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1 | Copyright © 2010 Grail Research, a division of Integreon
Mobile Payment Opportunity in the Middle East and Africa (MEA) Region February 2010
2 | Copyright © 2010 Grail Research, a division of Integreon
The Mobile Payment (M-Payment) market in the Middle East and Africa (MEA) region is expected to grow rapidly over the next few years
• MEA M-Payment transaction value is expected to grow at 66% annually over the next few years, reaching USD 28.1 billion or 11.3% of the global value by 2012
Key segments of the M-Payment market are M-Remittance (84% of the expected transaction value by 2012) and M-Money, which includes retail purchases, airtime top-ups and bill payments via mobile phone
Underlying drivers supporting this rapid growth in the market are:
• The large (and growing) gap between bank penetration and mobile penetration in the region
• A large number of contractual workers who typically do not have bank accounts
• A sizeable immigrant population making regular remittances to their home country
• The relatively low usage of credit cards in the region
The resulting economics and ROI for M-Payment service providers are attractive
• M-PESA, developed with an initial investment USD 3.2 million by Vodafone, generated USD 42.5 million in M-Payment revenue for its affiliate Safaricom in Kenya (in 2009)
Attracted by the fundamentals of the market and validation of the business model by players like Safaricom (M-PESA), many of the telecom companies in the region have introduced M-Payment services
However, the market is still in the early stages of development and there is plenty of opportunity for new and existing players to create and capture value through a number of different business models
Mobile Payment Opportunity in the MEA Region Executive Summary
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Table of Contents
Market Opportunity
Competitive Landscape
Business Models
Case Studies
Challenges
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Gross M-Payment Transaction Value by Region and Segment
Emerging markets such as Asia, MEA, and South America are expected to capture a global M-Payment market share of 65% by 2012
• M-Payment transaction value in the MEA region is expected to grow at a healthy rate (CAGR of ~66% over 2008-2012)
The expected increase in gross M-Payment transaction value will be driven by the rise in M-Payment subscribers and the greater value transacted per M-Payment user
Market Opportunity Expected Growth in M-Payment Transactions
USD
billi
on
151.6%
51.6%
Africa Middle East CAGR
2008-12
84%
1% 4%
11%
M-Money Segment
Gross M-Payment Transaction Value1 by Region, 2008–2012E M-Payment Transaction Value2 by Segment, 2012E
14.518.5 18.5
2.6
5.09.6
4.23.50.70.2
0
8
16
24
32
40
+66%
2012E
28.1
2011E
23.5
2010E
17.1
2009
4.9
2008
3.7
2
1
Retail Others Top up Remittance
M-Remittance Segment
The M-Payment market is defined as: • M-Remittance, which includes international and
domestic money transfers • M-Money, which includes retail purchases, top-ups,
utility payments, and B2C transfers M-Remittances comprise the majority of the market with
USD 23.6 billion in expected transaction value by 2012 Note: 1The data has been sourced from an image and may not represent the exact values; 2Estimated Values – Grail Research Analysis Source: ‘M-Payments surging ahead: distinct opportunities in developed and emerging markets’, Arthur D Little, Aug 2009; ‘Mobile Commerce in MEA’, Delta Partners, Jan 2009; ‘Dialed into EMEA telcos’, Macquaire, Mar 2009; Grail Research Analysis
The MEA region represents a significant opportunity for M-Payment services with transaction value expected to grow from USD 3.7 billion in 2008 to USD 28.1 billion in 2012
The global M-Payment transaction value is expected to reach USD 249.1 billion by 2012, implying an 11.3% share for the MEA region
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Market Opportunity M-Payment Market Segments
USD
billi
on 23.6
19.4
13.7
4.23.6
0
8
16
24
32
40
+60%
2012E 2011E 2010E 2009 2008
Currently, mobile top-ups and other value added services form a major portion of the M-Money market in the MEA region
