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Mobile Payment Opportunity in the Middle East and Africa (MEA) Region February 2010


The Mobile Payment (M-Payment) market in the Middle East and Africa (MEA) region is expected to grow rapidly over the next few years

• MEA M-Payment transaction value is expected to grow at 66% annually over the next few years, reaching USD 28.1 billion or 11.3% of the global value by 2012

Key segments of the M-Payment market are M-Remittance (84% of the expected transaction value by 2012) and M-Money, which includes retail purchases, airtime top-ups and bill payments via mobile phone

Underlying drivers supporting this rapid growth in the market are:

• The large (and growing) gap between bank penetration and mobile penetration in the region

• A large number of contractual workers who typically do not have bank accounts

• A sizeable immigrant population making regular remittances to their home country

• The relatively low usage of credit cards in the region

The resulting economics and ROI for M-Payment service providers are attractive

• M-PESA, developed with an initial investment USD 3.2 million by Vodafone, generated USD 42.5 million in M-Payment revenue for its affiliate Safaricom in Kenya (in 2009)

Attracted by the fundamentals of the market and validation of the business model by players like Safaricom (M-PESA), many of the telecom companies in the region have introduced M-Payment services

However, the market is still in the early stages of development and there is plenty of opportunity for new and existing players to create and capture value through a number of different business models

Mobile Payment Opportunity in the MEA Region Executive Summary


Table of Contents

Market Opportunity

Competitive Landscape

Business Models

Case Studies

Challenges


Gross M-Payment Transaction Value by Region and Segment

Emerging markets such as Asia, MEA, and South America are expected to capture a global M-Payment market share of 65% by 2012

• M-Payment transaction value in the MEA region is expected to grow at a healthy rate (CAGR of ~66% over 2008-2012)

The expected increase in gross M-Payment transaction value will be driven by the rise in M-Payment subscribers and the greater value transacted per M-Payment user

Market Opportunity Expected Growth in M-Payment Transactions

USD

billi

on

151.6%

51.6%

Africa Middle East CAGR

2008-12

84%

1% 4%

11%

M-Money Segment

Gross M-Payment Transaction Value1 by Region, 2008–2012E M-Payment Transaction Value2 by Segment, 2012E

14.518.5 18.5

2.6

5.09.6

4.23.50.70.2

0

8

16

24

32

40

+66%

2012E

28.1

2011E

23.5

2010E

17.1

2009

4.9

2008

3.7

2

1

Retail Others Top up Remittance

M-Remittance Segment

The M-Payment market is defined as: • M-Remittance, which includes international and

domestic money transfers • M-Money, which includes retail purchases, top-ups,

utility payments, and B2C transfers M-Remittances comprise the majority of the market with

USD 23.6 billion in expected transaction value by 2012 Note: 1The data has been sourced from an image and may not represent the exact values; 2Estimated Values – Grail Research Analysis Source: ‘M-Payments surging ahead: distinct opportunities in developed and emerging markets’, Arthur D Little, Aug 2009; ‘Mobile Commerce in MEA’, Delta Partners, Jan 2009; ‘Dialed into EMEA telcos’, Macquaire, Mar 2009; Grail Research Analysis

The MEA region represents a significant opportunity for M-Payment services with transaction value expected to grow from USD 3.7 billion in 2008 to USD 28.1 billion in 2012

The global M-Payment transaction value is expected to reach USD 249.1 billion by 2012, implying an 11.3% share for the MEA region


Market Opportunity M-Payment Market Segments

USD

billi

on 23.6

19.4

13.7

4.23.6

0

8

16

24

32

40

+60%

2012E 2011E 2010E 2009 2008

Currently, mobile top-ups and other value added services form a major portion of the M-Money market in the MEA region

Retail purchase via mobile phone is expected to witness the highest growth in M-Money transactions

• The transaction value of retail purchase is expected to rise from USD 26.3 million in 2009, to USD 405.7 million in 2012

Several companies are considering transferring employee salaries to their mobile phones. This may further increase the value of M-money transactions in the region

M-Remittance Transaction Value, 2008–2012E M-Money Transaction Value, 2008–2012E

USD

billi

on

In the Middle East, 70% of the recently launched M-Payment initiatives are related to money transfer through mobile, indicating a focus on M-Remittance related services

