mBanking Seminar - June 16, 2008, Karachi, Salman Ansari, Ver 4

8/3/2019 mBanking Seminar - June 16, 2008, Karachi, Salman Ansari, Ver 4

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Salman Ansari Technology Consultants (Pvt) Ltd

Salman Ansari


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empowerment

Why do we need virtual cash in Pakistan

How does it impact all of us

Why am I standing here talking about it today?

Why indeed!


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1950s 1960s 1970s 1980s

Noofnewa

dop

tors

1990s 2000s

2. ATM s

1. Bank IT systems

3. EFT POS

4. Internet

Source: Porteous 2007, Shorebank, Sevak Solutions

Client facing

Back end

Waves of Technology Adoption in FinancialServices

5. M-banking


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Vision(for want of a better word!)

Transform Cash-Based society to Virtual-Money

Society.

Do it via a platform that has multiple utility

for development of the grass roots economy

Use existing - and rapidly growingtelecom

and banking infrastructure

Start now

And scale fast

Be on the rising part of the opportunity curve!


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The landscape

Telecom

Spread and use

Voice and Data

Reliability

Issuesbottom line

and competition

Policy

Banking

Spread of

automation

Old money andnew money

Competition and

tools

Policy


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Inventory..

Banking policy & Infrastructure

Telecoms policy & infrastructure

Legislative and Regulatory Progress

Changing environment and

Opportunities

Silver bullet


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MAJOR TELECOM GROWTH

Phenomenal growth in last 2 years

Focus shifting to Rural developmentthe USFUniversal Service Fund

Investments

0

2000

4000

6000

8000

10000

12000

14000

16000

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

Million

US$

FDI (Million $) Foreign Investment (FDI+Public&Private Portf olio)

Total connected International Bandwidth

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2003 2004 2005 2006 2007

Mb/s

PTCL TW1 Total

Voice+Data

Total Voice Telephony

-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

2,004 2,005 2,006 2,007

Years

Users

Telephone lines (including WLL) Mobile phones Total

70%

60%

50%

40%

30%

20%

10%

Telephone Line Penetration

2004 2005 2006 2007

Teledensity

Total Voice Telephony

-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

2,004 2,005 2,006 2,007

Years

Users

Telephone lines (including WLL) Mobile phones Total

70%

60%

50%

40%

30%

20%

10%

Telephone Line Penetration

2004 2005 2006 2007

Teledensity


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Complexion of Mobile Telephony

Mobile Telephony is not a luxury good Economic impact is mediated by social capital Improved coordination of informal job

markets. Poor attribute a significant improvement in

quality of life to mobile access: consistent with high expenditure level & lowelasticity of demand.


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Banking

Dramatically changed in the last 5 years

Consistent growth of Automation

Forward looking regulation

More effective and innovative Policy making Perception of independence and dynamic

banking regulator

Private sector more creative


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Security and laws

Promulgated

Electronic Transactions ordinance Cyber Crime Actfaulty and needs correction

urgently

Needed

IPR protection Data Protection

Personal Privacy


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Growing Threats

Malicious messaging

(SMS/MMS/Java)

Viruses

Handset malfunctioning

Theft and Fraud

Bluesnarfing

Denial of Service

Network malfunctioning

Spam

Costly consequences:

