Archive for: Mobile Phones

Nokia, Microsoft, and PayPal have all taken fascinating steps in recent days to enable more financial services aimed at the poor and unbanked…someday.

Just today, Nokia announced it plans to launch a mobile financial service next year, to be called Nokia Money. It target consumers in emerging markets with a phone but no bank account. Nokia Money will be based on the Obopay platform.

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Over the last few weeks on this blog, we’ve looked at M-PESA in Kenya and Tanzania (read more about this comparison at www.cgap.org/technology), Zain’s Zap product that recently launched in Tanzania, and Zantel’s launch of Z-PESA. Here are some of my concluding thoughts on mobile banking in Tanzania.

With the success of mobile banking in neighboring Kenya, many people assume that similar success would be quick to arrive in Tanzania. And indeed there are many important lessons from Safaricom’s implementation of M-PESA in Kenya for m-banking launches all over the world. Marketing must be clear and simple, targeted at the common citizen’s need for a specific service. A strategic commitment from the entire company and the specific m-banking team must be strong. A willingness to make considerable investments, such as SIM swaps, must be present. And somehow Kenya was able to get agent acquisition to an auto-catalytic level.

Yet the mobile banking landscape in Tanzania is quite different from that of Kenya and must be adjusted accordingly. In some ways, we already see that happening in a form of “m-banking 2.0” emerging.

1. Zain recognized the need to pay commissions to agents much quicker than Safaricom has done in Kenya. In fact, their business model is such that agents receive commissions immediately. In response, Vodacom has also restructured its commission payments so that agents receive commissions directly into their float account.
2. Zain created a richer product proposition than simply “send money home” like that of M-PESA Kenya. In addition to remittances, Zap is focused on micropayments and business to business transactions. This makes it attractive to banked and unbanked customers alike.
3. Zantel and Vodacom realized that initial float accounts can prove an obstacle for agents to begin offering Z-PESA or M-PESA. They are both considering financing to help these agents get started.
4. Finally, pricing has been approached differently in Tanzania, both by Zain which allows customers to negotiate directly with agents and by Vodacom which has created a more segmented price scale for transaction amounts, making it more affordable for customer to send small amounts of money.

Perhaps Kenya is more of the exception than the rule to always be followed. While there are many good lessons to be learned from the Kenyan experience, it may not always be possible to carbon copy it anywhere in the world.

Over the last several weeks, I’ve been discussing the mobile banking landscape in Tanzania. I started with a comparison of M-PESA in Kenya and Tanzania, and next looked at Zain’s Zap product.

The third mobile payments product that has entered the Tanzanian market in the last year is Z-PESA offered by Zantel, the fourth operator in Tanzania. Zantel originated on the island of Zanzibar and only arrived in Dar es Salaam three years ago. It is now slowly expanding its network throughout the country and has recently achieved national coverage. But as the fourth operator in Tanzania with 8% market share as of 2008, it is already one step behind Zain and Vodacom in competing in the mobile payments space.

USSD-based Z-PESA launched in April 2008 in a race with Vodacom to offer the first mobile payments service in Tanzania. Like M-PESA, Z-PESA got off to a rocky start when it initially launched in April 2008. Looking back at the launch, Zantel believes that it was done more from a technology perspective instead of a commercial perspective. As a result, a new team is currently re-evaluating Zantel’s overall strategy towards Z-PESA, from commission structures to pricing to marketing. There is a comparison of agent commissions and pricing at www.cgap.org/technology.

Business Model & Agents

Zantel has found the task of building its agent network a challenge, as have many MNOs. While they are working with their high volume airtime dealers, they recognize the need to go beyond this network. They have lowered the initial float amount required for agents to get started. They are also considering putting up half of the initial amount and providing the other half to agents as a loan. In addition, agent locations previously required a computer to log transactions. But this made it very difficult to ramp up the agent network, so now agents simply have a physical log book to record transactions.

While Z-PESA may be a few steps behind M-PESA and Zap due to Zantel’s market share, it is still another competitor in this increasingly crowded space in the Tanzanian market.

These past few weeks we’ve been focused on Tanzania’s experience with mobile banking. We’re not alone. Gunnar Camner and Emil Sjöblom recently spent three months in Tanzania for their master’s thesis in Media Technology at the Royal Institute of Technology (KTH) in Stockholm, Sweden. Their study attempts to investigate mobile banking services from a user perspective. In which contexts do alternative uses, e.g. savings, become popular and why? The final report will be presented during autumn 2009 and made available at the project blog: http://valuablebits.com. Meanwhile, they sent us this dispatch.

