Archive for: Mobile Banking

On October 29th, CGAP’s Technology Program hosted a discussion with Vodafone’s Nick Hughes, who leads this global mobile network operator’s mobile banking efforts. Vodafone is one of the biggest mobile network operators with operations in 30 countries and over 250 million subscribers worldwide.

Vodafone has been expanding its operations in emerging markets. Safaricom, Vodafone’s network operator in Kenya, M-PESA was launched 18 months ago. Since this time, it has reached nearly four million people in a country with a population of 31 million people where just 5 million people have bank accounts.

Nick presented three key aspects of the M-PESA model….

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Back in August, Mark Pickens and I pulled together a pricing table comparing the prices of 6 branchless banking pioneers: GCash and Smart Money in the Philippines, M-PESA in Kenya, WIZZIT and MTN Banking in South Africa, and Tameer Microfinance Bank’s pilot with POS terminals in Pakistan. We did this because it seems that very little was known about the pricing schemes of these early movers, and so a comparison was in order.

Since posting the table, we have heard from many of you, covering a wide range of actors in the mobile banking space (both from comments on this blog and also from direct  interaction with our team). Several of you have used the pricing table to benchmark your own operations. For example, a commercial bank launching an m-banking service for low-income clients’ domestic remittances plugged in its pricing numbers to compare itself with the others. A donor has used the pricing model to analyze the offerings in the Tanzanian market, where m-banking is just taking off. If other organizations are willing to send us their pricing data, we would welcome the opportunity to expand the table for greater comparison.

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Earlier today CGAP hosted Vodafone’s Nick Hughes, who leads the global mobile network operator’s mobile banking efforts.  Vodafone has some 269 million customers worldwide. Hear about Vodafone’s stake in M-PESA, the Kenya mobile banking service that after just 18 months has reached nearly four million people in a country that has only five million deposit accounts. Vodafone is looking to replicate that success in other markets, including Afghanistan and India. We discuss:
-What is driving customer uptake in mobile banking?
-Why has M-PESA been so successful at signing up customers?
-What does the regulatory climate look like going forward?

Webcast archive:

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Recently we spoke with Naushad Contractor about India’s mobile banking trends. A payments professional with over 12 years experience across geographies, Naushad heads marketing for mobile commerce at Vodafone Essar ltd., India. He is also on the regulatory committee of the Mobile Payments Forum of India.

Part of e-Businesses success stories, he has played a key role in launching India’s first eWallet and was a member of the core team that launched and made Remit2India.com the World’s No.1 Independent Money Transfer Portal for Non Resident Indians.

Q: Is mobile banking popular or hyped?
I think Mobile Banking is increasingly becoming popular but it is much more hyped than it is popular. Everyone says “I Do” but actually not many actually do as they say. However, the factor of sheer convenience for the customer and lower transaction costs for the banks is creating a conducive pull + push environment for increasing understanding and usage of this relatively new concept. As in the early days of internet banking, most people will tend to use mobile banking just as an information tool rather than conducting too many transactions on the mobile. Even the initial transactions will be much lower in value. Once trust in mobile banking increases as a result of good user experience, both usage and transaction values will begin to normalize.

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This is an excerpt from a recent CGAP paper, Banking on Mobiles: Why, How, for Whom? In it, Kabir Kumar and Ignacio Mas examine the business case and deployment options around mobile banking for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.

Banking via a mobile channel is an idea that most bankers (and many bank clients) find intuitively logical, albeit daunting and confusing, to implement. In today’s world of electronic-based accounts, money is “information” passing through communications networks. The customer experience at the ATM—punching in a PIN, selecting among various options, being instantly gratified—evokes our mobile phone experience. We place our mobile phones in a very exclusive location—our pocket—alongside our money and our home keys, which suggests the high value we attach and even the level of dependence we have to the phone. Why can’t my mobile phone be my wallet?

But first an update on Ali Abbas Sikander and Tameer Bank: Abbas decided that the mobile banking channel was probably going to be the only channel for his rural customers, and hence it was going to be a key element of an aggressive growth strategy. Abbas and his colleagues determined the level of strategic engagement with the operator and the type of solution after navigating through their technology choices (which were explained in the second part of this paper). He decided to use an STK solution, which offers the highest level of end-to-end security but also requires a more integrated partnership with the mobile operator.

He decided to use the operator’s prepaid card distribution network, one of the largest retail networks in Pakistan, to distribute new SIMs and serve as cash-in/cash-out points. Although the new service is most likely to be co-branded by the operator and Tameer, the operator’s brand will be more prominent, which will help market the service to millions who use cell phones but have no formal banking relationships and already know the operator’s brand well.

