LIRNEasia » financial services

Colloquium: Mobile 2.0: m-money for the unbanked

Nilusha Kapugama — Tue, 30 Jun 2009 10:43:36 +0000

Colloquium conducted by Dr. Erwin Alampay of NCPAG, Philippines.

Presentation began by looking at the potential for M-money.

Why should we use m-money?

Improving efficiency: Improve services, financial services. BOP a target.

BOP (migrants) relies on various forms of remittances

Looking at Filipinos, 9% of BOP had a relative living abroad, and 13% in another part of the country, so there is a vested interest in m-money.

At present about 5% is going through informal channels according to the Filipino central bank. According to respondents about 80% sent through banks.

Workers need access to bank accounts in both the remitting and remitted country for remittances through banks. This is a limitation. M-money may not necessarily need an account in the remitting country.

Filipino workers generally prefere formal channels. Todays presentation will focus on m-money channels such as smart money of g-cash.

ADB: Transaction costs about 2.5%-3.5% of remittances.

For local remittances: Pawn shops used. Roughly remits around Php 500-1000. These are potential targets for m-money.

RS: How does the Pawn shops work? Pawn shops have a wide network, usually works through a call or SMS. A transaction number will be given to the person sending the money. The number will be given to the person who is due to receive the money. Identification is required for acquiring the cash. This is with regards to local remittances.

HG: Do the pawn shops work together, or is there a network that belong to one company. There is one network which has about 12,000 pawn shops.

Vasana: Are they licenced? EA: They are regulated by the central bank to a certain extend.

Central bank regulation is due to Anti Terrorism laws. Pawn shops charge a higher rate of interest. Technology is a catalyst for changing remittance landscape.

M-banking is one component of electronic money according to Circular 649 of Filipino Central Bank. M-Money is E-money stored in a mobile.

Electronic money defined as stored value or pre-paid payment mechanisms.

RS: can money loaded to the a pre-paid mobile account be refunded? EA: It is one of the issues which is going through regulatory process now.

3 modes of e-money issuers in Philippines: Bank (Smart money), Non bank financial institution recognised by BSP (Central Bank), Non bank registered with BSP as a money transfer agent (Example, GLOBE)

Registration is easier with Globe. Can do through SMS.

Looking at potential of M-money at the BOP the following method was used:
Method of access, Material access, skills access, Usage access

Method of access
Using LIRNEasia survey data, re-method of access, 566% of those who didnt use it said didnt know how to use it. According to focus group discussions, even though they were aware, they needed proof of efficiency, price.

With e-loading, familiarity with the Roman script is an advantage. If a person is familiar with transferring e-loads then using m-money will be easier.

Trust issues, Central bank looking at some of the issues. Security mechanisms such as PIN codes. At present Php 100,000 is the limit for any type of e-money. Same for M-money. Even if you have four m-money accounts, the total should be 100,000.

Material Access:
Only 13% of BOP have access to Bank accounts

On avearge there were 1.36 mobiles per household. More access to a mobile phones so there fore more potential for m-money.

Identification documents and physical access to cash in are seen as barriers to M-banking.

Individuals can get there m-money (Gcash) out from ATMs and cash in cash out venues. Therefore accessibility is an issue. There are already some Pawn shops being used as cash in cash out venues.

Can register from a distance but need to go to the bank to cash in. No identification cards in Philippines. Propoer identification is a problem in the Philippines.

Skills Access
40% of those surveyed in the LINREasia survey are familiar with e-loading.

99% of surveyed mobile users use SMS.

Filipinos top up small values at shorter time frames. Use to exchanging mobile top ups. This is consistent with remittance patterns. Comparatively, Filipinos send money often in smaller amounts

GCASH and Smart are accepted as forms of payment in Philippines, but this maybe more common among the more affluent users.

GLOBE (2006): Transacting USD 117 Million on average.

SMART (2006) Transacting USD 257,200 average daily transactions.

HG: How much is charged for Transactions? EA: Basic of SMS cost, plus 1% of transaction cost or minimum of Php 10.

HG: Transmission takes one or multiple SMS? EA: Have to confirm but it maybe a minimum of 2 SMSs.

