segmentation will help companies to collect the highest return on their investment.
Segmentation is particularly important in nascent industries like mobile money, since identifying early adopters and low-hanging fruit can create opportunities to grow quickly and achieve economies of scale. While it isn’t an easy process, especially in a country where data on markets are hard to come by, it can insure against wasted effort and unprofitable investments. We recommend starting by estimating the size of different segments, then prioritizing them based on the costs and rewards to serve them, and finally planning a strategy to capture the segments that present the highest returns.
To see how we prioritized the segments in Haiti and to read a profile of one of the most promising – the agricultural value chain – see our report here.
Over the past week, the world has been commemorating the 2nd anniversary of the Haiti earthquake. Today and tomorrow we will have two guest blog posts on the mobile money sector that has emerged over the last two years in Haiti. Today’s post is written by two colleagues at USAID.
Charley Johnson is a Presidential Management Fellow at USAID. Priya Jaisinghani is a Senior Advisor to the Administrator and Director of the Mobile Solutions team. Prior to her work at USAID, Priya helped launch the Gates Foundation’s work in financial services from 2005-2009.
Two years after the earthquake, Haiti is rebuilding not just brick by brick, but click by click.
The earthquake left behind a government in rubble, an economy in shambles, and a people living in makeshift camps, coping with enormous loss. Against this backdrop, the possibility of progress lives not just in the resilient spirit of the Haitian people, but also in the simple power of their mobile phones.
In June 2010, USAID and the Bill & Melinda Gates Foundation launched the Haiti Mobile Money Initiative (HMMI). This program leveraged the private sector and the ubiquity of mobile phones to bring financial services to Haitians, 90% of whom didn’t have access to a bank account before the earthquake destroyed nearly one-third of the country’s bank branches, ATMs, and money transfer stations. Put simply, mobile money gives Haitians access to banking without building a single bank.
It worked. In January 2011, one year after the earthquake, HMMI awarded Digicel and its partner bank, Scotiabank, a “First to Market” Award of $2.5 million for “Tcho Tcho Mobile.” Five months ago, HMMI awarded mobile operator Voila and their bank partner, Unibank, $1.5 million for “T-Cash.” While verification is still underway, data reported by the industry indicate that there are nearly 800,000 registered users. Moreover, there are over 800 agent locations now available to serve clients. In a country where there are fewer than two bank branches per 100,000 people, this represents a near doubling of accessible financial services.
These numbers are significant, but what do they mean for the people of Haiti? Why should we care about the growth of mobile money in Haiti and the rest of the developing world?
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In our first post in this series on interoperability, we introduced a three-level interoperability framework focusing on (i) platform interconnection, (ii) agent exclusivity, and (iii) customer-level interoperability. You can see the full framework in this presentation. In today’s post, we delve deeper into the first level–interconnection of mobile money platforms.
Platform-level interconnection is what most people have in mind when they think of interoperability in branchless banking. When we speak of interoperable platforms, we are referring to platforms that permit the transfer of funds from one mobile account to the mobile account of another service provider. This is similar to being able to send money from your bank account to your sister’s account at another bank. Or it is similar to being able to send a text message from your phone with your mobile network operator to your friend’s phone on the network of a different mobile network operator.
These “cross network” transactions should not be confused with “off-network” transactions which many mobile network operators claim to be platform interoperability. Off-network transactions make it possible for account holders to send money to anyone, whether they hold an account or not. For example, you send money from your mobile account to your friend, who doesn’t have an account, and your friend cashes out at your service provider’s agent. While off-network transactions can be beneficial for low-income users, we believe they are not as financially inclusive as cross network transactions. Off-network transactions require recipients to cash out, whereas cross network transactions make it possible for recipients to store received funds, on-send them or use them to make payments.
We identify different ways platforms can interconnect. In basic terms, platforms can interconnect: (1) directly (as the two ATM networks, 1Link and MNet, did in Pakistan) or (2) indirectly where a third-party entity which is either owned by providers, owned independently, or owned by the government interconnects platforms (as POS networks are currently doing in Brazil). The way in which platforms interconnect impacts pricing and efficiency of the payment system and potentially the ultimate value to customers.
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Mention the word interoperability in branchless banking and mobile money circles and watch people react in very different ways. For some, the word means something positive – efficient services and lower prices for consumers. For others, it means something negative – more costs, threats to competitive advantage and less profitability. For still others, the word means a reality that is inevitable but far in the distant future. Some don’t want you to say the word at all.
At the end of the day, we suspect interoperable systems will accelerate financial inclusion by allowing customers to use the infrastructure of multiple service providers to access their accounts. The question is how best do we get there?
