kabir-kumar (bb conf pres)

8/7/2019 Kabir-Kumar (BB Conf Pres)

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Understanding Branchless BankingBusiness Models International

Experiences

April 17, 2010


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CGAP Technology Program

14 active projects in 9 countries, 12 policy diagnostics

Research, Policy and advisory

Experimentation and communications

Co-funded by the Bill & Melinda Gates Foundation

Areas of Focus

Clients: what are the drivers of large-scale adoption and usage?

Providers: what incentives for offeringservices to large numbers of poorpeople?

Governments and regulators: how canthey develop (1) safe and enabling

regulations (2) policies that promoteadoption?

Project Locations


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Agenda

Emerging models in branchless banking Money service provider

Mobile bank model

Agentbased Acquirer model Business case for key actors

Business case for MNOs

Business case for Banks

Business case for IT provider

Role of market structure


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Transformational branchless

banking

Money service provider

(M-PESA Kenya, G-Cash Philippines,MTN Mobile Money)

Agent-based Acquirer(Eko India, DD Dedo Colombia)

Mobile bank(EasyPaisa Pakistan)

M-wallet Aggregator(SMART Money, M-Power Kosovo)

Consumer-facingbusinesses

family of

models

Multiple

variations likelyto exist

1

2

3

4

Emerging models in branchless banking

Low cost branch substitute(Caixa Brazil, BancoEstado Chile)

Additionalchannel forthe bank

AcquiringNetworks


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Understanding business models

Value proposition

What is the value to thecustomer?

Business logic

Why the business doeswhat it does to make

money?

Key partnershipsWhat are the key

relationships explainedby the value

proposition andbusiness logic?

Revenue/Costs

What are thedistinguishing costs?

Prudentialinstitution

What is the role of aprudentially regulated

institution?

Legal structure

Independent orsubsidiary or service


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Agenda



Mobile bank model

Agentbased Acquirer model

Business case for key actors






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Value proposition

Move

money electronicallyanywhere

Business logic

Drive volumes bycapturing all payments

products

Key partnerships

billers

Revenue/Costs

Tx fees (revenue)

Agent commissions(cost)

Prudential

institution

Holds pooled accounts

Legal structure

Independent orsubsidiary of bank,

MNO or other


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Structures observed today

Legalstructures Subsidiary

Service (byMNO or Bankor both)

Independent(limited liability)

e.g., SplashSierra Leone

e.g., WingCambodia

e.g., M-Pesa

Kenya


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Bank in the money service provider model

Role of the

bank

Sets upsubsidiary

Serves asagent

Holds pooledaccount e.g., SplashSierra Leone

e.g., WingCambodia

e.g., M-PesaKenya

Issues e-money

e.g., OrangeMoney

Mostcommonlyobserved

role


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Expanding beyond domestic transfers

121%CAGR in

customers

$1 M to $300M monthly

tx value

$40 M inreportedrevenue(2009)

9 Mcustomers

~17,000agents

Bill payments

Loanrepayments

Depositpayments

International

remittances

Governmentpayments ?


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Significant upfront investment

Cash

costs$

time

Marketing and agent set-up

Agent commissions

Set-up GrowthLaunch


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Agenda



Mobile bank model








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Mobile Bank

Value proposition

Full suite of banking

services anytime,anywhere

Business logic

Capture entire profitpool from products

Key partnerships

Between the bank andthe MNO

Revenue/Costs

Similar to MSP onpayment products butretain profit pool from

additional products

Prudential

institution

Owns the customer

Legal structure

Prudentially regulatedfinancial institution


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Corebusiness

Airtimereseller

network

Traditionalbranches

Traditionalplatform

$

Traditionalclients

Independent brand Bank name prominent

Additionalpersonnel orincreased capacity

for financialservices

Operations of the accountsoutsourced

Platform to handlemobile accounts

Mobileaccounts

Higher-level accounting updatedperiodicially

Mobile Bank: operational view
http://images.google.com/imgres?imgurl=http://www.unlockedphone-s.com/wp-content/uploads/2009/04/gps-cell-phone-300x300.jpg&imgrefurl=http://www.unlockedphone-s.com/gps-cell-phone&usg=__wLPrNXcYrOR7KppXk-jmoiRFP28=&h=300&w=300&sz=16&hl=en&start=110&sig2=N9z9WxtZY9PPGDwbTDeW2g&um=1&tbnid=qU7tIz7tUjwpvM:&tbnh=116&tbnw=116&prev=/images?q=cell+phone+reviews&ndsp=20&hl=en&rlz=1T4GGLL_enUS318US318&sa=N&start=100&um=1&ei=iB29SufuEMGwlAe3ga2VAQ


