Mobile Payment in Sri Lanka:
Market Demand Assessment
Dr. Peter Lovelock
Director, TRPC
The Study
Reasons for the study:
Lack of reach to the bottom of the pyramid segments:
Financial institutions have been limited in expanding their services to reach more people at the base of the pyramid.
High cost and limited infrastructure means that more affordable solutions are needed.
Mobile, or branchless banking as a solution:
Due to large unbanked population and widespread use of mobile phones, mobile banking offers a new business model
and delivery channel, to increase financial access to a wide range of services while reducing transaction costs.
Demand for mobile banking in Sri Lanka:
With no proven models of mobile baking in Sri Lanka, this study was conducted to understand the demand for mobile
based financial solutions, to help establish the availability of a viable business model for such services in the country.
Methodology:
•
Household survey conducted in Jan-Mar 2013 covering 2,040 households
•
•
•
•
Face-to-face interviews conducted using a structured questionnaire
Covered spending habits, mobile use, bank access, preference and mobile money demand
Differences across income, expenditure and education levels identified using Socioeconomic Classification (SEC)
system
73.2% respondents from rural areas
•
•
Average household income: LKR 20,000 - 35,000
40.3% of respondents between 15-30 years of age
Current Context
•
Banking Services:
•
Access to banking services widely acknowledged to be
high
•
Financial access in Sri Lanka estimated between 68.5% of
population (WB) to 82.5% of households (GTZ)
•
58% of adults of bottom 40% income group have bank
accounts (WB)
•
Macro perspective:
•
By 2012, 33 banks operated 3,378 branches
(16.2 branches per 100,000 people)
•
Majority of outlets concentrated in the
Western, Central and Southern provinces
•
One-third of population unable to transact
through a formal institution; with 50 per cent
accessing financial accounts only on a monthly
basis
Cash is still king in Sri Lanka, and there are significant numbers who would make use of an account if given
reasonable access – reasonable in terms of access, price, convenience and trust
Current Context
Formal Financial Account Usage:
•
While bank access is relatively high in Sri
Lanka, bank use is relatively low
•
13.7% of accounts inactive in any given
month, compared to 6.6% for South Asia
•
66.7% of account holders make 1-2 deposits
per month compared to 70.5% for South Asia
Alternative Payment Channels:
•
Cheques and RTGS are effectively the only
non-cash payment methods used on a broad
scale – 99% total non-cash value (3rd quarter
2012)
•
Penetration rate for debit/credit cards is low
•
Debit cards: 46% population (10 mill
cards)
•
Credit cards: 4.3-4.5% of population (1
million cards)
•
Mobile banking and tele-banking facilities
remain nascent
Source: CBSL
Mobile Telecoms
• As of 2013, 5 operators served 22.4 million
subscribers i.e. 97% penetration
Mobile Subscribers (million)
7.8
• Local estimates place the number of multiple
SIM users in Sri Lanka in the range 5-20% of
base i.e. total subscriber base of 17.3-18.5
million
• By contrast, Wireless Intelligence estimated
the rate of multiple SIMs in Sri Lanka to be
2.02-2.04, and the (unique) subscriber base to
be only around 9.5 million by 2013 i.e. 41.1%
penetration, which suggests limited market
penetration.
5
4.7
3.2
1.7
Dialog
Mobitel Etisalat
Airtel
Hutch
At high rates of penetration the mobile phone is an ideal alternative access
channel for offering services such as financial access – particularly in the case of
remote rural citizens who are otherwise not considered by the banks.
Available Mobile Banking Services
•
In 2013, 8 domestic commercial banks provided m-banking services in Sri Lanka
•
Available services: Range from balance inquiries to paying bills and fund transfers
•
Technologies: Range from SMS-based service and USSD to mobile apps for smartphones
•
In 2011, the Central Bank enabled a bank-led model and a non-bank-led custodian model
Available Mobile Banking Services (excluding Foreign Banks)
Banks
M-Banking Service
Technology used
SMS
IVR
USSD
App

Bank of Ceylon
BOC Paymate
Comm Bank of
Ceylon
Comm Bank
M-Banking

DFCC Bank
Mbanx

Hatton National
Bank
Hatton Mobile
Banking
National
Development
Bank
eZ Pay
Nations Trust
Bank
Nations Mobile
Banking
People's Bank
People's
M-Banking

