Archive for: News

Having just returned from 2 weeks in West Africa looking at the branchless banking market, one thing became quite clear to me: most African commercial banks have a very small retail banking business. As a Reuters Africa News blog post recently wrote:

Retail banking is not a high margin business. It is one where you have to earn a little from lots of customers, know them well and serve them well – not easy when you have many millions spread over a large area who may not be worth much individually even if they are better off than they have ever been before.  

But the post goes on to make reference to a report by Bain & Company indicating that the financial services industy in Africa could grow by 15% a year until 2020, with the biggest growth area coming from retail banking.  So what’s changed? 

Mobile banking in particular is seen as being a powerful driving force after the success of the M-PESA mobile money transfer service in Kenya and others elsewhere.

Speaking of M-PESA (when are we not, right?), there’s been some interesting discussions lately around interoperability in the Kenyan market. An article in the Business Daily bemoans the fact that a proposal has gone to the Prime Minister’s office asking the Central Bank of Kenya to “establish a form of clearing house that will process all transactions from all four mobile money platforms.”  The article goes on to say:

The small print [behind this proposal] reveals that some kind of market imbalance is being hatched in the quest to level what some believe is an uneven playing field. The success [of M-PESA] did not come easy to its creators. It was a hard fought battle against regulators as well as an expensive exercise for Safaricom who had to spend million – perhaps billions – educating its agent network, and indeed the world on a previously untested product. The proposal will effectively hand M-PESA’s rivals access to over four years experience in crafting that working eco-system - at no cost.

This topic also came up at the AITEC Banking & Mobile Money COMESA conference in Nairobi last week where Paynet Groups’ CEO in Kenya Bernard Matthewman said that there were 24 bank switches and credit management systems with multiple mobile banking platforms across the country. He continued on to say:

There is efficiency to be gained by not replicating infrastructure – you reduce costs and reap greater margins. You are in a much better position to go to places with less economic activity. Competition is increasing and CEOs are recognising that critical mass and volumes are needed to compete in the retail space. They are realising that they cannot reach competitive scale on their own.

Interestingly, the article includes similar quotes from representatives from Equity Bank and Orange, but not from Safaricom. Instead, in another article from the Business Daily describing the proposal before the Prime Minister, Claire Ruto, Safaricom’s corporate affairs officer said that:

Although consumers may initially enjoy the resulting price cuts, such a move bears the risk of killing innovations in the money transfer market. This is proprietary innovation and we don’t understand why our competitors should want to ride on it yet they too have theirs.

But to finish up, let’s switch from the supply side of the discussion to the demand side. We’ve blogged a lot over the last couple months about the launch of mobile money in Haiti. But one wonders how it is actually being used by people now that it’s in the market. A grant from USAID/HIFIVE has allowed a pilot of 100 beneficiaires to receive their unconditional cash transfers through the mobile phone, supported by Mercy Corps Haiti’s Economic Recovery Team. Here’s an update from Mercy Corps about how the first mobile money disbursement went:

When Marie first attended mobile money training, she didn’t understand how the money could be on the phone and would have preferred to be given cash directly. Now that she has seen mobile money in action, she believes that buying things is ‘very easy with the phone.’

- Sarah Rotman

The news wires have been busy with the recent announcement of partnerships and joint ventures in the Indian branchless banking market.  India’s largest public sector bank, the State Bank of India, announced a joint venture with the mobile operator Bharti Airtel to offer mobile banking. Meanwhile, India’s largest private sector bank, ICICI Bank Ltd, announced its tie-up with Vodafone Essar to bank the unbanked via the mobile phone. As the Hindu Business Line writes:

These two initiatives take mobile banking services to a whole new level. While Vodafone manages over 1.5 million retail points for acquiring customers and servicing them, Airtel is present across 5,101 towns and more than 500,000 villages.  That’s a big deal considering that The National Sample Survey data reveal that 51.4% of nearly 89.3 million farmer households do not have access to any credit from institutional or non-institutional sources…Only 13% are availing loans from the banks in the income bracket of less than Rs 50,000.

The Pakistani media was also abuzz with the pronouncement of the State Bank of Pakistan Governor that:

Branchless banking is the future of the country’s financial sector as it opens up opportunities for bringing unbanked segments of society into the financial system.

Governor Kardar made this address at the signing ceremony between United Bank Limited (UBL) and Shore Bank International for UBL’s branchless banking initiative, Omni banking. Meanwhile, easypaisa, launched by Tameer Microfinance Bank and Telenor in October 2009, reports carrying out 10 million transactions valuing Rs. 17 billion in 15 months since launch.

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In our last post for 2010, let’s recap what we’ve been discussing and share some headlines from around the globe.

