1. Building scope and fostering inclusion
Broadening adoption and usage of new payment systems
CLARIDEN Conference on Mobile Banking &
Payments for Emerging Asia
Bali, October 2012
Ivan Mortimer-Schutts

2. Contents
 Context
 Varieties of mobile in financial services
 Opportunities to accelerate development
 Current state of use of mobile money
 Scope and Scale – what’s at stake?
 Approaches to broadening adoption and usage
 Challenges and Prospects
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3. Mobile is being applied in a broad variety of ways to retail banking
Varieties of the Mobile Experience
Non-payment usage of mobile…
Disruptive
blog &
browse
•Shop
non-bank Transfers
and pay payment and bill
on-line
transport & payment
via the
mobile …generating agent solutions
demand for banking
relate models
banking
services Virtual
navigate
•Get Cards on NFC
Complementary
coupons &
targeted the mobile payments
offers on
your Mobile Mobile
mobile
•Browse products, banking transaction Mobile
scan and compare channels security marketing
prices
non-financial Banking Payments marketing
Selected elements of financial services
One day “mobile” will be an everyday part of all retail financial services
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4. Mobile and related innovations provide many emerging markets with an opportunity
to accelerate the cycle of financial sector development
Development slowed by a vicious circle…
 Expanding the number of
service points
 Providing services to
previously unbanked persons
 Adapting products to new
types of customers
…and eventually..
 Reducing the cost to serve
them with other products
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5. Adoption of new mobile financial services is growing, but actual usage is lagging
123 mobile money initiatives recorded in April 2012 … …but with low usage
 High rates of inactivity
 Focus on airtime top-ups,
P2P and bill payments
 Only beginning to expand
beyond payments and
services towards banking
* Source: GSMA Mobile Money Report 2011
Meanwhile most banks are still searching for their role in this evolving phenomena
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6. Contents
 Context
 Scale & Scope – what’s at stake?
 Approaches to broadening adoption and usage
 Challenges and Prospects
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7. Scale is important for some varieties of mobile, critical for others
Many Business models use a combination of leveraging existing and building new network value
Complementing existing networks… …to building new ones
Some value comes from For others, starting afresh opens
leveraging an existing base new possibilities..
of users…
ATM
…but demand depends
crucially on network
…fixed set-up and variable costs need to be
size
covered, but demand does not critically depend on
first creating a base of new users
New payment systems
can leverage strengths from old
to build new
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8. Scope is important in order to encourage clients to reach the tipping point –
from cash… to electronic accounts … from occasional to a part of daily banking
•TELCO
•Cash-in •Salary payment Indirect benefits
 Aggregate savings from keeping
m-$ the money in the system
 Information value / profiling
•Customer
 Contact and distribution savings
•P2P •Retail payments
•Cash-out
•Bill Payment
•TELCO
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9. Broadening adoption also usually requires going beyond price competition, to
create the spill-over effects that generate economic value “below the line”
Price
Competition many new services now
start here where
competition is weak
Improving on
price over cash &
alternatives
Bill
“One sided” Payments Multi-party
Payments Payments
Daily
Banking
Generating
indirect Retail
economic value Payments
“below the line”
B2B
Broader adoption requires
more specific, compelling
Non-price
offers competing with cash
Competition
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10. Contents
 Context
 Scope and Scale – what’s at stake?
 Approaches to broadening adoption and usage
 Include those who have purchasing power
 Get value in the system and keep it there
 Use the stepping stones available to borrow scale
 Try to create value beyond price competition
 Example of retail payments
 Partnerships
 Challenges and Prospects
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11. To gain scale and boost usage, services need to recruit clients across segments
and income groups to generate network effects and volume
Boost the scale of new inclusive
payment systems by encouraging
broader use between different
segments and
Individuals & Households Businesses & Public Sector users
in the economy
Complementary access and
payment services
Mobile Approach
More appropriate
services for growing
mass market
New services
competing with cash
The business model and product approach needs to be adapted to the segment
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12. Key to boosting usage is also to get it into the system from the start, reducing the
marginal costs and effort to clients of further cash-in’s
Flow of funds
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13. Borrow but don’t beg: Leverage existing systems and networks as stepping
stones to scale
 Leveraging the market power of existing networks to go into new niches by making
improvements to specific elements of the payments chain.
