MOBILE MONEY
BUSINESS MODELS
Payment
Innovations
Working Group
April 2012
WHY DISCUSS BUSINESS MODELS?
 Better understand the dif ferent roles NGOs can plan in the
mobile money field.
 Apart from being a consumer of the service, NGOs also play other
roles in the role out and development of mobile money services
 Forging strong partnerships with private sector stakeholders
 Understanding private sector’s motives in mobile money, in order to
better align your own organization’s priorities with potential partners
 Due diligence when selecting a partner is key
 Business models vary in each case
 We will discuss the three core business models for mobile money, but
as the field develops, joint ventures are becoming more common
THREE CORE BUSINESS MODELS
 MNO-Led Model
 Mobile network operator acts as de facto “bank”. This model places
most of the regulatory responsibility on the MNO.
 Bank-Led Model
 Financial services offered from a bank to their account holders
through a network of agents
 Independent Model
 Independent companies that often times establish a joint venture
with MNO or Bank to meet a specific demand not currently being met
MOBILE MONEY TRANSFER VALUE CHAIN
MNO–LED MODELS
And how NGOs
can engage
WHY?
MNO-LED BUSINESS DRIVERS
 MNO incentives for of fering mobile money services
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Reduced costumer churn (product differentiation)
Better brand positioning
Reduced distribution costs (ex. Printing of airtime scratch cards)
Additional revenues from mobile transactions
Providing evidence of good citizenship (In the eyes of regulators and
clients)
 MNO barriers to entry into mobile money
 MNO product cycles are traditionally 3-6 months, mobile money
products can be cash flow positive in three years (M-Pesa)
 MNOs face uphill regulatory process with central banks
 CEO of company is not interested. Leadership from the executive
suite is crucial for mobile money success
 Segmented market share
 Achieving scale and active accounts
WHO?
PROFILE OF MNOS WHO TAKE A
PRODUCT TO MARKET
 MNOs who decided to enter the mobile money
market
 Had no less than 30% of the voice market
 Existed in markets that had 20-60% mobile penetration
 Already had an extensive air time merchant network
 Were willing to take on big up front investments and often
times “leave money on the table” in the short term
 Had strong and positive executive leadership
 Made a strong marketing push for the product
 Wanted to reduce their churn through product
differentiation
FIRST MOVERS– MARKET SHARE AND
MOBILE PENETRATION
CGAP, April 2011, Five Business Case Insights on Mobile Money
WHAT?
MNO-LED MODEL TRAITS
 MNOs manage any and all relationships with formal financial
institutions, and are responsible for regulator y compliance
 A gent approval is done through the MNO
 Client Know Your Costumer (KYC) is of ten times done through an
agent.
 Range of products, including P2P (ex. remittances), B2P (ex.
salaries) and P2B (ex. Bill Pay)
 MNO is required to hold mobile money float in a regulated financial
institution
Mobile Money Transfer Value Chain
Data Network
Receive
cash
in/out
Move
Money
MNO
Hold
deposits
ADVANTAGES AND CHALLENGES FOR
MNO-LED MODEL
 Advantages
 Brand recognition and trust
 Very well developed
distribution market
through voice clientele
 Self funded model
 Flexibility in KYC process
 Familiar market segments
 Extensive agent networks
provide better access
 Challenges
 Lack of familiarity to
financial services sector
 Regulatory barriers
 Heavy upfront investment
 Lack of short term profits
 AML/ATF issues
 Establishing scale
 Heavy agent and end user
capacity building costs
HOW?
NGO ENGAGEMENT
 Linking MNO needs to NGO program goals
 MNO Needs
 Product differentiation
 Better understanding markets
 Risk mitigation through pilots
and testing of models
 Agent and end user training
 Repetitive payment streams
that provide scale and
consistency
 Meeting CSR goals
Examples: Juhudi Kilmo MFI, PACT governance program
 NGO Engagement
 Innovative NGO products that
offer new services to clients
 NGOs have a strong rural
footprint and understand that
market well
 NGOs are often times
implementing partners for pilots
 Training agents can also help
improve financial services
access
 NGO programs that disburse
funds on a regular basis to
beneficiaries is of interest to
MNOs
 NGOs can provide MNOs a more
socially responsible image
BANK–LED MODELS
And how NGOs
can engage
TRAITS OF AGENT BANKING MODELS
 Bank as a driver of the service
 Path to full financial inclusion and financial footprint
 Service linked to a bank account at financial
institution (may mean interest-bearing deposits,
possibility for more sophisticated financial services,
etc.).
 Real-time settlement of transactions linked to bank
account
 May use POS, mobile as device– innovation here is
the economics related to the agent model and new
financial products
 Deposit insurance
PLAYERS IN AGENT BANKING
Financial institution (commercial bank, MFI,
etc.)
Agents: typically look like MNO-led models–
small mom and pops, pharmacies, etc. May
also use third parties. Typically proprietary.
May also use “roving agents
Clients– linked to bank account or special
accounts for low-income groups
MNOs in many cases
ACTIVITIES
 Transactional account most common (bill pay,
loan repayment, etc.)