• International transfers are expected to form a major part of M-Remittances because of the large immigrant population

In Africa, domestic remittances are expected to form the majority of M-Remittances, as a result of the substantial unbanked population

Note: 1Estimated Values – Grail Research Analysis Source: ‘Mobile Commerce in MEA’, Delta Partners, Jan 2009; Business Intelligence Middle East; Middle East Mobile Money; Grail Research Analysis

9%

24%

67%

While remittances dominate M-Payment transactions, M-Money transactions are expected to grow at a faster rate, as value added services like retail purchases via mobile phone will become more popular

M-Money Transaction Value1 in the MEA M-Remittance Transaction Value1 in the MEA 2 1

Others Retail Top-ups

In the Middle East, 70% of the recently launched M-Payment initiatives are related to money transfer through mobile phones, indicating a focus on M-Remittance-related services

• International transfers are expected to form a major part of M-Remittances because of the large immigrant population

In Africa, domestic remittances are expected to form a major part of M-Remittances, as a result of the substantial unbanked population

4.54.13.4

0.70.1

0

2

4

6

8

10

+164%

2012E 2011E 2010E 2009 2008E


M-Payment is a convenient ‘funds transfer’ option in areas with low bank accessibility

The large and growing gap between the number of mobile subscribers and bank account holders make MEA an ideal market for M-Payment service providers

Market Opportunity Drivers of the M-Payment Opportunity

Note: 1Calculated by Grail Research and refers to Workers' remittances, compensation of employees, and migrant transfers, debit; 2 Made primarily through credit cards

Source: Business Intelligence Middle East; Gartner; IE Market Research; Arthur D Little; ‘Mobile Commerce in MEA’, Delta Partners, Jan 2009; First Arabic Financial Daily; International Trade Administration; International Organization for Migration ; World Migration Report 2008

Large Number of Transient Workers High Mobile Penetration & Low Bank Penetration

52%

30%

30%

22%

0% 35% 70%

Middle East

Africa

Population’s Reluctance to use Credit Cards

Adoption and usage of credit cards is low in the MEA region

• USD 6.9 billion in electronic payments2 in the region in 2009 represented only 1.8% of the global e-payment transaction value

Low credit card usage may be attributed to behavioral & religious reasons

Given the high mobile penetration, M-Payment can be a popular alternative to credit cards

1

4

Bank Penetration Mobile Penetration

Gap in Mobile and Bank Penetration in MEA, 2007

2

Transient workers, form a significant proportion of the workforce in the Middle East, accounting for over 50% of labor force in the GCC

These workers have low/irregular incomes and can benefit from M-Payment as no minimum balance or regular installments are required

Contractual workers typically make frequent low-value transactions that have lower risk, thus making M-Payment a preferred transaction medium

In MEA, factors such as the large number of migrants, transient workers and a substantial (and rapidly growing) mobile user base are driving the growth of the M-Payment market

The MEA region currently has ~40 million migrant workers, leading to a substantial outflow of funds from the region

• M-Payment service providers can capture a sizeable share of the ‘international remittance’ market, given the cost advantage over traditional funds transfer mechanisms

Large Immigrant Population in Need of Remittance Services

3

39.737.435.331.229.8

0

25

50

2008 2007 2006 2005 2004

Remittances1 Outflow from MEA, 2004–2008

US

D b

illio

n


427.5 587.5 702.9

122.50

400

800

1,200

1,600

2012E

1,280.0

2011E

773.0

2010E

466.9

2009E

282.0

2008

170.3

93.5

Investment for Money Transfer Platform Development

Market Opportunity Economics and ROI in the M-Payment Market

Market Potential (Range) for the M-Payment Services Sector in MEA, 2008–2012E

US

D m

illion

Market Potential for M-Payment Service Providers in MEA

Returns – M-PESA in Kenya

In 2003, Vodafone invested USD 3.2 million to develop a cash transfer platform (other costs such as setting up infrastructure, e.g., POS and advertising not included). The M-PESA offering was piloted in 2006 and formally launched in 2007. This money transfer platform enabled:

• Provision of cash balance on mobile phones (M-Wallet services)

• Transfer of money to third parties such as non-Vodafone customers and non M-PESA account holders

