Neo Edge

Mobile Commerce Asia Summit

“ Mobile Money and Banking as a way forward to Financial Inclusion”

24 – 25th March 2010 , Holiday Inn, GalleriaManila , Philippines

Santanu Sengupta Change Innovators Society

Secretary , Kolkata, India

WHY Financial Inclusion ?

• World almost stopped growing as

developed nations start reinventing

themselves

• It is more of East ward HO in the

Millenium

• Asia Pacific & LATAM starts serious

questions, How long are we to subsidise

West’s deficit?

• And we see in the G20 COUNTRIES HIGH

GROWTH laced with poor HDI

• If only we could bring the majority poorer

to have more money at their disposal

What is Financial Inclusion ?

• “Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.” ………C.R .Rangarajan , Chairman , Committee on Financial Inclusion

The Trends : Agent Led Models

Mobile Platform

• M Pesa

• G cash

• Smart

• Wing

• Zap

• Wzzit

• Fundamo

• Many More in the pipeline

Non – Mobile Platform

• Role of the Brazilian postal network in promoting financial access in deprived areas.

• Complementarities or substitution effects between different financial networks?

• Causal effect of Banco Postal on local development outcomes?

• BC/BF Model India

Contrasting Demands vis-à-vis Supply Side Challenges

Developed World

• Multiple Phones with increasing sales of PDA

• More customised & demand driven

• Travel, hotel, cinema, sports entertainment etc ticketing on the rise

• Financial ,Billing , Invoice tracking , portfolio management , share trading increasing day by day.

Developing World • Fixed Line is passe• Mobile is the daily needs of

the hour• Mpesa , Smart,Gcash,Wing

Zap, Tag, Mobicash slowly gains ground

• Inclusive banking & commerce will be the main mantra for financial inclusion.

• More money is there provided the price discovery is benchmarked

Bank & Versus Telco : Regulators Dilemma

Developed World • Banks run the pivotal role of an

economy , but does not work for the common people

• But standard operating procedure & practice more customised

• TELCOs HAVING tough time as Banks are older institution & have more people to say kind words about .

• But TelcoS are delivering & more innovating to catch mass imagination .

• TellcoS are user friendly , down to earth, a picture of next door neighbor in need.

• Banks image Down cast as the Wall Street has only compounded the problem

Developing World • Everywhere the TelcoS beat them

in hands down

• Providing a surge in most of the county’s GDP & ONLY shining sector amidst the gloom.

• Nobody worries too much about the missing minutes & fathers agony at daughter’s chat bills

• Banks drive away customers where TelcoS embrace them with “Chota ( Micro) Recharge”

Mobile Money Transfer : Fact File

• A billion Dollar industry awaiting for a nudge to Multi – Billion one.

• Everybody transfers money every now & then , but at what Cost & Time

• An average sample of Rs 500 ( $ 53 ) transfer by conventional means takes 3 minimum days at a cost of Rs 50 as the fastest mode.

• SJW close user group does in flat 2 minutes by exchange of cards at $ 0.20

• There is no clear or tangible estimate what is the market size: WORLDWIDE

Mobile Money & The Global Crisis: Paradigm Shift

What It can : • With the advent of the 3G

migration in the developing countries with or without regulatory support financial services will be booming.

• To unfurl 3G & a combination of Wimax to remote areas a parallel thrust will have to be concentrated effort on Power, Roads & Concurrent Human Resource development .

• It has to go hand in hand as otherwise the fate of the banks will happen

What it will : • It will open up more circulation of money &

weed out costly unproductive service delivery cost in real time.

• Small traders & Artisans will need not be at time bound mercy for small transaction & real GDP WILL INCREASE

• It will invariably lead to more savings as a net of residues in top off or wallet as poor man’s money is less elastic if idle.

• It will lead to wholesome transparency as to overall circulation of money ( Broad as well as Narrow ) thereby more revenue to the exchequer.

• Will generate a commensurate increase in specialised service delivery domain in financial services

• Like the Public Call Offices ( PCO) which started the Telecom revolution will be precurser to more hybrid Financial Services domain .

How it affects Public life?

Banks to GDP • In India there are only effective 200

million bank customers out which only only 17% feeds banks transaction on a daily basis.

• Out of the total transaction it is difficult to estimate the real contribution to GDP as mostly are in use as a transactional value

• Banks direct contribution to GDP as an instrument of development has been playing a subservient role due to a change in its overall positioning in the growth engine

• More & more banks primary function of a development agency has changed to one of a secondary institution like a post office of sorts or a street corner grocery shop with a higher incremental cost of delivery with lesser people

TelcoS to GDP • TelcoS have been generating more

compounded revenue , & employment at a fraction of a cost than a basic bank account opening to banking services .

