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Channels & Technology Enabling Financial Inclusion
Sonia Arenaza Director, Channels & Technology
Lauren Whitehead Summer Associate, Channels & Technology
August 2014
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Table of Contents
2
I. Channels & Technology Overview
II. Test Your Knowledge: Trivia Questions
III. Digital Financial Services
IV. Mobile and Branchless Banking Ecosystem
V. Case Exercise: Risks to Clients
VI. Market Archetypes
VII. References
Channels & Technology Overview
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In working with delivery channels, we have developed a Channels Methodology consisting of 9 unique components:
Feasibility Study
Market Research & Value
Preposition
Business Case Definition
Business Case Assessment
Digital Service Implementation Testing Phase
Pilot Phase
Full Scale Roll-out
On-going Channel
Management
3
Risk Management
• Tools
• Guidelines
• Best Practices
Each component is comprised of:
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Table of Contents
4
I. Channels & Technology Overview
II. Test Your Knowledge: Trivia Questions
III. Digital Financial Services
IV. Mobile and Branchless Banking Ecosystem
V. Case Exercise: Risks to Clients
VI. Market Archetypes
VII. References
Test Your Knowledge: Trivia Questions
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How much do you know about Digital Financial Services and financial inclusion?
5
Photos courtesy of CGAP, USAID, Banking Beyond Branches, Financial Spread, and Kifiya
Agent Networks Non-Banking Correspondents
Mobile Banking/ Mobile Money/Branchless Banking
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Channels & Technology Trivia
6
The world population is estimated at 7.2 Billion. Of these, how many people lack
access to formal financial services? A. 1 Billion B. 2.5 Billion C. 4 Billion D. 5.5 Billion
Photo courtesy of Visa
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Channels & Technology Trivia
7
B. 2.5 billion people have no access to formal financial services.
According to the World Bank, 1.9 billion people worldwide have a mobile phone but no bank account. Photo courtesy of Visa
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Channels & Technology Trivia
8
In which region of the world are banking correspondent agents most prevalent and
still leading the way? A. Africa B. Asia C. Europe D. Latin America E. North America
Bonus points if you can identify which country!
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9
Brazil
Latin America
How much do you know about Digital Financial Services and financial inclusion?
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Channels & Technology Trivia
10
In which region of the world is mobile money most prevalent and
still leading the way? A. Africa B. Asia C. Europe D. Latin America E. North America
Bonus points if you can identify which country!
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11
Kenya
Africa
How much do you know about Digital Financial Services and financial inclusion?
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Channels & Technology Trivia
12
What does P2P stand for? A. Pesa-to-pesa B. Pesa-to-provider C. Provider-to-provider D. Pesa-to-person E. Person-to-person
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Channels & Technology Trivia
13
What does P2P stand for? A. Pesa-to-pesa B. Pesa-to-provider C. Provider-to-provider D. Pesa-to-person E. Person-to-person
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Channels & Technology Trivia
14
Which of the following is not a branchless banking channel:
A. ATM B. Agent (Mom & Pop Shops) C. Bank Branch D. Mobile Phone E. Retail Shop
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Channels & Technology Trivia
15
Which of the following is not a branchless banking channel:
A. ATM B. Agent (Mom & Pop Shops) C. Bank Branch D. Mobile Phone E. Retail Shop
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Channels & Technology Trivia
16
Which of these terms refers to a form of financial service delivery that interacts
directly with clients? A. Mobile Network Operators B. Brick and Mortar Banking Locations C. Agent Networks D. Branchless Banking Channels E. E-Banking
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Channels & Technology Trivia
17
Which of these terms refers to a form of financial service delivery that
interacts directly with clients? A. Mobile Network Operators B. Brick and Mortar Banking Locations C. Agent Networks D. Branchless Banking Channels E. E-Banking
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Table of Contents
18
I. Channels & Technology Overview
II. Test Your Knowledge: Trivia Questions
III. Digital Financial Services
IV. Mobile and Branchless Banking Ecosystem
V. Case Exercise: Risks to Clients
VI. Market Archetypes
VII. References
Digital Financial Services
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19 Photos courtesy of ACDI/VOCA, Mondato, Banking Beyond Branches, and Live Mint
Mobile Financial Services + Branchless Banking
Branchless Banking is the delivery of financial services outside conventional
branches by using technology channels such as cards, POS, ATMs, and mobile phones.