• Airtime purchases for an individual’s or a third party’s phone

In FY09, Safaricom, an affiliate of Vodafone (40% stake) generated USD 42.5 million in revenue from M-PESA with an estimated USD 4.26 million1 subscribers

• This translates to an average incremental ARPU of USD 9.98

M-Payment penetration is ~46% of Safaricom’s subscriber base (as of Mar 2009)

ROI on M-Payment Services – The Case

of M-PESA

Safaricom’s M-PESA service illustrates the strong ROI experts believe M-Payment providers can expect. M-Payment service providers are projected to capture 2.5%-4.5% of the transaction value by 2012

Note: 1Estimated Values – M-PESA customers for each month have been averaged out Source: ‘Mobile Commerce in MEA’, Delta Partners, Jan 2009; ‘Progress of Funded Projects’, Vodafone Group, Nov 2006; Grail Research Analysis

Market potential for M-Payment services may range from USD 702 million to USD 1,280 million in 2012 (2.5%-4.5% of the total transaction value)

Range


Table of Contents

Market Opportunity


Business Models

Case Studies

Challenges


Potential Opportunity – Gap Between Mobile and Bank

Penetration, 2007 Zain Batelco Etisalat du Wataniya

Telecom Orange MTN STC

Jordan

UAE # of Bank Branches1: 727

Bahrain # of Bank Branches2: 95

Kuwait # of Bank Branches3: 554

Saudi Arabia

Oman Oman has two domestic mobile operators: Oman Mobile and Nawras. However, M-Payment services are not currently offered in Oman

Competitive Landscape Telecom Service Providers in the Middle East

Country

Players

Mobile Network M-Payment Note: 1Data for 2009; 2Data for 2003; 3Data for 2007

Source: ‘Mobile Commerce in MEA’, Delta Partners, Jan 2009; ITU; World Bank; IMF; Alrroya; Grail Research Analysis

While a number of Telcos in the Middle East offer M-Payment services, there is significant opportunity for both new and existing players to capture value from this market

33%

77%

62%

101%

193%1

37%

77%

Mobile Penetration

Bank Penetration

64%2

97%3

In Feb 2009, STC announced plans to launch M-Payment services in

Kuwait through its subsidiary - Viva

# of Bank Branches in country

?


Competitive Landscape in the Middle East

M-Payment services in the Middle East have been growing in the last few years; however Saudi Arabia continues to be an untapped market despite favorable fundamentals (mobile penetration, migrant population)

Note: Pricing details are represented in USD using on-date conversion rate from oanda.com Source: ‘Value-Added Service and Applications’, GSA, Jan 2009; ‘Etisalat mobile payment’, AME Info, May 2007; ‘Visa International and Fastlink debut new mobile payment service in Jordan’, AME Info, May 2005; Primary Research Interviews with industry experts/ operators; ‘Consumers not prepared to pay for mobile banking’, egovonline, Jul 2009

Competitive Landscape Incumbent M-Payment Service Offerings in the Middle East

Syria

Iraq

Jordan

Israel

Lebanon

Saudi Arabia

Yemen

Oman

U.A.E.

Qatar

Bahrain

Kuwait

Mobile operators in Saudi Arabia have not yet launched M-Payment services. The market has high mobile penetration (120% in 2008) and a large immigrant population (over 6 million in 2007), thus providing significant opportunity for service providers According to a survey in 2009, 67% of people in

Saudi Arabia indicated a ‘high comfort level’ in conducting financial transactions via mobile phones

Saudi Arabia

Zain: Launched in May 2005, Zain-M-Payment service allows users to transfer airtime to other customers. Zain charges USD 0.20 per transaction

Jordan Zain: Launched in 2006, Zain’s M-Pay

allows users to recharge airtime with funds from their bank account Wataniya Telecom: Launched in Feb 2006,

Wataniya Telecom’s GoDo! portal allows users to access their bank accounts through mobile phones

Kuwait

Du: Launched in Apr 2007, du’s M-Payment services allow users to pay bills and recharge airtime Etisalat: Launched in May 2007, Etisalat’s M-

Payment services allow users to pay their mobile bill via a pre-registered credit card