Sampath Bank
Sampath Mobile Cash

Seylan Bank
Mobile operators able to use the service

Mobitel
Airtel
Hutch



















Etisalat



Dialog















Mobile Payment Platforms
Introduced by Dialog in 2007. Provides m-payments, mbanking, and m-transfer
Introduced by Dialog in June 2012. Dialog users can pay utility
bills and transfer money even without a bank account
An ICT software and service provider for the health sector
SMS-based out-of-band payment solution provider with bank
and mobile operator interoperability
JV between zMessenger and Ambiq Technology, positioned to
be the “ideal platform” for NFC services in Sri Lanka
SMS-based out-of-band payment solution provider. A key
feature is bank and mobile operator interoperability
Central clearinghouse, undertaken the common mobile and
EFT payment switch rollout; including mobile payments
SkyPay branchless banking solution by OpenArc, including mbanking/m-payments
POS-based branchless banking module by EpicLanka, based on
owning 90% of all POS machines in the country
Key Findings
Monthly Average Household Expenditure (LKR):
•
•
•
Food, shelter and education comprise >50% monthly expenditure
Telecom expenditure the 4th largest spend item (6.1%)
Average mobile phone costs (LKR1,201.65) almost identical to average utilities expenditure
(LKR1,209.06)
Key Findings
•
Mobile phone ownership:
•
94.7% own only one mobile phone with far less multiple phone account usage than usually the case in rapidly growing
emerging economies
•
Higher ownership of smartphones by rural than urban respondents
•
Mobile usage:
•
Over-the-air top-up of mobile credit with 70.8% of usage
•
>15% respondents already share e-credits with friends and peers
•
Illustrates high familiarity with mobile credit transfer
•
Notably: a large gap between demand and use for m-banking, m-pay and remittance
•
Usage of banking services:
•
Bank account ownership high: 88.2% including 80% of lower income
•
20% of least developed still without a bank account
•
Majority of bank accounts being used only once a month or less
•
Use of non-cash payments:
•
Only 16.8% own a debit card; 4.1% own a credit card.
•
Main purposes of card use: withdraw money for cash, shopping bill payments
Purpose of using a debit card by SEC (percentage)
This presents a substitution opportunity for mobile payments solutions
Key Findings…Mobile Preferences
Mobile Phone Use and Desired Use
•
•
•
•
•
Demand for mobile social media and
entertainment stood out with >10%
demand
Of greater note: the gap between actual
use and wanting to use mobile banking,
remittance and payments
Almost equally true across all
demographics suggesting a strong and, as
yet, unmet demand for the services
Currently there is greater use of mobiles
for remittance (3.5%) than for m-banking
(1.7%); not surprisingly demand is greater
across lower segments
Money received through remittance is
mostly (52.7%) for personal or emergency
needs, which means timely transfers of
money are important
Socioeconomic Class
Make calls
Text messages
A
B
C
D
E
Using
100
100
100
100
100
Desiring
100
100
100
100
100
Using
63.3
61.1
61
53.1
50.2
Desiring
68
63
65
55
55
Using
27.5
21.2
19.3
18.3
19.1
Desiring
26
27
20
21
15
Using
13.7
9
7.5
4.8
4.3
Desiring
15
16
13
12
9
Using
2.1
2.3
1.7
1.1
Desiring
13
10
8
7
5
Using
0.6
3.6
3.4
2.8
1.6
Desiring
18
13
12
14
14
Using
1.3
3.4
1.9
0.9
0
Desiring
11
9
7
8
8
Entertainment
Social Media
M-banking
Remittance
Make
payment
Key Findings… Awareness of Mobile Money
Services
Awareness of M-Money Services (%)
• High awareness: 63.8% had heard of
and were aware
• But, only 2.1% aware that they were
using any m-money services
• Confusion in understanding
• eZCash: 2.4% aware, eChanneling: 0.2%,
int’l remittances: 0.1%
Person-to-Person fund transfers
71.3
Bill payments
63.9
Purchases
21.6
Banking
17.1
Air time top-up
15.5
Loan application
6.3
eZ Cash
2.4
eChanneling
0.2
Receive money from abroad
0.1
Key Findings…M-Money: Drivers
Mobile money drivers
A
B
C
D
E
Total (%)
Ease of use
144
251
517
199
86
59.1
Money security
108
188
379
149
81
44.6
Awareness of the service
70
123
307
115
52
32.9
Wide accessibility
26
62
136
58
43
16
Drivers: Ease of use, safe handling of money, and wide accessibility –in other words,
convenience and security
Demand for Different Type of M-Money Transactions (percent)
Note: SEC split for total population = SEC A 10%, SEC B 20%, SEC C 45%, SEC D 18%, SEC E 7%.
For example, as per above table, 1.3 mio of Sri Lanka’s population falling into SEC A, demand to pay utilities through M-Money