Handset replacements

Device downtime airtime lost

Legal settlements


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Virtual cash

RemotePaymentServices

RemoteValue AddedServices

ProximityPaymentServices

ProximityValue AddedServices

CashReplacement

SECURE TRANSACTION PLATFORM

WILL ENABLE AN IMMEDIATELAUNCH OF REMOTE PAYMENT & VAS,

EVENTUALLY SCALING TO MOBILE

PHONE BASED CASH REPLACEMENT


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Open and closed loop

Virtual cash takes on a life of its own if we

consider it as entity and not an add-on

For low value transactions, velocity of cash

takes on anew meaning

Strive for an open loop model rather than a

closed loop one

The users does not need to encash the money but use

this for getting more goods and services


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APPLICATIONS

Enable Mobile

Transactions in

Real & Virtual World

Secure Web-Service

Platform for Banks,

Carriers & Merchants

MOBILE

BANKING

AIRLINE

TICKETING

PREPAID

TOP-UP

MOBILE

ADVERTISING

BILL

PAYMENTS

RAILWAY

TICKETING


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CONTENT, ADS & TRANSACTIONS

PACKAGE

CONTENT, ADS & TRANSACTIONS FOR USERS

ACROSS THE ENTIRE DEMOGRAPHIC PYRAMID


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B2CBusiness to Consumer

Mobile phone replaces cash

Becomes mechanism for payment for goods

and services

Increased focus on mobile micro-payments

key for cash replacement


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B2BBusiness to Business

Mobile phone used to enhance business

processes rather than payments

M-banking is one form which is replacing

traditional forms of banking

Applications beyond business Rural

development and addressing poverty


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C2cConsumer to Consumer

Transactions occur between individuals

Across a business platform which holds money

in escrow

Then money is transferred

Risk of non delivery or faulty goods

Risk of identity theft, pilferage and fraud

t


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P2pperson to person

Enables individuals to transfer moneye.g. top

up accounts

Virtual accountsCOULD BE cell phone

companies or banks

KEY DRIVER FOR ACCESSING THE UNBANKED

TTA C S


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REMITTANCES

SPECIAL VARIANT OF P2P

DOMESTIC OR INTERNATIONAL

Smart, Globe, M-pesamany more following

Huge value of remittances

Adjunct to formal and informal modes of

remittance


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Reaching the mass market

What role for nonbanks? Intersect of electronic and the

cash economy

Can nonbanks play in the space?

Overprotective: South Africa banks-only

Underprotective: Kenya no control over entry

A lighter touch is needed: PSP license? On the fly adaptations: Case of the Philippines


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Operator, Bank, and ISP-Led Models

Operator-LedIndependent Service

Provider-LedBank-Led

No Bank

One Bank

One-to-Many

Many-to-Many

Copyright SEVAK Solutions


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Importance of the Agent Network(Pakistan)Access Points Number of nodes Locations Comments

Cigarette Shops More than 625,000 shops In every neighbourhood Interesting option, since locations

nearly ubiquitous. Potentialelectricity and connectivity

challenges.

Mobile Phone Centers Approximately 425,000 Mobilink

retailers, and about 100,000 retailers

for each of the second tier companies

(Telenor, Warid, and Paktel)

Throughout connected

districts, differs depending

on cellular provider

Sometimes one retailer is shared by

a few cellular providers.

Connectivity, cash management,

and transaction handling all

present.

Small Phone Operators(PCOs)

Approximately 353,000 shops Throughout the country Relatively small businesses.Liquidity concerns.

Postal Service Centers Approximately 12,000 sites All cities and major towns Over a century of experience in a

particular form of money transfer.

Liquidity concerns. Capacity and

efficiency concerns.

Pakistan State Oil

Stations (PSO)

Estimated 1,200 POS enabled stations

out of a total of 3,700 gas and servicestations, but number is growing

rapidly

On main roads Connecting to POS networks,

familiar with handling cash.Liquidity and corporate transaction

tracking, strong points.

POS Network (includes

PSO)

Approximately 20,000 split between

two primary providersOrix and

Marshall

Larger merchants, urban and

peri-urban

Some legal constraints over cash

and agent models. Overlap with

MF customer base currently

limited.


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Facilitation


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Facilitation (some brave decisions)

One plastic card should be useable at all ATMs, PoS,

Kiosks etc

Backend of PoS switches, ATMs, e-Banking systems,

other e-Payments infrastructures to be

interlinked.

Fees:

User not NOT to pay fee for ANY electronic transactionon ANY delivery channel.

ATM, POS transaction fee to be eliminated

Fee on any other domestic delivery channel to be

eliminated

Messages for regulators industry


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Messages for regulators, industry

Regulators Doing nothing is not a viable option

Engage in dialogue with industry

Proportionate rules balance safety &innovation

Industry Avoiding regulation may not be desirable

Scale and breadth of service networkwill be key defensive barriers for first-movers

Fears and interests


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Fears and interests

Totally new spacevelocity of cash in the new

paradigm

Dont rock the boat

Policy clashbanking, fiscal, telecom

Cell phone companies as banks

Non-banks as banks

Value of money

The time is now


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The time is now

The environment is ready to accept the change

The infrastructure is ready to support this

the technology has a great set of applications

riding on the Cellular platform

Public and private initiatives will take off with

a big bang if we dont drop the ball

Why is this happening now?


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Disruptive Technology Changes the Rules Cell phones Internet

Device convergence

Microfinance is an example of a disruptive conceptbanking to the poor was heresy toformal sector banks 20 yrs ago

Why is this happening now?

What do these have in common?


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What do these have in common?

Tata Nano M-Banking & M-Payments

Disrupt assumptions about traditional products

Come at a special point in time for regulation

End note


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End note

We stand in the cusp of time with an

opportunity to create a totally new paradigm

of creating opportunity for developing the

country

Making peoples lives easier

Creating a stronger trickle down effect of

macro economics to the grass roots


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S l A i T h l C l (P ) L d

Documents

mBanking Seminar - June 16, 2008, Karachi, Salman Ansari, Ver 4