01Sept09 Mobile Money for the BOP EAA - lirneasia.net

Mobile2.0:m‐moneyfortheBOPinthePhilippines

ErwinAlampay1andGemmaBala

LIRNEasia

TableofContentsIntroduction........................................................................................................................................... 2Mmoney and remittances ........................................................................................................................... 2

Expanding use of mmoney to the BOP in the Philippines ..................................................... 4Mental Access ................................................................................................................................................... 6Material Access ..............................................................................................................................................11Skills Access ....................................................................................................................................................12

Conclusions .............................................................................................................................................13Business Challenges .....................................................................................................................................13Policy issues....................................................................................................................................................14

References ............................................................................................................................................15

ThisresearchwascarriedoutaspartoftheMobile2.0projectofLIRNEasia(www.lirneasia.net)andwasfundedthroughagrantfromtheInternationalDevelopmentResearchCenter(Canada)andtheDepartmentforInternationalDevelopment(UK)

1Dr.AlampayisaResearchFellowatLIRNEasiaandanAssociateProfessorintheNationalCollegeofPublicAdministrationandGovernanceintheUniversityofthePhilippines

IntroductionThepotentialofelectronicbanking(e‐banking)andelectronicmoney(e‐money)2toimprove

efficiencies,reducetransactionalcostsandbringnewopportunitieshaslongbeenrecognized(Basel,1998).Greaterinteresthasbeengeneratedwithnewformsofe‐moneythatistransmittedwiththeaidofmobilephones.

InterestintheareaofICTandDevelopmentfieldiswithreachingtheunbanked,andpeopleatthebottomofthepyramid(BOP).Thisincludesthepotentialtoprovidethemwithbanking‐relatedservicesthroughmobilebanking(m‐banking)3andmobilemoney(m‐money)4(Soriano&Barbin2007;Bångens&Söderberg,2008),whichcanbedonebycapitalizingontherapiddiffusionofmobilephonesamongsocialnetworksincludingtheBOP(Zainudeen,2008).Theunbankedrequireefficientutilizationofvaryingsourcesofcashinflows.Livingoffacash‐basedeconomy,theyreceiveirregularincomefromoccasionaljobs,farmproduce,and“welfare”(Bångens&Söderberg,2008).Theirlimitedaccesstoestablishedfinancialchannelsexposesthemtofinancialrisksandlesssecuretransactions.

Amongtheirvariousincomeflows,remittancescouldbethedriverform‐moneyusageamongtheBOP.Onefactoristhelargeflowofmoneygoingthroughremittancechannelsthatimplyasteadycustomerbase.TheWorldBankestimatesthatthevalueofremittancesin2008wasUS$305billionworldwide(BSP,2009a)whichwereoftencoursedthroughvariousmoneytransferoutfits(MTO)(55%marketshare)andWesternUnion(25%marketshare)5(GSMA,2008).AnotherconsiderationisBOPphonesubscriberswhosendremittancesthroughcostlychannels,andtheuseofmobilephonesprovidesalesscostlyalternativewithaddedvalue.Thenextsectionelaboratesonthesepossibilities.

M‐moneyandremittances

Therearemanyreasonsform‐moneyserviceproviderstogetintotheremittancemarket.Oneisthatremittancesarerelativelystableevenduringeconomicslowdownincontrasttootherinvestmentforms.Second,theyarealsoexpectedtocontinuetoincreaseasaconsequenceofglobalization‐inducedlabormigration(Maimbo&Ratha,2005).ThesearesupportedbyanADBstudyin2005where,contrary

2“E‐moneyshallmeanmonetaryvalueasrepresentedbyaclaimonitsissuer,thatis‐(a)electronicallystoredinaninstrumentordevice;(b)issuedagainstreceiptoffundsofanamountnotlesserinvaluethanthemonetaryvalueissued;(c)acceptedasameansofpaymentbypersonsorentitiesotherthantheissuer;(d)withdrawableincashorcashequivalent;and(e)issuedinaccordancewiththiscircular.”Circular649,Sec.2(BSP2009b:1)Forthepurposesofthispaper,m‐moneyshallrefertoaformofe‐moneytransmittedthroughmobilephones.3Distinction ismadebetweenelectronicbankingandmobilebankingas the former refers to“theprovisionof smallbankingproducts through electronic channels” (Basel 1998:3) while the latter offers financial services through mobile networks inmobilephones(BångensandSöderberg2008)4Mobilemoneycanalsorefer to“services thatconnectconsumers financially throughmobile.Mobilemoneyallows foranymobilesubscriber–whetherbankedorunbanked–todepositvalueintotheirmobileaccount,sendvalueviaasimplehandsettoanothermobilesubscriber,andallowtherecipienttoturnthatvaluebackintocasheasilyandcheaply”MobileMoneyfortheUnbanked2009Annualreport,page75fromFigure5“EstimatedMarketShareofInternationalPerson‐to‐PersonTransferServices(bynumberoftransactionsprocessed)”oftheGSMA(2008)study

