The active user rate plays an important role in a mobile operator’s business model - if it’s unexpectedly low, it impacts cost of acquisition as well as the value a deployment can provide to its agents. Recently, we had conversations with five different deployments who shared their active user rates with the GSMA. To protect confidentiality, I won’t reveal which deployments - or even which markets - the numbers come from. Still, the figures should spark some discussion (and hopefully creative solutions) from the community.

Of the five deployments, one had an active rate of 60%, and the other four were all below 30%, with the lowest of the bunch coming in at 10%. Clearly, there’s room for improvement across the board. But to begin thinking about how we can improve the active user rates in any market, we first need to understand why they’re low in the first place. There’s an endless list of possible reasons - and please add your ideas below - but I’d like to start the conversation by presenting two that I think are particularly prevalent.

“Some of our agents do registration, and others do cash in/out”

A number of deployments around the world have created agent networks with two categories of agents: one to register customers, and another to facilitate cash in/out. In some cases, this structure has contributed to low active user rates for a few reasons. First, by creating a category of agents whose sole responsibility (and source of income) is to register new customers, it can be difficult to prevent them from selling a bit too eagerly to prospects with no actual demand in an effort to earn a commission. In this case, it’s less about a customer registering, and more about a customer being registered. Second, customers who register at dedicated ‘registration agents’ face an immediate barrier to use: finding an agent. Today in Nairobi this is easy - but in most early stage deployments, it can be a difficult task. And third, because registration agents typically earn most of their commission from the act of registering a customer, it’s difficult to persuade them to invest time in education.

“It’s our strategy: Phase One is acquisition, Phase Two is activation”

Another reason for low active rates is the philosophy that mobile money should be rolled out in two distinct phases. Disciples of this philosophy use phase one to register as many customers as possible and then later, in phase two, think about finding ways to get them transacting. If the active user rate equation has a denominator (number of registered users) and a numerator (number of active users), then this philosophy calls for a focus on the denominator in phase-one, and then a shift to focus on the numerator in phase-two.

We’re seeing this strategy play out in many African markets where operators are in the midst of implementing prepaid SIM registration. Operators are leveraging the unique touch-point with customers that SIM registration provides as an opportunity to promote mobile money. Of course, just because an operator activates an e-wallet for a customer who has gone through KYC, it does not necessarily mean that customer will ultimately be an active user. But, critically, it does give the operator an improved likelihood of success by eliminating the registration barrier and enabling the delivery of promotions. Still, the ultimate success of this strategy will hinge on phase two: giving customers a compelling reason to start transacting - and making sure that the ecosystem needed to facilitate transactions is still intact.

But why does the active user rate matter so much in the first place? People are always curious to hear the figure, but how exactly will a low active rate impact the rollout of a deployment? Well, it depends on who within a mobile operator you ask.

If you’re asking the head of distribution, he might say something like this: “I don’t care how many customers you register because only a fraction of them end up giving me what I need - transactions that will generate income for my agents. If customers don’t start transacting, my agents will lose interest and we’ll have no distribution network.” It’s clear then that the head of distribution cares more about active users than registered users.

If you’re asking the head of finance, she might say “in your business case you estimated the lifetime value of a customer to be X, which justified a cost of acquisition of Y. However, with so few customers transacting, the average lifetime value is too low to justify our COA.”

The trick, then, is to first have realistic estimates not just of registered users but of the number of active users, and to constantly be thinking of ways to drive usage. And simple things can make a big difference. An Asian deployment facing a low active rate partially due to having multiple categories of agents found that simple follow-up calls to educate customers got them transacting. An African deployment facing the same challenge found that encouraging their registration agents to perform activations in front of cash in/out agents helped to improve the active rate by clarifying to customers how they can start transacting. And in many deployments, operators have already begun stipulating that registration commissions will be paid in multiple tranches - some amount for registration, and the rest held for when a customer completes a certain number of transactions.

Safaricom and other veterans can look back at their historical figures and say that none of this should be surprising. The active user rate is something that requires attention, but can be addressed as a deployment matures. To help advance the thinking, please feel free to share your ideas below on ways that deployments at various stages of maturity can improve their active rates.

So what’s been happening in the last couple months?