A discussion on interoperating branchless banking and mobile money services that have yet to reach critical mass appears premature. But businesses and policy makers are already grappling with these issues in a number of markets where CGAP is heavily involved. In Ghana, the government is trying to understand its role in promoting interoperable branchless banking. In Pakistan, where Central Bank regulations permit a “many-to-many” model, there are questions about how the market will evolve into interoperable systems. In India, interoperability at the agent level is part of the financial inclusion vision painted by the Unique Identification Authority of India.
In general, governments are struggling to understand a regulatory approach that will balance the interest of customers with those of market players. They do not always adequately consider the state of the market or fully understand the implications of their approaches.
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by Sarah Rotman : Wednesday, January 4, 2012
One of the exciting and yet challenging aspects of the branchless banking industry is how fast things change. Topics discussed just 3 months ago can seem out of date today. That’s why it’s fun to look back over the topics we blogged about in 2011 starting from last January to see how the discussion has evolved over the last 12 months. Here are just a few of the blogs you may have missed or you may be interested in reading again:
by Leo Tobias : Friday, December 23, 2011
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 a guest post by Peter Goldstein and Caldwell Bishop of InterMedia. Peter is Director of Communications for InterMedia and Project Director of AudienceScapes, an African research program and online knowledge center for the global development field funded by the Bill & Melinda Gates Foundation. Caldwell is a communications intern at InterMedia and is currently pursuing a Masters in International Development at George Washington University.
We all remember the devastating 7.0 earthquake that struck Haiti in January 2010 reportedly destroying about one-third of the country’s bricks-and-mortar bank branches, limiting Haitians’ ability to send and receive money transfers, cash checks, or simply access much-needed cash resources.
In June 2010, the Financial Services for the Poor initiative at the Bill & Melinda Gates Foundation partnered with USAID on the Haiti Mobile Money Initiative (HMMI), featuring a $10 million fund to provide incentives to mobile service providers to quickly launch and expand m-money services. Notably, Digicel, Haiti’s leading mobile provider, won the first-to-market prize of $2.5 million in January 2011 after launching its Tcho Tcho Mobile service. Soon thereafter, Voila, Haiti’s second largest mobile provider, released its T-Cash m-money service and received a $1.5 million USD second-to-market award. The CGAP Technology Blog has had several posts on this initiative (here, here, here, here, and here).
To help monitor the impact of the HMMI as well as m-money service use and financial access in general, the Gates Foundation commissioned InterMedia to design and conduct a series of household surveys of Haitian adults (aged 18+). The first Haiti Mobile Money Tracker (HMMT) survey was conducted in March 2011, in the early days of m-money usage, and sampled all ten Haitian administrative departments based on figures from the latest census in 2003. Follow-up surveys will be conducted to establish usage trends – hopefully based on a more up-to-date 2011 census.
InterMedia’s HMMT Online Data Analysis Tool allows financial access practitioners and stakeholders to dive into the survey data themselves in a user-friendly way. The combinations of financial, mobile and demographic data are easily cross-referenced to support project planning and analysis.
Meanwhile, the first survey yielded some helpful insights and provided rare baseline data for a mobile money deployment. Here are some of the highlights:
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by Sarah Rotman : Tuesday, November 15, 2011
 Everyone is always talking about trying to move the branchless banking industry beyond just payments. Those of us concerned with accelerating “real financial inclusion” long to see credit, savings and insurance products pushed over new delivery channels. But is it possible that there’s still work to be done within the payments space itself, just diversifying a bit beyond simple P2P transfers?
For example, I’ve been hearing a lot of talk recently about really trying to crack the nut on merchant payments. Branchless banking providers see this as a huge opportunity not only for increased transactions (and therefore revenue), but also as a way to solve some of the tricky problems around liquidity management at agent locations when more people use electronic value for direct purchases instead of just cashing in and out. But how do small merchants respond to the possibility of being brought into the formal economy through using a traceable payments service? Will merchants and customers be willing to pay a fee to transact electronically instead of in cash? These are just a couple of the open questions that still need to be answered.
I ran across the organization Venture Capital for Africa (VC4A) at a recent conference in Ethiopia. One of their recently profiled ventures is addressing some of these questions around moving past person-to-person transfers to merchant payments and other business transactions. The start-up Yo! Payments in Uganda is trying to connect the ecosystem and facilitate mobile money as a real “medium of exchange.” Read about some other pretty cool startups in the African mobile market here.
What about even fancier transactions than just merchant payments, like investments? At a recent African bonds market workshop in Nairobi, discussions involved the possibility of allowing mobile phone users to buy Treasury bonds through mobile money transfers. I wouldn’t bank your investments on this yet though, as the article was clear that “details are yet to be worked out” and this seems to be the sort of transaction where the devil is indeed in the details.
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