kabir-kumar (bb conf pres)
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Understanding Branchless BankingBusiness Models International
Experiences
April 17, 2010
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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CGAP Technology Program
14 active projects in 9 countries, 12 policy diagnostics
Research, Policy and advisory
Experimentation and communications
Co-funded by the Bill & Melinda Gates Foundation
Areas of Focus
Clients: what are the drivers of large-scale adoption and usage?
Providers: what incentives for offeringservices to large numbers of poorpeople?
Governments and regulators: how canthey develop (1) safe and enabling
regulations (2) policies that promoteadoption?
Project Locations
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Agenda
Emerging models in branchless banking Money service provider
Mobile bank model
Agentbased Acquirer model Business case for key actors
Business case for MNOs
Business case for Banks
Business case for IT provider
Role of market structure
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Transformational branchless
banking
Money service provider
(M-PESA Kenya, G-Cash Philippines,MTN Mobile Money)
Agent-based Acquirer(Eko India, DD Dedo Colombia)
Mobile bank(EasyPaisa Pakistan)
M-wallet Aggregator(SMART Money, M-Power Kosovo)
Consumer-facingbusinesses
family of
models
Multiple
variations likelyto exist
1
2
3
4
Emerging models in branchless banking
Low cost branch substitute(Caixa Brazil, BancoEstado Chile)
Additionalchannel forthe bank
AcquiringNetworks
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Understanding business models
Value proposition
What is the value to thecustomer?
Business logic
Why the business doeswhat it does to make
money?
Key partnershipsWhat are the key
relationships explainedby the value
proposition andbusiness logic?
Revenue/Costs
What are thedistinguishing costs?
Prudentialinstitution
What is the role of aprudentially regulated
institution?
Legal structure
Independent orsubsidiary or service
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Agenda
Emerging models in branchless banking
Money service provider
Mobile bank model
Agentbased Acquirer model
Business case for key actors
Business case for MNOs
Business case for Banks
Business case for IT provider
Role of market structure
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Money service provider
Value proposition
Move
money electronicallyanywhere
Business logic
Drive volumes bycapturing all payments
products
Key partnerships
billers
Revenue/Costs
Tx fees (revenue)
Agent commissions(cost)
Prudential
institution
Holds pooled accounts
Legal structure
Independent orsubsidiary of bank,
MNO or other
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Structures observed today
Legalstructures Subsidiary
Service (byMNO or Bankor both)
Independent(limited liability)
e.g., SplashSierra Leone
e.g., WingCambodia
e.g., M-Pesa
Kenya
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Bank in the money service provider model
Role of the
bank
Sets upsubsidiary
Serves asagent
Holds pooledaccount e.g., SplashSierra Leone
e.g., WingCambodia
e.g., M-PesaKenya
Issues e-money
e.g., OrangeMoney
Mostcommonlyobserved
role
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Expanding beyond domestic transfers
121%CAGR in
customers
$1 M to $300M monthly
tx value
$40 M inreportedrevenue(2009)
9 Mcustomers
~17,000agents
Bill payments
Loanrepayments
Depositpayments
International
remittances
Governmentpayments ?
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Significant upfront investment
Cash
costs$
time
Marketing and agent set-up
Agent commissions
Set-up GrowthLaunch
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Agenda
Emerging models in branchless banking
Money service provider
Mobile bank model
Agentbased Acquirer model
Business case for key actors
Business case for MNOs
Business case for Banks
Business case for IT provider
Role of market structure
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Mobile Bank
Value proposition
Full suite of banking
services anytime,anywhere
Business logic
Capture entire profitpool from products
Key partnerships
Between the bank andthe MNO
Revenue/Costs
Similar to MSP onpayment products butretain profit pool from
additional products
Prudential
institution
Owns the customer
Legal structure
Prudentially regulatedfinancial institution
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Corebusiness
Airtimereseller
network
Traditionalbranches
Traditionalplatform
$
Traditionalclients
Independent brand Bank name prominent
Additionalpersonnel orincreased capacity
for financialservices
Operations of the accountsoutsourced
Platform to handlemobile accounts
Mobileaccounts
Higher-level accounting updatedperiodicially
Mobile Bank: operational view
http://images.google.com/imgres?imgurl=http://www.unlockedphone-s.com/wp-content/uploads/2009/04/gps-cell-phone-300x300.jpg&imgrefurl=http://www.unlockedphone-s.com/gps-cell-phone&usg=__wLPrNXcYrOR7KppXk-jmoiRFP28=&h=300&w=300&sz=16&hl=en&start=110&sig2=N9z9WxtZY9PPGDwbTDeW2g&um=1&tbnid=qU7tIz7tUjwpvM:&tbnh=116&tbnw=116&prev=/images?q=cell+phone+reviews&ndsp=20&hl=en&rlz=1T4GGLL_enUS318US318&sa=N&start=100&um=1&ei=iB29SufuEMGwlAe3ga2VAQ -
8/7/2019 Kabir-Kumar (BB Conf Pres)
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Mobile Bank: financial view
IncomeBank Rev
CostsAll own costs
Profit
Bottom lineEBITDA
IncomeTelco RevBank Rev
CostsDirect/
Commission costs,Taxes
Profittop line rev split
at source