totheconceptofremittancedecay,internationalremittancessentbyFilipinosandotherSoutheastAsianmigrantshaveremainedconstantovertime,regardlessoftheirlengthofstayoverseas.InthePhilippines,increasedremittanceflowsareexpectedtocorrespondtothatofincreasingnumbersofoverseasforeignworkers(Nakanishi,2009)asapproximately$16Billionwasremittedfromabroadin2008(Bird,2009).

Mostoftheseinternationalremittanceswereconcentratedtourbanareaswhilemostofmoneyflowsgoingtoruralareasarelocaltransfers(fromurbanareas)(Pangilinan,2007).ThisisexplainedbyAng(2007)whorevealsthatmostOverseasFilipinoWorkers(OFWs)comefromregionswithlowerpovertyrates,namelyRegionsI,III,IV,VI,XIandNCR,implyingthatpoorpeoplearelesstomigratetoothercountries(PerniainAng,2007).Thissuggeststhatbetweeninternationalanddomesticremittances,itisthedomesticremittancesthatwouldbemorerelevanttotheBOP. Hence, whilethepotentialform‐moneyservicesincludesthemovementofmoneyfrommigrantcountriestohomecountries,moresignificanttotheBOPwouldbethemovementofmoneyfromtheseeminglyrichurbanareastopoorerregionsinruralareas.

Inmovingmoney,sendersseekthemostaffordableandconvenientchannel.Further,theimportanceofphysicalinfrastructuresmaydiminishasmoremoneytransferoutfitsconsidernewtechnologies,suchastheinternetandmobilephones,asalternativechannels(ADB,2004).Thisnewlandscapehasmadem‐moneyaviableoptiontoconsider.CaseinpointareFilipinomigrantswhosehighSMSusage(ADB,2005)hasbeencapitalizedonbytelecomcompaniesandbankstooffermobile‐basedfinancialservicesincludingm‐money.Notwithstandingtheirpreferenceforexistingformalandinformalchannels6,theyuseSMStoinformtheirrecipientsoftheirremittance.

Whilethereisgrowingresearchintheuseofmobilephonesforfinancialservices,attentionhasbeenmainlyonapplicationdesignandadoption,andissuesrelatingtofinancialneedsandthemeasurementofimpactshavebeencomparativelyneglected(Duncombe&Boateng,2009). Hence,thenextpartofthispaperwilllookatm‐moneyinnovationsinthePhilippinestotapthehugeremittancemarketandwhatitmeansfortheBOP.ThepaperappliesVanDijk’s(2006)StagesofAccesstoDigitalTechnologiestothepotentialadoptionanduseofm‐moneyforremittanceamongtheBOP(seeFigure1).ThediscussionisbasedontheresultstakenfromLIRNEasia’[email protected].’s2009Teleuse@BOP3:AQualitativeStudy8BusinessandpolicyrecommendationsarethengivenonhowtoexpandaccessanduseofmobilemoneyforremittanceamongtheBOP.

6Formalchannels:banks,non‐banksandmoneytransferagencies/remittanceagenciesInformalchannels:courierservice/door‐to‐doorandhandcarriedcashbroughthomebyrelativesorfriends(Maimbo&Ratha,2005)7Thesurveywasconductedinsixcountrieswithanaimtoenable“morepeopleattheBOPtojointheinformationsociety”.(LIRNEasia,2008:4)InthePhilippines,ithad800respondentsnationwidewhobelongtoSECE.Thissamplehad,onaverage,ahouseholdmonthlyincomeof126USD,fourhouseholdmembersandonemobilephoneperhousehold.Therespondentscamefromurbanandruralareas,andarethosewhohaveusedaphone(regardlessiftheyownitornot)intheprecedingthreemonthsofthesurvey.8ThisstudycomplementstheTeleuse@BOP3surveyfindingsandwasconductedinthesamesixcountries.ThePhilippinesampleconsistsoffourrespondentsfromtheurbanarea(MetroManila)andthreerespondentsfromtheruralarea(SanFernando,Pampanga).Bothgroupshaveonerespondentwhoisaninternalmigrantorwhoisrelatedtoamigrantworker.