UAE

Zain: Launched in Nov 2008, Zain Me2U offers remittance, top-ups and utility payment services. It charges USD 0.15 for money transfer in Bahrain. International remittances start at USD 2.64 per transaction. In 2009, the offering had between 3,000 and 4,000 customers Batelco: Launched M-Payment services

in Jul 2004, including a mobile bill pay service

Bahrain


Potential Opportunity – Gap Between Mobile and Bank Penetration,

2007

Zain Batelco Etisalat Vodafone / Vodacom Orange MTN Glo

Mobile Maroc

Telecom Millicom

South Africa

Tanzania

Egypt

Kenya

Uganda

Nigeria

Mauritius

Morocco

Competitive Landscape Telecom Service Providers in Africa

Mobile Network M-Payment

Country

Players

Note: 1Data for 2008. Bank penetration is the average cited in news articles; 2Data for 2009 Source: Mobile Commerce in MEA’, Delta Partners, Jan 2009; New Vision; Grail Research Analysis

Most African markets have low bank penetration and a rapidly growing mobile subscriber base, making them attractive markets for M-Payment offerings

95% 46%

5%22%

30% 15%

32% 10%

74% 54%

39%2 16%2

48%1 20%1

Mobile Penetration Bank Penetration

59% 28%

Vodafone offers M-PESA service through its affiliate

Safaricom


Africa has been a test bed for M-Payment services. The early success of M-PESA and Glo has motivated pan-African rollout of these services and also served as case studies for M-Payment deployment globally

Competitive Landscape Incumbent M-Payment Service Offerings in the Africa

Niger

Egypt

Kenya

Tanzania

Nigeria

Malawi

Uganda

South Africa

Sierra Leone

Competitive Landscape in Africa

MTN: Launched in Aug 2005, MTN-Mobile Banking allows users to check balance, view bank statements and transfer money. MTN charges USD 1.90 per transaction Vodacom: Launched in Aug 2005, Vodacom-

PayPoint allows users to accept payments from credit cards. The service costs USD 6.44 per month

South Africa

Maroc Telecom: Launched in Jan 2010, Maroc Telecom is the first M-Payment service in Morocco. The service allows money transfers and bill payments through mobile phones

Morocco

MTN: Launched in 2009, MTN Mobile Money service in Uganda allows users to transfer money. For money transfers above USD 5, MTN charges USD 0.40 per transaction. MTN had 100,000 customers as of Sep 2009 Zain: Launched its M-Payment services – ZAP in

Uganda (2009) and in Niger, Malawi and Sierra Leone (2010). Zap enables customers to transfer money and manage bank accounts

Uganda, Niger, Malawi and Sierra Leone

Glo Mobile: Launched in Mar 2005, Glo M-Banking allows users to access bank accounts, transfer money and buy airtime at a flat rate of USD 0.27 per request

Nigeria

Millicom Mauritius: Launched in 2009, the Emtel Mobile Banking service allows users to conduct bank transactions through their mobile phones

Mauritius

Safaricom: Launched in Mar 2007, Safaricom’s M-PESA allows users to access bank accounts and transfer money. Safaricom charges USD 0.37 for money transfer of up to USD 440 to a registered M-PESA user. It had 8.5 million customers as of Nov 2009 Zain: Launched in Feb 2009, Zap allows users to

transfer money and manage bank accounts. Transaction fees of USD 0.13 are charged for the transfer of money between Zap accounts

Kenya

Vodacom: Launched in Apr 2008, Vodacom’s M-PESA enables customers to transfer money. Vodafone charges transaction fees up to USD 0.14 for transferring funds to a registered customer Zain: Launched in Feb 2009, Zain-Zap allows

users to transfer money and manage their bank accounts

Tanzania

Vodafone: Launched in 2007, Vodafone Mobile Banking allows users to access bank accounts and transfer money. Vodafone does not charge fees for transferring money. However, it charges a 2% transaction fee for recharging the M-Wallet account

Egypt

Note: Pricing details are represented in USD using on-date conversion rate from oanda.com Source: Value-Added Service and Applications’, GSA, Jan 2009; ‘Implementing successful millionT initiatives’, Octopus Consulting, Sep 2009; Zain; Primary Interview with customer care executives of telecom operators


