Mobile money overview

1. Mobile money overview Prepared for the Chamber of Commerce By: Joep Roest (PFIP) Date: 7 April 2011

2. What can mobile money look like? • m-wallet – Virtual wallet separate from bank account • m-banking – Underlying bank account accessed through phone • Linked wallet – Ability to move funds between bank account and wallet

3. Why does mobile money matter? • m-Pesa • 8.3 million users after 4 years • 40% of adult population • 14,000 cash-in / cash-out stores • $650m / month in deposits & withdrawals • Demand is high • Scalable – no clear limit • Cost effective delivery • Reach • Fast adoption • Geography no problem • Reporting • Speed • Security

4. Generally the following services… Send money (ONNET) Bill pay Self top-up Payroll Send money (OFFNET)

5. But later… Micro loans Online purchases Microsaving Supply chain Payroll MFI transactions Micro insurance ATM cards G2P MFI loan collection Link to schemes (VISA, Mastercard) International remittances

6. Players

7. Is there space for both mobile operators and banks? What mobile operators value What banks value Reduce airtime distribution cost Deposits Link a wallet to value added services First relationship & up sell What BOTH value Reduce prepay churn Corporate & SME customers Transaction revenue What mobile operators bring What banks bring Customers & brand Regulatory Retail & service reach Trust

8. Agents • Absolutely crucial • Commissions & opportunity cost • Super agent structure • Recruiting other agents • Liquidity • Transactions • Signing up customers • Cash in • Cash out • Ecosystem

9. Regulatory considerations • Addressing systemic risk • Managing money supply • Addressing AML/CFT • Address liability of agents • Enabling Consumers • Protecting Consumers

10. What makes a country right for mobile money? • Young population • Mobile phone usage is high or growing quickly • Cash movement expensive/risky • Cash is a large part of how transactions are completed • Bill payments • Payroll • Distribution payments. • Geographically dispersed with significant domestic rural to urban migration for work. Need to send money home. • Ideally, there are national network chains to partner with (eg Post, banks, distributors) • Progressive regulator • Enablers (M-Powa, credit transfer)

11. Great…..so how does it work?

12. Agent Agent Agent Agent Customer Customer Customer Customer Customer Customer Customer Customer Q-money Superagent Factory A mobile money platform is a system that records balances held within mobile wallets. These balances represent bank liabilities and are accounted for within a trust account on a bank CBS Mobile Money system Bank CBS Mobile Money trust account total $

13. 100 100 100 100 100 100 100 100 2,000 2,000 2,000 2,000 Agent Agent Agent Agent Customer Customer Customer Customer Customer Customer Customer Customer 50,000 Superagent 100,000 Factory The total value of the mobile wallets is represented IN TOTAL in the trust account Mobile Money system Bank CBS Mobile Money trust account total 258,800 100,000 Q-money

14. Agent Z Customer X Customer Y $ $ +250 50 260 - 250 Customer X sends 250 Kina to customer Y in Madang $

15. Agent Z Customer X Customer Y Customer Y cashes out 260 Kina from Agent Z in Madang $ $ 50 260 360 0 + 260 - 260 $ +260 1,660 1,740 - 260

16. Agent Z Customer X Customer Y $ $ 10 90 - 40 Customer X cashes in 40 Kina at Agent Z in Madang $ + 40 + 40 1,620 1,780 - 40

17. Great…..so why should I care?

18. Other opportunities for business • Bill Payments • Bulk payments • Worker payments • Supplier payments • Supply chain • Distributor payments • Ideas?

19. Advantages of MM salary payments Reduces cost of cash-handling for payroll Large number of workers paid & notified instantly Security benefits Reporting Fewer employees managing payroll services

20. Questions?