The following is a guest post we’re pleased to share by Hystra Consulting and Ashoka.

A recent study reveals how Information and Communication Technology (ICT) can viably provide access to education, healthcare, agro-services and financial services to the Base of the Pyramid (BoP). The study reviewed more than 280 initiatives set up by various types of actors (corporations, Citizen Sector Organizations, social entrepreneurs…) in Asia, Latin America and Africa which are using ICTs to provide services to the BoP. Hystra, a French consulting firm and its partner Ashoka evaluated the projects based on their ability to solve a problem, their scalability and their financial sustainability.  The report presents 15 of the most ground breaking market-based business models, which have reached a significant level of scale and have improved the living standards of the BoP using ICTs.

Financial sustainability varies across sectors, financial services being the most mature of the four areas studied.

3 of the projects featured as financial services case studies in the report serve profitably more than 5 million customers each via different business models: M-PESA in Kenya with mobile money, Bradesco in Brazil with branchless banking via post offices and small retail shops, and FINO in India with a suite of POS-powered financial services available to over 40 million clients via door-to-door agents.[1]

Why are financial services the most developed area in terms of business model sustainability? One of the reasons cited is the willingness of clients to pay upfront for the service, because it offers them immediate savings compared to previous practices (such as cheaper money transfers).  Moreover ICT-based financial services often go well beyond previous offerings, creating new practices for unbanked populations such as savings or insurance schemes that lower their vulnerability to adverse events. For example, some MNOs have developed innovative loyalty-based life insurance covers. These types of products help reduce churn and attract new customers for MNOs while providing a new valuable service to customers.

Establishing trust in the service is a key factor of success for ICT-based financial services, as they deal directly with people’s money. These services require robust and secured platforms, in addition to trusted agents who are able to sell the service, manage liquidity and provide a direct interface between the technology platform and end-users. Leveraging existing trusted networks such as Safaricom’s airtime resellers (in the case of M-PESA) or post office agents (in the case of Bradesco) appears as an effective way to create trust in these services.

The business models studied in the report tap into multiple revenue sources, getting commissions from governments for g2p payments, banks and insurance companies for the opening of new accounts, end-users for the transactions they perform, and MNOs which benefit from customer retention and higher end-users fees. Governments can actually play a large role in promoting such services: using them for their G2P payments, they can be a sufficiently large first client of ICT-based financial services to justify the initial investment in the technology that new companies entering this space need to make – one of the first services offered by FINO was G2P payments and state health insurance, for example.  Many actors have tried – with mitigated success – to replicate M-PESA. However, the study points out to a wider range of models which can be just as effective in providing financial services using ICT. The key is to find which business model is suitable in each local context.

The study was sponsored by AFD, Ericsson, France Telecom-Orange, ICCO and TNO and conducted by Hystra and Ashoka. The full report is available for download  in the MMU library.

[1] The number of FINO clients stood at “only” 28 million when the case study was done in February 2011, but FINO grows by over a million customers each month!

To understand more about Orange’s overall strategy, I recently caught up with Frederic Blehaut, Group Business Manager at Orange Money to gain some insights into their service and their journey towards this significant milestone.

MMU: Hi Frederic, Can you describe briefly the various Orange Money products and models presently found in Africa?

FH: Orange Money is an innovative, mobile-based payment service specially designed to meet the needs of customers in Africa and the Middle East.  In countries where it is available, customers may open an Orange Money account whether or not they have a bank account. Orange Money allows customers to carry out simple banking operations and transactions including money transfers, where users can send money using their phone to any Orange mobile customer in the country; bill payments, as well as access to financial services, including solutions facilitating savings and insurance.  For sub-Saharan Africa we are using a similar model so there is a general logic behind our regional strategy. However, we are aware we need to take into account the local context. For example, an exception to this rule has been our service in Kenya, Iko Pesa.  Given the presence of a strong competitor such as M-PESA, we had to carefully adapt our model to this unique market.  At the core is a partnership with Equity Bank which allows customers access to a full bank account.

MMU: Can you describe Orange’s interest / commitment in Mobile Money – why is this such a key service for the group?

FH: There is very high level of commitment from group level in addition to top management support at the national and supranational level.    The group is focused on providing a strong value proposition for its customers and wants to respond to their needs for these services.   We see mobile money as an investment, as well as enabler for in-country economic development.  By providing our customers with the means to save money, pay bills, run their businesses and receive money from abroad, we are not only reinforcing customer fidelity but we are also able to play an active role in the economic and social development of the country.

