Mobile money overview

Prepared for the Chamber of CommerceBy: Joep Roest (PFIP)

Date: 7 April 2011

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

Why does mobile money matter?

• Demand is high• Scalable – no clear limit• Cost effective delivery• Reach• Fast adoption• Geography no problem• Reporting• Speed• Security

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

Generally the following services…

Send money (ONNET) Bill pay

Payroll

Self top-up

Send money (OFFNET)

Micro loans MicrosavingOnline purchases Supply chain

Payroll Micro insurance

MFI transactions ATM cards

G2PLink to

schemes (VISA, Mastercard)

MFI loan collection

International remittances

But later…

Players

Mobile Money

Regulator

Banks

MNO

Agents

Is there space for both mobile operators and banks?

Transaction revenue

Reduce airtime distribution cost

First relationship & up sell

Link a wallet to value added services

Reduce prepay churn

Customers & brand

Retail & service reach

Deposits

Corporate & SME customers

Regulatory

Trust

What mobile operators value What banks value

What BOTH value

What mobile operators bring What banks bring

Mobile Money

Regulator

Banks

MNO

Agents

Agents

• Absolutely crucial• Commissions & opportunity cost• Super agent structure– Recruiting other agents– Liquidity

• Transactions– Signing up customers– Cash in– Cash out

• Ecosystem

Mobile Money

Regulator

Banks

MNO

Agents

Regulatory considerations

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

Mobile Money

Regulator

Banks

MNO

Agents

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)

Great…..so how does it work?

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

Customer

Agent

Factory

AgentAgent Agent

CustomerCustomer

Customer Customer Customer

Customer

Customer

Mobile Money system Bank CBS

totalMobile Money

trust account

Q-money

$

Superagent

100Customer

2,000Agent

100,000

Factory

100,000

2,000Agent

2,000Agent

2,000Agent

100Customer

100Customer

100Customer

100Customer

100Customer

100Customer

100Customer

Mobile Money system Bank CBS

total

258,800

50,000

Superagent

Mobile Money

trust account

The total value of the mobile wallets is represented IN TOTAL in the trust account

Q-money

Customer X

Agent Z

Customer Y

50 300

$

2,000 1,400

$

100 10

$

Customer X sends 250 Kina to customer Y in

Madang

- 250260+25050

Customer X

Agent Z

Customer Y

50 300

$

2,000 1,400

$

100 10

$

50 260

Customer Y cashes out 260 Kina from Agent Z in Madang

+ 260

- 260

0

1,660

- 260+260

360

1,740

Customer X

Agent Z

Customer Y

50 50

$

1,740 1,660

$

360 0

$

Customer X cashes in 40 Kina at Agent Z in

Madang

+ 40

- 40

- 40

+ 40

1,620

10 90

1,780

Great…..so why should I care?

Other opportunities for business

• Bill Payments• Bulk payments– Worker payments– Supplier payments

• Supply chain• Distributor payments• Ideas?

Advantages of MM salary paymentsLarge number of workers paid &

notified instantly

Fewer employees managing payroll

services

Reduces cost of cash-handling for payroll

Reporting

Security benefits

Questions?