Mobile Financial Services refer to bank and non-bank provided financial services such as mobile payments, mobile money,
mobile wallets, and mobile banking.
Digital Financial Services combine…
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What are Mobile Financial Services?
20
Mobile money, mobile banking, or mobile payments refer to the provision of financial services via mobile technology by either a financial institution, a mobile network operator (MNO), or a third-party provider.
For MNOs • Increase average revenue per user (ARPU) • Reduce prepay churn • Reduce airtime distribution cost
• Increase customer retention • New sources of revenue
For Financial Institutions • Improve presence and visibility • Strength relationship with client and upsell
• Provide stable, low cost products: loans, savings and other inclusive products like micro-insurance
What are the Incentives? • Enable clients to access formal financial
services
• Reduce travel time & commitments for clients to perform/receive payments
• Save time that can be used for work and leisure
• Save money that can be used on household expenses or invested in savings
Gives an institution the potential to • Reach a broader base of clients in remote areas • Encourage customer loyalty and adoption of
additional products and services
Why Mobile Financial Services?
Gives an institution the potential to:
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What is Branchless Banking?
21
Branchless Banking is the delivery of financial services outside of conventional branches by using technology channels such as cards, POS, ATMs, and mobile phones to conduct transactions with clients.
Why Branchless Banking? • Improve operational efficiency • Offer better services and at lower costs to clients (clients spend
less time and money)
• Better serve their existing customer base • Reach out to customers (who live in rural areas)
• Cross sell products: mobilize savings, insurance • Leverage existing providers and distribution networks (retail
shops and stores, mom and pop shops)
• Reduce infrastructure costs and gain operational efficiency
Gives an institution the potential to:
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The use of technology enables scale and outreach
250,000 657,000 1,400,000
30,000,000
Estimated Worldwide Points of Presence
Western Unions Bank Branches Post Offices ATMs POS Devices
22
Mobile Phone Connections
6,800,000,000
Source: Net Hope
Mobile phone connections are more than 10k times Bank Branches and 4k times ATMs.
Mobile Phone Connections
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23
Mobile Money is the predominant leader, especially in developing countries, including those where Accion operates
Accion in LatAm ü Colombia ü Peru ü Ecuador ü Brazil
Accion in Africa ü Tanzania ü Kenya ü Ghana ü Nigeria ü Cameroon ü Zambia ü Zimbabwe
Accion in Asia ü India ü China
Source: GSMA, State of the Industry 2013
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.. and its growth is expected to continue
24
Source: GSMA, State of the Industry 2013
Sub-Saharan Africa is the region with the highest number of mobile money services for the unbanked.
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… though each region is different
25
Source: GSMA, State of the Industry 2013
Region with: • The most registered
accounts: Sub-Saharan Africa (98.3M)
• The most active accounts: Sub-Saharan Africa (42.4M)
• Active/Registered account ratio: Best: Sub-Saharan Africa (43%)
Worst: MENA regions (5.3%)
Regional Statistics
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Early sprinters were leading the way but there are also moderate growth trends and higher levels of adoptions
26
Source: GSMA, State of the Industry 2013
Growth rate
is much more varied
Early sprinters (fastest growing mobile money
services)
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Table of Contents
27
I. Channels & Technology Overview
II. Test Your Knowledge: Trivia Questions
III. Digital Financial Services
IV. Mobile and Branchless Banking Ecosystem
V. Case Exercise: Risks to Clients
VI. Market Archetypes
VII. References
Mobile and Branchless Banking Ecosystem
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Who are the key players in the Digital Financial Services/ Mobile Banking ecosystem?