MMU: Orange Money recently reached the threshold of 3 million customers. What are the main changes in terms of Orange’s mobile money strategy which have contributed to this sharp increase in its customer base over the past year?

FH: There has been a change of focus. The Orange Money story is a long one in terms of product development.  Last year, the group launched in countries which we think have great potential. However, the focus is now on the actual business.    We are focusing on explaining to customers how Orange Money is a financial service and working on different customer segmentations.  We are also lucky to have a group of committed country team members which are now focusing heavily on business development.   The success of Orange Money today is not based on the natural evolution of the product but is rooted  in the simplicity of our service, in our ability to have a good distribution network and in an overall improvement to our communications strategy.  We realized that the customer journey needs to be pedagogical, secure and easy.

MMU: Orange launched in Botswana in partnership with Standard Chartered Bank and in Cameroon in partnership with BICEC. In your opinion, how do these countries differ from West and East Africa, both sub-regions which have their own internal market dynamics for mobile money?

FH: Botswana has one of the highest incomes per capita in Africa and exhibits higher rates of financial access. We are providing customers with a similar product but adapted to the local context.  Cameroon on the other hand is more similar to the rest of the sub-Saharan markets. An interesting market to watch in my opinion is Madagascar given the high level of competition and vibrancy in the market.  There are over half a million mobile money customers and it’s a large country with poor infrastructure, which facilitates the development of mobile money services.

We ask ourselves a key question going into a market: Do we just need a mobile wallet or do we need to go one step further and link it to a bank account.

MMU: Thank you Frederic.

]]> http://mmublog.org/blog/an-interview-with-orange-money-%e2%80%93-part-1/feed/ 0 http://mmublog.org/blog/mobile-money-in-haiti-realizing-the-promise-of-a-complex-new-industry/?utm_source=rss&utm_medium=rss&utm_campaign=mobile-money-in-haiti-realizing-the-promise-of-a-complex-new-industry http://mmublog.org/blog/mobile-money-in-haiti-realizing-the-promise-of-a-complex-new-industry/#comments Tue, 17 Jan 2012 11:30:09 +0000 Dalberg http://mmublog.org/?p=3994 By Vicky Hausman, Yana Watson, Matt Shakhovskoy and Lorenzo Bernasconi from Dalberg – Global Development Advisors.

In the aftermath of the earthquake in January 2010, organizations hoping to help Haiti recover were anxious to find innovative ways of delivering aid and fostering economic growth.  Because so few of Haiti’s people had bank accounts, giving them money was logistically difficult and potentially dangerous.  With the encouragement of a $10 million prize pool funded by the Bill & Melinda Gates Foundation, the government, private sector, and aid community embraced mobile-phone-based banking as the solution.  Since its launch a year ago, mobile money has offered millions of Haitians a safe and speedy way to transfer money, as well as their first experiences with a formal financial instrument.  Now, the companies providing the service are trying to figure out how to expand it in a profitable way.

Demand for mobile money to date has come from consumers and from the non-government organizations (NGOs) that use mobile money to distribute monetary aid and to pay people in cash-for-work programs.  Indeed, six out of the 14 aid programs that use mobile money in the entire world are operating in Haiti.  These aid programs may not last forever, though – some NGOs have even found that delivering paper money is cheaper – so demand from consumers will be critical.  In addition, high fees, a lack of financial literacy, and regulatory limits on the size of transactions consumers may make could stop demand from growing much further.

According to our research, the key to overcoming these barriers will be to make the services more attractive and affordable.  interoperability between the two consortia’s services would be a start, and a relaxing of regulation on transactions would help as well.  The creation of new services that build on the mobile money platform, such as e-commerce and bill payment, would also enhance its value.  And the mobile network operators who deliver the service may wish to focus on specific segments of Haiti’s economy as they try to build their market in a profitable way.

To read more about the state of the mobile money industry in Haiti and the conclusions of Dalberg’s research, please visit this link in the MMU Library.