Figure1:Stagesofaccesstom‐moneyforremittance

Inapplyingtheframework,thisstudylookedatthreeissuesthattheBOPhastoovercomeinordertousem‐moneyforremittance:MentalAccess,MaterialAccess,andSkillsAccess.DataforthiswasbasedonsurveysthatLIRNEasiaconductedin2008andqualitativeinvestigationsin2009.

MentalaccesslooksattheBOP’sinterestinusingm‐moneyandtheirawarenessthatremittancescanalreadybesentthroughmobilephones.Forserviceprovidersandpolicymakers,itisimportanttoknowthefactorsthatmotivatetheuseofthesealternativesvis‐à‐visthetraditionalwaysofremittingmoney.

Asdemandfortheserviceisestablished,thenextissuesfortheBOParesecuringthenecessarymaterialsandskillsform‐money.Crucialwouldbemobilephoneownership,theaccessibilityofservicesupportstructures,therequiredskillsandthemannerofobtainingthem.MaterialaccesswouldbebasedonpeopleattheBOP’saccesstomobilephonesthatcanusem‐money.Itwouldincludeitsaffordabilityandtheavailabilityoftheservice(andsupportinginfrastructure)inallareas.Thesupportinginfrastructurewouldincludefacilitiesforenrollingintheservice,andcashingoutmoney.

Skillsaccessidentifiesthecapabilityofpeopletosendm‐money.Sincetheprocessissimilartotextingabilitiesandexperiencewithe‐loading,people’scapabilitiestoSMSandpassloadsareimportantmeasures.

Lastly,adescriptionoftheircurrentusagewillillustratethefactorsnecessaryinexpandinguptakeandregularuse.Thisincludesdeterminingwhousesm‐money,forwhatpurpose,andhowmuchandhowoften.Withitsuse,howcantrustinthesystembeenhanced?

Fromthese,thepaperwillthendiscussthebusinesschallengesandpolicyconsiderationsinofferingm‐moneyanditsinnovations.Theseconsiderationsarerelevantforeverystage,especiallyinintroducinginnovationsforincreasingusageamongtheBOP.

Expandinguseofm‐moneytotheBOPinthePhilippines Twokindsofm‐moneyplatformsarepresentlyavailableinthePhilippines:SMARTMoneyand

GlobeGCash.Introducedin2001,SMARTMoneyisissuedbytheBancodeOro(BDO)UniversalBank,inpartnershipwithSMARTTelecom.Itisadebitcard(pre‐paidcard),whichcanbeaccessedusingan

automatictellermachine(ATM),acreditcardterminaloramobilephone.GCash,ontheotherhand,wasintroducedin2004byGlobeTelecomanditsfully‐ownedsubsidiary,GXI9Incorporated.GCashfunctionsasanelectronicmoneytransferfacilitythatturnsamobilephoneintoanelectronicwallet.

Despitetheabsenceofcomparablefigureswithrespecttom‐moneyusage,anindicationofusecanbeseenfromthenumberofregisteredusers,thevalueoftransactionshandled,andtheamountofrevenuegeneratedfromtheservice.Forinstance,in2007,GlobeTelecomincreaseditsGCashuserbaseto1.4MGCashfrom1.2Mthepreviousyear(Globe2008b:61).Attheendofthesameyear,theywerealreadyhandlinganaveragemonthlytransactionvalueofaroundP6.23billion(Globe2008b:65).SMART,ontheotherhand,wasabletogeneratePhp41MinrevenuefromSMARTMoneyalone(PLDT2008b:40).Moreover,thetotalvalueofremittancessentin2006usingSMARTMoneywasalreadyaroundUS$28.9millionfromabroad,whilewithinthecountryitwasUS$113.7million(Proenza2007).

Thisincomeandincreaseinuserbasemaybeduetovariousapplicationswithwhichm‐moneycanbetransacted.WithGCashorSMARTMoney,consumerscanalreadypurchasegoodsandservicesover‐the‐counterorremotely,payutilitybills,purchaseairtimecreditsandsendinternationalanddomesticmobileremittance(m‐remittance)(Proenza,2007,Mendes,et.al2007).IthasevenleadtoaFilipino‐versionofe‐commercethatcombinesuseofonlinesocialnetworksthatarecompletedwithm‐moneytransactions(Alampay2008).Whilethisreflectsthetransactiondemandform‐moneyandm‐banking,Proenza(2007)explainsthatthedemandhasstillbeenpredominantlyfromhighincomeurbandwellerslargelybecausetheyareeasiertoreach.

