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Beyond Branch Banking with Mobile Phones Sanjay Poudyal Chief Financial Officer (CFO) Kumari Bank Limited.

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Presentation on theme: "Beyond Branch Banking with Mobile Phones Sanjay Poudyal Chief Financial Officer (CFO) Kumari Bank Limited."— Presentation transcript:

1 Beyond Branch Banking with Mobile Phones Sanjay Poudyal Chief Financial Officer (CFO) Kumari Bank Limited

2 Core Issue

3 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 BOP Focus

4 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 Our Inspiration to Launch Bottom line: Banking services through traditional means have not met the demand 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

5 Our Inspiration to Launch Our continued focus on technology enabled delivery channel Empowers us to solve burning issues

6 Mobile phones are rapidly growing – YoY Growth > 40% 18 million users 10 million users % of Population Our Inspiration to Launch

7 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

8 Kumari Bank Limited Leading commercial bank in Nepal Leapfrog Technology US based software company with a development center in Nepal Institutions Behind Mobile Cash Our sincere belief is that our service carries the promise to change Nepals financial services landscape by drastically improving the formal financial services penetration rate

9 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 Our Offered Solution Features

10 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 What have we achieved? Total transaction volume till dateUS$ 900,000 Total DepositsUS$ 140,000 Total Withdrawals US$ 134,000 Total Mobile to Mobile RemittanceUS$ 91,000 Bank account to mobile transfer US$ 252,000 Mobile to bank account transfer US$ 175,000 Utility bill paymentsUS$ 28,000 Total Airtime RechargeUS$ 43,000

11 Launch Event on August 2010 First ever Mobile Wallet Launch in the Country Our Success Story

12 Payment Solution at the Largest Departmental Store Chain Across Nepal Our Success Story VPN Connectivity between the bank and the store makes for an instant transaction experience

13 Disbursement and repayment of microfinance loans by villagers in Surkhet district through a cooperative In coordination with Oxfam, a British INGO Our Success Story

14 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

15 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

16 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

17 Were only 1% of where we want to be But…. 1% We understand that paradigm shifts do not occur overnight Any strategic view requires a long term commitment

18 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 How can Mobile Banking Help Nepal? Studies by LBS, the WB, and Deloitte found that every additional 10% mobile phone penetration adds 0.6%-1.2% increase to the GDP

19 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 Joint effort o Interoperability (e.g. ATM Network) It cannot be a one-way traffic i.e. bringing rural savings for urban loans

20 Customers Merchants Agents Bank Mobile Banking Ecosystem Agents are crucial to the success of Mobile Banking. They are the first interface to customers and they need to be incentivized accordingly

21 Agents Key to the Ecosystem 21 Source: CGAP Five Business Case Insights for Mobile Money. April 2011.

22 How it is likely to evolve Mostly P2P remittances and pre-paid value storage Merchant payments. Payroll, utility bills, P2P, etc. Any type of payments and financial services 1 st Year 2 nd Year 3 rd Year Service Maturity 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

23 Boundless Opportunities 23

24 Toward Interoperability 24 Single Player Initial Strategy Operator or bank led Usually proprietary Limited customer reach One-to-Many Increased Opportunities Larger customer pool Increasing product diversity Many-to-Many Interoperability Greatest benefit to customers Any carrier, any bank Reminiscent of VISA model Scalability TodayFuture Low High Source: Sevak Solutions. 2008.

25 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 From the Trenches

26 Thank You

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