]]> http://mmublog.org/blog/mobile-money-in-haiti-realizing-the-promise-of-a-complex-new-industry/feed/ 0 http://mmublog.org/blog/geospatial-analysis-for-financial-inclusion-tracking/?utm_source=rss&utm_medium=rss&utm_campaign=geospatial-analysis-for-financial-inclusion-tracking http://mmublog.org/blog/geospatial-analysis-for-financial-inclusion-tracking/#comments Tue, 10 Jan 2012 15:57:42 +0000 The Bill and Melinda Gates Foundation http://mmublog.org/?p=3975 The following is a guest post we’re pleased to share by Karthik Balasubramanian and Jake Kendall from the  FSP program at the Bill & Melinda Gates Foundation.

In this blog post, we document the process of using GIS software and spatial data to assess the geographic distribution of bank branches, ATMs, CICO agents, and other financial access points relative to the spatial distribution of population (including the poor). (See these links for a sneak peak at our future post which will explore country mappings of Peru and Kenya. We have efforts underway to extend the Kenya mapping and to map Tanzania, Uganda, Pakistan, and other countries.)

Financial access is first and foremost a spatial phenomenon

Being near enough to a retail access point (e.g. bank branches, ATMS, agents, etc.) is a necessary first step before someone can use financial services – especially the world’s poor who don’t drive and often have a highly variable cash income stream, necessitating frequent trips to the bank.[1] For example, bank branch penetration, averaged only 3.3 branches per 100,000 people in the countries of Sub-Saharan Africa and 6.8 in South Asia (compared with 31 in the developed world) in 2009.[2] As a consequence it’s estimated that 88% of all adults in sub-Saharan Africa and 78% in South Asia are un-banked compared with less than 10% in much of the developed world.[3]

This situation comes about because building retail access points is expensive and financial service providers are keen to build as few as possible. Providers seek to place these points optimally in relation to the population so as to serve their existing customers and perhaps even gain territory with minimum outlay.

Financial inclusion advocates and policy makers also want broad coverage of the population by financial access points but would like to see that poor people also have access, a concern not always shared by providers.

Thus, solving the spatial distribution problem is central to the goals of both financial service providers and financial inclusion advocates. Having better data and analytics to understand financial access on a spatial dimension is going to be critical to solving this challenge.

New technology in the form of inexpensive GPS receivers, GIS software, and widely available spatial data, combined with enabling factors like Google maps and satellite images on the internet has made it feasible to attempt to map out the entire retail network of the financial system in many countries at relatively low costs. Once this has been done, it facilitates a range of analyses that can be of operational value to the commercial sector, the public sector, regulators, and donor agencies.

Software requirements, data inputs, and processes for a basic proximity analysis

Due to the advances in technology and enabling factors, the comprehensive mapping and analysis of a country’s financial landscape described below could be done in most developing countries for under $100,000 dollars and since central banks could easily require new branches to report location information, updating it would happen automatically. Contrast this to the >$1m often necessary to complete comprehensive household surveys such as the World Bank’s LSMS or FinScope’s surveys – a cost which must be paid again each time the data is updated.

Software and Hardware requirements: Spatial analysis (also known as GIS analysis) is generally only constrained by the availability of data (not software or technical expertise). The most widely-used software package for spatial analysis is called ArcGIS. This project is offered by the Earth Science Research Institute (ESRI) for $100 for a single-user non-profit license. Other packages (including open source) are also available.

Population data requirements: The first input to basic proximity analysis is a global spatial layer of population; there are two main high-resolution global datasets available for civilian use. The first, the Gridded Population of the World (GPW) produced by Columbia University’s Center for International Earth Science Information Network (CIESIN), is free, updated every 5 years, and has pixels sized 2.5 arc-minutes (5 sq km at the equator). The second, called LandScan, is produced the US government’s Oak Ridge National Laboratories (ORNL), is $6,000 for non-profit use, updated every year, and has pixel-sized 30 arc-seconds (1 sq km at the equator). With these datasets, the relationship between population and access points can be mapped fairly accurately.

Unfortunately, these datasets don’t have socio-economic information included so mapping the poor population to this level of accuracy is not easy. Most countries (even many developing countries) do track poverty statistics to relatively small geographic areas, such as states or even counties. Poverty ratio data can be overlaid and multiplied by the population density data to get rough estimates of poverty density. Granted, this approach loses some fidelity to the extent that poor people are clustered within these smaller geographic units (say in rural areas or slums around cities) but the approach should provide at least a rough mapping that will work for many types of analysis.