Retail purchase via mobile phone is expected to witness the highest growth in M-Money transactions
• The transaction value of retail purchase is expected to rise from USD 26.3 million in 2009, to USD 405.7 million in 2012
Several companies are considering transferring employee salaries to their mobile phones. This may further increase the value of M-money transactions in the region
M-Remittance Transaction Value, 2008–2012E M-Money Transaction Value, 2008–2012E
USD
billi
on
In the Middle East, 70% of the recently launched M-Payment initiatives are related to money transfer through mobile, indicating a focus on M-Remittance related services
• International transfers are expected to form a major part of M-Remittances because of the large immigrant population
In Africa, domestic remittances are expected to form the majority of M-Remittances, as a result of the substantial unbanked population
Note: 1Estimated Values – Grail Research Analysis Source: ‘Mobile Commerce in MEA’, Delta Partners, Jan 2009; Business Intelligence Middle East; Middle East Mobile Money; Grail Research Analysis
9%
24%
67%
While remittances dominate M-Payment transactions, M-Money transactions are expected to grow at a faster rate, as value added services like retail purchases via mobile phone will become more popular
M-Money Transaction Value1 in the MEA M-Remittance Transaction Value1 in the MEA 2 1
Others Retail Top-ups
In the Middle East, 70% of the recently launched M-Payment initiatives are related to money transfer through mobile phones, indicating a focus on M-Remittance-related services
• International transfers are expected to form a major part of M-Remittances because of the large immigrant population
In Africa, domestic remittances are expected to form a major part of M-Remittances, as a result of the substantial unbanked population
4.54.13.4
0.70.1
0
2
4
6
8
10
+164%
2012E 2011E 2010E 2009 2008E
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M-Payment is a convenient ‘funds transfer’ option in areas with low bank accessibility
The large and growing gap between the number of mobile subscribers and bank account holders make MEA an ideal market for M-Payment service providers
Market Opportunity Drivers of the M-Payment Opportunity
Note: 1Calculated by Grail Research and refers to Workers' remittances, compensation of employees, and migrant transfers, debit; 2 Made primarily through credit cards
Source: Business Intelligence Middle East; Gartner; IE Market Research; Arthur D Little; ‘Mobile Commerce in MEA’, Delta Partners, Jan 2009; First Arabic Financial Daily; International Trade Administration; International Organization for Migration ; World Migration Report 2008
Large Number of Transient Workers High Mobile Penetration & Low Bank Penetration
52%
30%
30%
22%
0% 35% 70%
Middle East
Africa
Population’s Reluctance to use Credit Cards
Adoption and usage of credit cards is low in the MEA region
• USD 6.9 billion in electronic payments2 in the region in 2009 represented only 1.8% of the global e-payment transaction value
Low credit card usage may be attributed to behavioral & religious reasons
Given the high mobile penetration, M-Payment can be a popular alternative to credit cards
1
4
Bank Penetration Mobile Penetration
Gap in Mobile and Bank Penetration in MEA, 2007
2
Transient workers, form a significant proportion of the workforce in the Middle East, accounting for over 50% of labor force in the GCC
These workers have low/irregular incomes and can benefit from M-Payment as no minimum balance or regular installments are required
Contractual workers typically make frequent low-value transactions that have lower risk, thus making M-Payment a preferred transaction medium
In MEA, factors such as the large number of migrants, transient workers and a substantial (and rapidly growing) mobile user base are driving the growth of the M-Payment market
The MEA region currently has ~40 million migrant workers, leading to a substantial outflow of funds from the region
• M-Payment service providers can capture a sizeable share of the ‘international remittance’ market, given the cost advantage over traditional funds transfer mechanisms
