CODIST I ICT Innovation ICT Applications m Banking Batchelor En

8/3/2019 CODIST I ICT Innovation ICT Applications m Banking Batchelor En

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The First Session of the Committee on DevelopmentInformation, Science and Technology

CODIST-I

Innovation ICT applications

for economic growthm-Banking,

Dr. Simon Batchelor, Gamos


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Introduction The role of mobile phones for banking and

transactions came out of a 6 country study on ICTtrade and economic growth commissioned by ECAunder the epol-net initiative.

M-Banking was flagged in some countries as a wayfor the poor to use ICTs in their economicendeavours.

Given the explosion of mobile telephony across thecontinent, this became an important area of studyfor the ECA, particularly with respect to getting a

sense of the kind of policy requirements needed tosustain this phenomenan. The about to be published report focuses on the

emergence, status and the future of m-commerceincluding mobile phone enabled banking. It drawstogether three country studies of Senegal, Kenyaand South Africa.


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Contribution of ICTs to pro-poor economic growth(OECD DAC Good Practice Guidelines on ICT and Economic Growth


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A mobile phone based banking solution would cover atleast 60% of those currently without bank accounts.Such a service would be used for storing cash securelyand for making money transferspeople currently carrycash, use the post office services, and make use ofairtime transfers. 15 to 20% rural households receive

money from members living elsewhere An international remittances service would benefit a

relatively small number of people but would bring insignificant economic support. 15 to 20%% urbanhouseholds receive international remittances. Africareceives $40 BILLION a year in internationalremittances.

Banking the unbanked: With 11 million Kenyans havingaccess to a mobile phone, and only approximately 4.5million banked, the new solution offers an avenue topush forward the access frontier in Kenya. This effortwill bring more Kenyans into banking solutions. atlaunch of Equity Mobile Banking Sept 2008, Prof..Njuguna Ndungu Governor Central Bank of Kenya


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Mobile Phone environment Financial Services Environment

Strength/Opportunity

High penetration rates for mobile

ownership

Even higher for mobile use

Uptake of new phones (allowingfor upgraded Sims)

Good growth of alternative accounts

(indicating demand for simplified lowcost accounts)High awareness of alternativeaccounts (implying thirst to knowabout alternative accounts)Large proportion still unbankedGrowth of savings clubs (peer to peertransactions)

Weakness/Threat General high price forcommunication Crowded technology (ATM, POS,additive mobile gateways, etc)

Crowded market place (Many banks,established and resistant to newplayers)Banks introducing innovations confusing to public)

SWOT analysis for the convergence of the Telecommunication andFinancial sectors


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So what is happeningName of proposition What the case

illustratesKey Features

COMMERCIAL BANK OFAFRICA (Kenya)

A conservative, additiveapproach.

Eases customer access to account information, butnot to financial transactions

Sonatel Multimedia(Senegal)

Offering bank alerts as part ofan information service

An MNO offers an information service independentof any one bank.

Equity Bank LTD (Kenya) An innovative bank exploringfrontiers

Offers financial transactions by phone, to existingcustomers

MTN (South Africa) A Mobile Network operatorenters the convergencespace.

Offers financial transactions, encourages non bankaccount holders to register, branded by the MNO,and with reduced registration requirements

JAMII BORA (Kenya) A microfinance institutionadds mobile phone accessthrough Point of Sale .

Uses magnetic srip card and biometrics todecrease fraud, increase efficiency of microfinance.Uses GSM network to enable POS devices toupdate.

Wizzit (South Africa) Entrepreneurs take the lead Phone and card combination, brandedindependently of a known Bank, although with Bankbackup. Agent network and marketing fromscratch.

M-PESA (Kenya) A Mobile Network Operatorintroduces an innovativetransformative proposition.

An innovative model phone to phone financialservices, using MNO agents for cash in and cashout. Branded as MNO, with Trust Fund tosafeguard customer funds.

Sokotele (Kenya) A Mobile operator co-operates with microfinance

Belated attempt to compete with M-Pesa by rivalMNO, has higher costs, and low take up.


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But life moves rapidly when you have the rightsolution

Within the first month Safaricom had registered over20,000 M-PESA customers, well ahead of the targeted

business plan. Within the first 8 months, 900,000customers had registered, 1,200 Agents had signed upnationwide and a cumulative KShs. 4 Billion had beentransferred. The average amount of money sent permonth was KShs. 41 Million by October 2007. Theaverage transaction value was below KShs. 5000 (US$

80). By July 2008, there were over 2.5 Millioncustomers, over 3000 Agents and Mpesa made a dealwith PesaPoint which manages a network of some 140ATMs thus moving closer to being integrated with thebanking system.

And by April 09over 6 million users! 8000 Agents!