Access point locations: Using these population density layers as the base dataset, coordinates of bank branches, agents, ATMs, and/or POS can be overlaid for the analysis. Collection of these coordinates has become extremely simple thanks to inexpensive GPS receivers. Stand-alone GPS receivers that can record highly-precise coordinates can be purchased for less than $75; additionally, an increasing number of smart-phones are equipped with built-in GPS receivers. Local consultants in many countries can map the entire country’s retail financial access points for around $50k.[4]

The recipe: Once these coordinates are plotted onto the spatial layer of population, basic “buffer” analysis can be done easily with the ArcGIS package to generate metrics such as the percentage of the population that is within some distance of a point of interest (bank branches, ATMs, POS devices, and/or agents). To determine the percentage of the poor population within a particular radius of points of interest, the base layer of population can be multiplied by poverty rates by the lowest level of administrative unit (e.g. county or city).  The next blog post will walk through this process applied to Kenya and Peru.

What are the uses for a spatial data framework?

Below are some productive uses for these spatial analyses that have come up in our conversations with the various actors:

A better way to measure financial inclusion – Perhaps the most important use of the spatial analysis approach documented here is that it is capable of generating much better metrics to track financial access that existing approaches.  current standard access measure in the financial inclusion world has been a crude density measure – i.e. branches per capita or ATMs per 100,000 people. Data of this sort was collected worldwide by Kendall, Mylenko, and Ponce (2010) who extended the approach first used in Beck, Demirgüç-Kunt, and Martinez-Peria (2007). However, these measures do not take into account the geographic clustering of financial access points or of poor populations within national boundaries. A more precise approach to measuring access is to use proximity measures such as the percentage of poor people within 5km of a bank branch, or median distance to branch. A notable exception to the lack of proximity measures in existing data sources is the metric proposed by the Alliance for Financial Inclusion, which is the percent of the population in a city or town with at least one access point (see here, though this measure too has obvious drawbacks since metropolitan areas can be quite large) [see our next blog post with more detail the subject of using spatially derived metrics as better financial inclusion tracking metrics and using the spatial analysis framework developed here as a better way to guide financial inclusion policy making]

Commercial applications – Another key area where spatial analysis could be useful is with commercial providers who wish to fine tune their deployment of retain infrastructure.

• Optimizing the CICO ( cash in cash out) agent network expansion- By plotting the coordinates of CICO agents (and other access points) onto a spatial layer of population, GIS analysis can produce a map that can make geographies with large, uncovered populations easily identifiable.
• liquidity Management- By adding CICO agent activity data to the map, GIS analysis can identify where liquidity issues are likely to manifest themselves, deployments can optimize their provision of liquidity management support.
• Customer targeting and marketing- By plotting the locations of customers and triangulating this information using wireless network call detail records (CDR), telcos can identify which customers are active voice and SMS users but not mobile account holders. This then can marketing campaigns be more geographically targeted for maximum effectiveness.

Public sector applications

• g2p targeting- By multiplying a spatial distribution of population by poverty levels of administrative units from census surveys, GIS analysis can generate high-resolution maps of where poor people live. With this knowledge, G2P programs can more effectively target the poor. Furthermore, by overlaying the coordinates of access points, G2P programs can assess the most effective channel for delivering these payments to the poor.
• Geography based incentives – While economists snipe (often with good reason) at the role of public sector incentives in guiding the financial sector, there may be some cases where carefully designed incentives to extend retail infrastructure into poor areas could be a valuable policy tool.[5]

Regulatory applications

• Policy analysis- Similarly, spatial analysis can help regulators critically analyze the effect of central bank policies.  For example, GIS analysis can estimate what percentage of India’s population could not be served due to RBI’s regulation that agents must not be more than 30km from a bank branch.
• Identifying underserved geographies- Spatial analysis can help regulators easily identify underserved geographies and can help shed a spotlight on the scale of the inclusion problem.

Donor applications

• Standardized grant progress and performance metrics- Metrics resulting from spatial analysis can be the basis for evaluating the performance of grants whose objectives include increasing the proximity of financial access points to the poor. For example, donors will be able to track the impact of agents on the poor’s proximity to access points. In other words, we will be able to track, in a standardized way, how many more (poor) people are within access thresholds of a financial access point due to the expansion of grant-funded services beyond the catchment areas of banks and ATMs.