28 28
MNOs
Banks/ Financial Institutions
Tech Providers
Retailers Agents
Regulators
Donors
Users
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Example of Mobile Money: mPesa in Kenya
29 29
Key Facts
https://www.youtube.com/watch?v=nEZ30K5dBWU
• Launched in 2007 in Kenya, mobile money service is now in Tanzania, South Africa, Afghanistan, and India
• Value Proposition: “Send Money Home”
• 17.5M registered customers
• Paved the way for other financially inclusive products (e.g. Mshwari, Mkopa)
• Transactions responsible for 31% of the $33.62 billion GDP of Kenya
• 35,000 agents generating $5BN USD/Yr
See Video
Source: Safaricom, GSMA, Quartz
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Mobile money has the potential to reach the poor and rural
30
Source: GSMA, Jack and Suri, Mpesa Use by Daily Consumption
mPesa is used by both poor and rural people in Kenya. By 2011, more than 70% of people living under 1.25 $/day benefitted from the service.
Per
cent
age
of p
opul
atio
n (b
y pe
r cap
ita c
onsu
mpt
ion)
usi
ng m
Pes
a
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31 31
Key Facts
…but there is a need for partnerships. Example of Partnership: mShwari (mPesa and CBA)
• 4,800,000 accounts; 1,300,000 loans
• Average savings: USD $4.2 (Total USD $21M)
• Outstanding Loans Day 30: 3.8% (Total USD $9.3M)
• Average Loan Size: USD $13
• Credit scoring algorithm uses savings/transactional data to assess amount available for loan; all transactions happen via mobile, no branch interactions involved
• No fees for moving money between mPesa and mShwari
• Savings accounts are eligible to all mPesa customers and consistent savers are rewarded while loans are eligible based on behavior
Source: CGAP, 2013 Photos courtesy of Think Mpesa and Kenyabwala
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Example of Mobile Money: bKash in Bangladesh
32 32
Key Facts
• Launched in 2011; bKash is a subsidiary of BRAC Bank, which is part of the BRAC microfinance group
• 80,000 agents
• 11M registered users (country has ~160M
inhabitants)
• Average transaction size: US$27
• Different from mPesa: • Bank accounts • Works with for four MNOs • Started user base from base up
See Video
https://www.youtube.com/watch?v=Dj0e7EdCOOY
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Example of Mobile Money: Daviplata in Colombia
33
• Launched in Colombia in 2011 (owned by one of the largest local banks, Davivienda)
• Open e-wallet with convenient cash-in and cash-out options
• Works with any mobile phone • Offers the following services:
• Money transfers (domestic and international), Payments for services (partners/merchants), Payments of utilities, top-ups, cash in-out
• More than 2M registered users, 800k unbanked
• 70k domestic transfers/month • 350k payments with 1600 partner companies
Key Facts
33
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Implementing DFS is not without its challenges…
34
Agents: Issues with
networks, lack value proposition,
profitability, productivity, high
turnover
Customer: Low usage and adoption, literacy
Interoperability:
Lack of access to service between different networks
and providers
Business Case:
Lack of support, uncertainty, unpopularity
Regulation: Pervasive
regulations, restrictive KYC
and AML
Photo courtesy of GSMA
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Who are the key players in the Digital Financial Services/ Mobile Banking ecosystem?
35 35
MNOs
Banks/ Financial Institutions
Tech Providers
Retailers Agents
Regulators
Donors
Users
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Agents are the leading way in provision of financial services in Latin America
36
5.6 9.7 19.9
34.2
50.7
6.1 9.3 21.1 23.6 26.1
5.7 8.5 10.8 14.8 18.6
0
20
40
60
2009 2010 2011 2012 2013
Colombia Mexico Peru Source: Banca de las Oportunidades, 2014; CNBV, 2014; ASBANC, 2014
Bank
Agen
t
Client
The trend of agents in Colombia, Mexico, and Peru implies that agents are on the rise.
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Brazil: Agents help banks to reach more populations
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2007 2012
Total Banking Correspondents
Unique locations 377,786
95,849
CAGR
32%
0
500
1,000
1,500
2,000
2,500
3,000
0 0.01 to 5 5.01 to 25
25.01 to 100
>100
Mun
icip
aliti
es
Access points per 1,000 km sq.
