The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

Innovation ICT applications for economic growth m-Banking, Dr. Simon Batchelor, Gamos

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

Introduction
 The role of mobile phones for banking and transactions came out of a 6 country study on ICT trade and economic growth commissioned by ECA under the epol-net initiative.  M-Banking was flagged in some countries as a way for the poor to use ICTs in their economic endeavours.  Given the explosion of mobile telephony across the continent, this became an important area of study for the ECA, particularly with respect to getting a sense of the kind of policy requirements needed to sustain this phenomenan.  The about to be published report focuses on the emergence, status and the future of m-commerce including mobile phone enabled banking. It draws together three country studies of Senegal, Kenya and South Africa.

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

Contribution of ICTs to pro-poor economic growth

(OECD DAC Good Practice Guidelines on ICT and Economic Growth

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

A mobile phone based banking solution would cover at least 60% of those currently without bank accounts. Such a service would be used for storing cash securely and for making money transfers people currently carry cash, use the post office services, and make use of airtime transfers. 15 to 20% rural households receive money from members living elsewhere An international remittances service would benefit a relatively small number of people but would bring in significant economic support. 15 to 20%% urban households receive international remittances. Africa receives $40 BILLION a year in international remittances. Banking the unbanked: With 11 million Kenyans having access to a mobile phone, and only approximately 4.5 million banked, the new solution offers an avenue to push forward the access frontier in Kenya. This effort will bring more Kenyans into banking solutions. at launch of Equity Mobile Banking Sept 2008, Prof.. Njuguna Ndungu Governor Central Bank of Kenya

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I
SWOT analysis for the convergence of the Telecommunication and Financial sectors
Mo bile Ph o n e e n viro n m e n t F in a n c ia l S e rvic e s En viro n m e n t S tre n g th / O p p o rtun ity

High penetration rates for mobile Good growth of alternative accounts ownership (indicating demand for simplified low cost accounts) Even higher for mobile use High awareness of alternative accounts (implying thirst to know Uptake of new phones (allowing about alternative accounts) for upgraded Sims) Large proportion still unbanked Growth of savings clubs (peer to peer transactions) General high price for Crowded technology (ATM, POS, communication additive mobile gateways, etc) Crowded market place (Many banks, established and resistant to new players) Banks introducing innovations confusing to public)

We a kn e s s / T h re a t

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

So what is happening
Name of proposition
COMMERCIAL BANK OF AFRICA (Kenya) Sonatel Multimedia (Senegal) Equity Bank LTD (Kenya) MTN (South Africa)

What the case illustrates

A conservative, additive approach. Offering bank alerts as part of an information service An innovative bank exploring frontiers A Mobile Network operator enters the convergence space. A microfinance institution adds mobile phone access through Point of Sale . Entrepreneurs take the lead

Key Features
Eases customer access to account information, but not to financial transactions An MNO offers an information service independent of any one bank. Offers financial transactions by phone, to existing customers Offers financial transactions, encourages non bank account holders to register, branded by the MNO, and with reduced registration requirements Uses magnetic srip card and biometrics to decrease fraud, increase efficiency of microfinance. Uses GSM network to enable POS devices to update. Phone and card combination, branded independently of a known Bank, although with Bank backup. Agent network and marketing from scratch. An innovative model phone to phone financial services, using MNO agents for cash in and cash out. Branded as MNO, with Trust Fund to safeguard customer funds. Belated attempt to compete with M-Pesa by rival MNO, has higher costs, and low take up.

JAMII BORA (Kenya)

Wizzit (South Africa)

M-PESA (Kenya)

A Mobile Network Operator introduces an innovative transformative proposition. A Mobile operator cooperates with microfinance

Sokotele (Kenya)

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

But life moves rapidly when you have the right solution

Within the first month Safaricom had registered over 20,000 M-PESA customers, well ahead of the targeted business plan. Within the first 8 months, 900,000 customers had registered, 1,200 Agents had signed up nationwide and a cumulative KShs. 4 Billion had been transferred. The average amount of money sent per month was KShs. 41 Million by October 2007. The average transaction value was below KShs. 5000 (US$ 80). By July 2008, there were over 2.5 Million customers, over 3000 Agents and Mpesa made a deal with PesaPoint which manages a network of some 140 ATMs thus moving closer to being integrated with the banking system. And by April 09 over 6 million users! 8000 Agents!