Key Findings… M-Money: Constraints
Barriers to mobile money
A
B
C
D
E
Total (%)
Lack of need
37.2
39.5
38.8
36.3
36.4
68.6
Awareness
30.7
30.5
30.3
32.6
31.9
55.7
Trustworthiness
9.1
8.3
10.8
7.1
4.8
16
Difficult to use
4.8
8.1
6.3
8.6
9.3
12.9
Availability
9.8
5
5.2
7.1
7.9
11.3
Affordability
6.2
6.6
5.5
6.9
7.3
11.2
Barriers:
•
Low ‘awareness’, lack of need, lack of trust, system difficulties, availability and
affordability
•
All are perception issues and thus subject to change with experience
•
Awareness, education and relevance can all be addressed through targeted intro of mmoney technologies
Gaps to be addressed
Communication between key
players
• Small market; too much
fragmentation undermines
economies of scale .
• Extensive misunderstanding,
disinformation and lack of
clarity on what key players
are doing, what’s
demanded, what ‘s possible,
what ‘s an opportunity
Understanding of mobile
payments (as opposed to
general ‘awareness’)
• ‘How do I use the service?’
‘Why should I use the
service?’ ‘What are the
benefits?’
• These are not clearly
understood
Identifying key pockets of
demand
• How much investment
required to commercialise
and to be able to scale to
sustainability?
• Robust answer required if a
mobile payments
‘ecosystem’ is to be built,
rather than single closed
loop payments solution
Pricing and ROI
• ‘How much should the
service provider charge for
mobile payments services?’
‘How much could the market
bear?’ ‘If fees are too low
how can ROI be achieved?’
• Models and existing best
practices needed to
accelerate current efforts
and investments
Opportunities and Next Steps
Regulatory Clarity for Branchless Banking
• Providers unclear on how to service the
branchless bank opportunity. New
guidelines on modes of branchless
banking helpful
Agent Networks
• Distinction between where they can and
cannot be used for ‘payments’ remains
unclear
• Develop a programme for outsourced
agent networks as part of overall market
development
• Encourage long-term thinking in the
development of an agent network business
to develop as a separate business creating
service agent deployments for other
providers
International Remittance
• Remittances account for $6 billion (6% of
GDP) and via mobile money can challenge
existing high-cost or grey-market
remittance channels
Utility Payments
• Encompasses payment of government
bills, public transport, water bill s, airtime,
utilities, car parks, insurance premiums,
MFI transactions, payroll distribution,
trishaw rides and fuel bills
• One challenge is partnering with the state
run utilities sector
Targeting the Underbanked
• Banks in general view mobile payments as
more appropriate to the middle income
market, (exceptions: Lanka Orix)
• Unintended consequences: small
businesses use eZ Cash to fill a
transactions gap (Dialog)
eGov Services and Payments
• Very low uptake due to low awareness.
Requires buy-in from the top and
expansion of services for effective take-off.
E-pension, e-local government and eforeign worker are some of the services
that the ICTA is looking to implement
Conclusions
• Significant enthusiasm for m-payments but little consistent understanding of demand
•
Understanding of mobile payments by Sri Lankans should not be taken as a given even where awareness
presents as relatively strong
• M-payments ecosystem fragmented and in flux
•
Institutional partners often not promoting m-payments; pride and a lack of information appears to prevent
companies from working with each other
• M-payments ecosystem likely to continue to emerge organically
•
Key question is whether that will enable traction or economies of scale
• Growing recognition that m-payments addresses existing payment gaps
•
•
Paying for public services online, transportation, etc.
Integration with e-government services could be established
• Central Bank seen to be supportive of development, and inclusive in its process, but
further clarity on what players are allowed to do would be beneficial
Sri Lanka is still largely a cash-based economy; vast majority of transactions
carried out in cash. Mobile payments uptake is increasing but much needs to be
done for mass adoption of such services to take place.
Thank you
Mobile Banking/Payment Interoperability
Scenarios for Sri Lanka
Interoperability is considered critical to mobile
banking mass adoption
• To be widely accepted and used, must be as fungible as cash
• While mobile operators are initiators of mobile money, not
drivers of interoperability due to business model conflicts
