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The Opportunity of M-banking to Popularize Payment Services

The Opportunity of M-banking to Popularize Payment Services. David Porteous "Exploring Frontiers in Payments Systems" Washington DC 31 May 2007. Contents. The Opportunity The Hype The Reality The Opportunity re-examined. Finland. South Africa . Philippines. Kenya.

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The Opportunity of M-banking to Popularize Payment Services

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  1. The Opportunity of M-banking to Popularize Payment Services David Porteous "Exploring Frontiers in Payments Systems" Washington DC 31 May 2007

  2. Contents • The Opportunity • The Hype • The Reality • The Opportunity re-examined

  3. Finland South Africa Philippines Kenya 1. The m-banking proposition 100% 97% % mobile phone penetration 50% • 2.6bn cell phone users vs. +/-1.6bn bank account holders globally • >50% of world’s population within wireless coverage (2005) 20% 10% 10% 50% 100% % banked Sources: Numbers: % Banked Honohan 2007; % m-penetration: ITU; WireIess Intelligence 4:2002, 4:2006

  4. 2. The hype? “Mobile phone banking takes off” World Bank PSD Blog, 2006 “NFC spells plastic card decline” GFG Report, New Zealand, 2006 “Mobiles begin calling the shots on banking and payments” The Banker, 1 Feb 2007 “GSMA links with Mastercard in global pilot” Mobile Payments World, February 2007 “Cell phones bring banks to the poor” Business Day, South Africa, 19 March 2007

  5. 3. The reality

  6. The mobile adoption S-curve Source: ITU 2004/ WI 2007

  7. Current reality: m-payments No of users 1 2 3 4

  8. Target group: ‘unbanked’ with mobile 8% adults use an ATM card; 21% have transferred airtime % of adults; numbers are in m Source: FinScope 2006; FinAccess 2006

  9. Philippines SmartMoney (Smart): 2000- (2.4m) G-Cash (GXI): 2004- (0.5m) Transformational m-banking models in developing world • South Africa: (500 000 users 2006) • - MTN Mobile Banking: 2005- • Wizzit: 2005- • Kenya: • M-Pesa (Vodafone): 2005 pilot started • March 2007: National rollout

  10. 4. The opportunity reconsidered 2002: +50 years 84% US households have a payment card 2007: +5 years 4m Philippinos/10% of m subscribers have a m-wallet Sources: US: Paying with Plastic (2005); other: company reports How fast is realistic?

  11. Country take-up potential is a function of: • Mobile/ internet access ratio • MICs e.g. Philippines 7:1; Japan 1.5:1 • Existing retail payment infrastructure • How pervasively is plastic accepted? • Tech ‘savvi-ness’ of population • SMS vs menu driven • Regulation • Openness vs certainty of regimes

  12. Potential for take-up of m-banking

  13. Potential for take-up of m-banking

  14. Potential for take-up of m-banking

  15. Potential for take-up of m-banking

  16. Key uncertainties: Regulatory questions • Are non-banks allowed to issue e-money on a attractive basis? • Can non-bank agents handle cash in and out on an easy basis? • Branching regulation and AML/CFT • 3. Can telcos directly access retail payment systems? • If yes, to all three, then more likely to be enabling

  17. Mobile payment platforms • Are they likely to be reabsorbed into existing payment systems? • e.g. Deutsche Bank Research report 44, 2004 • Security element issue • Who controls access to the SIM? • Bank vs telco struggles • Recent Mobey Forum/ GSMA reports stress need for trusted third party to control access

  18. Not enabled Conclusion: which trajectory? Enabled No of consumers

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