RevTransfer
IncomeMNO Rev
CostsAll own costs
ProfitBottom line
EBITDA
Rev
Transfer
Bank P&LVirtual P&L
For Mobile BankMNO P&L
TaxCost
CommCost
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Benefits of leveraging costs
Money service
provider(MNO service)
Money service
provider(MNO-Bank)
Mobile bank
costs
incurredcosts
margins
Distributionmanagement
Risk
management Accountmanagement
Personnel
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Agenda
Emerging models in branchless banking
Money service provider
Mobile bank model
Agentbased Acquirer model
Business case for key actors
Business case for MNOs
Business case for Banks
Business case for IT provider
Role of market structure
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Agent-Based Acquirer
Value proposition
A single network of
agent points that iseasy to integrate with
Business logic
Share the cost ofnetwork across multiple
providers
Key partnerships
Financial providers,both banks and non-
banks
Revenue/Costs
Service fees (revenue)
Agent commissions(cost)
Prudential
institution
One of the providers
Legal structure
Independent orsubsidiary of bank,MNO or other that
manages the network
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Agent options for banks
BANK
MERCHANT MERCHANT MERCHANT
BANK
MERCHANT MERCHANT MERCHANT
Manager Agent Acquirer
BANK
MERCHANT MERCHANT MERCHANT
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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EKO
State Bank of India(SBI)
Airtel
Airtel-EKOdistribution
Branding by EKO
Airtimedistribution
EKOs
distribution
Branding by EKO
Agent-based Acquirer: operational view
http://images.google.com/imgres?imgurl=http://www.unlockedphone-s.com/wp-content/uploads/2009/04/gps-cell-phone-300x300.jpg&imgrefurl=http://www.unlockedphone-s.com/gps-cell-phone&usg=__wLPrNXcYrOR7KppXk-jmoiRFP28=&h=300&w=300&sz=16&hl=en&start=110&sig2=N9z9WxtZY9PPGDwbTDeW2g&um=1&tbnid=qU7tIz7tUjwpvM:&tbnh=116&tbnw=116&prev=/images?q=cell+phone+reviews&ndsp=20&hl=en&rlz=1T4GGLL_enUS318US318&sa=N&start=100&um=1&ei=iB29SufuEMGwlAe3ga2VAQ -
8/7/2019 Kabir-Kumar (BB Conf Pres)
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Agenda
Emerging models in branchless banking
Money service provider
Mobile bank model
Agentbased Acquirer model
Business case for key actors
Business case for MNOs
Business case for Banks
Business case for IT provider
Role of market structure
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Business case for MNOs
Biggest benefit in non-saturated markets 8% increase in market share for SafaricomMarket
Share
0.5% (China) to 6% (India, Philippines) Studies cite 30% reduction in churn No effect for Safaricom from M-Pesa Could be offset with market share
Sharp decline in ARPUs (Ghana and
Pakistan halved in three years) M-Pesas contribution to Safaricom revenuewas 4% (FY 2009)
Churn
ARPU
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Agenda
Emerging models in branchless banking
Money service provider
Mobile bank model
Agentbased Acquirer model
Business case for key actors
Business case for MNOs
Business case for Banks
Business case for IT provider
Role of market structure
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Business case for Banks
Lower capital expenditure to set-upinfrastructure
Agent channel is 1/30th the cost of setting upa branch channel
Bank targeting customers transacting at low
values Mobile channel reduces cost per transactionto help maximize margins
Banks in Pakistan watching Tameer
Microfinance Bank
Growth
Seg-ments
Differ-entiate
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Agenda
Emerging models in branchless banking
Money service provider
Mobile bank model
Agentbased Acquirer model
Business case for key actors
Business case for MNOs
Business case for Banks
Business case for IT provider
Role of market structure
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Business case for IT provider
Options for ITproviders
Sell service
Sell product
Upfront($234 K)
Future flows($1.90/customer/yr)
Operate($.40/customer/yr)
UpfrontCharge(w/ integration)
Sell service
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Agenda
Emerging models in branchless banking
Money service provider
Mobile bank model
Agentbased Acquirer model
Business case for key actors
Business case for MNOs
Business case for Banks
Business case for IT provider
Role of market structure
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8/7/2019 Kabir-Kumar (BB Conf Pres)
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Role of market structure in telecom market
Degree of fragmentationhigh low
low
high
Competitiv
ethreat
NO MARKET FORCE
Single dominant player so noimminent competitive threat
Lots of room to grow in core
business
DOMINANT PLAYER IS THEMARKET FORCE
Single dominant playercontrols pace of development
Pricing and distributioncontrolled by single player
WEAK MARKET FORCE
Significant competition Lot of growth left in core
business
subscriber growth mode
STRONG MARKET FORCE
Significant competition Little growth left in core
business pocket share mode
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Role of market structure in telecom market
Herfindahl-Hirschman Index(0=fragmented ; 1 = monopolistic)
high low
low
high
Degreeofpe
netration
(connec
tions)
c
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Advancing financial access for the worlds poor
www.cgap.org
www.microfinancegateway.org
http://www.uncdf.org/english/index.phphttp://www.themastercardfoundation.com/
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