Large Immigrant Population in Need of Remittance Services
3
39.737.435.331.229.8
0
25
50
2008 2007 2006 2005 2004
Remittances1 Outflow from MEA, 2004–2008
US
D b
illio
n
7 | Copyright © 2010 Grail Research, a division of Integreon
427.5 587.5 702.9
122.50
400
800
1,200
1,600
2012E
1,280.0
2011E
773.0
2010E
466.9
2009E
282.0
2008
170.3
93.5
Investment for Money Transfer Platform Development
Market Opportunity Economics and ROI in the M-Payment Market
Market Potential (Range) for the M-Payment Services Sector in MEA, 2008–2012E
US
D m
illion
Market Potential for M-Payment Service Providers in MEA
Returns – M-PESA in Kenya
In 2003, Vodafone invested USD 3.2 million to develop a cash transfer platform (other costs such as setting up infrastructure, e.g., POS and advertising not included). The M-PESA offering was piloted in 2006 and formally launched in 2007. This money transfer platform enabled:
• Provision of cash balance on mobile phones (M-Wallet services)
• Transfer of money to third parties such as non-Vodafone customers and non M-PESA account holders
• Airtime purchases for an individual’s or a third party’s phone
In FY09, Safaricom, an affiliate of Vodafone (40% stake) generated USD 42.5 million in revenue from M-PESA with an estimated USD 4.26 million1 subscribers
• This translates to an average incremental ARPU of USD 9.98
M-Payment penetration is ~46% of Safaricom’s subscriber base (as of Mar 2009)
ROI on M-Payment Services – The Case
of M-PESA
Safaricom’s M-PESA service illustrates the strong ROI experts believe M-Payment providers can expect. M-Payment service providers are projected to capture 2.5%-4.5% of the transaction value by 2012
Note: 1Estimated Values – M-PESA customers for each month have been averaged out Source: ‘Mobile Commerce in MEA’, Delta Partners, Jan 2009; ‘Progress of Funded Projects’, Vodafone Group, Nov 2006; Grail Research Analysis
Market potential for M-Payment services may range from USD 702 million to USD 1,280 million in 2012 (2.5%-4.5% of the total transaction value)
Range
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Table of Contents
Market Opportunity
Competitive Landscape
Business Models
Case Studies
Challenges
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Potential Opportunity – Gap Between Mobile and Bank
Penetration, 2007 Zain Batelco Etisalat du Wataniya
Telecom Orange MTN STC
Jordan
UAE # of Bank Branches1: 727
Bahrain # of Bank Branches2: 95
Kuwait # of Bank Branches3: 554
Saudi Arabia
Oman Oman has two domestic mobile operators: Oman Mobile and Nawras. However, M-Payment services are not currently offered in Oman
Competitive Landscape Telecom Service Providers in the Middle East
Country
Players
Mobile Network M-Payment Note: 1Data for 2009; 2Data for 2003; 3Data for 2007
Source: ‘Mobile Commerce in MEA’, Delta Partners, Jan 2009; ITU; World Bank; IMF; Alrroya; Grail Research Analysis
While a number of Telcos in the Middle East offer M-Payment services, there is significant opportunity for both new and existing players to capture value from this market
33%
77%
62%
101%
193%1
37%
77%
Mobile Penetration
Bank Penetration
64%2
97%3
In Feb 2009, STC announced plans to launch M-Payment services in
Kuwait through its subsidiary - Viva
# of Bank Branches in country
?
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Competitive Landscape in the Middle East
M-Payment services in the Middle East have been growing in the last few years; however Saudi Arabia continues to be an untapped market despite favorable fundamentals (mobile penetration, migrant population)
Note: Pricing details are represented in USD using on-date conversion rate from oanda.com Source: ‘Value-Added Service and Applications’, GSA, Jan 2009; ‘Etisalat mobile payment’, AME Info, May 2007; ‘Visa International and Fastlink debut new mobile payment service in Jordan’, AME Info, May 2005; Primary Research Interviews with industry experts/ operators; ‘Consumers not prepared to pay for mobile banking’, egovonline, Jul 2009
Competitive Landscape Incumbent M-Payment Service Offerings in the Middle East
Syria
Iraq
Jordan
Israel
Lebanon
Saudi Arabia
Yemen
Oman
U.A.E.