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A conservative,additive approach.A secondary

survey of the 25banks in Kenyashowed that fourof them haveintroduced SMS-based services.The most

common SMS-based servicesare balanceinquiry, statementrequests, andmoney transfer.


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Offering bank alerts as part of an information service


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An innovative bankexploring frontiersFocuses on the poor, by

offering Kenyas poorpeople savings accountsand microloans, hascaptured 50 percent of theKenyan bank market. Itnow has more than 3million customers andopens 4,000 new accountsa day.

But despite launchingmobile banking in Sept 08makes no mention of it atShareholders AGM inMarch 09?


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A Mobile Networkoperator enters theconvergence space.MTN Banking SouthAfrica is a mobilebanking joint venturebetween MTN(Africas largestmobiletelecommunicationscompany) andStandard Bank(Africas largestbanking group), and

offers an additiveservice.

The website states: The mobile banking application implemented is one of themost advanced in the world today, offering a full feature banking suite with manyadditional innovative offerings. The service achieved 80,000+ subscribers in itsfirst year of launching. The service now provides access to about 200,000subscribers.


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Jamii Bora Customers

0

20000

4000060000

80000

100000

120000

140000

160000

180000

2001 2002 2003 2004 2005 2006 2007

Years

Numbe

rofcustomers

customers

A microfinance institution adds mobilephone access through Point of Sale.The leading microfinance institutions inKenya have also introduced SMS-basedservices. This includes Jamii Bora, K-REP bank and Faulu Kenyamicrofinance institutions.

The average loan size in 2003 was Ksh7,209 (US$ 90). The members areorganized in credit groups with fivemembers in each group. The groupmembers guarantee each others loansand provide important moral and socialsupport to each other.

Jamii Bora owns and manages the mobile application. It has installed applicationservers at its headquarters in Nairobi. The mobile application was developed in orderto cope with the rapid growth that made it difficult for the staff to provide acceptablecustomer service.The services offered currently include checking balances, mini statements, withdrawalsand loan repayment. There has been a tremendous improvement in funds collectionsince the adoption of the technology.

Th Fi S i f h C i D l


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Entrepreneurs take the lead.

Wizzit is a startup mobile banking provider inSouth Africa that offers a transaction bankingaccount accessible via mobile phone and debitcard. The company operates as a division of

the South African Bank of Athens (which hasalmost no branches).Since its launch in December 2004, Wizzit hasacquired more than 150,000 customers.Wizzit bills itself as a virtual bank and has nobranches of its own. Customers can use theirmobile phone to make person-to-person

payments, transfer money, purchase prepaidelectricity, and buy airtime for a prepaid mobilephone subscription.

In April 09 Wizzit received funds from CGAP to expand isthis good news or bad. A good market product tends toexpand by itself?

Th Fi t S i f th C itt D l t


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Th Fi t S i f th C itt D l t


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Zainannouncedplans in Feb 09

to bring itsmobile bankingservice Zap, toall of its 22operationsacross MiddleEast and Africa,with the initialprogrammebeing launchedin Kenya,Tanzania andUganda.

Zain hasovercomeregulatory

hurdles in tolaunch the ZapM-bankingservice Kenya,and willcompete withSafaricoms M-Pesa service

which has sixmillionregisteredusers

The First Session of the Committee on Development


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Africa ahead of the game?

Safricom doing a quiet pilot UK Kenya

Links being made with Western Union and GSMA

What about elsewhere?

Philippines the famous oneGcash, Smart

Brazil, the agent network

American not that into Mobile phonesinternet

EuropeansEastern Europe it is happening, butmainland Europe......

Of course Japan and Korea both have integratedsystems nowbut additive.



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Where 2 nxt?

As always on

becomes

increasingly popularwe can move awayfrom SMS.

Always on will

become broader andbroader.

Near Field Communication technology is a key part of the future mobile phoneenabled payment landscape. Nokia estimate that by 2012, 30% of allphones will have NFC built in.

While NFC may seem to demand new infrastructure, it has many peer to peercapabilities, and requires less literacy than current USSD menu basedpropositions..



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Regulatory issues

Inclusion - Regulatory and policy prompts so that commercial

propositions reach financial services to the poor

Branchless Banking and Agents; tied to the above, is the need for

agents to act on behalf of the institution to cash in and cash out. Customer protection including regulating deposits, and tracking

financial transactions

Additional barriers, some of which relate simply to mobile

communications

high cost of calls, and IP and SMS services in particular;

revenue sharing for value added services balance in favourof operators tends to inhibit content development;

legal framework (and enforcement) need to refine lawsrelated to intellectual property



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Documents

CODIST I ICT Innovation ICT Applications m Banking Batchelor En