Payment Innovations Working Group, April 2012, NetHope; For more information, e-mail hamiliton.mcnutt at nethope.org

1. MOBILE MONEY Payment
Innovations
Working Group
BUSINESS MODELS 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 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
Receive Move Hold
Data Network
cash in/out Money deposits
MNO

10. ADVANTAGES AND CHALLENGES FOR
MNO-LED MODEL
! Advantages ! Challenges
! Brand recognition and trust ! Lack of familiarity to
! Very well developed financial services sector
distribution market through ! Regulatory barriers
voice clientele ! Heavy upfront investment
! Self funded model ! Lack of short term profits
! Flexibility in KYC process ! AML/ATF issues
! Familiar market segments ! Establishing scale
! Extensive agent networks ! Heavy agent and end user
provide better access capacity building costs

11. HOW?
NGO ENGAGEMENT
! Linking MNO needs to NGO program goals
! MNO Needs ! NGO Engagement
! Innovative NGO products that
! Product differentiation offer new services to clients
! Better understanding markets ! NGOs have a strong rural
! Risk mitigation through pilots footprint and understand that
and testing of models market well
! NGOs are often times
! Agent and end user training
implementing partners for pilots
! Repetitive payment streams ! Training agents can also help
that provide scale and improve financial services access
consistency ! NGO programs that disburse
! Meeting CSR goals 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
! F inancial institution (commercial bank, MFI,
etc.)
! A gents: typically look like MNO-led models–
small mom and pops, pharmacies, etc. May
also use third parties. Typically proprietary.
May also use “roving agents
! C lients– linked to bank account or special
accounts for low-income groups
! M NOs 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 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

18. NGO ENGAGEMENT
! Programming to link up with formal accounts
! G2P payments
! Additional financial ser vices 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 ser vices 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
INDEPENDENT MODELS Models for
Mobile Money

20. 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

21. /
Credit: Ben Lyon Source: http://technology.cgap.org/2012/01/30/customer-level-interoperability-a-story-of-two-mobile-handsets

22. WHO?
! Often call 3 r d party or Hybrid Models
! Joint Ventures
! Eko India (http://www.boardofinnovation.com/2011/05/02/eko-india-banking-for-the-poor-via-mobile-and-local-stores/)
! 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
! A dvantages ! D isadvantages
! Independence ! Lack of Brand
! Creative products recognition
! Flexible partner ! Lack of Distribution
! Clear mission network
! Fewer partners to split ! Funding
revenue (could mean lower ! Regulation
prices and/or higher
commissions)

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 Process and
Roles
OVERVIEW

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
cmartin@meda.org
Hamilton McNutt
hamilton.mcnutt@nethope.org