Qatar
Bahrain
Kuwait
Mobile operators in Saudi Arabia have not yet launched M-Payment services. The market has high mobile penetration (120% in 2008) and a large immigrant population (over 6 million in 2007), thus providing significant opportunity for service providers According to a survey in 2009, 67% of people in
Saudi Arabia indicated a ‘high comfort level’ in conducting financial transactions via mobile phones
Saudi Arabia
Zain: Launched in May 2005, Zain-M-Payment service allows users to transfer airtime to other customers. Zain charges USD 0.20 per transaction
Jordan Zain: Launched in 2006, Zain’s M-Pay
allows users to recharge airtime with funds from their bank account Wataniya Telecom: Launched in Feb 2006,
Wataniya Telecom’s GoDo! portal allows users to access their bank accounts through mobile phones
Kuwait
Du: Launched in Apr 2007, du’s M-Payment services allow users to pay bills and recharge airtime Etisalat: Launched in May 2007, Etisalat’s M-
Payment services allow users to pay their mobile bill via a pre-registered credit card
UAE
Zain: Launched in Nov 2008, Zain Me2U offers remittance, top-ups and utility payment services. It charges USD 0.15 for money transfer in Bahrain. International remittances start at USD 2.64 per transaction. In 2009, the offering had between 3,000 and 4,000 customers Batelco: Launched M-Payment services
in Jul 2004, including a mobile bill pay service
Bahrain
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Potential Opportunity – Gap Between Mobile and Bank Penetration,
2007
Zain Batelco Etisalat Vodafone / Vodacom Orange MTN Glo
Mobile Maroc
Telecom Millicom
South Africa
Tanzania
Egypt
Kenya
Uganda
Nigeria
Mauritius
Morocco
Competitive Landscape Telecom Service Providers in Africa
Mobile Network M-Payment
Country
Players
Note: 1Data for 2008. Bank penetration is the average cited in news articles; 2Data for 2009 Source: Mobile Commerce in MEA’, Delta Partners, Jan 2009; New Vision; Grail Research Analysis
Most African markets have low bank penetration and a rapidly growing mobile subscriber base, making them attractive markets for M-Payment offerings
95% 46%
5%22%
30% 15%
32% 10%
74% 54%
39%2 16%2
48%1 20%1
Mobile Penetration Bank Penetration
59% 28%
Vodafone offers M-PESA service through its affiliate
Safaricom
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Africa has been a test bed for M-Payment services. The early success of M-PESA and Glo has motivated pan-African rollout of these services and also served as case studies for M-Payment deployment globally
Competitive Landscape Incumbent M-Payment Service Offerings in the Africa
Niger
Egypt
Kenya
Tanzania
Nigeria
Malawi
Uganda
South Africa
Sierra Leone
Competitive Landscape in Africa
MTN: Launched in Aug 2005, MTN-Mobile Banking allows users to check balance, view bank statements and transfer money. MTN charges USD 1.90 per transaction Vodacom: Launched in Aug 2005, Vodacom-
PayPoint allows users to accept payments from credit cards. The service costs USD 6.44 per month
South Africa
Maroc Telecom: Launched in Jan 2010, Maroc Telecom is the first M-Payment service in Morocco. The service allows money transfers and bill payments through mobile phones
Morocco
MTN: Launched in 2009, MTN Mobile Money service in Uganda allows users to transfer money. For money transfers above USD 5, MTN charges USD 0.40 per transaction. MTN had 100,000 customers as of Sep 2009 Zain: Launched its M-Payment services – ZAP in
Uganda (2009) and in Niger, Malawi and Sierra Leone (2010). Zap enables customers to transfer money and manage bank accounts
Uganda, Niger, Malawi and Sierra Leone
Glo Mobile: Launched in Mar 2005, Glo M-Banking allows users to access bank accounts, transfer money and buy airtime at a flat rate of USD 0.27 per request
Nigeria
Millicom Mauritius: Launched in 2009, the Emtel Mobile Banking service allows users to conduct bank transactions through their mobile phones
Mauritius
Safaricom: Launched in Mar 2007, Safaricom’s M-PESA allows users to access bank accounts and transfer money. Safaricom charges USD 0.37 for money transfer of up to USD 440 to a registered M-PESA user. It had 8.5 million customers as of Nov 2009 Zain: Launched in Feb 2009, Zap allows users to
transfer money and manage bank accounts. Transaction fees of USD 0.13 are charged for the transfer of money between Zap accounts
Kenya
Vodacom: Launched in Apr 2008, Vodacom’s M-PESA enables customers to transfer money. Vodafone charges transaction fees up to USD 0.14 for transferring funds to a registered customer Zain: Launched in Feb 2009, Zain-Zap allows
users to transfer money and manage their bank accounts
Tanzania
Vodafone: Launched in 2007, Vodafone Mobile Banking allows users to access bank accounts and transfer money. Vodafone does not charge fees for transferring money. However, it charges a 2% transaction fee for recharging the M-Wallet account