Banking Correspondents
2000 2010
• 100% of municipalities have at least 2 outlets of regulated financial institutions • 94% of municipalities have at least 5 • 67% of Brazilians now live within 5km of an access point • Banking correspondents are used primarily for bill payment
Source: Febraban, CGAP Research; Sanford and Cojocaru “Do Banking Correspondents improve financial inclusion?”: Evidence from a national survey in Brazil, Bankable Frontier Associates
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Peru: Banks are succeeding in migrating transactions to cheaper channels
From 2007 to 2013, the Bank Agent channel has grown more than 700% in comparison to Tellers at the ATM.
Source: ASBANC and FIG
225
283
210
98
269
212
83
79
2013
+738%
483
11
25
45
2007
50
1,107 Teller Other Internet POS ATM
Bank Agent
Evolution of total transactions in the
banking system (mn of transactions)
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Bank
Client
Branchless Banking: Cash-in
• Client opens bank account (accessible by mobile phone, cards)
• Exis=ng clients register/link their account with mobile phone
Agent opens bank account (accessible by mobile phone,
or POS)
2 Cash-‐in
3Electronic value registered in client’s account
4 Agent account debited
Client account credited
1 1
- +
Agen
t
Adapted from: CGAP
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Bank
Client
Branchless Banking: Cash-out
1 Electronic value sent to agent
2 Cash-‐out
3Agent account
credited Client account
debited - +
Agen
t
3
Adapted from: CGAP
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Who are the key players in the Digital Financial Services/ Mobile Banking ecosystem?
41 41
MNOs
Banks/ Financial Institutions
Tech Providers
Retailers Agents
Regulators
Donors
Users
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Retailers are well fitted to provide financial services
42
Well-positioned to enhance
value proposition
Direct Revenue Indirect Revenue
• Fees, transaction, and float income
• Large footprint of store locations
• Financial Services takes limited square footage of floor space
• No inventory to deal with
• Increased foot traffic in stores • Provides additional value to
existing customers • Enhances knowledge of
customers (loyalty programs and data analytics)
• Reach new customer segments
• Diversify revenue streams
Adapted from CGAP, 2014 Boulder Microfinance Photo courtesy of GSMA
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Example of Retailer Partner: Banco Azteca and Elektra in Mexico
43 43
Key Facts
• Started in 2002 as a bank built on the existing infrastructure of Elektra departments stores
• Over 7m Txs per day at a cost of 3 cents each Tx), and in-depth knowledge of customers
• Savings accounts: 16m (US$ 3 BN)
• Credit accounts: 18m (US$5 BN loan port.) • Products offered: consumer / business /
personal loans, housing loans, savings accounts, term deposits, money transfers, insurance, pensions
• Payments services: internet, telephone, ATMs
• Loan officers reach out customers by using motorcycles and tablets
• …though APR is 110%
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Who are the key players in the Digital Financial Services/ Mobile Banking ecosystem?
44 44
MNOs
Banks/ Financial Institutions
Tech Providers
Retailers Agents
Regulators
Donors
Users
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What are the incentives for becoming an agent?
45
Agents are key drivers of the Mobile money / Mobile banking service
Additional Income
§ Agents receive fees/commissions based on the transactions they performed o This can represent between 20% of total income (or 100%
when agent is dedicated shop for the service)
Increase foot traffic
§ Agents in Brazil process more Tx/day than agents in Kenya o In Brazil, 73% of stores that are BCs confirm that the
volume of clients in the business has increased an average of 37%
Brand and recognition
§ Being an agent –specially from a top Bank or MNO- provides more prestige to the agent o In South Africa, the MNO pays for marketing and
branding for the agent
Leverage network interoperability/lack of exclusivity
§ Freedom to work with other networks
§ Able to do many transactions with many banks and FIs
Agents can benefit from one or many of the following:
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There are challenges with agents on the demand and supply sides …
46
Agents are key drivers of Mobile Money/ Mobile Banking services…
Supply (Agents/Entrepreneurs)
• Turnover of agents • Agents not fulfilling the selection criteria or
with low levels of education • Concentration of commissions
• Lack of biz case and profitable
• Agents performance • Dormant agents
• Monitoring of agents (worsens when agent network grows)
Demand (Agent Network Managers)
• Agent is not well trained and does not provide good service to customers
• Agent does not identify a value proposition
• Not enough capital to become an agent
• Issues with liquidity to support transactions (which could lead to additional transportation cost to rebalance)
• Lack of protection for thefts and robbery
High quality agents stay longer and have more transactions per month.