While M-PESA in Tanzania has had a hard time competing with its sibling in Kenya in user uptake, there is one way of sending money via the mobile phone that is very popular in the country. That is by using airtime top-up vouchers. The most common way to do this is to buy an airtime voucher, scratch it in order to get the code and then text the code in an SMS to the person you want to send money to. It is then up to the recipient to go out and sell the code to people who want to buy airtime, or resellers and shops that in turn will sell it to people wanting airtime. The value of the voucher is reduced when selling it the second time, in most cases by about 10% but sometimes it is reduced by up to 40%. M-PESA and Zap are much cheaper and charge about 2-5% of the value sent.

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If you didn’t catch the comparison we did recently of M-PESA in Kenya and Tanzania, you can read about it at www.cgap.org/technology. But in addition to M-PESA, there are several other mobile payment products that have launched in the Tanzanian market over the last year.

Perhaps Vodacom M-PESA’s toughest competition is offered by Zain, the second-largest mobile operator in Tanzania after Vodacom.  Launched simultaneously in Tanzania and Kenya in February 2009, Zain’s new Zap product aims to link micropayments to merchants, thereby circumventing the need to convert money into cash. From Zain’s perspective, there are two ways to approach a mobile payments product. Either an MNO focuses on transfers and remittances or it focuses on micropayments. Zain has chosen the latter approach with the goal of going beyond remittances in offering a service that focuses on small payments made directly to merchants.

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Recently we caught up with Cameron Goldie-Scot, who is a mobile banking consultant with Triple Jump Advisory Services - East Africa Mobile Banking Team. Triple Jump delivers practical technical assistance to high potential microfinance institutions (MFIs). The team in East Africa, partnered with Mobile Microfinance Ltd, acts as a bridge between existing MFIs and mobile operators.

Tell us a bit about your group and whom you’re trying to serve.
Our aim is to enable microfinance clients to repay loans and deposit savings using their mobile phones. We assist our partner MFIs in developing the mobile payments business plan, developing the technology required, conducting staff and client training and assisting the management in rolling-out mobile payments. So far, the team has had a successful partnership with a large Kenyan MFI and is currently working with Tujijenge, a young MFI in Tanzania.

Rather than develop independent mobile banking products, we utilize those already in place, such as M-PESA, Zap and Zpesa. This enables the MFI to increase their competitiveness and lower the interest rates charged to clients, without incurring the cost of developing an independent mobile banking product. We are confident in the benefits of this approach and are keen to develop a set of best business practices that can be used by MFIs wishing to replicate the successes of our partners.

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When speaking of mobile payment services, the countries that are usually mentioned include Kenya, the Philippines, South Africa and a few others. Here at CGAP, our projects also focus on places such as Mongolia, Pakistan, the Maldives and India. Yet what about West Africa, and specifically francophone West Africa, as the next frontier of mobile banking?

I recently visited Cote d’Ivoire and Mali to learn more about what the banks and mobile network operators (MNOs) are doing in this region. Here are some of my initial observations. Read the rest of this page »

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 »

In a recent CGAP Focus Note, Ignacio Mas and I wrote about six cases of e-money schemes in developing countries. Going Cashless at the Point of Sale: Hits and Misses in Developed Countries intended to draw lessons from these experiences to inform the work being done with e-money in developing countries. The last post in this series looked at the mobile operator-centric payment scheme Simpay. Now we turn to the second such scheme, Osaifu-Keitai in Japan.

DCM is Japan’s leading mobile communications operator, with 53 million subscribers as of March 2008, representing over half of Japan’s cellular market. It launched a mobile wallet service, Osaifu-Keitai (meaning: wallet-mobile phone) in July 2004.

Osaifu-Keitai is based on a FeliCa card embedded in mobile phones (the same that was used by Octopus in Hong Kong). Osaifu-Keitai is a device-based mobile payments solution, supporting both proximity payments in shops that have a FeliCa chip reader and remote (online) payments. Read the rest of this page »

Mobile phones may have a huge role to play in expanding access to finance. But does the company that operates the mobile network need to actually provide financial services? Or should others offer financial services, with the mobile operator merely providing the underlying wireless connectivity? The fact that mobile phones can be used as transactional devices doesn’t necessarily mean that the mobile operator needs to “own” the financial service.

That’s the subject of a new CGAP brief authored by Ignacio Mas and me. Read it here.