Thechallengethenistoexpandm‐moneyusagetolowerincome,ruraldwellers,inparticular,usersfromtheBOP.Ifitistousethetechnologyforremittances,thepotentialdemandcouldbefrompeoplewhohaverelativesworkingabroadorpeoplewhohavemigratedinternallytootherregionsinthecountry.

InasurveyoftheBOPthatLIRNEasiaconductedin2008(n=800),9%hadrelativesworkingabroadand13%hadmigratedinternallytootherregionsofthecountry.Ofthem,61%sentmoney10(n=172workingabroad)(LIRNEasia2008),whileamajority(71%,n=74;55%,n=103respondentswhohavefamilymembersworkingawayfromhome)receivedfinancialsupportonamonthlybasis.Chancesare,aconsiderablenumberstillusetraditionalremittancechannels.AccordingtotheNSO(2007)ofremittancessent,77%arecoursedthroughbanks,14%throughdoor‐to‐doorservices,and9.2%aresentinformallythroughtheagency,localofficers,friends,co‐workersorothermeans.MorerecentreportsfromtheBSPsaysthatthenumberofFilipinoswhosendthroughinformalchannelshavebeengoingdownandestimatesthistobeonly5%in2008(Gonzales,2009).

Giventhis,howcanpeopleattheBOPbeconvincedabouttheadvantagesofusingm‐money,insteadofthetraditionalandinformalmethodsmentioned?

9GXIisregisteredwiththeBSPasaMoneyTransferOutfit/RemittanceAgent,whichfallsunderthethirdclassificationofe‐moneyissuers(EMI‐others)recognizedbytheBSP.Theothertwotypesare:(1)abankand(2)anon‐bankfinancialinstitutionrecognizedbytheBSP(BSP,2009b)10TheaverageamountsentamongFilipinoOFWsis$90permonth,accordingto58%oftherespondentswhohavehouseholdmembersworkingabroad.

MentalAccess

AlmostaquarteroftheBOP(23%,n=800)werefoundinLIRNEasia’ssurveytobeawarethatfinancialandbankingservicescanbeaccessedthroughmobilephones,and41%ofthemknewsendingorreceivingmoneythroughICTswaspossible.Moreover,38%whowereunawareoftheservice(n=469)expressedinterestinusingm‐moneytransfers(LIRNEasia2008).

However,theBOP’sreasonsfornotusingpaymentsthroughtelephonesorcomputers(seeTable1)reflectbarrierstosubsequentusageofm‐money.Forexample,1%and4%ofthosewhowereawareofsuchservicesbutdidnotusethemsuggestachallengeofovercomingmotivationtochange.

Table1:Reasonsfornotusingpaymentservicesoverthetelephoneorcomputer

Reason %(n=294)Idonotknowhowtouseit 56It’snotapplicabletome 16Idonotownatelephoneorcomputer 10Mytelephonedoesnothavethatcapability 9Itistooexpensive 9Thesearenotreliable/trustworthy 4Iamsatisfiedwithmypresentmodeofobtainingsuchservice.

1

LIRNEasiaSurvey(2008)11

Fewoftherespondentsactuallyhadissueswithm‐money’strustworthiness(4%)(seeTable1),whichcouldhavebeenafactorintheirdecisiontonottrythemobilechannel.TheirtrustmayhavetodowithFilipinos’highuseofSMSande‐loadingwhichmakesthemhighlyexposedtoelectronicexchanges.Theirexperiencehasbeenverypositiveasreflectedintheirhightrustratingofe‐loading(4.63)12inthesurvey(LIRNEasia2008).ThishightrustmakesthePhilippinemarketfeasibleform‐moneyservices,astheconceptoftransferringinformationandmonetaryvaluesaresomewhatsimilar.

Thebiggerchallengeisexplaininghowitactuallyworks,andthebenefitsthatcouldbegainedbyusingthetechnology.Inthecaseofremittances,respondentsfromFGDsperceivethatthedifferentandofteninformalwaysofsendingmoneyaremoretrustworthythantheirownabilitytosendm‐money.Theinvestigationalsorevealsthatyoungerpeoplearemoreinterestedinm‐moneythanthoseolderthan35yearsofage(CKS2009).