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Mobile Bank: financial view

IncomeBank Rev

CostsAll own costs

Profit

Bottom lineEBITDA

IncomeTelco RevBank Rev

CostsDirect/

Commission costs,Taxes

Profittop line rev split

at source

RevTransfer

IncomeMNO Rev

CostsAll own costs

ProfitBottom line

EBITDA

Rev

Transfer

Bank P&LVirtual P&L

For Mobile BankMNO P&L

TaxCost

CommCost


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Benefits of leveraging costs

Money service

provider(MNO service)

Money service

provider(MNO-Bank)

Mobile bank

costs

incurredcosts

margins

Distributionmanagement

Risk

management Accountmanagement

Personnel


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Agenda



Mobile bank model








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Agent-Based Acquirer

Value proposition

A single network of

agent points that iseasy to integrate with

Business logic

Share the cost ofnetwork across multiple

providers

Key partnerships

Financial providers,both banks and non-

banks

Revenue/Costs

Service fees (revenue)

Agent commissions(cost)

Prudential

institution

One of the providers

Legal structure

Independent orsubsidiary of bank,MNO or other that

manages the network


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Agent options for banks

BANK

MERCHANT MERCHANT MERCHANT

BANK


Manager Agent Acquirer

BANK



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EKO

State Bank of India(SBI)

Airtel

Airtel-EKOdistribution

Branding by EKO

Airtimedistribution

EKOs

distribution

Branding by EKO

Agent-based Acquirer: operational view
http://images.google.com/imgres?imgurl=http://www.unlockedphone-s.com/wp-content/uploads/2009/04/gps-cell-phone-300x300.jpg&imgrefurl=http://www.unlockedphone-s.com/gps-cell-phone&usg=__wLPrNXcYrOR7KppXk-jmoiRFP28=&h=300&w=300&sz=16&hl=en&start=110&sig2=N9z9WxtZY9PPGDwbTDeW2g&um=1&tbnid=qU7tIz7tUjwpvM:&tbnh=116&tbnw=116&prev=/images?q=cell+phone+reviews&ndsp=20&hl=en&rlz=1T4GGLL_enUS318US318&sa=N&start=100&um=1&ei=iB29SufuEMGwlAe3ga2VAQ


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Agenda



Mobile bank model








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Biggest benefit in non-saturated markets 8% increase in market share for SafaricomMarket

Share

0.5% (China) to 6% (India, Philippines) Studies cite 30% reduction in churn No effect for Safaricom from M-Pesa Could be offset with market share

Sharp decline in ARPUs (Ghana and

Pakistan halved in three years) M-Pesas contribution to Safaricom revenuewas 4% (FY 2009)

Churn

ARPU


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Agenda



Mobile bank model








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Lower capital expenditure to set-upinfrastructure

Agent channel is 1/30th the cost of setting upa branch channel

Bank targeting customers transacting at low

values Mobile channel reduces cost per transactionto help maximize margins

Banks in Pakistan watching Tameer

Microfinance Bank

Growth

Seg-ments

Differ-entiate


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Agenda



Mobile bank model








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Options for ITproviders

Sell service

Sell product

Upfront($234 K)

Future flows($1.90/customer/yr)

Operate($.40/customer/yr)

UpfrontCharge(w/ integration)

Sell service


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Agenda



Mobile bank model








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Role of market structure in telecom market

Degree of fragmentationhigh low

low

high

Competitiv

ethreat

NO MARKET FORCE

Single dominant player so noimminent competitive threat

Lots of room to grow in core

business

DOMINANT PLAYER IS THEMARKET FORCE

Single dominant playercontrols pace of development

Pricing and distributioncontrolled by single player

WEAK MARKET FORCE

Significant competition Lot of growth left in core

business

subscriber growth mode

STRONG MARKET FORCE

Significant competition Little growth left in core

business pocket share mode


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Role of market structure in telecom market

Herfindahl-Hirschman Index(0=fragmented ; 1 = monopolistic)

high low

low

high

Degreeofpe

netration

(connec

tions)

c


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Advancing financial access for the worlds poor

www.cgap.org

www.microfinancegateway.org
http://www.uncdf.org/english/index.phphttp://www.themastercardfoundation.com/

kabir-kumar (bb conf pres)

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