Let’s begin our update by looking at the South Asian Region. Easypaisa in Pakistan has launched its third product, the Mobile Account. Mr. Ali Abbas Sikandar, Group Executive Director at Tameer Microfinance Bank recently shared some impressive numbers about their deployment: over 500,000 transactions processed in the last four month and 420,000 bill payments since its launch.

More details here.

In Barcelona, Globe announced some big changes that will impact the Philippines: using the Beglacom ICS HomeSend service, it will soon be easier to send money back to the Philippines electronically.

Moving to Africa, we’ve seen a continued expansion from Zain, who announced that Zap is now available in Ghana.  And in Somalia, we’ve added two deployments that previously were not captured in our tally: Somtel’s Zaad which has been live since the end of 2009, and Hormuud Telecom, which will hopefully be gaining traction in the months to come with their newly launched mobile money transfer service.

In India, Nokia has teamed up with YES BANK to introduce a live commercial pilot scheme of Nokia Money. This initiative, based on Obopay’s platform, is initially targeted at growth markets and designed to work in partnership with multiple network operators and banks, involving distributors and merchants.

Finally, in Latin America, Trivnet has been selected to provide mobile money services to Telefonica’s Movistar customers. A wide range of services are being planned for their 12 regional subsidiaries including person-to-person mobile money transfer, mobile commerce, bill payment and mobile banking will be offered

Clearly , the success stories are growing and we will continue to update our readers regularly on the rising new players in the MMU arena.

Q: I’m not from Latin America - will MMS be relevant to me?

A: Yes. While this event is being held in Brazil, it will feature global content. Whether you’re from Africa, Asia, North America or the North Pole, there will be relevant content for you at MMS.

Q: What if I don’t focus on the unbanked segment? Is the event still relevant?

A: Yes. There will be content on the programme that’s relevant to people interested in both banked (i.e. general programme) and unbanked markets (i.e. MMU working group).

Q: I go to many events. Will I be hearing the same things from the same people in Rio?

A: No. MMS will feature fresh, new speakers. Further, any familiar names who have spoken recently will be required to present new and interesting content.

Q: I want to share content / make a presentation at Mobile Money Summit. What should I do?

A: You’re in luck - but you need to act fast. The call for papers closes on March 5th. Click here for more information.

Q: I’m a technology vendor (or other service provider) and I’d like to find a way to reach my target market. What do you suggest that I do?

A: Click here to learn about advertisement, exhibition, or sponsorship opportunities at MMS.

Q: What was the 2009 Mobile Money Summit like?

A: 2009 was a great year, and we’re confident 2010 will be even better. Last year the event attracted 457 attendees from 68 countries. 63% of these attendees were C-Level, VP, Board, or Directors. There were 42 speakers last year and 82% of attendees would ‘strongly’ or ‘definitely’ recommend the event to a colleague. Check out some of the presentations from 2009 at www.mobileworldlive.com.

Q: We are trying to launch mobile money, but are having difficulty working to get approval from our financial services regulator. Will there be any content at MMS to address this?

A: On Monday 24 May we’ll host a free regulatory executive training session. This full day session is open to mobile operators, and is designed to help them better understand the ways they can influence their financial services regulator. To provide direct and valuable feedback, a regulator will take part in the session. The most appropriate person to attend this session would be the mobile money regulatory lead contact from the MNO.

Q: I’m ready to buy a ticket to attend. Where do I go?

A: Stay tuned - in the coming weeks, this will be possible at www.mobilemoneysummit.com.

- Southern Cone and Brazil
- The Andean region
- Mexico and Central America.

The mobile money phenomenon is a relative late comer to the region, and experts both in the telco, banking, and development sectors seemed baffled by its slow uptake when compared to frenzy seen in Africa and East Asia. Thus far, a key barrier to growth has been the restrictive regulatory environment, but this hurdle is slowly being overcome and 2010 is looking like the year when mobile money will finally take off. Sweeping regulatory changes on branchless banking are being introduced in Peru, Colombia and Mexico, and as a result, innovative initiatives are starting to spring up, taking into account the local socio-economic context. Regional players such as Telefonica and Tigo Millicom have started rolling out pilots proving that telcos in this region are also eager to jump on the opportunity.