Collectively,respondentswereopentousingsuchaservice,butsaidthey“willneedtoseetheservicedoverywell,proveitsreliability,havetoberecommendedbytheirsocialnetworksandcompetitivelypricedforthemtouseit.”(CKS2009).Thisissimilartotheconcernsforsendingmoneyhome‐‐securityofthetransaction(thatitgetshome),excessivefees13,andtimeittakestoreceivethemoney(Comninos,etal,2009).ThepopularityofWesternUnion’sremittancedeliveryindicatesthatitaddressessaidconcerns,alongwiththeBOP’spreferenceofhavingremittancesdeliveredathometo

11multipleresponsequestion12where1means“Idistrustthismethodcompletely”and5means“Itrustthismethodcompletely”,respondentswereaskedtoratetheirdegreeoftrustintop‐upmethodsused:top‐upcards,electronicreloads,loadtransfersfromothers,andSMStop‐ups13feesaredependentonaccesstobankaccounts,thespeedoftransfer,thedestination,amount,exchangerates,etc.(Comninosetal,2009)

savetimeandtravelcosts(CKS,2009).Hence,tobeconsideredanalternativeremittancechannel,m‐moneyserviceshavetoasserttheiraddedvalueandservicequalitytotheBOP.

Forsubscribers,thebenefitsthatmobilecurrenciesprovideincludesavingsincost,time,andsecurity.OtherstudieshaveestimatedthattheadvantageofusingSMSpaymentsoverover‐the‐countertransactionswouldbearoundPhp216(roughly$4.25),whenoneconsidersthecostoftravel,andtheopportunitycostoftimespentforthetransaction(Owens,2006:6,ascitedinProenza,2007:52).Thisisasidefromthesafetyitprovidesgiventheriskofburglaryortheft.Theboxbelowillustratessuchsavings:

.

BOX1:TheCommonRemittanceprocess

Tounderstandthepotentialofm‐moneyforremittancepurposes,onemustfirstunderstandthenatureofdomesticremittancesamongthepoor.TakethecaseofMs.A,whoworksasadomestichelperinManila,andsendsmoneybacktoherparentsmonthly:

“ I send Php2000.00 per month to my mother through Cebuana Lhuillier (a pawnshop). The first time I sent money through them, I was asked for some identification. I provided my postal ID, after which they gave me a customer ID that I could use for future transactions. For every remittance I send, I provide the name of the person, and their address. For every transaction I do, they provide a control number. I pay a fee of Php70 per Php1000 I send. So every month I pay Php140. I call my mother to inform her of the control number. I also text her the control number to make sure she gets it correctly. She can then collect the money from her end by showing her ID (I think she will also get a customer ID once she’s been a client before), and the control number. Without the control number and ID, she will not be able to get the money. It costs Php 15 to travel to get the money, and another Php15 back.”

Inthecaseabove,onecanseethatforeveryPhp2000,theyspendaboutPhp195(P140fee;SMS/callP10;sendertransportP15;receivertravelP30).Thistranslatestoalmost10%ofthetransactionvalue.Onecanassumethatatravelcostvariesdependingonthedistancerelativesarefromthetowncenters.

Monetarysavingsareevidentwithm‐money,asthesenderandrecipientcollectivelysaveuptoPhp180.Assumingthatthesenderdidhercash‐inatGlobeWirelessCentersforfree,sheonlyneedstospendanadditionalSMSfeeofPhp2.50tosendtheremittancethroughmobile.Therecipient,however,onlyneedstopayaminimumofPhp20.00,assumingthatshewenttoapartnercentercharginga1%cash‐outfee.Onceinthecash‐outcenter,therecipienthastoreplywithherMPINtoasystem‐generatedSMSinitiatedbythecashierthatcostsPhp2.50worthofairtimeload.ThesaidSMSisanadditionalsecuritymeasuretoensurethatthepersondoingthecash‐outisthesameowneroftheGCashwallet/mobilenumber.