Table of Contents

Market Opportunity


Business Models

Case Studies

Challenges


Business Models Introduction to the Value Chain Three business models for M-Payment services have emerged; each differs based on the type of organization that plays the role of Issuer, Acquirer and Payment Network

Business Model Role of Acquirer Payment Network Role of Issuer

Operator-Centric Mobile Operator Mobile Operator Mobile Operator

Financial Institution-Centric Financial Institution Financial Institution Financial Institution

Collaboration Mobile Operator or Financial Institution Financial Institution Mobile Operator or Financial Institution

Key Business Models – M-Payment Services

A

Key Parties and Their Role in an M-Payment Transaction

Payment networks connect and switch transactions between the acquirer and the issuer

Acquirers provide Point of Sale equipment to the merchant and charge the issuer for the transaction Upon receipt of payment, acquirers

credit merchants’ accounts Customer

Customers initiate the purchase or transaction through the mobile application/solution/SMS

Customers receive funds on their mobile phones. They buy credits through the purchase of a ‘pre-paid balance’ or receive a charge in their mobile bill

Transaction / Purchase

Merchants accept payments from customers and record them through Point of Sale equipment (reader or a mobile phone) New technologies such as ‘Near Field

Communication’ enable customers to use their mobile phone as a smart card

B

C

Issuer (Bank/ Mobile

Operator)

Issuers provide credit (M-Wallet) to customers on their mobile phones and manage their accounts

Merchant

Payment Network (Bank, mobile operator or financial

institution such as Visa/ MasterCard)

Acquirer (Bank/ Mobile

Operator)


Business Models Operator-Centric Model

Customer Merchant M-Wallet Provision by

Mobile Operator

or

Customer conducts a transaction using a mobile phone

Mobile Operator (Acquirer + Payment Network + Issuer)

Merchant transfers

transaction information

Operator adjusts customer’s mobile balance or charges the customer on

his/her bill

Customer has the required credit on

his/her mobile phone

Customers go to the mobile operator’s agent to receive a mobile

balance in exchange for cash

Operators charge customers for transactions via their mobile bill

Operator credits

merchant’s account

1

2

The Operator-Centric Model is particularly attractive in countries with weak a financial services infrastructure, because the telecom operator manages the entire M-Payment value chain

Source: ‘Proximity Mobile Payments Business Scenarios: Research Report on Stakeholder Perspectives’, Smart Card Alliance, Jul 2008; ‘The M-commerce reality in the MEA’, Comm.ae, Feb 2009

Operator-Centric Model

In the ‘Operator-Centric Model’, the telecom operator manages the entire M-Payment value chain • The operator plays the role of acquirer, payment network and issuer. The operator is also responsible for providing the Point of Sale (POS)

equipment to merchants Examples: NTT DoCoMo FeliCa (Japan); G-Cash (Philippines), Mobipay (Spain), M-PESA (Kenya) Key Features:

• The operator leverages its existing infrastructure, customer base and experience in managing a wide distribution network » Operators can adopt this model in developing markets such as the MEA where there are large volumes of micro-payments (low-risk

associated with such payments) • Since operators are managing the entire value chain, they need to make significant investments in POS equipment and customer service for

merchants

A


Business Models Financial Institution-Centric Model

Financial Institution-Centric Model

Customer has the required credit

on his/her mobile Customer Merchant

Customer conducts transaction using the mobile

Acquirer (Bank / Financial Institution)

Payment Network (Bank/ Financial Institution) Issuer Bank

Information is transferred through payment network

Issuer charges the customer for the purchase

Issuer transfers payment Payment is transferred through payment network

Acquirer credits the merchant’s account

The Financial Institution-Centric Model works well in markets with an established and trusted financial infrastructure

Source: ‘Proximity Mobile Payments Business Scenarios: Research Report on Stakeholder Perspectives’, Smart Card Alliance, Jul 2008; ‘Mobile Commerce in MEA: A Current Reality’, Delta Partners, Jan 2009; ‘DOCOMO to Launch Mobile Remittance Service’, NTT DOCOMO, Jul 2009

