international business assignment 8
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Principles for BoP Market InnovationKelly Poppe-GaleSeptember, 2012
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Overview
• Mobile Money Transfer Industry
• BOP Classification and Demographics
• BOP Opportunity
• Market for Mobile Money Services
• Models for MMS partnerships
• Kenya
• Afghanistan
• Phillippines
• 12 Principles for BOP Innovation
Mobile Money Transfer Industry
• Reaching the Unbanked• Technology Dependent Banking
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BoP Consumers
• Population of 4 billion
• They are brand conscious
• They are value conscious
• A higher percentage of money is spent on luxury goods
• They do not own their homes or real estate and therefore do not invest money there
• 85% of residents of one city in India own television sets, blenders, and gas stoves
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Why BoP Markets for MMT?
• Consumers are:– connecting and
networking– Readily accepting of
advanced technology• Only 4%
penetration of existing companies
Safaricom and M-PESA
• Only MNO in Kenya at launch• Vodaphone owned 40%• Targeted the Unbanked• Population was technologically
prepared• Kenyan Government does not
require bank accounts
M-PESA Success Factors
• Simplicity
• Immediate functionality
• Differentiated fee structure
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Vodaphone, Roshan and M-Paisa
• Roshan was leading MNO in Afghanistan
• Targeted Microfinance Loans Market
• Low Literacy• High Consumer
education needs
USAID/Microenterprise Access to Banking Services
(MABS) - Philippines
• Smart Communications• Globe Telecom• Targeted large
population of rural banks
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Recurring Considerations
• Importance of trust in agents
• Volatile market conditions
• Need for education of consumers
• Customer Due Diligence (CDD)
• Know Your Customer (KYC)
• Anti-Money Laundering (AML)
Regulatory Considerations
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12 Principles of Innovation
• Free accesses to the platform
• Subscription • Flat fee • Tiered transaction
basis.
1. Create a new price-performance envelope
12 Principles of Innovation
2. Offer Hybrid solutions• Match existing structures
for similar services • Offer options when possible
3. Design scalable solutions for ease of adaptation in similar BOP markets
12 P
rinc
iple
s of
Inno
vation
4. Reduce Resource Intensity
5. Design Products for Functionality
6. Develop a logistics Infrastructure
7. Deskill work
Principles of Innovation
8. Inform Customers about product usage
– Transactions– Fees
9. Design products for durability and reliability
10.Research heterogeneity of the population
11.Develop low cost distribution methods
12.Use a systems approach; design platform for ease of new feature introduction
Principles of Innovation
Market Factors
• Literacy• % consumers with
Bank Accounts• Competition• Agent Network
Development• Availability of
Technology• Current Business
Practices
Potential New Players
Grameen BankObopayNokia
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Recommendations
• Complete a cultural analysis of market
• Determine Government Requirements
• Study consumer behavior
• Adopt best model
Conclusions
• Choose partners carefully
• Best model currently is that of Safaricom in Kenya
• Modify for market conditions and adopt best practices from other models
References
Mas, I., & Ng'weno, A. (2010). Three keys to M-PESA's success: Branding, channel management and pricing. Journal of Payments Strategy & Systems, 4(4), 352-370.
Mas, I., & Radcliffe, D. (2011). Scaling mobile money. Journal of Payments Strategy & Systems, 5(3), 298-315.
Merritt, C. (2011). Mobile money transfer services: The next phase in the evolution of person-to-person payments. Journal Of Payments Strategy & Systems, 5(2), 143-160.
De Sousa, S. (2010). The role of payment systems in reaching the unbanked. Journal Of Payments Strategy & Systems, 4(2), 145-155.
Jack, W., Suri, T., & Townsend, R. (2010). Monetary Theory and Electronic Money: Reflections on the Kenyan Experience. Economic Quarterly (10697225), 96(1), 83-122.
Abdalla, S. (2011). Stock market development and economic growth in Sudan (1995-2009): Evidence from Granger Causality Test. Journal of Business Studies Quarterly, 3(2), 93-105.
Boşcor, D. D., & Brătucu, G. G. (2010). Base-of-the-pyramid global strategy. Bulletin Of The Transilvania University Of Brasov. Series V: Economic Sciences, 311-16.
Majumder, M. (2012). A Critical Approach in Understanding Bottom of the Pyramid Propositions. Journal of Management & Public Policy, 3(2), 18-25.
Prahalad, C. K. (2005). The Fortune at the Bottom of the Pyramid. Wharton School Publishing, Upper Saddle River, NJ.
References
Griffin, R. W., & Pustay, M. W. (2010). International Business. 6th Ed. Upper Saddle River, NJ.
International Finance Corporation, (n.d.) M-money channel distribution case – Afghanistan. World Bank Group. Retrieved September 27, 2012, from: http://www.ifc.org/ifcext/gfm.nsf/AttachmentsByTitle/Tool6.9.CaseStudy-M-PaisaAfghanistan/$FILE/Tool+6.9.+Case+Study+-+M-Paisa+Afghanistan.pdf