• While transfers are a fundamental starting point, banks are
most suited to financial service diversification
Value of Interoperable Mobile Transfers
National Payment Corporation of India:
Interbank v. Intrabank Mobile Transfers
Source: NPCI
An interoperability framework must accommodate multiple forms
of acceptance points, payment methods, and processing systems
Transfer
Device
Fund Source
Cash
Cash
Point of
Transaction
Transfer
Systems
Fund
Destination
Cash Agent
Cash
Clearing
POS
Card
Account
Settlement
ATM
Phone
&
Wallet
Systems
Wallet
Account
Phone
Transfer Device
Supporting multiple
transfer devices can
cover a broader range of
use cases and leverage
existing network
investments such as
initiating ATM
withdrawals via a mobile
phones
Fund Source
Fund source
interoperability, typically
encompassed in “product
interoperability” is
compounded by need for
different source (i.e. a
mobile wallet and a bank
account) compatibility as
well as different issuer
compatibility.
Point of Transaction
Transfer Systems
Fund Destination
Cash agents are a key
focal area of mobile
payment and banking
interoperability policy
Banks who are able to
leverage existing payment
network arrangements
have the opportunity to
extend the value of this
infrastructure to mobile
transactions.
Challenge to broader
interoperability has
been to resolve
interconnections with
closed loop mobile
payment/wallet systems
typically run by mobile
operators and non-bank
financial institutions
The counterpart to fund
source, product
interoperability has important
implications for scale and
usage. Workarounds provide
interim partial solutions such
as mobile payments that send a
unique “cash out” PIN and
cumbersome multistep
methods of wallet-to-accountto-account
Example: One of many possible cooperation models
Scenario 1: Mobile Intrabank transfer
Performed as existing ‘on-us’
transaction.
Scenario 2: Mobile Interbank transfer
Performed through existing LankaClear
clearing/settlement, augmented as
necessary to support instant transfers
1
Bank 2
2
Bank 1
Bank 3
LankaClear
Scenario 3: e-Money-to-Account transfer
eMoney funds held in escrow
purchased/transferred by escrow
managing bank to then initiate either
‘on-us’ or interbank transfer
Bank n
Bank 4
Bank 5
Scenario 4: Bill pay
Agree to common billing codes
conforming to biller’s account number;
support directory to map customer’s bill
account to bank account.
4
Mobile
Operator
eMoney
Escrow
3
Thank you
Nepal-hampered by no RTGS
• Nepal system supports
strong linkages between
wallet and account
products with two-way
transfers, easing cash-in to
wallet at retail level and
transfer from wallet to
account via mobile action.
Mobile
Wallet
Bank
Account
Phone
Mobile
Wallet
• Non-interoperable wallets
do create confusion and
difficulty to compete with
cash; customers need
multiple wallets to transact
with all and cash agents
may/may not serve
multiple wallets
Bank
Account
Must
register
for sending
service
before
cash-out
Phone
Mobile
Wallet
Bank
Account
Partner
Banks Only
Mobile
Wallet
Bank
Account
• New initiative, M-Nepal,
aims to address this
challenge as well as
interbank transfer
limitations in country
Annex: Demographics: Survey Respondents
Province
District
Urban
Rural
Western
588
229
359
Central
260
56
204
Southern
265
60
205
North Central
120
11
109
Sabaragamuwa
184
37
147
Uva
134
11
123
North Western
231
30
201
Eastern
160
61
99
Northern
98
52
46
2040
547
1493
Total
SEC
Frequency
Split (%)
Number
Percent
Urban
Rural
A
232
11.4
38
62
B
386
18.9
29
71
C
891
43.7
30
70
D
348
17.0
17
83
E
183
9.0
10
90
Total
2040
100
100
100
• Survey covered 2,040 households
• Households used as primary unit
• Respondents required to own and use a
mobile phone.
• Differences across income, expenditure
and education levels identified using
Socioeconomic Classification (SEC)
system
•
43.7% within SEC C.
•
The lower the SEC, the higher the rural
representation.
•
Fairly wide range across household
income.
Annex: Demographics: Key Characteristics
• For the majority of respondents (69.1%),
the main source of income is full-time
employment,
• The father/ husband was usually the
person in charge of expenditure
decisions.
• The male/ female split was fairly even
and most respondents lived in families
of 4-6 persons, with an average monthly
income and expense range of 20,00035,000 Sri Lankan Rupees.
• The majority of respondents were in the
15-30 year bracket, skewing survey
results slightly ‘young’.
Product/
Companybased
decisions
Annex: Demand Characteristics