Evidenceoftrustinthetechnologyanditssecurity,isseenwithhowsomepeoplesendtheirtransactiondetailsandcontrolnumbersviaSMS(seeBox1Story).Thesepeoplearguethatsuchmethodmightbesaferthanhavingitwrittenonpaper,whichmaybemisread,miswrittenorlost.ThiswascapturedinthequalitativeinvestigationofLIRNEasiaonTeleuse@BOP3(CKS2009):

“…respondentsinallthesecountriesdidnothesitateinsendingtheirtransactionidentitynumbersforremittancesoveranSMS.In(the)Philippines,Thailand,SriLankaas

wellasBangladesh,migrantworkersdonothesitateinsharingtheimportantdetailsoftransactionsviatextmessagesorcallstotheirfamilymembersintheircountryoforigin.Theyinfact,preferit,sothatthewrittenrecordremainsconvenientlyathandanddoesnotfallinwronghands,whichcouldhappeniftheywerewritteninpaper(CKS2009:88).

Figure2:Sendinglocalremittancethroughtraditionalchannels(MTOs)

Sendingremittances,whetherlocallyorinternationally,wouldrequirethesendertoeventuallycommunicatewiththerecipientthatmoneywasbeingsent.Thiscouldeitherbethroughacall,anSMS,oranemailmessage.

Fromaninformationsystemsperspective,thisprocessissimplifiedwiththem‐moneyplatformsincetheresponsibilityofinformingtherecipientshiftsfromthesendertothem‐moneyserviceproviderandeliminatesthecostsofcallingandtextingrecipientsregardingtheirremittance(seeFigs.3&4).Itistheinformationsystemthatautomaticallysendsconfirmationtextstobothsenderandrecipientindicatingthesuccessofthetransactionatthesametimethem‐currencyistransferred.Moreover,itmakessendingmoneymoreflexible:senderscancash‐inmoneyinbulkthensendmoneyinincrements,anywhereatanytime,providedthatitiswithinthelimitsofmaximumnumberoftransactionsallowedperday.ThisreducesthetravelingexpensesandtimespentwhensendingmoneythroughMTOs.

Figure3:sendinglocalm‐remittancethroughcash‐in/outcenters

Figure4:sendinglocalm‐remittancethroughmobilephones

Table2showsthatthefeesforsendingmoneyaredependentontheavailablepartnercentersinthearea;forexample,asendermaycash‐inatacentercharginga1%transactionfeewhiletherecipientmaycash‐outatapartnercentercharging5%.Comparedtootherremittancechannels,feesform‐moneyservicesoccurbothatthefirstandlastmile14oftheprocess,afeaturewhichmaynotappealtomostrecipientsastheyareusedtothesendershoulderingallthetransactioncosts.Therefore,itisimportanttoexplaintocustomersthatinsummingallthefees,m‐moneyservicesarestillcomparativelycheaperthanotherexistingchannels.

Basedonpriceratesalone,theBOPmaystillusetheirexistingremittancechannelsintheeventthattheclosestm‐moneycentertothemwouldbetheonethatchargesa5%transactionfee.Otherwise,priceratesshouldserveasoneoftheincentivesforshiftingtom‐moneyforremittance.

14firstmile:sendingtheremittancelastmile:receivingtheremittance

Table2:FeesforsendingPhp1,000worthofdomesticremittance

Totalfeesarecomputedbasedonthepriceratesretrievedfromrespectivewebsitesande‐mailcorrespondences15;notethatLBC,WesternUnionandCebuanaLhuillierofferdifferentwaysofremittingmoney.Theyarenotlimitedtodeliveryorpick‐upremittance.Forpurposesofthispaper,onemethodandpricerateperMTOwaschosen.

15e‐mailcorrespondenceswith:DianaBonghanoy,QualityRelationsSpecialist,CebuanaLhuillier DonNinoSantos,GCashServicesTeam LeiMadridandYaniMallari,SMARTCustomerCareWesternUnion’sfeeisverifiedbytheirCustomerServiceRepresentative

Still,evenwiththerelativelylowtransactioncosts,theproportionofSMARTandGlobesubscribersutilizingSMARTPadalaorGCashremainssmall.Ofthe25millionSMARTsubscribers,only7millionhaveactivatedSMARTMoneySIMcards.Ofthese,only500,000areactiveusers.Globe,ontheotherhand,has1millionactivatedGCashSIMcardsfromits19millionsubscribers(CGAP2008).

MaterialAccess

TheperceivedubiquityofmobilephonesamongallsegmentsofsocietyincludingtheBOPhasbeentherationaleforconsideringthetechnologyfortheunbanked.

LIRNEasia’ssurveyconfirmedthattheBOPhaveeasieraccesstomobileservicesthanbankingandfinancialservices.Inthesurvey,only13%oftheBOP(n=800)reportedhavingabankaccountandonly1%hadaccesstocreditcard.Thisisincontrasttothe1.36mobilephoneperhouseholdforthesamesample.Hence,theavailabilityofmobilesinthehandsoftheBOPmakestheservicemorefeasible.

