Mobile 2 Mobile Banking Nov 7, 2013

1. Mobile 2 Mobile BankingNov 7, 2013 Alejandra Aneeq Michael Rimpei

2. Key Terms • Unbanked • Financial inclusion • Branchless Banking • Remittance • Mobile banking • Adoption • DFID (Bilateral aid agency of UK) • Microfinance • E-Wallet • Over-the-Counter (OTC)

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

4. Financial Inclusion 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 3rd party intermediaries & technologies • Mobile Banking: Branchless banking through mobile phones (simplified) • Need: • “Access to finance facilitates entrepreneurial activity” – Nick Hughes (M-Pesaideator) • Large number of workers away from home (international and domestic migrants)

5. Unbanked Percentage of Unbanked

6. Remittance 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

7. Mobile banking Cellphone use in Kenya Source – Economics of M-Pesa

8. Mobile banking US vs Developing World

9. 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

10. 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

11. Remittance 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: Who’s Served? At What Price? What’s Next?, CGAP, Sep., 2010

12. Remittance Scheme of M-Pesa Sender Receiver 5: Transfer m-money 6: Withdrawal operation 8: Withdraw cash 3 4: Buy m-money M-Pesa m-money Account 7 2 Rural Agent Urban Agent Link Bank Account Rural Agent Urban Agent Urban M-Pesa Agent Rural M-Pesa Agent 9 1 *1 M-PESA: Mobile Money for the “Unbanked” Turning Cellphones into 24-Hour Tellers In Kenya

13. Over-the-Counter 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

14. e-Wallet e-Wallet (account) vs Over-The-Counter *1 http://www.cgap.org/blog/mobile-money-otc-versus-wallets

15. Remittance M-PESA – urban to rural money transfer http://www.economist.com/node/16319635

16. Financial Inclusion Socioeconomic profile of users 2008 2009 ** Source: Jack, Willian & SuriTavneet. Mobile Money: The economics of M-PESA

17. Adoption 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

18. Adoption Individual’s reasons for not using M-PESA

19. 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

20. Financial inclusion Factor in common

21. Branchless Banking ** Source: McKay, Claudia & Pickens Marks. Branchless Banking 2010: Who’s served? At what price? What’s next?

22. Mobile 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

23. Mobile banking Challengesfor 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

24. Adoption Adoption Comparison *State Bank of Pakistan http://www.sbp.org.pk/publications/acd/BranchlessBanking-Apr-Jun-2013.pdf **DFID Kenya Blog