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

A conservative, additive approach. A secondary survey of the 25 banks in Kenya showed that four of them have introduced SMSbased services. The most common SMSbased services are balance inquiry, statement requests, and money transfer.

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

Offering bank alerts as part of an information service

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

An innovative bank exploring frontiers Focuses on the poor, by offering Kenyas poor people savings accounts and microloans, has captured 50 percent of the Kenyan bank market. It now has more than 3 million customers and opens 4,000 new accounts a day. But despite launching mobile banking in Sept 08 makes no mention of it at Shareholders AGM in March 09?

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I
A Mobile Network operator enters the convergence space. MTN Banking South Africa is a mobile banking joint venture between MTN (Africas largest mobile telecommunications company) and Standard Bank (Africas largest banking group), and offers an additive service. The website states: The mobile banking application implemented is one of the most advanced in the world today, offering a full feature banking suite with many additional innovative offerings. The service achieved 80,000+ subscribers in its first year of launching. The service now provides access to about 200,000 subscribers.

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I
A m icrofinance institution adds m obile phone access through Point of Sale. The leading m icrofinance institutions in Kenya have also introduced SMS-based services. This includes Jam ii Bora, KREP bank and Faulu Kenya m icrofinance institutions. The average loan size in 2003 was Ksh 7,209 (US$ 90). The m em bers are organized in credit groups with five m em bers in each group. The group m em bers guarantee each others loans and provide im portant m oral and social support to each other.

Jamii Bora C stomers

180000 160000 140000 120000 100000 80000 60000 40000 20000 0 2001 2002 2003 2004 2005 2006 2007 Years

N m er of c stomers

customers

Jam ii Bora owns and m anages the m obile application. It has installed application servers at its headquarters in Nairobi. The m obile application was developed in order to cope with the rapid growth that m ade it difficult for the staff to provide acceptable custom er service. The services offered currently include checking balances, m ini statem ents, withdrawals and loan repaym ent. There has been a trem endous im provem ent in funds collection since the adoption of the technology.

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

Entrepreneurs take the lead. Wizzit is a startup mobile banking provider in South Africa that offers a transaction banking account accessible via mobile phone and debit card. The company operates as a division of the South African Bank of Athens (which has almost no branches). Since its launch in December 2004, Wizzit has acquired more than 150,000 customers. Wizzit bills itself as a virtual bank and has no branches of its own. Customers can use their mobile phone to make person-to-person payments, transfer money, purchase prepaid electricity, and buy airtime for a prepaid mobile phone subscription.
In April 09 Wizzit received funds from CGAP to expand is this good news or bad. A good market product tends to expand by itself?

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

Zain announced plans in Feb 09 to bring its mobile banking service Zap, to all of its 22 operations across Middle East and Africa, with the initial programme being launched in Kenya, Tanzania and Uganda.

Zain has overcome regulatory hurdles in to launch the Zap M-banking service Kenya, and will compete with Safaricoms MPesa service which has six million registered users

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

Africa ahead of the game?

 Safricom doing a quiet pilot UK Kenya  Links being made with Western Union and GSMA  What about elsewhere?  Philippines the famous one Gcash, Smart  Brazil, the agent network  American not that into Mobile phones internet  Europeans Eastern Europe it is happening, but mainland Europe......  Of course Japan and Korea both have integrated systems now but additive.

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

Where 2 nxt?
 As always on ecomes increasingly pop lar we can move away from S S. Always on will ecome roader and roader. Near Field Communication technology is a key part of the future mobile phone enabled payment landscape. Nokia estimate that by 2012, 30% of all phones will have NFC built in. While NFC may seem to demand new infrastructure, it has many peer to peer capabilities, and requires less literacy than current USSD menu based propositions..

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I

Regulatory issues
    Incl sion - Reg latory and policy prompts so that commercial propositions reach financial services to the poor ranchless an ing and Agents; tied to the a ove, is the need for agents to act on ehalf of the instit tion to cash in and cash o t. C stomer protection incl ding reg lating deposits, and trac ing financial transactions Additional arriers, some of which relate simply to mo ile comm nications

 high cost of calls, and IP and SMS services in particular;  revenue sharing for value added services balance in favour of operators tends to inhibit content development;  legal framework (and enforcement) need to refine laws related to intellectual property

The First Session of the Committee on Development Information, Science and Technology CODISTCODIST-I