Still,reasonscitedintheLIRNEasiasurvey(referbacktoTable1)showthatissuesonphone/computerownership,andfees,stillhindersomeusersinaccessingtelephoneandcomputer‐basedpaymentservices(10%and9%respectively,n=294).Therearealsothosewiththeperceptionthattheirphoneisnotcapableofusingthatm‐moneyapplications(9%,n=294).Inreality,suchcapabilityhowever,isnotdependentonthemobilephoneitselfbutontheSIMcard.Whilem‐moneyforremittancesinthePhilippinesisanSMS‐basedserviceapplicabletoanymobilephonewithanSMSfeature,itishowever,limitedtothetwotelcoswhoareprovidingm‐moneyservices‐‐GlobeTelecom(GCash)andSMART(SMARTMoneyandSMARTPadala).M‐moneyservicesareexclusivetothesubscribersofthesaidtelcosandcross‐networkmoneytransferisnotpossible.Intheoryusingm‐moneymayalsobepossiblewithsharedhandsets;however,thiswouldalsohaveimplicationswithrespecttotheprivacyandsecurityoftransactions.

Tousem‐money,theBOPnon‐subscriberseitherhadtoswitchtoanothernetwork(purchaseanotherSIMcard)orusetwoSIMcards,whereinonewillbeusedform‐moneytransactions.ThisisevidentinthePhilippines,asamongthecountriessurveyed,ithadoneofthehigherreportedmultipleSIMuse(16%,n=506).Itwasnoted,thatoneBOPuserinterviewedsaidsheusuallyusesonenumber/networkforregularSMS‐communication;sheusestheotherwhenevershecallsonceamonthandcoordinatesherremittance(LIRNEasia2008).

Besidesaccesstoanybasicmobilephoneuseofm‐moneyforremittancewouldalsorequireaccesstosupportstructuressuchascash‐in/outcentersandfacilitiesforenrollingintheservice.Cash‐in/outcentersaresomewhatsimilartoMTOs.Theyarephysicaloutfitsthatconvertcashtom‐money(cash‐in)andviceversa(cash‐out);theymayalsofacilitatethemobilefundtransferfromthesendertotherecipient.Thisisbecausetherearetwowaystosendm‐moneyusingthemobileplatform‐‐throughthecash‐in/outcenter(seeFigure3)orthroughthemobilephone(Figure4);bothhoweverrequirecash‐intransactionspriortofundstransfer.TheGlobeGCashserviceconductsbothtransfermethodsunderthesamebrand.SMARThowever,marketseachprocessinadifferentbrand:SMARTMoneyallowsforphone‐to‐phonetransfers(Figure3)whileSMARTPadalausesthecash‐in/outsystem(Figure4).ASMARTMoneycardalsoallowsuserstowithdrawcreditortochargepurchasesthroughanyMasterCardterminal.Italsoallowsuserstosendcashcreditfromone’sSmartMoneyaccounttoanotherperson’sSmartMoneyaccountusingtheirmobilephone(Proenza,2007).Besidesthis,bothGlobeandSMARToperateinpartnershipwithotheragents(calledpartnercenters)suchasconveniencestoresandpawnshops.Thishelpsincreasetheirreachtoallgroups,particularlythoseinruralareaswhohaveproblemsinaccessingfinancialinstitutions.

Whileaccessibilitygenerallyoverridescostconcernswhensendingremittances,asexemplifiedbytheBOP’spreferencefortheWesternUnionDeliveryService,cash‐in/outfeesarestillaconcernsincethissectorheavilyreliesoncashfortheirexpenses.Hence,havinglimitednetwork/outletsacceptingm‐moneyfortransactionsposesproblems.Andwithlessthan1%ofthe1millionmerchantssellingairtimeregisteredtoperformthisfunction,themobiletransferprocessnowbecomessimilartothepick‐upremittanceprocess:recipientshavetogotophysicalinstitutionstoutilizethemoney(CGAP2008).Thesenewoptionsprovidecustomersnotonlywithconvenience,butalsochoice.Whatisimportant,however,isgreatertransparencywithrespecttorates,asfeesmayvarydependingonthe‘partner’used.Also,choicewouldstillbemorelimitedinruralareas.