As banks follow Abbas’s lead and begin implementing their mobile banking strategy, here are some “lessons for the road.”

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This is an excerpt from a recent CGAP paper, Banking on Mobiles: Why, How, for Whom? In it, Kabir Kumar and Ignacio Mas examine the business case and deployment options around mobile banking for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.
There are significant regulatory factors that define the competitive field for mobile banking, and providers would do well to consider them carefully. Key regulatory factors that need to be considered include the following:

Cash-in/cash-out: Regulatory restrictions on banks to outsource cash-in/cash-out functions to third party retail establishments. These restrictions or lack of clear regulation on use of agents play a role in determining how banks can use existing retail networks—including the operators’ distribution—for cash-in/cash-out points. Restrictions may relate to who can become a banking agent (e.g. in India it has to be a not-for-profit organization), agents’ licensing requirements (e.g. in Brazil agents engaging in deposits and withdrwals must be individually approved by the Central Bank), and the nature of the contract between the bank and the agent.

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The promise of mobile web services, including WAP-based banking in developing countries is well established. Mobile banking, simply put, is transactions over a mobile network (via text message or connection to a data service) with a cash-in/cash-out agent (such as a local merchant or post office). This is a core piece of CGAP’s work. We share the belief that increased access to the online world can help transform the offline world (what some inelegantly call Meatspace). That has been true in wealthier nations and it is proving true in emerging markets. The need and the demand seem clear. Last month, Google and HSBC backed a plan to bring broadband backbone connectivity to telecoms and internet service providers in poor places. The venture is called O3b (”Other Three Billion”) and is easier said than done (remember Iridium, the failed satellite phone project?). As the Christian Science Monitor trimly puts it: “Are 16 satellites the answer to reaching 3 billion people?”

But…what if the entire way we get connected will be different in a few years time? Today’s telecom headlines include details of an effort to transmit wireless communications over visible light:

­Boston University’s College of Engineering is launching a program, under a National Science Foundation grant, to develop the next generation of wireless communications technology based on visible light instead of radio waves. Researchers expect to piggyback data communications capabilities on low-power light emitting diodes, or LEDs, to create “Smart Lighting” that would be faster and more secure than current network technology. (via Cellular News)

When it comes to getting connected, there is no shortage of mobile phones on this planet. The part of the UN that deals with telecom issues tells us that by the end of this year there will be some four billion mobile phone connections. Many of the handsets being sold around the world are still the basic, cheap models that do voice and text messaging. One of the more popular models in India even features a flashlight, which makes me think there’s a sales slogan in there somewhere (mobile phones can go where electricity cannot) or something silly like that.

The connectivity story in rural, poor places is changing fast. An increasing share of handset sales in Africa and Asia are capable of fast data speeds, enabling more robust services that are web-based. If O3b gets off the ground, it will enable millions of people to leapfrog copper wires and rudimentary mobile handsets, right to broadband web. If Boston University’s program succeeds, then that’s one more way to close that digital divide.

This is an excerpt from a recent CGAP paper, Banking on Mobiles: Why, How, for Whom? In it, Kabir Kumar and Ignacio Mas examine the business case and deployment options around mobile banking for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.

From a technical standpoint, three critical questions need to be answered: How do you transmit data from and to the phone? How do you secure the data so that it cannot be retrieved or tampered with during transmission? How do you manage the user interactions, including the presentation and capture of data to/from the user?

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This is an excerpt from a recent CGAP paper, Banking on Mobiles: Why, How, for Whom? In it, Kabir Kumar and Ignacio Mas examine the business case and deployment options around mobile banking for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.

So far we have discussed the commercial strategy considerations surrounding the development of a mobile banking proposition. We now turn to the main implementation decisions a bank faces. The key aspects relate to the following:

• The customer experience the bank wishes to construct
• The electronic data security framework that limits the banks’ liability and protects customer privacy
• The roles and activities the bank wishes to undertake itself versus what it will outsource to partners or vendors
• The degree of service interoperability the bank wants to offer its customers (interworking with other banks, operators, bill payers, etc.)

These four aspects are intimately linked, and in some cases directly determined by the technical platform selected by the bank.

The technical choices depend on the kinds of customers the bank wishes to reach. We therefore start with a description of the main technical options that banks need to consider. Our aim is not to provide a technical recipe book, but to provide enough understanding to illustrate, in subsequent sections, how technology choices can condition the customer experience, the bank’s operational processes, the relative bargaining power between bank and mobile operator, and service interoperability.