The success of mobile money services such as M-PESA has raised the question of how to regulate nonbanks—most notably mobile network operators, which are often well-placed to reach customers with affordable financial services due to their existing customer base, marketing capabilities, network of agents, physical distribution infrastructure, and experience with high-volume, low-value transactions. Yet regulators are often reluctant to permit operators to directly contract with customers for the provision of financial services. Chief among regulator concerns is how to protect customer funds.
We write a lot about M-PESA. That’s because it is the most successful mobile money service launched (so far). This new CGAP video by my colleague Jeanette Thomas explains.
On Monday, Aug. 2 CGAP’s own Kabir Kumar will take the stage at “Tech@State: Mobile Money,” an event hosted by the U.S. State Department in Washington with an exciting line-up of mobile money practitioners from around the globe. Questions to tackle include:
-How do we scale the mobile frontier, leveraging technology and partnership for sustainable development and financial inclusion?
-What do case studies reveal about success and failure?
-What are the applications of mobile money and its implications for U.S. foreign policy?
The conclusion: mobile banking and other forms of branchless banking are cheaper than traditional banking, but the gap between the two may not be as wide as some may think.
On average, branchless banking is 19% cheaper than banks. Why isn’t the pricing gap wider? Mobile money providers might be keeping profits for themselves and not passing them on in lower costs. There could be a good reason.
It is possible that establishing a successful, scaled branchless banking service could be more expensive than expected. Some branchless banking providers want to leave room to come down on prices as more competitors enter the market.
Other highlights:
The lower the transaction value, the cheaper branchless banking is in comparison with banks. For example, at a transactional value of $23, branchless banking is on average 38% cheaper than commercial banks the study looked at.
Branchless banking is 54% cheaper than informal options for money transfer.
Customer usage is influenced not only by absolute prices but by the way a service is priced. For example, in order to encourage trial of money transfers, some services offer free deposits, which make branchless banking an affordable way to save.
Average branchless banking price is $3.90 per month.
Informal providers charge double the price for a money transfer than a branchless banking provider.
Services analyzed:
Afghanistan: M‐Paisa
Brazil: Bradesco and Caixa
Cambodia: WING Money
Cote d’Ivoire: MTN Mobile Money, Orange Money
India: Eko
Kenya: M‐PESA and Zap
Pakistan: easypaisa
Philippines: GCash and Smart Money
Tanzania: M‐PESA, Zap
South Africa: MTN Mobile Money, WIZZIT
The study found that by comparing 26 branchless banking pioneers and traditional banks with products aimed at the same kind of customers, on average, branchless banking is 19% cheaper across eight use cases:
1. Sending Money Transfer
2. Receiving Money Transfer
3. Short‐term safekeeping
4. Medium‐term saving for asset
5. Bill Payments
6. High Usage (as a proxy for financial inclusion)
7. Average monthly transactions per M‐PESA user in 2008
8. Average monthly transactions per Kenyan banking customer in 2008
May 24-26 we’ll be in Rio for the Mobile Money Summit. I’ll be blogging from the sessions (we promise to share powerpoints here!) and if you’re joining us in person, please stop by the CGAP booth or look out for our latest work focused on how providers can expand access to finance to the unbanked and underbanked. We’ll draw on our latest work around mobile money in Brazil, India, and Kenya, among other places.
Many mobile money services are out there, but what’s different about MTN Mobile Money? In MTN’s recipe for mobile banking success, Chris Bold pointed out three things:
MTN has teamed up with not one, but nine different banks – and others are knocking on the door.
Customer sign-up is done anywhere that customers can be found.
They have built a completely independent network of cash-in/cash-out agents.
In 1968, a film titled “Planet of the Apes” captured the dystopian mood of the time by vividly telling the story of an astronaut who gets lost in space for many years, and eventually crashes on a strange world where apes, not men, are at the top of the food chain. The main plot twist comes when the astronaut finds the buried head of the Statue of Liberty, and realizes he is not on another planet, but rather, is on a post-nuclear-holocaust planet Earth – many years in the future. Everything mankind took for granted is gone. Humans are relegated to a life of servitude, subordinate to the super smart race of apes that has come to rule the planet.
This week at the Mobile World Congress has felt a bit like a live-action version of “Planet of the Apes,” with a few differences. Instead of apes, we have apps. The species rising to power goes by the ticker symbols of GOOG (Google), YHOO (Yahoo!), APPL (Apple), though some telecom wags seem to think these are simply four letter words.
On Planet of the Apps, the species running in fear are the mobile network operators.
Industry actors say their biggest unknown is how to build a viable network of branchless banking agents. Over the next 3 months, CGAP’s Technology Program will analyze agents in 3 reference countries (Brazil, India and Kenya). Because this area is so new, we will be out in the field ourselves talking to agents, network managers and banks.
We’ve already begun in Brazil, where CGAP is partnering with The Center for Microfinance Studies at FGV (Fundação Getulio Vargas), the leading Brazilian business school. Planet Finance Brazil is also a partner in the field research. Data was gathered on 295 agents, 49 of which were interviewed in-person. Read more about this collaboration.
-Mark Pickens
Next: A round-up of mobile banking developments from the Mobile World Congress.
Today, the CGAP Technology Blog comes to you from the Mobile World Congress in Barcelona. The MWC is the world’s biggest business show for all things mobile related. In recent years we’ve noticed how the focus on mobile banking has slowly grown on the agenda – both in the conference itself, as well as for the mobile network operators who comprise the membership of the GSMA.
Just two years ago, mobile money was relegated to a side session of a few hours. This week, there’s two full days of mobile money content – starting with Monday’s panel of the so-called “two billion club” – the handful of mobile operators who combined reach one third of humanity with their cell coverage. Read the rest of this page »
More than 170 million poor people worldwide receive regular payments from their governments, but the potential to use these payments to increase financial inclusion is largely untapped, according to “Banking the Poor via G2P Payments,” a new Focus Note from CGAP and the U.K.’s Department for International Development (DFID).
Pioneering programs in Brazil, India, Mexico, and South Africa are providing financial services, such as savings accounts and electronic money transfers, to poor recipients of government transfers. But the Focus Note finds that worldwide fewer than one-quarter of government-to-person (G2P) payments to the poor land in a financially inclusive account—i.e., one that enables recipients to store funds, make or receive payments from other people in the financial system, and is accessible, in terms of cost and distance.
In 1968, a film titled “
Today, the CGAP Technology Blog comes to you from the 
