Archive for: Implementation

A few weeks ago in Washington, DC, we hosted many of our partners who are implementing branchless banking products and services around the world. This was a chance not only for us to learn about the state of play of the industry at a global level, but also to allow the partners themselves to share learnings and experiences with each other.

Is there something that a nonbank electronic money issuer in Burkina Faso can learn from a state-owned commercial bank in India? Is there cross-learning between a mobile network operator in Pakistan and a large retail chain in Mexico? We think so. Chances are these businesses have more in common than we might think at first glance, especially if their overall objective is to reach the unbanked through innovative uses of technologies and new business models.

One of the topics we discussed together was the keys to building powerful partnerships. No one can launch a branchless banking service alone. Either an MNO must partner with a bank to hold the float, or an agent network company must partner with an MNO to provide the transaction channel, or a bank must partner with an MNO to build an agent network, or… the list could go on and on. If one thing is crystal clear in branchless banking, it is that partnerships are critical and yet partnerships are difficult.

So we asked our partners to brainstorm together and give us their top 10 list of recommendations for building powerful partnerships based on their experiences that we could share with the global industry (that’s you!). Here’s what they came up with, organized in three loose categories:

Broad strategy and vision:

1. Ensure that there is a long-term strategic alignment among partners with a shared common vision.

2. Align specific incentives and expectations on financial returns among partners.

3. Focus not only on commitment from top management but from the entire staff of an organization.

4. Do not ignore the soft factors like cultural fit among partners.

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On a recent visit to Bangladesh Sarah Rotman and I met with Post Office Director General, Mobasherur Rahman, at his office in the middle of busy downtown Dhaka to hear about his foray into the world of branchless banking.

Rahman escorts us through winding corridors, deep into the heart of the Bangladesh Post Office headquarters, to a room unlike any other in the enormous building. Outside an innocuous looking door are about twenty pairs of shoes watched over by a small security camera. We were politely asked to remove our shoes and were shown into the room.

The Post Office now offers two branchless banking services. The longest established service, which was launched in March 2010, is the Electronic Money Transfer Service (EMTS) which allows customers to instantly send money from one branch to a friend or relative who can pick up the funds at 2,000 of the 10,000 post office branches. EMTS, it is envisaged, will soon replace the traditional money order. Post office staff use either a web interface, for those with internet connectivity, or a menu on a specially equipped mobile phone to key in information about the sender and receiver. There is also an option for a free text to be sent to the recipient notifying them of the transfer.

As we enter we are greeted by a blast of icy air from a room where the environment is carefully controlled – other post office staff have to brave the Dhaka heat and humidity with only the aid of a fan. In front of us is a small call center where half a dozen people are answering questions from post office staff and customers about the service. The other half of the room is taken up with huge server racks and we watch as transactions are processed, flashing up on the screen for a few seconds before the next transaction takes its place. Over two million transfers have now been carried out and the system now processes 14,000 transactions per day. As if to answer our questions about what happens in the event of a power cut, the lights momentarily dim and we hear a generator automatically start up in the background. The servers keep humming throughout and there is no let-up in the transactions popping up on the screen.

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This is a guest blog by Greta Greathouse, Chief of Party for the USAID-funded Haiti Integrated Finance for Value Chains and Enterprises project (HIFIVE).

Voila and Unibank receive the second "First to Market" Award for Ti-Cash

Just seven months ago on January 11, CGAP reported that HIFIVE and the Haiti Mobile Money Initiative (HMMI) awarded Digicel  and its partner bank Scotiabank, its “First to Market” Award of $2.5 million for “Tcho Tcho Mobile”. It was a very positive piece of news just prior to the ceremonies one day later marking the first anniversary of the earthquake that hit Port au Prince. Established in June 2010 as part of a longer term response to the disaster in an effort to establish long term financial services for all Haitians, HMMI was created by the Bill & Melinda Gates Foundation in partnership with USAID. HMMI, implemented by the USAID project HIFIVE, provides incentives to encourage mobile operators and financial institutions to launch mobile money services.

Here is a follow up on how that legacy is developing. On July 5 HIFIVE awarded mobile operator Voila and their bank partner Unibank the $1.5 million second “First to Market” Award for “Ti-Cash”. With this important milestone completed and others rapidly approaching, mobile money is well on its way to fulfilling the promise of being a “legacy of the earthquake” that was hinted at in this blog in January. 

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This is the fourth post in our series on G2P, branchless banking and financial inclusion. All the other posts can be found here. In this post, our guest bloggers look at the case of the small island country of Fiji. Matt Leonard, formerly with MicroSave, is a consultant documenting the lessons learned from Fiji DSW’s experience.  Till Bruett is the Regional Technical Advisor for UNCDF in the Pacific and the Project Manager of the Pacific Financial Inclusion Programme.  PFIP is a Pacific-wide programme helping provide sustainable financial services to low income households and is funded by the Australian Agency for International Development (AusAID), UNCDF, the European Union, and the UNDP’s Pacific Centre.  More information can be found at www.pfip.org.

On a warm day in the first week of May, hundreds of rural Fijian social welfare recipients traveled from Fiji’s remote, interior highlands to attend what was for many an initiation to branchless banking. The recipients assembled near a small shop in the village of Vunidawa to be introduced to the new concepts by Westpac staff equipped with red bank cards and wireless point-of-sale (POS) devices.  Throughout the morning they showed their new clients how to check balances and cash out benefits. Meanwhile the busy local shopkeepers rang up record numbers of receipts through electronic sales.