 Adding volume to new networks by making them compatible tools used by populations
that are already banked
Examples
 Square brings card networks further than
banks have managed to penetrate by focusing
on the barriers to adoption by small retailers
/ sole traders
 PayPal leverages existing bank account
holders and infrastructure to be of use in
new circumstances (scale is critical)
Stepping Stones to Scale
 Enabling retailers to efficiently support
multiple consumer payment processes
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14. No more “plain vanilla”: focus on the challenges that different users face, and
see how experience, process and networks can generate D value for them
Areas in which well-designed payments services
can create extra value:
• inventory finance and supplier payments
“Time is money” • Bill payments and shoe leather
• Cleaning up after failed payments
• DvP: Delivery versus Payment
“Cash is king”
• Seamless connections between different stores of value
• Customer risk management
“Knowledge is
• Customer profiling
power”
• Contact and acquisition
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15. One challenge to more frequent use is competition from cash at the point of sale –
Adoption requires that we work both sides of the market
? Focus on
Focus on ?
? Cash or Halo effect? Providers
Consumers
electronic?
?
?
Above the line Cash has a perceived
cash has clear zero cost for the
advantages for Cash has immediacy for
consumer
the consumer the retailer
m-$ SHOP
Customer What
benefits for
banks,
MNOs,..?
Focus on the
How does the retailer pay for supplies?
“other half”
Who finances inventory?
Below the line, Is the retailer credit constrained?
other improvements
in services could Does the distributor extend credit?
incentive retailers Is a bank involved?
to pay the
necessary fees How strong is the competition? Distributor/Wholesaler
…
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16. Finding the right partnerships: Banks, MNOs, and Retailers need to take a sober
look at each others’ strengths and interests to find agreements that work for all
Mobile operator strengths Value for banks
 A communication and distribution  Access to potential new clients
network reaching millions of  Lower cost basis for basic transaction services
consumers
 Broader networks for payments to achieve
 Sales and product oriented culture economies of scale
 Innovative payment product and tools  Intelligent interactive banking platforms
Value for operators Bank strengths
 Complementary product and sales  Financial product expertise
expertise and skills  Payment management & interoperability
 Additional commercial power to  Production and distribution synergies with
promote mobile to other users other segments and financial services
 Integration with broader ecosystem to  Regulatory expertise and status
reach critical mass
Partnerships need to focus on creating value beyond fee revenue for all members:
 Transaction fees cannot be the sole revenue source that makes the business case work
 The other sources of value for banks, for MNOs and retailers need to be developed
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17. Contents
 Context
 Scope and Scale – what’s at stake?
 Approaches to broadening adoption and usage
 Challenges and Prospects
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18. So why is this not happening? Its’ hard work and there are many goals that cannot
often be achieved alone
Timing and sequencing
 Value of new services build on an established client base
Client knowledge
Firm
level  Needs and expectations of clients are specific – but knowledge and expertise of new
issues payment providers is not competitive everywhere
Cost, complexity of doing more in-house
 Doing everything can distract from core business; requires significant expansion of scope
Many challenges derive from the difficulties in aligning interests - over time and between
actors – as needed to ensure coordination and collaboration
Sector  When building a network, the longer you wait the more value you get when you open it?
level
issue  Standardisation – but on whose terms ?
 Fragmenting the value chain, “partnerships” and impact on the “customer ownership”
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19. Contacts
Ivan Mortimer-Schutts
East Asia Pacific Regional Advisor for payments and retail banking
International Finance Corporation
Email: imortimerschutts@ifc.org
Anastassiya Marina
Senior Operations Officer,
Access to Finance Advisory Services, Indonesia
International Finance Corporation
Email: amarina@ifc.org
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