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Mobile 2

Mobile Banking
Nov 7, 2013
Alejandra
Aneeq
Michael
Rimpei

Key Terms
1. Unbanked
2. Financial inclusion
3. Branchless Banking
4. Remittance
5. Mobile banking
6. Adoption
7. DFID (Bilateral aid agency of UK)
8. Microfinance
9. E-Wallet
10. Over-the-Counter (OTC)


Agenda
Key Concepts
Mobile banking
Case Study: M-Pesa
Case Study: EasyPaisa
Guest: Tughral Regional Mgr. North Pakistan
(EasyPaisa)
Innovation in development

Key Concepts
Unbanked: population that does not access formal
and/or semi-formal banking services
Financial Inclusion: Providing financial services to the
unbanked
Remittances: Transfer of money by a foreign worker to
home country (we also use it in domestic terms)
Branchless Banking: Delivery of financial services
outside conventional bank branches using agents and
3
rd
party intermediaries & technologies
Mobile Banking: Branchless banking through mobile
phones (simplified)
Need:
Access to finance facilitates entrepreneurial activity
Nick Hughes (M-Pesa ideator)
Large number of workers away from home
(international and domestic migrants)


Financial Inclusion
Percentage of Unbanked
Unbanked
Difficulty in Cash Transfer
No bank in a rural area
No one has a bank account.



Bring cash by him/herself by bus High cost
Ask a bus driver to carry cash High risk
Remittance
Cellphone use in Kenya
Mobile banking
Source Economics of M-Pesa
US vs Developing World

Mobile banking
What is M-PESA
Mobile based money transfer and
microfinancing service in Kenya & Tanzania
(East Africa)
M is for mobile &Pesa is the Swahili for cash
Operated by Safaricom and owned by
Vodacom
Started in 2007

Mobile banking
Kenya, a conducive
environment for mobile banking
Large market for domestic remittances with
high demand for transfer services
High literacy levels
Support of the Central Bank of Kenya
High Mobile Penetration
An entrepreneurial base of micro
entrepreneurs
Mobile banking
Solution: Mobile Banking
Transfer money without a bank account
Transfer money safely and quickly
Low remittance fee 12% lower than banks
*1
No long bus journey reduce cost and time
*1 Branchless Banking 2010: Whos Served? At What Price? Whats Next?, CGAP, Sep., 2010
Remittance
Bank Account
M-Pesa
m-money Account
Urban
Agent
Urban
Agent
Link
Rural
Agent
Rural
Agent
Scheme of M-Pesa
1
2
3
4: Buy m-money
9
7
6: Withdrawal
operation
8
:

W
i
t
h
d
r
a
w

c
a
s
h

Urban
M-Pesa
Agent
Rural
M-Pesa
Agent
Receiver Sender
*1 M-PESA: Mobile Money for the Unbanked Turning Cellphones into 24-Hour Tellers In Kenya
5: Transfer m-money
Remittance
Need for Over-The-Counter
Situation & Problem
Neither a sender or a recipient have mobile banking
account but they want to send money.

Solution Over-The-Counter
A mobile banking agent of a sender transfers e-money
by mobile banking on behalf of the sender, charges
commission.
A mobile banking agent of a recipient receives e-
money on behalf of the recipient.
The recipient gets money.

Benefit of Over-The-Counter
Relieve of account opening requirements
Eliminate technical limitations
*1 http://www.cgap.org/blog/mobile-money-otc-versus-wallets
Over-the-Counter
e-Wallet (account) vs Over-The-Counter
E-Wallet OTC
Mobility
Customer retention
Company Revenue
Need ? ?
*1 http://www.cgap.org/blog/mobile-money-otc-versus-wallets
e-Wallet
M-PESA urban to rural money transfer
http://www.economist.com/node/16319635
Remittance
Socioeconomic profile of users
Users Non-
users
Users Non-
users
Change
Annual Household
Expenditure (USD)
3,600 2,000 2,900 1,400
Household with at
least one cell
phone
92% 52% 92% 39%
Unbanked 25% 75% 50% 50%
Rural Population 29% 71% 59% 41%
Urban Population 53% 47% 76% 24%
2008 2009
** Source: Jack, Willian & Suri Tavneet. Mobile Money: The economics of M-PESA
Financial Inclusion
Socioeconomic profile of users
Consumption and Education Level
Early Adopters > Late Adopters > Non User
Banked
Early Adopters > Late Adopters > Non User
Earliest users Wealthier and most educated
Over time, M-PESA is being adopted by people
of more varied socioeconomic levels

Adoption
Individuals reasons for not using
M-PESA
Reason 2008 2009
Dont own a mobile phone 28% 60%
Dont know about it 18% 3%
Dont need it 14% 21%
Dont understand it 5% 5%
Adoption
Success Factors
Built Trust by good Branding
- Investing on a national marketing launch
- Aggressive advertisement on television and radio
- Road shows and tents that travelled around the
country
User experience
- Offering a product that is simple to use
- Building an extensive channel of retail agent
Robust network
- Attracting customers and stores at the same time
- Creating an attractive pricing scheme for customers
and stores

Adoption
Factor in common
Kenya Brazil Pakistan
Great number of unbanked people
Use of informal means to get cash, send remittances, make
withdrawal, etc.
Low-income population
Many people that live on rural areas
Financial inclusion
** Source: McKay, Claudia & Pickens Marks. Branchless Banking 2010: Whos served? At what price?
Whats next?
Branchless Banking

Started in 2009 in Pakistan
Telenor (Mobile operator) bought 51% of
Tameer Microfinance Bank before launch
Expected to serve international remittances
Over-the-counter transaction main activity


Mobile banking
Challenges for EasyPaisa:
Slow adoption of mobile wallets / e-wallets
E-wallets still require significant Know Your
Customer requirements which cannot be met
at the 30,000 agent level
Businesses are also not accepting EasyPaisa
as mode of payment

Mobile banking
Adoption Comparison
Kenya
M-Pesa
Pakistan
EasyPaisa
Wallets 13 M
(Aug 13)**
2.4 M (12%)
(Aug 13)
Transactions a day 6,000,000 ~320,000*
Market Share 98%
of all mobile
banking transaction
50%
of all mobile
banking transaction
*State Bank of Pakistan
http://www.sbp.org.pk/publications/acd/BranchlessBanking-Apr-Jun-2013.pdf
**DFID Kenya Blog
Adoption

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