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Agents are transforming Latin America ...but agents’ productivity remains a challenge
47 Source: FIG estimates with CNBV and ASBANC information
52
7
36
16
20
Evolution of transactions
per day, per agent, across countries
(# transactions)
Average of benchmarks
Countries are still struggling to increase agents’ productivity, but it also depends on the business model of each service.
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Who are the key players in the Digital Financial Services/ Mobile Banking ecosystem?
48 48
MNOs
Banks/ Financial Institutions
Tech Providers
Retailers Agents
Regulators
Donors
Users
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Example Mobile Payments and Agent Network: Zoona
49 49
Key Facts
• Launched in 2009; leading provider ahead of Airtel and MTN
• Helps grow businesses by enabling easy, quick, and safe payments between suppliers and micro/small enterprises in emerging markets
• Company’s DNA is payments solutions, financial services, and data
• Previously engaged via OTC (over the counter), but now expanded into a mobile wallet offering
• 272 shops and is going to an aggregator model to scale network
• P2P and bringing distributors and retailers to the ecosystem
Sandra Jere - Zoona Agent
Terry Simanya – Zoona Distributor
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Example of an Agent Network Manager: GKN
50 50
Key Facts
• Founded in Peru in 2007 as Globokas Peru, to extend the presence and coverage of financial and business institutions
• 2,000+ agents • Serves financial institutions such as BBVA,
ScotiaBank, Caja Nuestra Gente, Caja Sullana with a multi-bank platform
• Service offered: bill payments, deposits and withdrawals, bank transfers, credit fees payments, credit card payment, balance enquiry
• Has increased network at a similar growth rate of the agent network market.
• Agents with a higher levels of transactions remain in the network longer, regardless of potential offers from competitors.
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Who are the key players in the Digital Financial Services/ Mobile Banking ecosystem?
51 51
MNOs
Banks/ Financial Institutions
Tech Providers
Retailers Agents
Regulators
Donors
Users
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Customer Experience: Time Lapse
52 Source: GSMA, 2013. Penetration and active user statistics compiled from GSMA 2012 Mobile Adoption Survey in Africa, Asia, and select LatAm countries
Awareness: the industry is very good at generating awareness
Registration: the industry is very good at registering users
Trial: the industry struggles to drive activity
Regular Use: the industry struggles to achieve regular usage, a lengthy process which can take an estimated 10.5 months for a user to
reach the 6th transaction
Active mobile money users by region
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Customer Experience: Revenue Generated
53
Source: Mobile User Analytics: A Case Study in Mobile Agriculture, GSMA, 2014
• Users typically grew “stuck” at
registration (59%) while fewer were “stuck” at trial (28%). Hurdle to overcome.