While the process we have laid out here is focused on banks and retail banking infrastructure, there is no reason why it could not be extended to map credit and insurance provider locations as well as remittance and bill pay points. The spatial dimension is often ignored in financial inclusion discussions despite its’ being the key dimension along which financial access is determined. Hopefully this oversight will be rectified now that the field has a better way to track and assess progress on this dimension.

We plan to continue to explore the topic of spatial mapping with a series of future blog posts and our forthcoming paper on the topic.

[1] In a blog post on NextBillion.net Ignacio Mas and Jake Kendall discuss the fact that academic researchers have not studied the extent to which distance related transaction costs are a key barrier to financial inclusion, despite the fact that reducing the distance related barrier is obviously a necessary first step to bringing people in to the financial system http://www.nextbillion.net/blog/2011/09/28/wheres-the-bank-

[2] From data described in Kendall et al, (2010) “Measuring Financial Access around the World,” World Bank Policy Research Working Paper # 5253. Numbers from Author’s calculations, see www.cgap.org for raw data.

[3] Ibid, see Eurobarometer surveys and the Federal Reserves’ Survey of Consumer Finances for banking rates in Europe and the US.

[4] There are other commercial uses for this kind of mapping which have driven some marketing and consulting companies to develop the capability. For instance, companies with large numbers of retail outlets often want exact location data to feed into mapping features on their web page to help customers find the nearest point.

[5] See for example the paper by Burges and Pande (2004), “Can Rural Banks Reduce Poverty? Evidence from the Indian Social Banking Experiment” which presents strong evidence that the India social banking laws, which required banks to branch into rural areas, did have a positive effect in reducing poverty.

1.       MMU article on the relationships between banks and mobile operators

Offering a mobile money service for the unbanked requires the participation of both a bank and a mobile operator. That means these two parties need to align on what parts of the mobile money value chain each will carry out, agree on a way of working with each other, and decide how to split the value that is created by the service. To shed some light on the issues that can complicate bank-operator relationships, the MMU team released in January an article called “Mapping and Effective Structuring Operator-Bank Relationships to Offer Mobile Money for the Unbanked”

2.       GSMA Hosts Webinar on Mobile Money Pricing and Commissions.

The MMU programme hosted a webinar on the topic of mobile money pricing and commissions. This interactive session was designed to help mobile money practitioners capture best practices from deployments around the world. In part 1, we shared the pricing component which best practices in valuing a mobile money service, structuring a tariff sheet and proofing against fraud and in part 2, we discussed best practices in setting mobile money commissions including an overview of agent profitability drivers and how to influence agent profitability

3.       Summary and Presentations from the 6th MMU Working Group at MWC 2011

The MMU team shared the proceedings from the 6^th working group held on February 16th in Barcelona during the 2011 Mobile World Congress. The event covered a number of challenges, and included interviews with experts in the field giving participants the chance to learn first-hand from others, as well as providing them with the opportunity to share their insights with MMU.

4.       MMU Released Report on Driving Customer Usage of Mobile Money for the Unbanked

In March, MMU released an article on marketing mobile money. “Driving Customer Usage of Mobile Money for the Unbanked” considers the many nuances of marketing mobile money. A key theme of the article is that marketing mobile money is very different from marketing airtime. The article discusses tactics that marketers can employ when customers get stuck along this journey, such as when they have registered but fail to transact, and includes a diagnostic as a supplement to the article to help operators diagnose and rectify such issues among their potential customer base.

5.       Small Business Might Be Big Business for Mobile Money

Jake Kendall from the FSP program at the Bill & Melinda Gates Foundation discussed the potential use of mobile money by small business owners and entrepreneurs  highlighting two studies which touch upon this issue: the first was a study of MTN Mobile Money users in and around Kampala done by Ali Ndiwalana, Olga Morawczynski, and Oliver Popov in 2009. The second piece was a study conducted by Lennart Bångens & Björn Söderberg who interviewed 110 MSEs in Tanzania about their usage of mobile money. The authors found that the rate of mobile money usage by business owners is much higher than national average and that many report significant benefits. The main benefit these entrepreneurs reported was increased efficiency from time saved and improved logistics.