Before diving into our series, it is important to highlight that Latin America is a highly heterogeneous region. Even though it shares a historical common heritage, a couple of factors distinguish this region from others: its enormous gap in income distribution, along with its wide-ranging levels of economic development; rates of access to financial services; and different levels of mobile penetration. South America is the most unequal continent and this feature, along with the massive uptake of mobile communications poses a unique, yet complex environment for mobile money to emerge in. A recent study by Fundacion Telefonica and AFI - Analistas Financieros Internacionales found that mobile solutions are already being used by banks in many LAC countries such as Brazil, Chile, and Colombia, but these are mostly used to access bank balances and only in very few cases to make payments (with some exceptions such as Argentina and Brazil). Furthermore, these deployments are directed at banked users and serve as an additional distribution channel, next to the more traditional bank branches and ATMs. This is a first step, but the question that remains unanswered is when will these solutions begin to trickle down to the unbanked and how? It is, after all, this lack of access to financial services that is one of the pillars that obstructs people’s paths to better socio-economic wellbeing. In 2009, 80 percent of Latin Americans carried a cellphone, but only 30 percent had access to basic financial services. (Source: World Bank and Wireless Intelligence)

As a result, policy makers and regulators in the LAC region have been facing the challenge of reconciling the development of branchless banking with the emergence of mobile money and the effort to increase levels of financial access. In addition, Latin American migration to the United States has been the most dynamic migration pattern in the world; as the largest recipients of cross-border remittances, unbanked customers in countries like Mexico and Brazil are in a strategic position to take advantage of mobile money services combined with branchless banking. Moreover, as CGAP recently highlighted, the rise of G2P payments and the vigorous growth of the MFI industry in Latin America will create a further dependence on mobile branchless banking over the coming decade.

We look forward to updating our readers next week with a survey of the Southern Cone and Brazil. Already many questions arise about an emerging Latin American model and we hope that these series will clear the air and pave the way for further research in the region.

The roundtable was attended by MTN, Orange, Zain, Camtel, Citibank, Afriland First Bank, BEAC, BCEAO, Central Bank of Kenya (thanks to the support of the Alliance of Financial Inclusion), Bank of Ghana, CGAP and GSMA.

So why did we choose to host our first regional regulatory roundtable in Cameroon? If you look at our deployment tracker, it’s clear that East and West Africa are hotbeds of mobile money activity, but so far no deployments have been launched in Central Africa - this in spite of the fact that MTN, Orange and Zain all have strong footprints in the region. Our hope is that this will change in 2010, and if Tuesday’s session was any indication, the outlook is positive.

I’d like to highlight two promising themes from the day:

Mobile Operators and Banks Working Together

MTN, Orange and Zain all made brief presentations describing their models, and it was clear that each of them have logically divided responsibilities between bank and MNO based on which party has the relevant expertise. It became clear to the participants (and regulators) that there is a clear win-win situation both for banks and MNOs (not to mention the social and economic benefits for Central Africa) when they work together.

Dialogue - Curiosity From All Sides

We left a great deal of time for discussion on the agenda, but even still it wasn’t enough. Regulators were keen to share their perspectives and ask candid questions to their peers from other markets, as well as the banks and operators in the room. It’s clear that there is a huge desire to exchange knowledge, particularly between countries that share similar contexts and challenges.

A lot of the day’s value came from creating dialogue between the key stakeholders on the specific issues that are relevant to Central Africa as a precursor to (hopefully) approving the launch of mobile money. There is an incredible amount of potential for mobile money in Central Africa - but, like any other region, there are questions about the service that must be answered first. Tuesday was an important step in the process.

We’d like to thank our co-hosts, MTN and Citibank for helping to make this roundtable possible, as well as BEAC for actively participating in and contributing to our first regional regulatory event.

As regulators confront the challenges of regulating branchless banking, protecting the consumer is often their primary concern. And for good reason. Branchless banking is a new service targeting the least sophisticated customers and introducing new actors such as mobile network operators and retail agents into a sector formerly reserved for well capitalized and regulated commercial banks. As a result, there can be an understandable tendency to err on the side of caution.

But compliance with regulations comes at a cost - and that cost is ultimately passed on to the consumer. Over-regulation therefore could threaten the emergence of viable business models, ultimately denying the customer any financial service at all. In other words, in an effort to protect poor consumers, over-zealous regulators effectively punish them.