Egypt
Note: Pricing details are represented in USD using on-date conversion rate from oanda.com Source: Value-Added Service and Applications’, GSA, Jan 2009; ‘Implementing successful millionT initiatives’, Octopus Consulting, Sep 2009; Zain; Primary Interview with customer care executives of telecom operators
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Table of Contents
Market Opportunity
Competitive Landscape
Business Models
Case Studies
Challenges
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Business Models Introduction to the Value Chain Three business models for M-Payment services have emerged; each differs based on the type of organization that plays the role of Issuer, Acquirer and Payment Network
Business Model Role of Acquirer Payment Network Role of Issuer
Operator-Centric Mobile Operator Mobile Operator Mobile Operator
Financial Institution-Centric Financial Institution Financial Institution Financial Institution
Collaboration Mobile Operator or Financial Institution Financial Institution Mobile Operator or Financial Institution
Key Business Models – M-Payment Services
A
Key Parties and Their Role in an M-Payment Transaction
Payment networks connect and switch transactions between the acquirer and the issuer
Acquirers provide Point of Sale equipment to the merchant and charge the issuer for the transaction Upon receipt of payment, acquirers
credit merchants’ accounts Customer
Customers initiate the purchase or transaction through the mobile application/solution/SMS
Customers receive funds on their mobile phones. They buy credits through the purchase of a ‘pre-paid balance’ or receive a charge in their mobile bill
Transaction / Purchase
Merchants accept payments from customers and record them through Point of Sale equipment (reader or a mobile phone) New technologies such as ‘Near Field
Communication’ enable customers to use their mobile phone as a smart card
B
C
Issuer (Bank/ Mobile
Operator)
Issuers provide credit (M-Wallet) to customers on their mobile phones and manage their accounts
Merchant
Payment Network (Bank, mobile operator or financial
institution such as Visa/ MasterCard)
Acquirer (Bank/ Mobile
Operator)
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Business Models Operator-Centric Model
Customer Merchant M-Wallet Provision by
Mobile Operator
or
Customer conducts a transaction using a mobile phone
Mobile Operator (Acquirer + Payment Network + Issuer)
Merchant transfers
transaction information
Operator adjusts customer’s mobile balance or charges the customer on
his/her bill
Customer has the required credit on
his/her mobile phone
Customers go to the mobile operator’s agent to receive a mobile
balance in exchange for cash
Operators charge customers for transactions via their mobile bill
Operator credits
merchant’s account
1
2
The Operator-Centric Model is particularly attractive in countries with weak a financial services infrastructure, because the telecom operator manages the entire M-Payment value chain
Source: ‘Proximity Mobile Payments Business Scenarios: Research Report on Stakeholder Perspectives’, Smart Card Alliance, Jul 2008; ‘The M-commerce reality in the MEA’, Comm.ae, Feb 2009
Operator-Centric Model
In the ‘Operator-Centric Model’, the telecom operator manages the entire M-Payment value chain • The operator plays the role of acquirer, payment network and issuer. The operator is also responsible for providing the Point of Sale (POS)
equipment to merchants Examples: NTT DoCoMo FeliCa (Japan); G-Cash (Philippines), Mobipay (Spain), M-PESA (Kenya) Key Features:
• The operator leverages its existing infrastructure, customer base and experience in managing a wide distribution network » Operators can adopt this model in developing markets such as the MEA where there are large volumes of micro-payments (low-risk
associated with such payments) • Since operators are managing the entire value chain, they need to make significant investments in POS equipment and customer service for
merchants
A
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Business Models Financial Institution-Centric Model
Financial Institution-Centric Model
Customer has the required credit
on his/her mobile Customer Merchant
Customer conducts transaction using the mobile
Acquirer (Bank / Financial Institution)
Payment Network (Bank/ Financial Institution) Issuer Bank
Information is transferred through payment network
Issuer charges the customer for the purchase
Issuer transfers payment Payment is transferred through payment network
Acquirer credits the merchant’s account
The Financial Institution-Centric Model works well in markets with an established and trusted financial infrastructure
Source: ‘Proximity Mobile Payments Business Scenarios: Research Report on Stakeholder Perspectives’, Smart Card Alliance, Jul 2008; ‘Mobile Commerce in MEA: A Current Reality’, Delta Partners, Jan 2009; ‘DOCOMO to Launch Mobile Remittance Service’, NTT DOCOMO, Jul 2009