• This represents a loss of value as regular use equates to 5x the revenue of trial
• Countrywide campaigns did not garner a more active customer base than cheap and easy SMS blasts
• Many providers expressed the desire to continue this analysis in the future
Key Findings
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Potential risks to clients in using Digital Financial Services
1. Lack of adequate information from providers
2. Inadequate or lack of client care channel
3. Data protection and security
4. Fraud perpetrated against clients
5. Data privacy
6. Agent incompetence leads to lack of service
7. Blocked access to funds or float
8. Insufficient transparency
and information disclosure
9. Agent misconduct or corruption
10. Agent discrimination against clients
54
Aligned with the Smart Campaign’s Seven Principles
Photos courtesy of Brookings Institute
1. Appropriate product design and delivery
2. Prevention of over-indebtedness
3. Transparency
4. Responsible pricing
5. Fair and respectful treatment of clients
6. Privacy of client data
7. Mechanisms for complaint resolution
1. Appropriate product design and delivery
2. Prevention of over-indebtedness
3. Transparency
4. Responsible pricing
5. Fair and respectful treatment of clients
6. Privacy of client data
7. Mechanisms for complaint resolution
1. Appropriate product design and delivery
2. Prevention of over-indebtedness
3. Transparency
4. Responsible pricing
5. Fair and respectful treatment of clients
6. Privacy of client data
7. Mechanisms for complaint resolution
1. Appropriate product design and delivery
2. Prevention of over-indebtedness
3. Transparency
4. Responsible pricing
5. Fair and respectful treatment of clients
6. Privacy of client data
7. Mechanisms for complaint resolution
1. Appropriate product design and delivery
2. Prevention of over-indebtedness
3. Transparency
4. Responsible pricing
5. Fair and respectful treatment of clients
6. Privacy of client data
7. Mechanisms for complaint resolution
1. Appropriate product design and delivery
2. Prevention of over-indebtedness
3. Transparency
4. Responsible pricing
5. Fair and respectful treatment of clients
6. Privacy of client data
7. Mechanisms for complaint resolution
1. Appropriate product design and delivery
2. Prevention of over-indebtedness
3. Transparency
4. Responsible pricing
5. Fair and respectful treatment of clients
6. Privacy of client data
7. Mechanisms for complaint resolution
1. Appropriate product design and delivery
2. Prevention of over-indebtedness
3. Transparency
4. Responsible pricing
5. Fair and respectful treatment of clients
6. Privacy of client data
7. Mechanisms for complaint resolution
1. Appropriate product design and delivery
2. Prevention of over-indebtedness
3. Transparency
4. Responsible pricing
5. Fair and respectful treatment of clients
6. Privacy of client data
7. Mechanisms for complaint resolution
1. Appropriate product design and delivery
2. Prevention of over-indebtedness
3. Transparency
4. Responsible pricing
5. Fair and respectful treatment of clients
6. Privacy of client data
7. Mechanisms for complaint resolution
1. Appropriate product design and delivery
2. Prevention of over-indebtedness
3. Transparency
4. Responsible pricing
5. Fair and respectful treatment of clients
6. Privacy of client data
7. Mechanisms for complaint resolution
Smart Campaign Seven Principles:
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Table of Contents
55
I. Channels & Technology Overview
II. Test Your Knowledge: Trivia Questions
III. Digital Financial Services
IV. Mobile and Branchless Banking Ecosystem
V. Case Exercise: Risks to Clients
VI. Market Archetypes
VII. References
Case Exercise: Risks to Clients
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Case Exercise: Identify potential risks to consumers
56
When: - Mrs. Prithi registers for the service, however, there is a power
outage and the system fails. What risks might this pose to Prithi?
- Mrs. Prithi is illiterate and shares her PIN with the agent to perform transactions. What risks might this pose to Prithi?
Scenario 1: Airteam in Kyndia launches a new mobile money service in which customers can perform the following transactions: deposit, withdrawal, and transfer money to family and friends.
Photo courtesy of Cherie Blair Foundation
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Case Exercise: Identify potential risks to consumers
57
Fraud perpetrated
against clients
Data Privacy and Security
Concern
Insufficient Transparency and Disclosure
Scenario 1: Airteam in Kyndia launches a new mobile money service in which customers can perform the following transactions: deposit, withdrawal, and transfer money to family and friends.
Photo courtesy of Cherie Blair Foundation
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Case Exercise: Given the conditions of providing DFS, what might be potential risks to consumers?
58
Aligned with the Smart Campaign’s Seven Principles
However, when new customer James goes to a designated retailer for a withdrawal, the agent realizes: - There is just enough cash on hand to fulfill James’ request but
the agent know that another client will come later to perform cash-out transactions. What risks might this pose to James?