I blogged about the launch of Orange Money’s service in Kenya.  This has been the subject of many articles and blog posts online, and Mobile Money Africa linked to an interesting take on the launch:

The future of money transfer is here. So runs the latest prime time TV advert “introducing Orange Money”. To the casual Kenyan TV viewer, this sounds just like another fancy advertisement pushing just another new product from a local firm or consortium. But to those more informed about the cutting edge and the next level of both modern banking and computing, this advert could herald the future not only of money transfer in Kenya, but of the economy as a whole.

The Central Bank of Nigeria has been busy lately, issuing licenses to several mobile money service providers, including Paga, eTranzact and United Bank for Africa:

According to the EFInA Access to Financial Services in Nigeria 2010 Survey, Nigeria lags behind South Africa, Botswana, and Kenya in terms of the percentage of the population who are financially served. The growth in financially served population in many of these markets is mainly attributable to their mobile money offerings.

Chris Bold blogged about international remittances over the mobile channel, and Axis Bank in India announced a domestic “remittance pilot” with IDEA Cellular.

While everyone may know M-PESA quite well, Claire Alexandre guest blogged about things we might not have known about the service, while Mark Pickens shared some of the new innovations happening in Kenya.  Maha Khan from the MMU at GSMA wrote an interesting blog about the use of mobile money in post-conflict enviornments, such as Afghanistan:

There is a lot of optimism about the use of mobiles in the peace-building sector and in particular mobile money bringing financial services to the poor.  While there is widespread reach of mobile phones in post-conflict countries—Afghanistan has 13 million mobile phone subscribers—is mobile money the silver bullet? 

And speaking of challenging environments, an op-ed by Nicholas Kristof discussed some of the benefits that mobile money could bring to Haiti.  But more on Haiti in the New Year.

MTN Mobile Money continues its sweep of Africa, now launching services in Benin:

Mobile operator MTN Benin and Ecobank Benin have launched MTN Mobile Money, a prepaid money transfers service available throughout the country on mobile phones using the MTN network, reports L’Autre Quotidien. Mobile Money can handle account opening, money transfer, deposits and withdrawals, as reported here.

Interesting lessons from the success of South Africa’s Absa mobile banking initiatives were recently applied to the Egyptian market:

For mobile banking to prosper in an emerging market several criteria must be present, such as a low internet penetration rate combined with a high mobile phone penetration rate, Lana Strydom, manager of the Mobile Portal section of the Digital Channels Retail Banking division for Absa explained. For one, payment alternatives, such as credit cards must not be well established, which is indeed the case in Egypt. Furthermore, a significantly large segment of the population must be outside of the banking sector. In Egypt, where the population is 80 million, only around 10 million are banked. The geography of the country must be rather large, with a substantial rural population. Again, although 20 plus million live in Cairo, the remaining 60 million lie beyond the capital’s limits.

Africa seems to be the theme of the day and the Daily Monitor reports that Nokia, during the 2010 Mobile Africa Conference recently held in Helsinki, encouraged more European firms to invest in Africa, given the growing demand for mobile phone-driven services.

And sticking with the Nokia theme, Simon Rockman from the GSMA Mobile Money Exchange had an interesting article about how Nokia’s move into the mobile money space is quite a good fit for the company. He writes that the technology piece of mobile money is quite low-tech. So while technology might not be that important, two things really are: brand and distribution. And Nokia is great at both of these:

To a person who has never encountered any kind of payment that wasn’t cash or barter the idea of putting money into an account means you really have to trust the brand associated with it. According to Interbrand, Nokia is the number five brand in the world – one of only two non-American brands in the top 10. The highest financial services company is American Express at 20 and the top bank HSBC at 32. This is a global ranking; in developing markets Nokia is even stronger. It’s the top brand in India.

- Sarah Rotman

Do you feel close to the people who send you text messages? Banks seem to think so. Juniper predicts a global surge in text messages from financial institutions, to 90 billion texts per year by 2015. From Finextra:

Juniper analyst Howard Wilcox says: “Our research found that messaging is a ‘win-win’ for banks. They can improve customer service significantly, whilst simultaneously eliminating the cost of servicing customer enquiries placed with call centres.”

Though many say it will be years (or never) by the time near-field communication (NFC) technology gets into the hands of the mass market customer, at least one very notable handset maker appears to be making moves towards integrating NFC into its future products. From the New York Times:

There are a number of reasons Apple could decide to integrate NFC into its line of mobile phones and music players. The company could try to replace cash or credit cards, allowing iPhone owners to swipe their phones at a terminal to pay for products or services.

I don’t know about you, but the customer count for M-PESA in Kenya gives me whiplash (or is it vertigo?). As of the end of July, M-PESA in Kenya reached a new milestone – nearly 12 million subscribers. And Vodacom in South Africa plans to launch the service in that competitive market at the end of August, as Nairobi’s Daily Nation tells us:

Safaricom says M-Pesa subscribers have grown by 61 per cent to 11.89 million by July 2010 from 7.38 million the same period last year. It has transferred Sh525.84 billion since its inception in 2007 and the monthly average has increased by 30 per cent. Last month, Sh33 billion was transfered compared to Sh20 billion in July last year.