The challenge therefore is to balance consumer protection regulation with financial inclusion. The good news here is that branchless banking, to the extent it still focuses primarily on mobile transfer of low-value funds, has a number of built-in protections that suggest that expensive consumer protection measures may not be as necessary as one might think. In the case of mobile banking consumer protection regulation, less could very well be more.

For example, mobile banking transactions are real-time - a customer is immediately notified of activity on her account with updated account balances that only a legitimate transaction can produce. This real-time nature of mobile financial transactions allows a customer to know immediately whether the product works and whether the retail agent in question is trustworthy. Real time transactions empower consumers to protect themselves against fraudulent agents much more than any regulation could. Take the case of the retailer who claims to be an agent only to abscond with customer funds. Some regulators have considered requiring posting of expensive, difficult to replicate certificates or maintenance of publicly available agent lists or databases against which consumers must verify authenticity of any given agent. But real time notification will expose fraudulent behavior rather quickly.

Another example of a protection built into branchless banking is the national consumer base. Branchless banking transactions are often multi-party and span different parts of the country. For example, unlike a microloan with only a lender and a borrower in a limited region, the person to person mobile transfer involves the service provider as well as a sender and a recipient in two different locations. This national consumer base greatly facilitates word-of-mouth endorsement and criticism of any branchless banking scheme, and consequently protects consumers far more efficiently than any regulation requiring the posting of a consumer hotline number. This is not to suggest that such posting a hotline number is not advisable - it is. The point is simply for regulators to understand most customers would probably take more comfort in the endorsement of their friends and family than they would in the knowledge of a hotline (which may or may not be effective anyway).

Another consumer protection built into branchless banking is the low value of the typical transaction -which ultimately limits consumer exposure. Compare this to the microcredit sector where customers can take on huge (and multiple) debts and risk repossession of collateral. For microcredit, it makes sense to have clear regulations outlining price transparency of complex interest rate calculations as well as effective recourse mechanisms. In branchless banking however, the low amounts involved suggest customers are unlikely to spend time, energy and even more money pursuing a claim - they are far more likely to avoid a particular agent or avoid the service altogether. And the ability to walk away is the ultimate consumer protection.

]]> http://mmublog.org/global/the-consumer-protections-built-into-branchless-banking/feed/ http://mmublog.org/global/2010-mobile-world-congress-day-2-of-mobile-money-in-review/ http://mmublog.org/global/2010-mobile-world-congress-day-2-of-mobile-money-in-review/#comments Tue, 16 Feb 2010 17:21:12 +0000 Paul Leishman http://mmublog.org/?p=662 Today was day number two of Mobile World Congress, and for me (and most readers of our blog), the highlight had to be the MMU Working Group. Mobile operators, vendors and other industry stakeholders convened to exchange learnings in our full-day interactive session.

The focus of the day was agent distribution, and conversations ranged from individual agent economics to the best practice for structuring an agent network, to the role that scratch cards might play. After some introductory remarks by Seema Desai, the day got started with a presentation on agent economics in Brazil by CGAP’s Mark Pickens. You can find his summary and presentation here, but I found a couple things particularly interesting:

- Agents handle 2.4 billion transactions per year
- Agents in Brazil make just $5.17 in profit per day, or 4 cents per transaction
- Agents do 166 transactions per day, or 1 transaction every 3 minutes

After Mark, I provided some learnings provided to me by Cambodia’s WING. Their model is particularly interesting and they’ve got some hard earned experience tackling key issues that many operators will face early on in their launches. Much of the conversation oriented around WING’s decision to use ‘Pilots’ for registration, and WING Cash Express Agents for cash in/out. Some operators, like MTN Uganda, have used a similar approach (although WING calls their staff ‘field registration agents’ rather than ‘Pilots’, so the learnings were timely. To help put WING’s model in context, we used M-PESA’s agent network as somewhat of a foil. Comparing the agent networks, it was interesting to see that there are two main differences: first, whereas M-PESA has one uniform agent that provides registration,c ash in and cash out, WING has two categories of agents - one category that does registration, and another that does cash in/out. Second, whereas M-PESA’s network of today has multiple tiers, WING’s had just one at launch - a second one was added about a year later and this looks like the tiering path that many models are following (including M-PESA).