 Depending on regulation, may do account
opening at agent level. Typically will be a lower value account
 Increasingly, services such as insurance, loans
are offered through mobile
 May enable B2B activities such as salary or bill
payments for businesses
 Increasing value for banks related to G2P
payments
 In addition to transactions, may drive potential
clients to sign up in branch
 Airtime top ups
BUSINESS DRIVERS
 Accessing new markets (client segments and
geographies)
 New revenue streams (bill pay, G2P, transactions,
cross-selling etc.)
 Decongesting bank branches
 Cost savings (particularly compared to ATMs)
 Additional motivations for linking with existing
mobile money systems (although not traditionally
bank-led): new service for clients, operational
efficiency, fraud reduction, etc.
 Many banks are also doing this as a competitive and
reactive measure, although sustainability of this as a
motivator is limited
ADVANTAGES & CHALLENGES
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Lower cost than brick and mor tar branches
Potential revenue driver, competitive posturing
Unlocking future customer segments
Retain advantage in financial ser vices space vs. MNOs
 May not have experience managing agents
 Loss of brand control and building trust
 May be completely new, unfamiliar client segments —training, product
development, etc.
 Not in line with banks’ traditional business models (low value, high
volume transactions)
 KYC and registration in some countries
 Large, upfront costs
 Perception of banks
 Managing customer experience
 Potential for increase in fraud
 Maintaining active accounts
NGO ENGAGEMENT
Programming to link up with formal accounts
G2P payments
Additional financial services such as insurance and loans
Can be card based, which helps in areas of low mobile
penetration, low literacy, etc.
 It remains to be seen whether bank -led models "outlive” MNOled, but financial services is within the core business of banks
and reflects their expertise
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Examples:
Mercy Corps and BanKO in Philippines
MEDA in Nicaragua
Save the Children and UBL in Pakistan
 What are some other areas to engage?
INDEPENDENT MODELS
New Business
Models for
Mobile Money
WHY?
 Business Drivers
 MNO- and Bank-led models have strengths but also weaknesses, as
we have seen
 Other players see business opportunity to fill existing gaps in the
market
 Gaps include:
 Interoperability
 Product Development
 Demand for customized services
 Regulation
 Often requires a bank partner
Credit: Ben Lyon Source: http://technology.cgap.org/2012/01/30/customer-level-interoperability-a-story-of-two-mobile-handsets
/
WHO?
 Often call 3 rd party or Hybrid Models
 Joint Ventures
 Eko India ( h t t p : / / w w w . b o a r d o f i n n o v a t i o n . c o m / 2 0 1 1 / 0 5 / 0 2 / e k o - i n d i a - b a n k i n g - f o r - t h e - p o o r - v i a - m o b i l e - a n d - l o c a l - s t o r e s / )
 MobiPay, Georgia
 Start-ups
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Mobile Transactions Limited, Zambia
Splash, Sierra Leona
M-Peso, Nicaragua
Beam India (pre-paid)
WHAT?
 Often look like MNO-led models
 Rely on agent network (often independent, rather than retail outlets)
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May or may not partner with existing MNO or bank
Range of products including P2P and B2B
Outside funding from investors
Smaller reach than MNO or bank models (not always)
Value-added services
Starting to blur the line completely between MNO & Bank -led
 Ex: Telenor Pakistan investment in Tameer Microfinance Bank
PROS & CONS
Advantages
 Independence
 Creative products
 Flexible partner
 Clear mission
 Fewer partners to split
revenue (could mean lower
prices and/or higher
commissions)
Disadvantages
 Lack of Brand
recognition
 Lack of Distribution
network
 Funding
 Regulation
HOW?
NGO ENGAGEMENT
 Need to carefully access the capability of an independent
company (which may be less clear than established bank or
MNO)
 Ex: M-Peso in Nicaragua
 Worth considering, especially for smaller projects not of
interest to large MNOs
 Workforce development & Livelihoods programs
 Ex. Splash/IFC
 Private Sector development programs
 Increase competition and support for SMEs
 Not an option in every country
 Good for voucher programs
 Ex: Mobile Transactions Limited Zambia
NGO ENGAGEMENT
OVERVIEW
Process and
Roles
NGOS–TIPS FOR ENGAGING MOBILE
MONEY PARTNERSHIPS
 Not everyone will be a good partner – often times your market
may not be their traditional market.
 Understand the gaps NGOs will need to fill to complete this
program– KYC registration, training, etc…
 Understand the partner gaps that will need to be filled
 Understand that partners have commercial motivations, and
try to align them with your own
 Personality and connection are important
 Look to promote/ suggest engagement that is familiar to
them– i.e., cash for work payments may equate to salary
payments
 Determine what data you can receive from technology
platform, and gage your partner’s willingness to share it
 In the end, make absolutely sure everything fits within your
program’s goals.
 Sometimes more traditional methods of disbursing funds will
be best, mobile money is not a silver bullet
ROLES OF NGO
 Roles:
 Consumer
 Advisory (including product development and market
knowledge)
 Training and education
 Deployment accelerator
 Facilitator/Broker
 Contribute to private sector CSR goals
QUESTIONS AND ANSWERS
Thank You
Cameron Peake
cpeake@dc.mercycorps.org
Chrissy Martin
cmartin@meda.org
Hamilton McNutt
hamilton.mcnutt@nethope.org