Technical Innovation for Expanding Outreach: Mobile Phone Banking in the Philippines MELIZA H. AGABIN Deputy Chief of Party, MABS Program Presented at the 3 rd African Microfinance Conference Kampala, Uganda August 20-24, 2007

Philippines Location:

Microenterprise Access to Banking Services (MABS) Program The program assists banks to develop the capability to profitably provide financial services to microenterprises through technical assistance and training.

Rural Banks in the Philippines Wide network coverage: 760 rural banks; over 2,000 branches Over 50 year history US$2 billion in assets Over 5 million deposit accounts Over 1 million borrowers

MABS Partner Rural Banks As of June 2007 MABS works with 90 rural banks through 337 branches Over 165,000 active microenterprise borrowers Over 390,000 new micro borrowers served since 1998 Over 410,000 new micro deposit accounts

Challenges Reaching deeper into rural areas without costly investments in infrastructure Reducing costs of servicing Avoiding security risks from robbery, holdup Reducing costs to clients

Challenges for Rural Banks to reach Rural Clients High Transaction Costs −Transportation Cost −Loss of business opportunity −Security risk

Technology Solution: Mobile Phone Banking

To extend low-cost banking services to existing clients and un-banked individuals especially in rural areas. WHY CHOOSE THIS TECHNOLOGY?

Why Choose this Technology? External Drivers : Rapid expansion of mobile phone outreach Nationwide coverage Enhanced Mobile Phone Services Falling cost of technology Increased competition Ability to offer banking services at very low cost

Why choose this technology? High level of mobile phone literacy among clients Affordable & widely used Existence of Mobile Payment Platforms which,,, Are safe and secure Recognized by the Philippine Central Bank Address Anti-Money Laundering Requirements

MABS Partner: Globe Telecom

Leading mobile phone operator in the Philippines Increasing focus on the “bottom of the pyramid”; willing and able to partner with MABS and rural banks Handles over 250 million messages/day Developed G-Cash platform in 2004 − More than 500,000 active users − More than 500 G-Cash partners − More than 4,900 outlets − Transactions in 2006 exceeded $700M Globe Telecom

What is G-CASH? G-Cash is the service of Globe telcom that turns a mobile phone into an electronic wallet. It is a reliable, accessible and easy way to: Buy & sell goods and services Send / Receive remittances locally or from abroad Pay bills and taxes; school tuition fees Load cell phone airtime credit Transfer money from one person’s phone to another

Key Features Reliable – recognized by BSP as a new payment system Secure - uses PIN Safe - all transactions are recorded in an electronic ledger in Globe Convenient - all you need is your cell phone Fast - moves at the speed of text messaging Easy to Use - as easy as sending a text message Meets AML (Anti-Money Laundering Law) requirements - requires all users to register via text with their personal details

An Opportunity to Use the Platform for Microfinance MABS Developed Products and Services riding on the G-Cash Platform Secured BSP approval of the services Forged excellent partnership and cooperation with a local telecom

The road map we followed in developing Mobile Phone Banking Services for the Rural Banks Text-A- Remittance (Cash-in/ Cash-out) Text-A- Withdrawa l (debit system) Text-A- Payment (loan collection) Text-A-Deposit Text-A-Sweldo Text-A-Credit Text-A-Bills Payment We are Here!

“Text-A-Payment” Loan Collection Loan Payment Transactions clients can do without leaving their business “Text-A-Deposit” (Deposit Taking Service) Pay Bills Deposit Money Bills Payment Money Transfer (Remittance) “Text-a-Withdrawal” “Text-A-Credit” Savings Withdrawal Loan Disbursement

Payroll Services “Text-a-Sweldo” Payroll Offer Payroll services to staff and and business clients WIRE

Text-A- Withdrawal Text-A-Payment Text-A-Deposit Facilitating Mobile Commerce for Micro and Small Businesses

RURAL BANK POWERED MOBILE PAYMENT ECOSYSTEM BANK Market vendor, tricycle driver, gas station, restaurant, suppliers and repair shops deposit daily sales thru Text-A- Deposit Individual pays Utility company, school etc. tru bill- pay facility offered by rural bank Bank credits utility company's and school’s accounts with the corresponding amount paid by individuals through electronic money Individual receives electronic money by way of Text-A- Remittance or Text- A-Sweldo Individual buys food, pays tricycle fare, fuel and even buy from the market using electronic money Market vendor, tricycle driver, gas station owner and restaurant pays suppliers, repair shops etc. thru electronic money Utility Companies Suppliers Farmers Service Centers Transport Operators Gas Station Restaurants Market Vendors Schools Clients