6.       The World Economic Forum launched the 2011 MFS Development Report

WEF launched the Mobile Financial Services Development Report 2011. Providing an analysis of more than 100 variables across 20 countries in Africa, Latin America and Asia, the aim of this report was to build consensus on the drivers for realizing scale in mobile financial services and on how they should be measured.  The report provided empirical support for many of the issues widely discussed on this blog such as the relative few number of countries that have achieved scale in mobile financial services, the importance of dense and well incentivized distribution networks, and factors that drive adoption other than those influenced by regulators and the private sector.

7.       MMU Working Group at MMS Singapore 2011

The city of Singapore was the host of the 7th mobile money for the unbanked Working Group at the GSMA’s Mobile Money Summit.  Over 100 participants from various organizations including MNOs, Banks, and donor agencies discussed the latest happenings in the field of MMU.   Paul Leishman from MMU and Jennifer Barrasa, CEO of Top Image, a below-the-line field marketing agency that works with M-PESA discussed the importance of ensuring a quality customer experience at the agent level.  David Porteus, Managing Director of Bankable Frontiers presented the findings from a demand side study of domestic payments in the Philippines that was designed to understand: the extent to which customers in the Philippines use mobile money, for what purposes, and why – in the context of other financial services available to them.  Yasmina McCarty from MMU discussed how driving customer activation has become one of the prominent challenges facing mobile money programmes, and Salah Goss from the Bill & Melinda Gates Foundation, discussed the role of the Haiti Mobile Money Initiative (HMMI) Competition, a partnership between the Bill & Melinda Gates Foundation and USAID in incentivizing the deployment of mobile money services in Haiti.

]]> http://mmublog.org/blog/2011-a-year-in-review-%e2%80%93-part-1/feed/ 0 http://mmublog.org/blog/gsma-announces-details-of-nfc-mobile-money-summit-2012/?utm_source=rss&utm_medium=rss&utm_campaign=gsma-announces-details-of-nfc-mobile-money-summit-2012 http://mmublog.org/blog/gsma-announces-details-of-nfc-mobile-money-summit-2012/#comments Wed, 14 Dec 2011 10:28:00 +0000 Camilo Tellez http://mmublog.org/?p=3906 GSMA Event Places New Focus on Burgeoning Market for NFC Technologies and Services

The GSMA today announced that it will hold the new GSMA NFC & mobile money Summit October 22-25, 2012 at the Milano Congressi in Milan. With the growing industry momentum behind Near Field Communications (NFC) and the increased adoption of this technology by ecosystem players around the world, the GSMA has expanded the scope of its established Mobile Money Summit event to more prominently showcase NFC and its many applications. In 2012 and beyond, the event will be known as the GSMA NFC & Mobile Money Summit.

“NFC is an important innovation for consumers around the world, and while it is perhaps best known for enabling secure mobile payments, it will go far beyond to facilitate a wide range of innovative and exciting new services and applications, such as mobile ticketing, entertainment services, secure access to hotels, offices and cars, loyalty schemes and couponing, among others,” said Michael O’Hara, Chief Marketing Officer, GSMA.  “The NFC & Mobile Money Summit will bring together key players from every sector of the ecosystem, providing an environment to forge relationships, expand ideas and foster the growth of NFC and mobile money.”

The market potential for SIM-based NFC is significant, according to forecasts from industry research firm Strategy Analytics.  Nearly 1.5 billion SIM-based handsets will have been sold worldwide between 2010 and 2016, supporting transactions of more than $50 billion globally over the same period. Further, ABI Research indicates that 85 per cent of all new point of sale terminals shipped in 2016 will be NFC-enabled. Last month, more than 45 of the world’s leading operators committed to support and implement SIM-based NFC solutions and services, and the GSMA announced that it has published a new set of industry specifications, which will serve as an important catalyst in accelerating the adoption of NFC services.

The NFC & Mobile Money Summit will feature two days of exhibition showcase and conference sessions, augmented by two days of invitation-only industry meetings designed to create dialogue around the opportunities and progress for the NFC and mobile money ecosystem. The conference and exhibition will be held on Tuesday, October 23rd and Wednesday, October 24th, with additional meetings and workshops being held on Monday, October 22nd and Thursday, October 25th.

For more information on the NFC & Mobile Money Summit 2012, including details on how to attend, exhibit or sponsor, please contact mmssales@gsm.org.