B

M-Wallet Provision

Customers’ banks provide the M-Payment application on mobile phones or enable the customer to conduct transactions via their

mobile phone

Merchant transfers the transaction information using the POS equipment

provided by the acquirer

Acquirer transfers transaction information to the network

In this model, banks and financial institutions are the only parties involved in processing the transaction and transferring funds • The acquirer and issuer bank may or may not be the same

Banks are responsible for providing customers with the M-Payment application/solution on their mobile phones and deploying Point of Sale equipment with the merchant Examples: MasterCard’s Pay-Pass Key Features:

• Mobile operators are not involved in the process, except for the use of the mobile network (SMS/WAP) • The model reduces cash and check handling and improves customer loyalty for banks; customers benefit from improved transaction

security since banks are involved • This model does not work in markets with poor banking penetration or for customers that do not have a bank account • Banks need to incur an additional cost for installation and maintenance of the mobile application, sometimes on multiple networks


Business Models Collaboration Model

Collaboration Model

In the Collaboration Model, services across the value chain are distributed between telecom operators, banks and other financial institutions such as MasterCard and Visa Examples: South Korean SK Telecom’s Moneta service launched in association with financial services companies such as Visa Key Features:

• Leverages the core competencies of financial institutions (credit and risk management) and telecom operators (mobile application and transaction)

• Telecom operators do not need to take on the financial risk • Investment and revenue are shared among stakeholders • This model is effective in areas with low bank penetration, as the mobile operator plays the role of the issuer

M-Wallet Provision

Banks or mobile operators provide the

M-Payment applications on

customers’ mobile phones or enable

customers to conduct transactions via their

mobile phones

Customer Merchant

Customer conducts transaction using their mobile

Acquirer (Mobile Operator/ Bank

Merchant transfers the transaction information using the POS equipment

provided by the acquirer

Payment Network (Bank/ Financial Institution)

Issuer (Mobile Operator/Bank)

Transfer of information through payment network

Issuer transfers payment Transfer of payment through payment network

Acquirer credits merchant’s account

Source: ‘Proximity Mobile Payments Business Scenarios: Research Report on Stakeholder Perspectives’, Smart Card Alliance, July 2008; ‘Mobile Commerce in MEA: A Current Reality’, Delta Partners, Jan 2009; ‘DOCOMO to Launch Mobile Remittance Service’, NTT DOCOMO, Jul 2009; FINsights

Customer has the required

credit on his/her mobile

Issuer charges the customer for the purchase

C

Acquirer transfers transaction information to issuer

The Collaboration M-Payment Model adapts to suit the requirements of different geographies. Telecom operators and financial institutions distribute the transaction-enabling roles (acquirer, issuer, etc.) as appropriate for the market


Table of Contents

Market Opportunity


Business Models

Case Studies

Challenges


Case Studies Safaricom’s M-PESA in Kenya – A Success Story

M-PESA revenue grew 750% from USD 5.61 million (KSH 0.37 billion) in FY083 to USD 42.54 million (KSH2.93 billion) in FY093

Overview

M-P

ESA

Cus

tom

ers

(milli

on)

Launched in Mar 2007, M-PESA is the M-Payment solution offered by Kenya’s major telecom operator, Safaricom, in association with Vodafone

• It was a initially a pilot project funded by Vodafone and UK’s Department for International Development

Services Offered: M-Wallet services, money transfer, withdrawal of money received through M-PESA, mobile top-up and bill payment for Safaricom customers

M-PESA customers can also

receive money from senders in the UK

Monthly M

-Payment Transfers

(USD

million)

Conducive Market Conditions Low Cost Accessibility Security

~23% of the population had bank accounts; while the mobile penetration was ~40%

M-PESA is cost effective, compared to other alternatives • 27% less expensive than

the post office’s PostaPay

Wide network of over 14,000 agent outlets2

Strong security features including PIN protection and value recovery in case of phone loss

1 2 3 4 Success Factors

0

2

4

6

8

10

0

100

200

300

400

Apr-07

Jan-09

Jan-08

Nov-09

Key Performance Indicators

Note: 1The data is represented in USD using on-date conversion rate from oanda.com; 2As of Nov 2009; 3Financial year ending Mar 31 Source: ‘Safaricom Website’; ‘M-Payment surging ahead – Arthur D. Little’; ITU

