Beyond Branch Banking with
Mobile Phones
Sanjay Poudyal
Chief Financial Officer (CFO)
Kumari Bank Limited
Core Issue
BOP Focus
 Who are the BOP population?
 Earnings less than $2 per day
 Do not have access to financial resources
 Ignored by formal banking sector
 Most vulnerable population – high cost of capital, susceptible to
predatory lending, exposed to risks of carrying cash
Our Inspiration to Launch
Nepal has one of the lowest formal financial services penetration rates, compared to other
countries even in South Asia
In around 75 years of formal banking era, today less than 30% of Nepali population ( population
is 28 million) has access to formal financial services
 Bank Branches (Per 100,000 People)
4.12
 ATMs (Per 100,000 People)
3.40
 Credit/Debit Card (Per 100,000 People)
2,000
 Mobile Phones (Per 100,000 People)
35,000
Bottom line: Banking services through traditional means have not met
the demand
Our Inspiration to Launch
• Our continued focus on technology enabled delivery
channel
•
Empowers us to solve burning issues
Our Inspiration to Launch
Mobile
phones are rapidly growing – YoY Growth > 40%
Mobile Phone Users in Nepal
10 million users
18 million users
52%
45%
% of
Population
21%
25%
35%
40%
15%
2%
5%
2006
2007
2008 2009
2010
Year
2011
2012
2013
2014
Why Should we Cater to the Unbanked?
It is good for the country
 Improves access to sustainable financial resources vital for socio-economic
progress
 Contributes towards Millennium Development Goals of reducing poverty by
half by 2015
It is good for business
 70% of the population yet to be tapped into formal banking – growth
opportunity
 Brings informal remittance, domestic and international, into the formal sector
It is a good social initiative
 Services the most vulnerable population – high cost of capital, susceptible to
predatory lending, exposed to risks of carrying cash
Institutions Behind Mobile Cash
Kumari Bank Limited
Leading commercial bank in Nepal

Leapfrog Technology
US based software company with a development center in Nepal
Our sincere belief is that our service carries the promise to change Nepal’s
financial services landscape by drastically improving the formal financial
services penetration rate
Our Offered Solution Features
 Supports any phone
 Structured SMS for lowest common denominator
 J2ME application for java enabled phones allows greater usability
 Features
 Fund Transfer using mobile phones
 Microcredit disbursements and payments using mobile phones
 Cash withdrawal and deposit at agent and branch locations
 Merchant Payment
 Link to bank accounts


Transfer money to and from bank accounts
Transfer from one bank account to another
 Prepaid airtime top-up and Utilities Bill Payments
 Flexible tariff rates
 Robust and flexible reporting system
What have we achieved?

Successfully launched in 2010

Contractual agreement with two of the largest telecom providers:
 Nepal Telecom and Ncell (95% of in country market)

Total users over 16,000 till date

Close to 50% of registered members are non-bank customers

200 transactions per day and increasing
Total transaction volume till date
Total Deposits
Total Withdrawals
Total Mobile to Mobile Remittance
Bank account to mobile transfer
Mobile to bank account transfer
Utility bill payments
Total Airtime Recharge
US$ 900,000
US$ 140,000
US$ 134,000
US$ 91,000
US$ 252,000
US$ 175,000
US$ 28,000
US$ 43,000
Our Success Story

Launch Event on August 2010

First ever Mobile Wallet Launch in the Country
Our Success Story

Payment Solution at the Largest Departmental Store Chain Across Nepal

VPN Connectivity
between the bank and
the store makes for an
instant transaction
experience
Our Success Story
 Disbursement and repayment of microfinance loans by villagers in Surkhet
district through a cooperative
 In coordination with Oxfam, a British INGO
Our Success Story

Airtime Recharge in remote district of Salyan
 One of the most poorest districts located in western Nepal
 Villagers saved from having to walk over 4 hours to top-up prepaid airtime
Our Success Story

The mBillionth Award 2011 was held in New Delhi, India in July 2011, to honor innovative applications and
services excellence in the field of mobile communications.

The summit was sponsored by internationally acclaimed telecommunications giant Vodafone

Of more than 200 applicants from Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri
Lanka, 21 were selected as winners in 11 core categories, with Kumari Bank, the sole winner representing Nepal

Won award under the m-Business & Commerce/Banking category
Our Success Story

Won the Manthan Award South Asia 2011 –at an International Summit 2011 held in New Delhi 2 weeks ago


The award was won in the e-business and enterprise category
Out of more than 481 applications from across Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan
and Sri Lanka, 38 were selected as winners in 30 different core categories, with Kumari Bank, the sole winner
representing Nepal
But….
• We understand that paradigm shifts do not occur overnight
• Any strategic view requires a long term commitment
1%
We’re only 1% of where we want to be
How can Mobile Banking Help Nepal?
 Future of Retail Banking in Nepal

Banking 2.0
 Low cost mechanism to bring greater access to finance

Banks & FIs save on branch costs
 Pension, government subsidy and social security disbursement through mobile
phones

More secure

Reduces Fraud

Saves tax payers from inefficiency costs
 Increases the velocity of money

More economic activities with a given money supply circulating at a faster pace
 Enhance Population Productivity:

5-30% rise in income for people in countries where mobile wallet has been launched
Studies by LBS, the WB,
and Deloitte found that
every additional 10%
mobile phone penetration
adds 0.6%-1.2% increase
to the GDP
Challenges in Mobile Banking

“Cash is king” society

Nationwide awareness campaign and training programs is capital intensive

Developing pervasive distribution channel throughout Nepal

Illiteracy (conventional & digital) and resistance to change

The solution has to be rural friendly

Setting up a regulatory framework that allows co-existence of social benefit along with
profit potential to the solution providers

Need cooperation not competition among providers to achieve scale
o
o
Joint effort
Interoperability (e.g. ATM Network)
It cannot be a
one-way traffic
i.e. bringing rural
savings for urban
loans
Mobile Banking Ecosystem
Customers
Merchants
Agents
Bank
Agents are crucial to the
success of Mobile Banking.
They are the first interface to
customers and they need to be
incentivized accordingly
Agents Key to the Ecosystem
Source: CGAP Five Business Case Insights for Mobile Money. April 2011.
21
How it is likely to evolve
Service Maturity
Mostly P2P remittances
and pre-paid value storage
1st Year
Merchant payments. Payroll,
utility bills, P2P, etc.
2nd Year
Any type of
payments and
financial services
3rd Year
•Purchase Air/Bus/Movie Tickets
•Disbursement of government pensions
and subsidies
•Payment of School Fees
•Payment of Doctor & Hospital Services
•International Remittance
•Utility bills Payment – Electricity, Water,
Waste
Boundless Opportunities
23
23
Toward Interoperability
High
Scalability
Many-to-Many
One-to-Many
Interoperability
Greatest benefit to customers
Any carrier, any bank
Reminiscent of VISA model
Increased Opportunities
Larger customer pool
Increasing product diversity
Single Player
Low
Today
Initial Strategy
Operator or bank led
Usually proprietary
Limited customer reach
Future
Source: Sevak Solutions. 2008.
24
From the Trenches
 The promise is real and achievable
 Growth is not explosive, at least not until critical mass is obtained
 Training and awareness drive to increase consumer knowledge and
confidence is crucial
 Agents are the most important piece of the puzzle
 Ultimately what drives adoption is how useful your product is to
the people
 Localization
 Greater network for the network effect to take hold
Thank You