Another highilght of the day was a discussion panel that included representation from Zain, Grameenphone, Roshan and Globe. The focus of the panel was on agent networks, and one learning that I found particularly interesting was the approach operators on this panel have taken to structuring agent incentives. Globe, Grameenphone and Zain all provide their agents with some degree of input into the ultimate price of the service, and thus, the agent’s commimssion. This approach varies notably from Safaricom’s fixed tariff structure, which is often touted as contributing to the consistent customer experience that fuelled the growth of the service.

I’ll share more in the coming days but thought I would share my highlights from a day where many people contributed to the learnings shared. Keep a watch out for the presentations from the day.

Case Study Presentation at MWC

Not surprisingly, the day was filled with learnings… and numbers. I’ve taken a moment to share what I thought were the seven most interesting ones:

1: New deployment launched in India. Today, Nokia Money launched in India and this will certainly be a deployment to watch.

2: The number of years that it takes for a mobile money ecosystem to make money and become sustainable, according to Cenk Sedar, Director, Vodafone.

3: The number of developing markets that Telefonica will have launched in by the end of 2010. This follows on the release last week by Trivnet of their partnership with the operator.

13: the number of minutes that it takes for a customer to report their phone stolen, according to a study conducted by Telefonica. This compares to 1-2 days for a bank card.

500,000: the number of transactions that Pakistan’s easypaisa has processed in the last four months.

3 million: the number of customers that M-PESA in Tanzania has reached.

8 million: the number of customers that M-PESA in Kenya has reached.

And finally, we couldn’t put a number on this one, but it merits sharing. According to Vodafone’s Cenk Sedar, M-PESA will process more transactions per year than Western Union by the end of 2010. Truly a reflection of their growth.

Tomorrow is the Mobile Money for the Unbanked Working Group, and I’m looking forward to the exchange of learnings. More to come throughout the week.

Click here for day two.

When the MMU Programme was officially launched at MWC last year, the MMU message ringing through Barcelona was about opportunity and potential; we announced that there were 1 billion customers with access to a phone today, but no access to formal financial services… And that serving these customers presented a US$5 billion direct revenue opportunity for mobile network operators by 2012. As we announced the MMU Fund - set up to accelerate deployments around the world - all eyes darted around the room, eager to see where the next MPESA success story would spring from.

A year on, we’re still waiting for our next MPESA - such success stories don’t arrive overnight, but we have a clearer view of where the next one might come from, and most importantly, what it will take to make it happen. We’ve dug into the detail around a number of mobile money models, including True Money in Thailand and WING in Cambodia - we understand who their customers are, what the value proposition is and why they are set up in the way that they are (focusing particularly on why deviations from the MPESA model have been needed in these markets); we have a better understanding of the challenges that exist around mobile money, particularly in the area of agent networks and how to build, incentivise and manage mobile money distribution successfully; and we have allocated nearly all of the MMU Fund to projects which are going to contribute massively to our understanding of mobile money, through testing hypotheses around aspects of distribution, the provision of more sophisticated services such as savings and insurance, and how to acquire and activate customers.

So the focus of our Working Group will be to share these learnings with the industry - from our case studies, our ongoing research on agent networks, early insights across the Fund portfolio, and from key operators themselves such as Zain, Grameenphone, SMART and Roshan. We’re keen to hear your views and to gain further insights from you which will help to further enrich these learnings. The MMU team is very excited about Barcelona - we look forward to meeting many of you there, for what is sure to be an interesting, insightful (and exhausting!) few days.

Launched in 2005, True Money is now used by 6 million customers. The system processes over USD$900 million in electronic payments and 120 million transactions per year. This doesn’t match the US$3.5 billion in P2P payments M-PESA processes per year, but it does suggest that the model has gained some traction.

What’s most interesting is just how unique True’s approach has been. Whereas M-PESA has scaled remarkably well as a money transfer offering, True Money has gained its traction as a payments offering. That is, their scratch cards, e-wallet and 8,000 ‘True Money Express’ agents form the basis of a system designed to process True Group bill payments, 3rd party bills, and prepaid bills from niche issuers.

True Money and M-PESA differ in many ways, but are both success stories in their own right. Indeed, True’s success to date vividly illustrates how market conditions, customer needs, and operator assets shape the nature of the mobile money opportunity in every market.

Read the case study and share your thoughts below.

True Money Case Study -