Challenges and Policy issues:

1) Developing mental access: Increasing awareness, better financial advantages.

2) Developing Material access: Making services that work with the kinds of phones used by BOP, making cash in/cash out more accessible.
Regulating GCASH and SMART:

100% reserve requirement

HG: 100% reserve requirement for just e-money or any transfer? EA: Thats for e-money.

HG: Is there a time limit on the money put in the e-money account? a 100% RR is very high. EA: They do not work as banks. Money is earned through transactions.

Policy Issues:
Security of the systems

prevention of fraud

Interoperability

Tracking users

Increasing access

RS: Comparisson with M-Pesa in Kenya will be useful.

HG: Comaprison with the regular banking transactions will also be useful.

India: Bharti to rely less on telecom

Chanuka Wattegama — Tue, 04 Nov 2008 05:14:56 +0000

The Bharti Group is aiming to reduce its dependence on the telecom sector to 50 per cent for the group’s revenues by 2013. At the moment, telecom operations provide over 80 per cent of its revenues with new businesses which include retail, financial services and agriculture just about taking off the ground.

Unveiling a new brand for the group, the third time that the group has announced mega brand changes, Sunil Bharti Mittal, chairman and group CEO, Bharti Enterprises, said, “We are breaking free from our telecom legacy. In the next five years, we hope to get more than 50 per cent of our revenues from businesses other than telecom, which constitutes more than 80 per cent right now.”

Read the full story in Business Standard here.

Internet telephony pioneers stumble

Lorraine Salazar — Wed, 03 Oct 2007 15:25:13 +0000

Last updated 10:01am (Mla time) 10/03/2007, Philippine Daily Inquirer

NEW YORK–In spite of its global popularity, Internet telephony (VoIP), which is almost free for users, has not become a gold mine for its pioneers such as Skype and Vonage.

Popular online auction firm eBay, which bought Skype two years ago for $2.6 billion, affirmed that message in a costly way earlier this week when it devalued the once-darling firm, knocking $1.43 billion off its value.

The accounting move was long anticipated.

“We are glad to see eBay admit that it overpaid for Skype and that much-hyped synergies have not yet materialized to any large extent,” said global financial services firm Cantor Fitzgerald.

“We have struggled with the economics of the Skype transaction relative to the financial expectations for the business.”

Read full story

The ‘Next Billion’

Ayesha Zainudeen — Tue, 07 Aug 2007 08:26:15 +0000

The ‘Next Billion’ is a somewhat familiar term to those in the telecom/ICT sector. This Boston Consulting Report considers the ‘next billion’ in financial services.
The report reveals many parallels with the ‘next billion’ talk in the telecom sector, except for the fact that this realisation has already been made in the telecom industry whereas, according to this report, the financial sector is just on the verge of making that same realisation in a big way.
It looks at those traditionally excluded from financial services, because they are deemed a non-commercially lucrative group to serve. It argues that by adopting innovative business models, these groups can become commercialy viable to serve.
One of the strategies that the report recommends is collaboration with other industries, specifically taking example from the mobile sector. It notes the growth in mobile subscribership in developing countries where new mobile customers are being added faster than new banking customers. However, the prerequisite for such collaborations with the mobile indstry is regulators allowing telecos to ‘straddle industry borders.’

Read full report

Central Bank on telecom growth in LK

Rohan Samarajiva — Tue, 04 Apr 2006 13:14:41 +0000

:: Daily Mirror – FINANCIAL TIMES ::
Services Sector
The Services sector maintained its importance in the economy, recorded a 5.9 per cent growth and contributed 53 per cent to overall economic growth in the fourth quarter of 2005. This growth was largely driven by the performance in the post and telecommunications, domestic trade and financial services sub sectors.

Of these sectors, the Transport, storage and telecommunication sector expanded by 11.8 per cent during this period. The post and telecommunications sector which has continued to grow at a high pace, expanded further by 24.9 per cent in this quarter. With the latest CDMA technology, subscriber levels of Fixed Access – Wireless Local Loop phones increased by 159,162 new connections, a notable expansion for this category. The subscriber level of cellular phones expanded by 52 per cent and the mobile penetration ratio (Mobile connections per 100 people) was around 17.