Since January 2011, Westpac Banking Corporation of Australia has been helping in the distribution of social welfare benefits across Fiji through its network of branches, ATMs and POS devices in their merchant network. In the process, they have also provided access to flexible, no-fee accounts to a previously unbanked population including those living in hard-to-reach areas.

The benefits consist primarily of an unconditional cash transfer averaging about US$37/month for those classified as widows, elderly, disabled, single parents or those with chronic illness. A smaller group of beneficiaries receive a semi-conditional cash transfer for taking care of orphaned, abused or neglected children.

Up until January 2011, it was a common occurrence in Fiji to see long queues of social welfare recipients suffering under a hot sun outside post offices or district social welfare offices across the country. Not only would many of the 24,000+ recipients trek many hours from the poorly connected interior each month to pick up or encash their vouchers, but many might spend FJ$ 10-20 (US$6 – $12), or 15-30% of their modest allowance on travel. It was on one of these days in January 2009 when the Pacific Financial Inclusion Programme (PFIP) decided this was an opportunity to extend the financial access frontier in Fiji –  putting in motion the first major G2P project for the poor in the Pacific.

In early 2009, PFIP found a willing ally in an overwhelmed and understaffed Department of Social Welfare (DSW). Despite constitutional turmoil that contributed to high-level of turnover at DSW and its ministry among the senior ranks, PFIP and DSW staff conducted an activity-based costing analysis that laid bare the case for transformation. The process of printing and distributing benefit vouchers was time consuming (up to 2 months) and costly (upwards of FJ$  844,000 or nearly US$500,000 per annum) and subject to fraud, error and leakage. PFIP also did a survey of the DSW beneficiaries’ perceptions and attitudes toward banks and electronic banking methods which confirmed that there seemed to be few barriers other than inertia holding back change.  Indeed, these studies – together with critical support from senior staff at DSW and the Minister of Women, Social Welfare and Poverty Alleviation herself – led to Cabinet-level endorsement for the shift from the outdated voucher system to a progressive electronic-based payment system in late 2009.

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You want proof mobile money can make money? Look to M-PESA, which according to Safaricom’s annual financial statements released just a few days ago accounted for 9 percent of company revenues in the last fiscal year, for a total contribution of USD 94.4 mil (Ksh 7.56 bil). M-PESA revenues grew 158% over last year’s figure of USD 36.6 bil (Ksh 2.93 bil).

M-PESA as percentage of Safaricom's data revenue. ©CGAP analysis

It’s not just the gross revenue amount that is surprising. Two more things caught my eye.

First, Safaricom is lauding 78% growth in data revenue as the main engine behind the overall 37 percent growth in company profits (to USD 261.9 mil). And M-PESA now accounts for 48% of all data revenues, and 70% of the total growth in data revenue last year. In other words, this year M-PESA was the single biggest driver of new profits for Safaricom. Goodbye SMS as the #2 revenue source, at least for this mobile network operator.

Second, M-PESA may be delivering even more to the bottom line. A little guesswork is involved. The service is 3+ years old. Safaricom still incurs variable costs of agent commissions, marketing, HQ staff. But if they’ve paid off the original large, lumpy front-end investments in the M-PESA platform, the huge initial marketing blitz and no doubt a few high-priced lawyers to help sort out regulatory treatment… well, it would not surprise me if a substantial portion of M-PESA revenues now flows directly through to profits. Let’s say it’s half; in other words, USD 47.2 mil in profits from M-PESA. And we know Safaricom’s overall profits for 2010 were USD 261.9 mil. In this scenario M-PESA is generating 18% of all Safaricom profits.

Not bad. Not bad at all.

-Mark Pickens

In 2009, CGAP teamed up with the GSM Association (GSMA) and McKinsey to measure the global market for financial services delivered via mobile phones (mobile money) in 147 developing countries. This is the first study of mobile money and the unbanked—those without access to formal financial services—estimated to be almost 4 billion worldwide.

The Philippines provides a window onto the complex financial lives of low-income families. Three out of four Filipinos are unbanked (Demirgüç-Kunt, Beck, and Honohan 2008). The country hosts two of the earliest pioneers in mobile money—Smart’s Smart Money launched in 2001 and Globe’s GCASH launched in 2004. CGAP, GSMA, and McKinsey gathered data on 1,042 unbanked consumers in the Philippines, split between mobile money users and nonusers.

Download Window on the Unbanked: Mobile Money in the Philippines

Members of CGAP’s Mobile Banking and Microfinance Group can also request an in-depth toolkit with which they may replicate this analysis in their own market(s).

-Jim Rosenberg

George Conard is the Executive Director, Technology for Microfinance, at Grameen Foundation. The Foundation’s Mifos Initiative delivers open source technology and business services for microfinance institutions worldwide.

Back-office management information systems (MIS) are a critical enabler of the growth and effectiveness of microfinance. To realize the full value of the technology, however, MFIs must look beyond the software and consider human and business process factors. Further, the value of the technology investment will be multiplied dramatically as the core MIS is integrated into other internal and external technology systems.

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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.

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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