• It is time elastic, infinitely more sensitive to customer loyalty ,quality of service & other forms of documentation to tracking of criminal & other obnoxious activities .

• More & more we are having quality almost thousands of intelligent Points of Presence who can & are in many ways giving financial services at a lesser cost

Mobile Money Transfer : Form & Content

• Many pilots have sprung up.

• It will be different models as per the level of financial soundness, regulatory norms plus ICT readiness in a given country. Copy-Pasting may not be the ideal solution, may prove disastrous.

• Initially it will be quasi -manual to electronic as more POS will be required to a transient use as in growth of SMS gradually to more literate sections first to more embedded pre formatted options

• Transition to experience borne habit changes will be the order of the day as initially E tickets were shunned by customers to regular train tickets

• Regulator’s concern cannot be done away with as missing money will be a governments nightmare compare to missing mobile minutes.

The Various Forms of Inclusiveness

Country Provider Model*Afghanistan Roshan (mobile operator) M-banking

Brazil Caixa Economica Federal (bank) Card-basedBanco Bradesco (bank) Card-based

Chile BancoEstado (bank) Card-basedColombia Banco Caja Social (bank) Card-basedDR Congo Celpay (bank) M-bankingIndia SKS Microfinance (MFI) M-banking

State Bank of India (bank) M-bankingKenya Safaricom (mobile operator) M-banking

Equity Bank (bank) M-bankingMalawi Opportunity International (bank) Card-based

First Merchant Bank (bank) Card-basedMexico Banamex (bank) Card-based

* Source: Mpfi.

M- MONEY & Financial

Inclusion

Mobile Money

Transfer and Value added

services

High Usage drives GDP

Growth

Ranks Highest

amongst the drivers

Cash based to Stored

Value Base

Financial sector

reforms needs it most

Approx STATS :• Contributes almost 8-13% of GDP on an average • LOW ICT Readiness one of the main reasons • Intensive usage leads to proliferation of poorer sections more in services , savings, and prosperity

Uneven Portends

Financial Inclusion does not seem to move anywhere

Mobile Growth beats all

predictions

Mobile Money TO Financial Inclusion

Banks/ Development

agencies reluctant to

provide credit

Moves away from Treasury to Transaction

based

Manageability and price discovery

becomes an ISSUE

Wants to cash in on huge

cash floating around

Legacy and Inertia THE WAY

FORWARD

THE ACTION PLAN

Multi Pronged Attack

Fin Inclusion Programme

Business Responds

Community Reacts

Post Fin Crisis It is the road to Salvation

If you have the roads Vehicles would be more

& move faster

Mpesa and other story

Mobile Money Transfer gives the First Taste to Financial Salvation

Government paves the way for Financial

Superhighway

Leveraging Investment to

build long term blocks to development

Mobile gives them the first hand usage. Then the SMS, soon other services to pay for

Ah Financial Transactions

E commerce, land records , birth and

death Certs.

After the Euphoria : The Road Ahead

Mobile Money . It is the governments first duty

to gradually shift to cash less society

• Surveys show everywhere that the highest demand for small mobile top off is at the week ends.

• It will be the same for Mobile Money .

• Every bank managers are looking to woo small money clinets , alas in the legacy system

Mobile Banking • Banks now looking at various

options to use agent network

• Using the MNOs network makes sense as they are much closer to their customers than banks

• Using half of 500 million ( 250) small money account of $.0.10 cents of daily transaction top off give them Usd 50 million daily free float at a fraction of a cost .

• Use data collaboratively to see trends, who’s who , pattern usage

• New financial services designed

GOVERNMENT SPEARHEADS ??

• Government has to move ahead if it has to aspire to conform to Millennium Goals.

• What is the meaning of Growth? If we continue to slip in HDI ? It is not Inclusive.

• If our Governments do not spearhead we have more distress, terrorism, riots – instability.

• So e Government ,today, I Government tomorrow and to…………….M GOVERNMENT

Benefits to All Segments

Combine developmental work through Mobile Money

Not One kind. UID programmewill be the biggest of Mobile Financial Inclusion drive.

You have identity, governments direct cash access programmethrough a bank account

Cannot be legacy Banking M PESA or Gcash on biometric

devices Postal as well E governance

Centres as POS

•Cheaper

•Transaction

•Cost

•Towards greater Inclusivity

•Direct Cash access to

•Savings Formation

•More Cash to the system pushing up Capital Base

Government Banks

TelcosPeople

EVERY BODY SMILING

THANK YOU THANK YOU ALL