M-PESA, which follows the Operator-Centric Model, has been a huge success in Kenya. With over 8 million subscribers, it accounted for more than USD 300 million in monthly M-Payment transfers in Nov 2009

No. of M‐PESA Customers (million) Value of M-Payment Transfers (USD million) 1


Case Studies Me2U Zain Wallet in Bahrain – An Emerging Story

Zain had ~686,000 active mobile phone subscribers in 2008; This indicates significant untapped potential for the operator in the mobile payment services segment

In Nov 2008, Zain launched a mobile financial transaction service, Me2U Zain Wallet, in Bahrain • Zain Wallet, operates in collaboration with MODE

Bahrain1 (financial institution partner) and enables users to transfer money domestically and internationally » The payment interface of Zain Wallet uses

SMS, sent from the SIM Menu • The product is available at Zain outlets, under the

Zain brand • Immigrants account for ~30% of the Bahraini

population, so the potential for international remittances using mobile phones is high

Services Offered: Domestic and international remittances; top-up prepaid account; balance inquiry; money withdrawal or deposit at selected Zain or Nonoo exchange branches Geographic Scope: Bahrain

• International money transfers can be made to 32 countries

Challenges: Low education and awareness among customers may prove to be a constraint

Low Cost Accessibility Security

Free monthly subscription; domestic funds transfer/payment costs USD 0.13; international remittances start at USD 2.66 • No charge to open a Wallet account

19 Zain and Nonoo branches throughout Bahrain • Looking to expand the number of outlets

in the future to reach untapped areas

High security features such as PIN protection and account blocking on phone loss

1 2 3 Factors that may contribute to the greater adoption of Me2U Services

Current Me2U Service Distribution, 2009a

30%

50%

Payments

20%

Remittance

Airtime Purchase

Note: 1MODE Bahrain is a money transfer company, owned by BMI Bank and Nonoo Exchange Source: ‘Zain Bahrain’; aPrimary Research with industry experts/personnel; Grail Research Analysis

Overview

Me2U Wallet, Zain’s M-Payment service in collaboration with MODE Bahrain, had between 3,000 and 4,000 subscribers in 2009. Low-cost and strong security features are expected to drive continued growth

(Total Me2U subscribers: 3,000-4,000)


Table of Contents

Market Opportunity


Business Models

Case Studies

Challenges


Note: ‘Know Your Customer’ refers to a regulation that requires banks and financial institutions to verify the identities of their customers Source: ‘Mobile Banks face Challenges in Africa’, Wireless Federation; ‘Mobile Banking: Knowledge Map and Possible Donor Support Strategies’, InfoDev; ‘Consumer Protection a Key Issue for Branchless Banking’, CGAP, Mar 09

Challenges Barriers to Growth of M-Payment in the MEA Region

A large segment of the population in the MEA is not comfortable with the use of technology

• Service providers will need to invest in simplifying the technology and interface, and in educating customers

Lack of Technological Sophistication

Among Customers

Challenges in the MEA M-Payment Market

The regulatory framework for financial transactions via mobile phones is currently not well developed • As regulations evolve, M-Payment service providers may have to comply with stricter controls such

as ‘Know Your Customer’ requirements (to prevent money laundering, terrorism funding, etc.), which may add costs and slow adoption

Regulatory Barriers

A wide distribution network of agents is critical to success in this market, but setting up and maintaining such a network can be difficult and costly in a number of MEA countries Low start-up costs and an attractive commission structure for their network of agents will be critical for

service providers as they look to develop and maintain distribution networks

Distribution

Some M-Payment service providers require customers to have a bank account, which limits the potential for services within the unbanked population, an important customer segment for growth In addition, some service providers concentrate on existing bank customers rather than going after the

unbanked population ,who are most in need of services like M-Remittance and M-Money for retail purchases

Mandatory Requirement of

Bank Accounts (by Some M-Payment

Networks)

While the MEA M-Payment market opportunity is significant, telecom operators face adoption, distribution and regulatory challenges


For More Information Contact:

Grail Research ([email protected])

Copyright © 2010 by Grail Research, a division of Integreon No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means — electronic, mechanical, photocopying, recording, or otherwise — without the permission of Grail Research, a division of Integreon

mobile payment opportunity in the middle east and … mobile payment (m-payment) market in the...

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