Beyond Branch Banking

Introduction

The concept

Provide access to finance

In 75 years of formal banking era, less than 30% of population has access to formal financial services

More than 7.5 mio. mobile phone users within 7-8 years of market penetration with annual growth of 35%

Use mobile phone as an interface to banking activities

Nation-wide supporting agent network

Delivery of financial services in a fast, secure and low cost manner

Local Remittance

Send / receive money to and from anywhere in the country

Microfinance

Support microfinance activities in rural areas

Mobile phones are rapidly growing - Medium to spur entrepreneurial activities

Currently 20% of the population uses mobile phones, with projection of 50% by 2014

What is Kumari Mobile Cash (KMC)

KMC is an innovative mobile phone based payment system introduced by Kumari Bank.

It is a product that enables business transactions via mobile phones.

It offers various services such as point-to-point remittance, payment of

goods and services, and much more, all across Nepal!

Why KMC

It is a result of our continued focus on technology driven service delivery to leverage technology as our delivery channel to customers to reduce cost of transaction and save transaction time

It provides convenient and an efficient way to conduct business transactions

It provides much better market penetration compared to other products Bank Branches (Per 100,000 People) 4.12 ATMs (Per 100,000 People) 3.40 Credit/Debit Card (Per 100,000 People) 2000 Mobile Phones (Per 100,000 People) 25,000

• We cannot ignore this large customer base

2006 2007 2008 2009 2010 2011 2012 2013 20140%

10%

20%

30%

40%

50%

60%

2% 5%

15%21%

25%30%

35%41%

48%

Mobile Phone Users in Nepal

Year

Perc

ent

of P

opul

ation

15 million users

7.2 million users

Why KMC cont…

Source for 2006-2009: "Nepal - Telecoms, Mobile, Internet & Forecasts" published by BuddeComm; Data for 2010-2013 are authors’ own projection based on YoY population growth rate of 2% and YoY mobile user growth rate of 20%

Point to point Remittance Receive and send money directly from/to mobile phones anywhere in Nepal Available on Nepal Telecom GSM Network across Nepal Ncell Network still being Pursued

Top-up cash or withdraw cash from mobile phones At an agent or at a bank counter

Pay for goods and services at shops and stores anywhere in Nepal

Transfer money to family and friends Peer to Peer Lending

Air-time top-up at face value

Associate bank account Allows cash transfer from/to bank account

Pay utility bills

Web Portal

KMC Solution Features

Impact on Economy Kenyan Experience

10% GDP flows through M-Pesa 5-30% increase in Income for those who use M-Pesa

With 20% of the population using M-Pesa, that translates to roughly 3.5% GDP growth and 1.75% decline in unemployment (Okun’s Law)

Easier access to finance

Increased economic activities

Easier to get microfinance loans and pay monthly installments

Secondary services on top of the platform

Mobile phone based transactions is a rapidly-adopting alternative business tool, especially in developing countries.Examples:

G-Cash, Phillippines Grameen Phone, Bangladesh M-Pesa, Kenya

Combined market for all types of mobile phone based transactions is

expected to reach more than $600 Billion globally by 2013.

Social Benefits

This service is available to all mobile phone users, and customers registering for this service do not have to have a Kumari bank account!

Government distributing money to almost 4000 village development committees (VDCs) Current: Disbursement to one point requiring villagers to travel Future: Disbursement directly to end user via a mobile phone

Retired veterans receiving pension Current: A monthly camp setup in one place requiring the recipients to travel Future: Pension funds disbursed directly into recipient’s mobile phone

A person living in a remote place no longer has to walk for one day to make microfinance loan payments

Eliminating travel costs that sometimes is more than the amount of the loan installment

Son working in Kathmandu can send money to his parents in a village instantaneously Eliminate physical travel Eliminate risk of carrying cash

Daughter studying in Kathmandu can receive money from her parents instantaneously to pay school fees

Built on Java platform – scalability and security

Supports any phone Structured SMS for lowest common denominator J2ME application for java enabled phones allows greater usability

Security All transaction require PIN authentication ISO 8583 standard communication

Firewall secured network of servers

Secured SMS Gateway using short code 2274 (CASH)

Transaction Amount Monitoring

Cap per transaction, per day, per month

Reduced physical cash handling

KMC Technology

How it Works

Merchant/Agent Enrolment

Mobile Cash Committee Inclusion of all relevant departments

Product Development Phase wise Implementation

Mobile Cash Department formed Call Center with a country wide Toll Free Number

Meeting with Multilaterals: World Bank, DFID, ADB, IFC

Meeting with Finance Ministry, NRB and NT

Advertisement and Informatials concept TVC, Radio, Print Media, Animations, Pocket Guide etc.

Training to prospective agents, merchants and our employee in following locations completed Eastern Region: Biratnagar, Birtamode, Itahari, Urlabari Western Region: Argakhanchi, Beni, Baglung, Bhairahawa, Butwal, Damauli, Palpa, Pokhara Central Region: Kathmandu, Birgunj, Narayanghar Mid West Region: Nepalgunj, Surkhet, Salyan, Dang Far West Region: Dhangadi, Mahendranagar

The Approach

Launched on 17th August 2010

Promotional Campaign Educational and Awareness Programs through:

TV Interviews Radio Programs Local Events

Kiosks at various locations Branding KMC to various neighborhoods Advertisements on All major newspapers Advertisements on All major TV channels Advertisements on Many radio stations including regional ones

Roadmap – Short Term

Enroll All KBL Bank A/C Holders into Mobile Cash Approximately 70,000 customers will be contacted All Customers with Mobile Phones have been sent SMS All Customers with email records have been emailed

Enrollment of Agents/Merchants 500 Agent Outlets 200 Merchant Outlets

Ncell Gateway Testing in Progress Agreement to be signed in the near future

Dedicated Network at Large Supermarkets Establish VPN and deploy API

Ability to initiate transactions online Currently can initiate transactions only with mobile phones

Utility Payment Various utility providers

Roadmap – Short Term

IVR – Interactive Voice Recognition Customers able to conduct transactions with the help of voice prompts

USSD – Unstructured Supplementary Service Data Quicker Response Time compared to that of SMS Much better customer experience; the transactions are real time rather than “store and forward” concept of

SMS Dependent upon Telecom Provider Service Availability

PoS (Point of Sale) Device Device that scans phones based on RFID signal, accepts payments, and generates receipt

Localization Menu interface and SMS messages in Nepali Language

Support for GPRS Application Internet Enabled

Application Built into the SIM Dependent upon Telecom Provider Cooperation

Roadmap – Medium Term

Pension Disbursement to Gov’t Retirees Microcredit payment Facility Salary Disbursement International Remittance School Fee Payments Insurance Premium Payments and many more……..

Roadmap – Long Term

Growth Milestones

Challenges

Regulatory Framework

Distribution Network

Awareness and Promotion

Illiteracy & Resistance to Change

Trust Factor

These challenges can be address with joint effort of Government, Multinationals and other stakeholders….

We can help on Technicalities and Financial solutions..

Thank you