Scenario 2: Stantbarb Bank partners with a local retailer to provide South Mafricans with reliable access to cash in/ cash out services in additional areas around the country where the bank does not have a branch. This saves Stantbarb on the cost of building and maintaining additional brick and mortar locations.
Photo courtesy of Afmi Network
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Case Exercise: Given the conditions of providing DFS, what might be potential risks to consumers?
59
Aligned with the Smart Campaign’s Seven Principles
Scenario 2: Stantbarb Bank partners with a local retailer to provide South Mafricans with reliable access to cash in/ cash out services in additional areas around the country where the bank does not have a branch. This saves Stantbarb on the cost of building and maintaining additional brick and mortar locations.
Photo courtesy of Afmi Network
Lack of Adequate
Information from Providers
Agent Misconduct
and Corruption
Agent Discriminates Due to Lack of
Liquidity
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Case Exercise: Given the conditions of providing DFS, what might be potential risks to consumers?
60
Aligned with the Smart Campaign’s Seven Principles
- Users of the service (1 in 5) are sharing their pin numbers
with one another to streamline access to their accounts, and
- Some individuals (1 in 7) are even sharing pins with agents to receive assistance with transactions.
What risks might this pose to users in the country?
Scenario 3: In Lanxania, Vocadom MNO has successfully launched its mobile money platform and expects to continue scaling throughout the country. The MNO contracts a research company to monitor customer’s experience. The research co. finds out that contrary to expectation:
Photo courtesy of Mobile Marketing Magazine
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Case Exercise: Given the conditions of providing DFS, what might be potential risks to consumers?
61
Aligned with the Smart Campaign’s Seven Principles
Scenario 3: In Lanxania, Vocadom MNO has successfully launched its mobile money platform and expects to continue scaling throughout the country. The MNO contracts a research company to monitor customer’s experience. The research co. finds out that contrary to expectation:
Photo courtesy of Mobile Marketing Magazine
Fraud Perpetrated
against Clients
Inadequate or Lack of Client Care Channel
Agent Incompetence Leads to Lack
of Service
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Case Exercise: Given the conditions of providing DFS, what might be potential risks to consumers?
62
Aligned with the Smart Campaign’s Seven Principles
- She is 65km from town and will not return again for two weeks when
her son can bring his truck, and she was not given any information on how to contact either the bank or agent.
- She needs to make a payment for her new seed stock, however, within five days’ time.
What risk has this service poses to Ana Maria?
Scenario 4: In the country of Watepala, potential customers attending a large festival are encouraged by traveling non-banking agents of Watepala Bank to sign up for new accounts with the bank. Ana Maria arrives home and quickly realizes that the agent incorrectly recorded the last digit of her account and she cannot gain access.
Photo courtesy of Women’s Worldwide Web
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Case Exercise: Given the conditions of providing DFS, what might be potential risks to consumers?
63
Aligned with the Smart Campaign’s Seven Principles
Scenario 4: In the country of Watepala, potential customers attending a large festival are encouraged by traveling non-banking agents of Watepala Bank to sign up for new accounts with the bank. Ana Maria arrives home and quickly realizes that the agent incorrectly recorded the last digit of her account and she cannot gain access.
Photo courtesy of Women’s Worldwide Web
Data Privacy in Jeopardy
Inadequate or Lack of Client Care Channel
Insufficient Transparency and Disclosure of Information
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Case Exercise: Given the conditions of providing DFS, what might be potential risks to consumers?
64
Aligned with the Smart Campaign’s Seven Principles
Scenario 5: Fernanda, a new agent in Crazil, learns that she can earn: - 0.5 reais commission for performing 1-50 tx - 0.7 reais for performing 51-500 tx - 1.0 reais for performing 501-1000 tx A client approaches Fernanda with 1100 reais. - How might she try to cheat the system to earn more commission on her transactions? - How might this be both fraud perpetrated against the provider of the service and a risk to the client?
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Case Exercise: Given the conditions of providing DFS, what might be potential risks to consumers?