Earlier this year, Telefonica announced it was working with MasterCard to provide mobile financial services to its 87 million customers across 12 Latin American markets.  Today, the first of these partnerships comes into being with the formal announcement of the creation of a joint venture to offer mobile financial services for 65 million banked and unbanked Vivo consumers in Brazil.  Vivo is Telefónica’s largest operation in terms of customer numbers.

While this JV is still subject to regulatory approval, their plan is to launch an m-wallet allowing Vivo costumers to make mobile payments as well as P2P, bill payments, and airtime and online purchases. (Brazil’s has 81 million online users and its online market grew 18% in the last year).  The service hopes to promote financial inclusion by allowing operations between banked and unbanked consumers and fostering the acceptance of mobile payments in locations that traditionally have only accepted cash transactions, such as taxis and delivery services as well as direct sales such as door-to-door transactions.

Brazil is already seen by many as a global leader in branchless banking – its banks have created wide-reaching branchless channels that use cards and point-of-sale (POS) devices at various retail locations.[1] This move is expected to complement the existing agent network infrastructure which has already been successful at bringing financial services to a large portion of the population.

Prior to this announcement, Vivo had already ventured into the field of mobile payments for banked customers.  In 2010, Itau (one of Brazil’s biggest banks), Redecard and Vivo were the first companies to adopt a payments platform, created through a joint venture between MasterCard and Smart Hub from the Philippines. This service works by storing a MasterCard cardholder’s credit or debit card number in a SIM card or chip device to enable customers to make retail purchases or reload prepaid phone balances.  About 1,000 merchants and 30,000 customers participated in the pilot in Sao Jose dos Campos, a suburb of Sao Paulo.

It is still not clear how this existing product will complement the newly created venture.  What is clear is that the rules of the game are changing in the Brazilian mobile payments domain.  During the last couple of years, Brazilian MNOS have not been under pressure to develop more value-added services due largely to positive growth forecasts.   According to Wireless Intelligence, it is expected that, by 2013, there will be 50 million new connections bringing up the number of total connections to 280 million.  So far banks have been driving innovation in mobile payments and branchless banking, but Mastercard and Telefonica’s formal arrival into the mobile money sphere marks a new chapter.

Moreover,  as we discussed  here a couple of weeks ago, Paggo, the mobile credit card company which spun out of Oi and is now co-owned by Cielo and Banco do Brasil is planning to launch a full service m-wallet by integrating it to over a million acquiring points of the Cielo network (owned by Bradesco and Banco do Brasil).

[1] http://www.cgap.org/gm/document-1.9.50801/CGAP_Technology_Program_Country_Note_Brazil_Public_Rev.pdf

“The line-up of keynote speakers announced today strengthens what is an already unparalleled conference programme,” said Michael O’Hara, Chief Marketing Officer, GSMA.  “Mobile World Congress attendees will have the opportunity to hear from many of the mobile communications industry’s most influential leaders across our four-day programme.  We’re looking forward to a very exciting event in February.”

New keynote speakers at Mobile World Congress include:

• Warren East, CEO, ARM
• Brian Dunn, CEO, Best Buy
• Xi Guohua, Vice Chairman, China Mobile
• Vikram Pandit, CEO, Citigroup
• Michael Abbott, CEO, ISIS
• Kevin Johnson, CEO, Juniper Networks
• Dan Hesse, CEO, Sprint Nextel
• Jo Lunder, CEO, VimpelCom

Previously announced Mobile World Congress 2012 speakers are:

• Ben Verwaayen, CEO, Alcatel-Lucent
• Ralph de la Vega, President and CEO – AT&T Mobility and Consumer Markets, AT&T
• Sunil Mittal, Chairman and MD, Bharti Airtel
• René Obermann, CEO, Deutsche Telekom
• John Donahoe, President and CEO, eBay
• John Riccitiello, CEO, Electronic Arts
• Hans Vestberg, President and CEO, Ericsson
• Eric Schmidt, Executive Chairman, Google
• Peter Chou, CEO, HTC
• Michael Roth, Chairman and CEO, Interpublic Group
• Stephen Elop, President and CEO, Nokia
• Ryuji Yamada, President and CEO, NTT DOCOMO
• Franco Bernabè, Chairman and CEO, Telecom Italia Group
• Jon Fredrik Baksaas, President and CEO, Telenor Group
• Vittorio Colao, Chief Executive, Vodafone

Topic areas addressed in the keynote programme will include mobile operator strategies in developed and developing markets, cloud computing, connected consumers, mobile money, mobile OS and applications and next-generation networks and technologies.