B
M-Wallet Provision
Customers’ banks provide the M-Payment application on mobile phones or enable the customer to conduct transactions via their
mobile phone
Merchant transfers the transaction information using the POS equipment
provided by the acquirer
Acquirer transfers transaction information to the network
In this model, banks and financial institutions are the only parties involved in processing the transaction and transferring funds • The acquirer and issuer bank may or may not be the same
Banks are responsible for providing customers with the M-Payment application/solution on their mobile phones and deploying Point of Sale equipment with the merchant Examples: MasterCard’s Pay-Pass Key Features:
• Mobile operators are not involved in the process, except for the use of the mobile network (SMS/WAP) • The model reduces cash and check handling and improves customer loyalty for banks; customers benefit from improved transaction
security since banks are involved • This model does not work in markets with poor banking penetration or for customers that do not have a bank account • Banks need to incur an additional cost for installation and maintenance of the mobile application, sometimes on multiple networks
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Business Models Collaboration Model
Collaboration Model
In the Collaboration Model, services across the value chain are distributed between telecom operators, banks and other financial institutions such as MasterCard and Visa Examples: South Korean SK Telecom’s Moneta service launched in association with financial services companies such as Visa Key Features:
• Leverages the core competencies of financial institutions (credit and risk management) and telecom operators (mobile application and transaction)
• Telecom operators do not need to take on the financial risk • Investment and revenue are shared among stakeholders • This model is effective in areas with low bank penetration, as the mobile operator plays the role of the issuer
M-Wallet Provision
Banks or mobile operators provide the
M-Payment applications on
customers’ mobile phones or enable
customers to conduct transactions via their
mobile phones
Customer Merchant
Customer conducts transaction using their mobile
Acquirer (Mobile Operator/ Bank
Merchant transfers the transaction information using the POS equipment
provided by the acquirer
Payment Network (Bank/ Financial Institution)
Issuer (Mobile Operator/Bank)
Transfer of information through payment network
Issuer transfers payment Transfer of payment through payment network
Acquirer credits merchant’s account
Source: ‘Proximity Mobile Payments Business Scenarios: Research Report on Stakeholder Perspectives’, Smart Card Alliance, July 2008; ‘Mobile Commerce in MEA: A Current Reality’, Delta Partners, Jan 2009; ‘DOCOMO to Launch Mobile Remittance Service’, NTT DOCOMO, Jul 2009; FINsights
Customer has the required
credit on his/her mobile
Issuer charges the customer for the purchase
C
Acquirer transfers transaction information to issuer
The Collaboration M-Payment Model adapts to suit the requirements of different geographies. Telecom operators and financial institutions distribute the transaction-enabling roles (acquirer, issuer, etc.) as appropriate for the market
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Table of Contents
Market Opportunity
Competitive Landscape
Business Models
Case Studies
Challenges
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Case Studies Safaricom’s M-PESA in Kenya – A Success Story
M-PESA revenue grew 750% from USD 5.61 million (KSH 0.37 billion) in FY083 to USD 42.54 million (KSH2.93 billion) in FY093
Overview
M-P
ESA
Cus
tom
ers
(milli
on)
Launched in Mar 2007, M-PESA is the M-Payment solution offered by Kenya’s major telecom operator, Safaricom, in association with Vodafone
• It was a initially a pilot project funded by Vodafone and UK’s Department for International Development
Services Offered: M-Wallet services, money transfer, withdrawal of money received through M-PESA, mobile top-up and bill payment for Safaricom customers
M-PESA customers can also
receive money from senders in the UK
Monthly M
-Payment Transfers
(USD
million)
Conducive Market Conditions Low Cost Accessibility Security
~23% of the population had bank accounts; while the mobile penetration was ~40%
M-PESA is cost effective, compared to other alternatives • 27% less expensive than
the post office’s PostaPay
Wide network of over 14,000 agent outlets2
Strong security features including PIN protection and value recovery in case of phone loss
1 2 3 4 Success Factors
0
2
4
6
8
10
0
100
200
300
400
Apr-07
Jan-09
Jan-08
Nov-09
Key Performance Indicators