• Not surprisingly, basic requirements of food, shelter and education take the top 3
places and by themselves comprise >50% of average monthly household spend.
• Telecom expenditure cumulatively (fixed line + mobile bills) comes in 4th, with the
mobile component being more than half. Telecoms spend = 6.1% of av monthly spend.
• Interestingly, the proportion of budget put aside each month for savings according
to survey respondents – LKR2455.64 – would have come 4th on this list.
12000
10000
8000
6000
4000
2000
0
Annex: Mobile Usage
• Scratch cards are the most used form for topups, but OTA top-up use rising rapidly and now
accounts for 70% respondents.
• Average top-up frequency: once a week;
• Some 7.5% respondents top-up every day.
• Average top-up amount = LKR51-100 pm.
What this means:
• Familiarity of mobile money already exists broadly;
• When built upon behavior already prevalent
services take-up looks likely to be dramatic;
• Healthy nascent demand for m-transfers already
emerging; and,
• Mobile carriers have significant room for reducing
costs by shifting the market over to OTA top-ups.
Frequency of top-up (%)
Daily
8.2
2-3 times per week
35.6
Once a week
39.1
Once every 2 weeks
11.3
Once a month
5.4
Once every 2-3 months
0.1
Don’t know
0.3
Annex: Banking Use & Demand
Bank Account Possession by SEC
•
A
B
C
D
E
Total
Banked
94
89
88
87
80
88
Without bank acc
6
11
12
13
20
12
Of 2040 households, 88.2% had a bank account, with 94% of the top socioeconomic bracket
banked, and 80% of the SEC E bracket banked.
•
The higher the income class the higher the bank penetration rate.
•
Numbers skewed somewhat because of Samurdhi accounts – with 14.1% of respondents having
a Samurdhi (or Samurdhi-style) account, most of these being at the lower ends of the
socioeconomic segments.
•
20% SEC E still without a bank account
•
While ~ 40% without a bank account are living on household income <LKR20,000 pm, 4.6% living
on household income <LKR10,000 pm.
Bank Account Possession by Household Income
<10,000
10,001-20,000
20,001-35,000
35,001-50,000
50,001-75,000
Total
Banked
72%
81%
89%
93%
93%
88
Without bank acc
28%
19%
11%
7%
7%
12
Annex: Unbanked or Underbanked?
• Sri Lanka comparatively well banked.
•
How active are those bank accounts?
•
How well are they fulfilling the demands of a
rapidly growing society?
• Bank accounts predominantly used for savings.
•
•
Daily
Weekly
Bi-weekly
Monthly
<Monthly
Savings
0.3
1
2.4
52.3
39.6
Withdrawals
0.1
3.8
10.9
40
39.4
ATM card use
2.8
18
27.3
33.3
15.4
0
0.5
0.9
4.5
88.9
Savings, withdrawals, and pawning are key
uses of bank accounts,
Pawning
To a lesser extent: fund transfers and
Debit card use
1.7
14
28.5
39.6
13.6
Funds Transfer
5.6
5.1
6.6
36.7
38.8
Remittances
1.6
8.4
4.7
47.1
26.2
remittances.
• Most accounts used only once a month or less.
•
Frequency of Usage
Suggests that banks are not used for purchase
transactions or to facilitate the flow of funds
Annex: M-Money Demand
Demand for Different Type of M-Money Transactions (%)
A
B
C
D
E
Total
Pay utilities
64
55
53
53
45
54
Remittances
35
34
32
33
30
33
Other retail payments
34
29
31
31
29
31
Fund transfers
26
23
20
21
20
21
General payments
18
16
16
15
15
16
Phone bill (fixed line)
16
12
11
12
5
12
Government payments
7
9
8
15
13
10
Mobile bill
17
8
7
7
6
8
Pay TV
6
8
5
7
3
6
Public transport
7
6
5
4
5
5
B2B payments
5
6
4
5
2
5
Payroll
6
5
4
3
2
4
Microloan repayments
4
4
3
6
2
4
Mobile money services demanded by respondents that would drive adoption are
utility payments, remittances, retail payments and phone bills.
Annex: Mobile Payments
• In 2011, the Central Bank enabled a bank-led model and a nonbank-led custodian model with the following guidelines:
i. ‘Mobile Payment Guidelines No.1 for Bank-led Mobile Payment
Services’
i. ‘Mobile Payment Guidelines No.2 for Custodian Account Based
Mobile Payment Services’
Annex: Mobile Payments Definitions
Understanding the various definitions relating to mobile banking are important:
Mobile banking (m-banking): refers to financial transactions undertaken using
a mobile device against a bank account accessible from that device;
Mobile payments (m-payments): point of sale or remote payments made
through a mobile device;
Mobile money transfers (m-money): the ability to move stored value from one
account to another account using a mobile device;
Mobile wallets (m-wallet): an electronic store of value linked to the mobile
number or mobile account. They do not require the holder to have a bank
account, and can also be used as a payment instrument and a transfer
instrument.