65
Aligned with the Smart Campaign’s Seven Principles
Scenario 5: Fernanda, a new agent in Crazil, learns that she can earn: - 0.5 reais commission for performing 1-50 tx - 0.7 reais for performing 51-500 tx - 1.0 reais for performing 501-1000 tx A client approaches Fernanda with 1100 reais… She might attempt to coerce the client into performing several smaller transactions to accrue more commission than a large single transaction which is clearly a risk to the client as well as the provider. On the contrary, she might collude with the client by offering a small share of her larger commission which is a risk to the provider.
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Who are the key players in the Digital Financial Services/ Mobile Banking ecosystem?
66 66
MNOs
Banks/ Financial Institutions
Tech Providers
Retailers Agents
Regulators
Donors
Users
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Regulators play a key role in balancing risk and quality access
67
Proportionality principle: The cost of regulating should not outweigh the impact of the risk
Source: based on G20 principles for innovative financial inclusion
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Example of Regulation for Agents
68 68
Key Questions
• Who can be an agent? • What approvals are needed for
authorize operations of agents? • Is the agent exclusive? • What are the Customer Due
Diligence (CDD) / Antimoney Laundering (AML) norms?
• How is liable for the behavior of the agent?
• What is it considered a suspicious transaction for an agent?
• Can the agent register clients?
Photo courtesy of SA
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Table of Contents
69
I. Channels & Technology Overview
II. Test Your Knowledge: Trivia Questions
III. Digital Financial Services
IV. Mobile and Branchless Banking Ecosystem
V. Case Exercise: Risks to Clients
VI. Market Archetypes
VII. References
Market Archetypes
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Population density + GDP per capita are priming factors for financial services (access and quality)
70
a) Adequate access
b) Several actors in the market
a) Limited/weak bank infrastructure
b) Gov’t/social problems
a) Low access b) Weak infrastructure
a) Adequate population and GDP per capita increases attractiveness of business and financial services
a) Need for financial products and services
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Which Financial Inclusion strategy prevails?
71
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Thank you. Questions, comments ?
For more informa=on, please contact: Sonia Arenaza <[email protected]>
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Table of Contents
73
I. Channels & Technology Overview
II. Test Your Knowledge: Trivia Questions
III. Digital Financial Services
IV. Mobile and Branchless Banking Ecosystem
V. Case Exercise: Risks to Clients
VI. Market Archetypes
VII. References References
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References 1. Zoona Video:
– Lelemba Phiri, MD speaks at the 4th MobileMoneyExpo in 2014 about being deliberate about financial inclusion in strategy and how Zoona fits the mold.
– Watch the video at: https://www.youtube.com/watch?v=n5BPz-hjEa4&index=6&list=PLOcMS8DuX4uZbaHjjKrMdr1-lrFKh2kD_
2. Bkash Video: – CGAP investigates how bKash is making remittances easier in Bangladesh. – Watch the video at:
http://www.cgap.org/photos-videos/bkash-making-remittances-easier-bangladesh
3. Banco Azteca Video (English): – World finance interviews Federico Gerdes, Treasurer of Banco Azteca, on the
conference floor of FELABAN 2013 in Miami. Federico Gerdes explains how Banco Azteca serves the bottom of the financial pyramid.
– Watch the video at: https://www.youtube.com/watch?v=d1Ep4DNV7xc
4. Banco Azteca Video (Spanish): – Brief commercial advertising the retail and finance partnership between Elektra
and Banco Azteca. – Watch the video at: https://www.youtube.com/watch?v=5zfBWNMhJgo
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Suggested Advanced Viewing/Reading Material
1. Video The Story of Mpesa
2. Reading Evolution of Standards: Digital Financial Services and Microfinance Institutions (collaboration between Smart Campaign and Channels & Technology)
3. Powerpoint (PDF) The Customer Journey to Regular Usage (GSMA, 2013) http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2013/07/Customer-Journey-MMU-Global-Event-2013.pdf
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Advanced Viewing: How did Mpesa begin?
76
This is for advanced viewing. The Story of Mpesa, TechChange Video,
6:13 min
Mpesa began in Kenya in 2007 through
an initiative led by Safaricom and
Vodacom in response to a call from DFID.
See Video