2009 RBAP-MABS National Round table Conference May 12-13, 2009 Hyatt Hotel and Casino Manila

1. Expanding E-Money Resellers in rural areas for Mobile Phone Banking Nixon P. Mahilum MABS Mobile Phone Banking Specialist nmahilum@rbapmabs.org www.mobilephonebanking.rbapmabs.org 2009 RBAP-MABS National Round table Conference May 12-13, 2009 Hyatt Hotel and Casino Manila

2. Mobile Phone Banking is Branchless Banking • Branchless Banking is the cheaper alternative delivery of financial services outside the conventional bank branches using Merchants as Bank’s Agents and Technology (such as ATM, Internet, POS Terminals and mobile phone) as tools. • Mobile phone Banking is a variation of Branchless Banking wherein mobile phone and E-Money are being used (with or without agents) to perform banking functions.

3. What is Electronic Money (E-Money)? E-Money shall mean monetary value as represented by a claim on its issuer that is: electronically stored in an instrument or device,… withdrawable in cash or cash equivalent… Electronic instruments or devices shall mean cash card, e-wallets accessible via mobile phones or other access devices…. E-Money issuer may be Bank, Non-Bank Financial or Non-Bank registered with the BSP. For GCASH, Globe is the issuer. Source: BSP E-Money Circular • Notes: • E-Money issuer of GCASH is GXI (a subsidiary company of Globe Telecom) • E-Money is not considered a deposit, therefore not covered by PDIC.

4. Why do we need to expand E-Money Resellers in the rural areas? • To Expand Financial Services to rural areas faster at very low cost while increasing customer base and market share. • Study says that in developing countries using retailers as agents is the only way to reach the unbanked at lower setup and running cost. • E-Money Resellers are backbone of Branchless Banking • It is a global trend in banking. Retail Outlets are increasingly utilized as important distribution channel.

5. Mobile Phone BankingImplementation Challenges Few Merchants and E-Money Resellers in the rural areas Effects: • Low adoption of technology; • Low transaction volume; • Benefits to the rural bank is not substantial; and • Apprehension of the use of technology GCASH Partners and Outlets in the Philippines: 3,000+ Rural Bank partners Small Merchant 4,000+ Globe Partners 650+ Rural Bank outlets

6. Solutions: Adoption of Branchless Banking for Expansion and Outreach • Leverage Retailers and accredited them as E-Money Resellers or independent agents to provide Cash-In and Cash-out services, therefore, expand banking services to clients even to remote place; • Leverage Mobile Phone Subscribers which are Clients of the Bank or potential clients of the bank.

7. Potential of Branchless Banking through Mobile Phone Philippines: 68+ Million Mobile Phone subscribers (1.7+ M in 1998) vs. 32+ Million Bank Accounts (23M+ in 1998) 7,000+ ATMs 25,000+ POS Worldwide points of presence 3.5B+ 1M+ 25M+ 600K+ 500K+ 250K+ Bank Branches Post Offices ATMs POS Mobile Phone Western Union

8. Trends in Branchles Banking • The Economist: forecasts “End of the Cash Era” • In-Stat researcher: mobile phones will be wallets within the next four years • BCA Indonesia : “Business has become more mobile, and customers want to be able to do banking transactions anytime, anywhere” • Juniper Researh (UK): Globally, mobile phones will handle $587 billion in financial services by 2011 • Google says “mobile phone may be the most prolific consumer product ever invented” • Researcher-De La Salle University Manila: Mobile phone users are everywhere in the Philippines, mobile banking would be advantageous to provinces with fewer banks. It brings banking to everyone’s reach. 32 Million Bank Accts 68 Million Mobile Phone subscribers

9. RBAP-MABS Branchless Banking Business Model (A Hybrid Approach) • Other Models: • Bank-led • Telco-led • Independent Service Providers

10. Logic of Branchless Banking 2 3 Use of Existing Retail Infrastructure Delivery through and use of existing and deployed technologies 1 4 Client Rural Bank Mobile Phone

11. Elements of Branchless Banking

12. Business Drivers of Branchless Banking

13. Components of Branchless Banking through Retailersusing POS vs. Mobile Phone

14. Success of Branchless Banking in Other Countries Source: CGAP

15. Basically, any store can be an E-Money Reseller E-Money Reseller is a retail outlet or merchant accredited by the Bank or mobile network operators (MNO) wherein clients can buy their E-Money and perform mobile phone banking transactions. E-Money Reseller facilitates cashing-in and cashing-out of electronic money to clients of the rural banks.

16. Requirements in SelectingE-Money Reseller • Existing Depositor (or to open a deposit account) of the GCASH accredited rural bank. • With Cellphone; with active Globe SIM and registered to GCash • Stable micro, small and medium enterprise (SME) operator in the area • Willing to serve bank clients within the area and to follow KYC requirements, security and internal control procedures required by the bank. • Willing to limit Transaction Fee at P10 pesos or 1% of the transaction amount (whichever is higher)

17. Services that E-Money Reseller can offer? • Provides Cash-In (converts GCASH to cash) and Cash-out (converts Cash to GCASH) transactions to bank Clients and individuals who want to transfer money • Accepts e-money payments for Purchase of goods and services (remote and face-to-face) • Reloads Airtime of walk-in using GCASH (and enjoy 10% rebate) • Performs Text-A-Withdrawal to pre-fund Resellers GCASH wallet and Performs Text-A-Deposit for GCASH collected in daily sales of the business.

18. Know-Your-Customer (KYC) Challenge Sample ID Challenge: • Not all E-Money Reseller has the skills to perform proper KYC and detect ID frauds because of the complexity and number of available valid IDs. Proposed Solutions: • Standardized ID Card that will be issued by the rural banks with photo, contact details and control number. • This ID will be presented to E-Money Reseller for every financial transaction. • ID Card may also be used for discounts, perks, promos, loyalty, etc.

19. Transaction Process(at the E-Money Reseller) To have GCASH: • Reseller requests GCASH from the BANK during business hours using Text-A-Withdrawal service. • Bank debits the the Reseller’s Bank Account and Sends GCASH to the Reseller. To accommodate Cash-In Transaction: • Client approaches the Reseller, fill-up some forms and submit the “Privilege ID” Card. • Reseller verifies the ID submitted and proceeds with the sending of GCASH to the Client • Reseller records the transaction details and Client’s info including ID Control No.

20. Transaction Process(at the Client) • Once Client has GCASH in his mobile phone, Client sends GCASH to: • the BANK for Payment, Deposit, etc. • Other Globe subscribers (registered to GCASH) as fund transfer • the Utility Companies and Schools for payment of Bills and Tuition Fees • BIR for payment of taxes • Other forms of payment • Client takes note of his/her transaction reference number.

21. Benefits of Branchless Banking (Along the Value Chain) E-money Merchants and Resellers Bank Client Convenient & more secure than cash Comfort of dealing with corner merchant or reseller-neighbors Access to financial services from the bank remotely with reduced time and transportation costs Leverage Merchants, Resellers and Mobile Phone subscribers to expand client base Increase efficiency and save on transaction costs Increase deposit levels Cross selling opportunities Significant image building opportunity with major partner Bank keeping up with new technologies Increase walk-in traffic (cross selling opportunities) Decrease cash-on hand, minimize fraud/risks Revenue from fees Remote Purchase + Delivery Service

22. Ecosystem Development Rural Bank

23. Mobile Phone is more than just a phone… With Mobile Phone, you can now… Microenterprise Access to Banking Services Program www.rbapmabs.org

24. End of Presentation