There were 19,500 agents by July. The money transfer system has become globally acclaimed with other countries adopting the model. South Africa’s Vodacom, teaming up with local banking group Nedbank, is set to launch its service by August 31.

If you need a refresher (or introduction) as to why M-PESA has done so well in Kenya, watch this and read this.

-Jim Rosenberg

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?

You can watch the event live online starting at 8am ET.

-Jim Rosenberg

We kicked off July in China, with my interview with Wokai founder Casey Wilson:

One interesting challenge that we navigate on a daily basis operating in China is the regulatory landscape. Microfinance was late to develop in China, only starting in 1994, in contrast to 1976 in Bangladesh. Regulations prohibit MFIs from accessing debt and equity investment, leaving them completely reliant on donor funding which is decreasing rapidly as the outside world sees China as an economic superpower rather than a country in need of aid.

When we first started Wokai, we aimed to create a Kiva-like model in which lenders from all over the world could lend no interest capital that when then go to our MFI Field Partners, and, finally, be lent out to the end borrowers on the ground. Once the borrowers repaid their loans to our Field Partners, the capital would then be repaid to lenders online.

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Virtual conference: Getting past the technology hurdles at MFIs: Why do MFIs struggle with technology and what can MFIs, donors, investors, software vendors and others do to improve the situation? Join us for a virtual conference to discuss these issues (7-8 July 2010).

In Proof mobile money can make money? M-PESA earns serious shillings for Safaricom, Mark Pickens sees happy figures:

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).

Mark also reported back from his panel at the Mobile Money Summit with Four keys to reach the unbanked with mobile money: dispatch from the Mobile Money Summit:

…mobile money providers in many markets will need a more sophisticated suite of products to attract (a) an attractively large number of customers who (b) will be active and do a number of transactions per month. To do this, providers need fresh thinking about mobile money products that will work with the mass market.

Mark and Claudia McKay shared their powerpoint on the pricing practices of branchless banking providers in For the unbanked, is mobile money cheap enough? CGAP releases pricing study across 16 providers in 10 countries:

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.

Related to that, Claudia blogged about how different products are priced, and we shared a spreadsheet so that you can try this at home:

…these high-level numbers mask significant differences between providers, use cases and transaction values and volumes. Providers make numerous pricing decisions that impact the end price for different customer segments. For example, I’ve blogged before about the pros and cons of offering discounts for airtime purchased via a mobile banking service. Four of the 16 providers in the study offer airtime discounts of between 5 – 10%.  As a group, their average price across eight use cases is 25% lower with the discounts than without and the discounts more than offset the prices of transfers and bill payments in several cases.

Sarah Rotman wondered if mobile money will finally get traction in countries with more developed banking systems via remittances:  My mobile, my neighbor and $20: a dispatch from the US. And Jan Chipchase continued his blog series on customer adoption, as well with Mobile banking: Agents as mediators and Mobile banking: Threshold of concern, threshhold of alarm and the zone of comfort.

Lauren Braniff took us to the subcontinent with India, microfinance and technology: tackling efficiency from every angle:

Between the morning and evening sessions at the branch, a typical loan officer might spend 25% or more of their time on data entry and other administrative tasks related to managing their portfolio. What if you could reduce or even eliminate these tasks from the loan officer job description?

We ended June by hearing from one of the most prominent “doers” in the mobile money space with my Interview with Greg Reeve, Head of Mobile Payment Solutions at Vodafone:

There are two challenges for all mobile money services. The biggest challenge to launching a new service is understanding and adapting to local regulations. As we know, and have seen, these services can have large consumer benefits. However, not all markets have the same regulatory framework and the step change required in terms of meeting the local regulations  can sometimes slow down implementation times.

The biggest challenge to making an existing service successful is customer education.  The concept is new and we have to help people learn about it and understand how it could benefit them.

-Jim Rosenberg

Amid the flurry of news coming out of Toronto, you’d be forgiven for missing this important development:

The G20 Leadership Summit in Toronto this past weekend highlighted the importance of the work being done by the G20’s Financial Inclusion Experts Group (FIEG). The group released nine “Principles for Innovative Financial Inclusion” formed through the efforts of the Access through Innovation Sub-Group (ATISG). “We have developed a set of principles for innovative financial inclusion, which will form the basis of a concrete and pragmatic action plan for improving access to financial services amongst the poor. This action plan will be released at the Seoul Summit,” the Toronto declaration said.

Read the nine principles here and over on the Microfinance Gateway you’ll find the Principles and report from the Access through Innovation Sub-Group of the G20 Financial Inclusion Experts Group.

Want the backstory? Check out an interview I did in March with Paul Flanagan, co-chair of the G-20 Financial Inclusion Experts Group and General Manager, International Finance Division, Australian Treasury: “The G-20 eyes financial inclusion using mobile phones, other ICTs.”

-Jim Rosenberg