In addition to the keynote programme, the 2012 conference will also feature dedicated tracks on applications, cloud computing, embedded mobile, mobile advertising, mobile health, mobile money, next-generation technologies and OSS/BSS, as well as sessions exploring business strategy, developing markets, devices, network capacity, regional issues and social media, among other subjects.

For more information on Mobile World Congress 2012, including details on how to attend, exhibit or sponsor, please visit www.mobileworldcongress.com.

The Mobile World Congress is the cornerstone of the Mobile World Capital – Barcelona. In addition to Mobile World Congress, the Mobile World Capital also includes the Mobile World Centre and the Mobile World Festival, programmes and activities that will span the entire year and will benefit not only the citizens of Barcelona, Catalonia and Spain, but also the worldwide mobile industry. For more information on the Mobile World Capital, please visit www.mobileworldcapital.com.

• On the regulatory front, Nicaragua, Guatemala and Bolivia have introduced regulation for the provision of mobile financial services paving the way for the launch of new services in these countries.  Likewise, Peru pledged at the last AFI Global Policy Forum last month to enact a new law regulating e-money within the next year.

• Banco Davivienda in Colombia launched an m-wallet called Daviplata earlier this year.  The service has signed up over 500.000 users and processed over 3,000,000 transactions since its launch in January. It allows banked and unbanked customers to do P2P, airtime top-up, bill payments, and card-less cash out via any of their ATMs.

• América Móvil and Citi have officially launched “Transfer”, their $50m joint venture.   American Movil is Latin America’s leading telecom group present in over 18 markets and with more than 225 million customers.  America Movil’s ambitious plan is to get 15% of its subscriber base to use “Transfer” and will initially offer the service to clients of Citi’s Mexican subsidiary, Banamex. Transfer will enable customers to open bank accounts, transfer money, and withdraw cash from ATMs along with bill and merchant payments.

• MasterCard and Telefónica/Movistar announced a similar JV earlier in the year to launch mobile financial services in 12 markets.

• Tigo Millicom has launched its OTC mobile money service “Giros Tigo/ Tigo Money” in 4 markets (Paraguay, Guatemala, El Salvador and Honduras). Bolivia is scheduled to launch next.

• Paggo in Brazil is now co-owned by Cielo and Banco do Brasil. This new position improves their capability of launching a full service m-wallet by integrating it to over a million acquiring points of the Cielo network (which is also owned by Bradesco and Banco do Brasil)

• Over in Haiti, Voila’s T-Cash has been awarded the ‘Scale Award’ from the Haiti Mobile Money Initiative (HMMI), a partnership between The Bill and Melinda Gates Foundation and USAID. The results since May show that there are currently over 300,000 registered T-Cash users who have conducted over 3 million financial transactions on their Voila phones to make or receive cash deposits, withdraw funds, purchase food and supplies or transfer money to friends or family. Voila has built up a network of over 1100 T-Cash agents and merchants throughout Haiti, with plans to scale up to 1500 by the end of the year.

Recently, Airtel in Kenya launched a new promotion offering Airtel Money (formerly known as Zain Zap) customers free money transfers to both registered and unregistered customers. Although slated to run only for a short time, this promotion is a clear illustration of an attempt to subsidize participation in a network that has far fewer users than its competitor M-PESA, the most famous and well-established mobile money service in the world.

Such a move is risky, but not crazy. Ignacio Mas has pointed out that the online payments service PayPal lost $23 for every customer they signed up during their first 9 months of operation because they paid large sign-up bonuses and chose not to charge fees that were large enough to cover their variable costs. PayPal racked up millions of dollars of losses that way, but in the process it built a user base that it was later able to monetize: PayPal went on to a successful IPO and now has over 100 million active users around the globe.

For this tactic to work, a networked business must be willing to sustain losses up until the point that it has built a network large enough—which is to say, valuable enough—that users and potential users are willing to pay to use it.

We’ll see if this gambit pays off in Kenya.

Subsidizing early adopters is just one of the tactics that networked businesses can employ to exploit network effects. Previously, I’ve written about how network effects apply to mobile payments and their implications for target market selection and marketing communications.