1. Mobile Money Business Models
Payment Innovations Working Group
April 2012

2. Why discuss business models?
Better understand the different 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

3. 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

4. Mobile Money transfer Value chain

5. MNO–led models
And how NGOs can engage

6. Why? MNO-Led Business drivers
MNO incentives for offering mobile money services
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

7. 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

8. First Movers– Market share and mobile penetration
CGAP, April 2011, Five Business Case Insights on Mobile Money

9. What? MNO-Led Model traits
MNOs manage any and all relationships with formal financial institutions, and are responsible for regulatory compliance
Agent approval is done through the MNO
Client Know Your Costumer (KYC) is often 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
Data Network
Receive cash in/out
Move Money
Hold deposits
Mobile Money Transfer Value Chain
MNO

10. Advantages and Challenges for MNO-Led Model
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
MNOs are often times a trusted brand in rural areas, as they have actually targeted that market where banks have not…

11. 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
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
Examples: Juhudi Kilmo MFI, PACT governance program

12. Bank–led models
And how NGOs can engage

13. 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

14. 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

15. 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

16. 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

17. Advantages & Challenges
Lower cost than brick and mortar branches
Potential revenue driver, competitive posturing
Unlocking future customer segments
Retain advantage in financial services 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

18. 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” MNO-led, but financial services is within the core business of banks and reflects their expertise
Examples:
Mercy Corps and BanKO in Philippines
MEDA in Nicaragua
Save the Children and UBL in Pakistan
What are some other areas to engage?

19. New Business Models for Mobile Money
Independent models
New Business Models for Mobile Money

20. WhY? Business Drivers Regulation
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

21. Credit: Ben Lyon Source: http://technology. cgap

22. who? Often call 3rd party or Hybrid Models Joint Ventures Start-ups
Eko India (
MobiPay, Georgia
Start-ups
Mobile Transactions Limited, Zambia
Splash, Sierra Leona
M-Peso, Nicaragua
Beam India (pre-paid)

23. What? Often look like MNO-led models
Rely on agent network (often independent, rather than retail outlets)
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

24. ProS & cons Advantages Disadvantages 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

25. 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

26. NGO engagement Overview
Process and Roles

27. 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

28. 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

29. Questions and Answers Thank You Cameron Peake cpeake@dc.mercycorps.org
Chrissy Martin
Hamilton McNutt