Benefits: Banks & Clients

Increase outreach and client base Retain clients New value-added services Capture remittance market Reduce operating costs Fast and efficient service Increase loan officer productivity Benefits for Rural Banks

Benefits for Clients Reduced travel time Reduced costs Reduced risk Convenient Time-saving Increase sales

Case of Cantilan Bank Profile10-branch Rural Bank Motivation Reduce cost and increase efficiency of loan collections Mobile Banking Solution Text-A-Payment IssueLack of Cash-In locations Remedy Create G-Cash resellers via Text-A-Withdrawal service Actual BenefitsFor Bank – Time Saving; cost of collection reduced

Case of Bangko Kabayan IssueLack of Cash-In locations Remedy Create G-Cash resellers via Text-A-Withdrawal service Actual Benefits Expand outreach; Reduced transaction costs; convenient for clients Profile9-branch Rural Bank MotivationExpand outreach to rural areas Mobile Banking Solution Text-A-Payment

Case of 1 st Valley Bank Profile16-branch Rural Bank Motivation Increase deposit base and offer bill collection services Mobile Banking Solution -Partnered with an electric cooperative -Offering customers Text-A-BillPay service -M-Payment services for local merchants Actual Benefits Able to remotely accept bills payment; Increase Deposit Balance; Merchants become new bank depositors

What Users Say …

Main Challenges Lack of Re-sellers (Cash-in outlets)  Introduced TEXT-A-SWELDO (salary) service Banks pay employee salaries and bonuses with G- Cash. −Created a critical mass of people carrying G-Cash in their mobile phones, using the technology, and familiar with different services and benefits −Employees help with promotions.

Main Challenges Still, rural re-sellers are lacking Text-A-Withdrawal (TAW) service developed so bank depositors can withdraw savings remotely, and be G-Cash re-sellers. Unique business benefits to re-seller –1% fee earned is more than the interest rate on bank deposit; no- fee transaction with bank; no hassle withdrawal in seconds

Main Challenges Marketing to convince more people to embrace the technology and use the services. Eco-system rollout: MABS work with rural banks to train and accredit merchants and shops to accept G-Cash in payment for goods and services. Telecom co-branding with partner rural banks for marketing materials Telecom support for merchandizing materials, like tarpaulins and standees promoting G-Cash services.

Main Challenges Training and reaching more users, overcoming initial fear of USE technology and SECURITY of their money. Whether it is the bank, the merchant, the end user, presenting the unique benefits helped. Globe offered 10% discount on pre-paid airtime load using G-cash; opportunity to earn; frequency of use establishes G-Cash security, ease and convenience.

Updates and Future Direction

Volume of Transactions Through Accredited Rural Banks (as of June 2007): Accredited Rural Banks37 Accredited Bank-Branches287 # of Employees ( Receiving salaries & benefits through Text-A-Sweldo (TAS) 2,484 # G-Cash Transactions (cumulative)110,000 Amount G-Cash Transactions – in Pesos - in USD PhP380 M USD 7.6 M Ecosystem Roll-out (# of merchants- accredited by rural banks) 145

New Developments and Future Directions of Mobile Phone Banking and Mobile Commerce Text-A-BillPay (through rural banks) has been piloted and ready for rollout Activating more G-Cash Resellers to serve Text-A- Payment clients Continuous development of G-Cash Ecosystem in the rural areas to increase the use of e-money especially in commercial applications Continuous Pilot testing of the other mobile banking services to model cost effective ways of reaching more and more people in areas farther away from the bank.

New Developments and Future Directions of Mobile Phone Banking and Mobile Commerce Developed a Mobile Banking Website ( as information portal particularly for rural banks, its clients, money senders, and the cyberworld in general Continuous Support and Training-Workshop on Mobile Phone Banking Text-A-Credit (line) manuals and procedures – development on-going Development of mobile phone banking system to automate G-Cash transactions

This is the road we’ve traveled so rural banks can reach more people farther away, faster, cheaper, and more efficiently. Text-A- Remittance (Cash-in/ Cash-out) Text-A- Withdrawa l (debit system) Text-A- Payment (loan collection) Text-A-Deposit Text-A-Sweldo Text-A-Credit (Line) Text-A-Bills Payment We are Here!

TEXT A MONEY REMITTANCE TEXT A SWELDO TEXT A PAYMENT TEXT A DEPOSIT TEXT A WITHDRAWAL And this is the roadmap a bank in a remote area in Mindanao Region is following. The goal is to turn the rural folks’ mobile phones into a virtual ATM. TEXT A LOAN PROCEEDS

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