Note: 1The data is represented in USD using on-date conversion rate from oanda.com; 2As of Nov 2009; 3Financial year ending Mar 31 Source: ‘Safaricom Website’; ‘M-Payment surging ahead – Arthur D. Little’; ITU
M-PESA, which follows the Operator-Centric Model, has been a huge success in Kenya. With over 8 million subscribers, it accounted for more than USD 300 million in monthly M-Payment transfers in Nov 2009
No. of M‐PESA Customers (million) Value of M-Payment Transfers (USD million) 1
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Case Studies Me2U Zain Wallet in Bahrain – An Emerging Story
Zain had ~686,000 active mobile phone subscribers in 2008; This indicates significant untapped potential for the operator in the mobile payment services segment
In Nov 2008, Zain launched a mobile financial transaction service, Me2U Zain Wallet, in Bahrain • Zain Wallet, operates in collaboration with MODE
Bahrain1 (financial institution partner) and enables users to transfer money domestically and internationally » The payment interface of Zain Wallet uses
SMS, sent from the SIM Menu • The product is available at Zain outlets, under the
Zain brand • Immigrants account for ~30% of the Bahraini
population, so the potential for international remittances using mobile phones is high
Services Offered: Domestic and international remittances; top-up prepaid account; balance inquiry; money withdrawal or deposit at selected Zain or Nonoo exchange branches Geographic Scope: Bahrain
• International money transfers can be made to 32 countries
Challenges: Low education and awareness among customers may prove to be a constraint
Low Cost Accessibility Security
Free monthly subscription; domestic funds transfer/payment costs USD 0.13; international remittances start at USD 2.66 • No charge to open a Wallet account
19 Zain and Nonoo branches throughout Bahrain • Looking to expand the number of outlets
in the future to reach untapped areas
High security features such as PIN protection and account blocking on phone loss
1 2 3 Factors that may contribute to the greater adoption of Me2U Services
Current Me2U Service Distribution, 2009a
30%
50%
Payments
20%
Remittance
Airtime Purchase
Note: 1MODE Bahrain is a money transfer company, owned by BMI Bank and Nonoo Exchange Source: ‘Zain Bahrain’; aPrimary Research with industry experts/personnel; Grail Research Analysis
Overview
Me2U Wallet, Zain’s M-Payment service in collaboration with MODE Bahrain, had between 3,000 and 4,000 subscribers in 2009. Low-cost and strong security features are expected to drive continued growth
(Total Me2U subscribers: 3,000-4,000)
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Table of Contents
Market Opportunity
Competitive Landscape
Business Models
Case Studies
Challenges
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Note: ‘Know Your Customer’ refers to a regulation that requires banks and financial institutions to verify the identities of their customers Source: ‘Mobile Banks face Challenges in Africa’, Wireless Federation; ‘Mobile Banking: Knowledge Map and Possible Donor Support Strategies’, InfoDev; ‘Consumer Protection a Key Issue for Branchless Banking’, CGAP, Mar 09
Challenges Barriers to Growth of M-Payment in the MEA Region
A large segment of the population in the MEA is not comfortable with the use of technology
• Service providers will need to invest in simplifying the technology and interface, and in educating customers
Lack of Technological Sophistication
Among Customers
Challenges in the MEA M-Payment Market
The regulatory framework for financial transactions via mobile phones is currently not well developed • As regulations evolve, M-Payment service providers may have to comply with stricter controls such
as ‘Know Your Customer’ requirements (to prevent money laundering, terrorism funding, etc.), which may add costs and slow adoption
Regulatory Barriers
A wide distribution network of agents is critical to success in this market, but setting up and maintaining such a network can be difficult and costly in a number of MEA countries Low start-up costs and an attractive commission structure for their network of agents will be critical for
service providers as they look to develop and maintain distribution networks
Distribution
Some M-Payment service providers require customers to have a bank account, which limits the potential for services within the unbanked population, an important customer segment for growth In addition, some service providers concentrate on existing bank customers rather than going after the
unbanked population ,who are most in need of services like M-Remittance and M-Money for retail purchases
Mandatory Requirement of
Bank Accounts (by Some M-Payment
Networks)
While the MEA M-Payment market opportunity is significant, telecom operators face adoption, distribution and regulatory challenges
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