Otherbarrierstousingthetechnologyinclude:(1)theBOP’saccesstoacceptableidentificationdocuments(suchasformalhomeaddressrequiredforidentityproof(CKS,2009))whichareneededtoactivateanaccountortochangem‐moneytocashand(2)themethodofconvertingcashintoelectronicvalueandtheotherwayaround,asrequiredbybankingregulations.

SkillsAccess

M‐moneyservicesrequireSMS‐relatedskillsaswellasinformalfinancialskillssimilartoreceivingorsendingremittancesthroughtheusualplatforms.

With99%oftheBOPrespondentsbeingknowledgeableinusingSMSand98%sayingtheywritetheirownSMS(LIRNEasia2008),coupledwiththeconsiderablenumberwhohavesentremittancesitissurprisingthat56%oftheBOPstillstatedthattheirprimaryreasonfornotusingsuchservicesisbecausetheydonotknowhowtousetheservice(referbacktoTable1).Thisistruewithrespecttobothinternalandexternalmigrants.

Partofthereasonstemsfromtheolderagegroups’perceptionthatusingm‐moneyrequiresothersetsof‘softskills’acquiredfromusingcomputers,bankATMsandotherautomatedsystems,noneofwhichareprominentlyavailabletothem(CKS2009).Althoughcash‐in/outcentersandcustomerservicehotlinestechnicallyserveasinformationhubsforpotentialusersofm‐money,theBOPstilldependontheirsocialnetworksforinformationinputs.However,theyalsoexerciseagreatdealofindividualdecision‐makingthroughtheirrelianceoninformationontheinternet.Respondentsrelyontheirfriendsandothercontactsintheirsocialnetworkfortheirinformationbuttheyhavealsobeguntousetheinterneteffectively(CKS2009:109).Thisimpliesthatthespeedofadoptioncouldbeexponentialonceapartofamemberofasocialnetworkbecomesconvincedandlearnstheprocess.

Credibilitycomesintoplaywhenrespondentsaredealingwithimportantbusinessrelatedissuesontheirmobilephones,whenfinancialtransactionsarebeingcarriedoutornewservicesareexperienced(CKS2009).Inmostcountriespeoplewouldstillpreferface‐to‐facetransactionstoensuretransactionsoccur‘effectively’(sic).Itisnotthattheydistrustmobilephones,butfinditisdifficulttoimaginehowtransactionscanbedoneoverthephone.Thisisthechallengethatmobilecurrencieshavetoovercome:demonstratingthatsuchaservicecanworkandperhaps,whendealingwith‘larger’amounts,theBOPhastoweightherisksabitdifferently.

Conclusions

Giventhedearthofstudiesthatanalyzehowmobilephonesareinter‐relatingwiththepre‐existinginformalpracticesthatthepoorfavor(Duncombe&Boateng,2009),thisstudylookedathowm‐moneyasanalternativeremittancechannelcansubstituteforlongestablishedwaysthatthepoorremitmoneytotheirfamilies.

ThefeasibilityoftappingFilipinosattheBOPtousem‐moneyforbankingandremittancesisgood.AlargepercentageofthemhaverelativesworkingabroadorinotherpartsofthecountryandbasedontheLIRNEasiasurvey,only13%oftheBOPhavebankaccounts.Personalphoneownershipamongthemishigh,andthereare1.36mobilesperfamily.TheyalsohavetheprerequisiteknowledgeinSMS,andhighknowledgeandtrustinelectronicreloading.TheyalsohavehighawarenessincomparisonwithcounterpartsinSouthAsiaandSouthEastAsiaregardingthecapabilitytosendmoney(41%)anddobanking(23%)usingthephone.

However,despitetheapplication’sobviousrelevancetomanyFilipinosattheBOP,andtheirknowledgeofthefinancialservicessuchasbankingandmoneytransfersofferedthroughmobilephones,only1%oftheBOPhasuseditforbankingservices,andonly5%17hasmadepaymentsorreceivedmoneythroughthismethod.Thechallengeishowtoincreasethesenumbers.

BusinessChallenges

Themainchallengeform‐moneyusageismorementalsinceavailabilityofmobilesandtheskillsnecessaryforusingthemaregenerallypresentevenamongtheBOP.Foracountrywithalonghistoryofmigrantlabour,ithasalreadyaningrainednetworkandsystemforsendingmoneyhome.

ThelimitedawarenessoftheBOPraiseschallengesonthebusinesses’wayofpositioningtheirm‐moneyproduct.Theyfacecompetitionfromotherfundtransferagents‐‐pawnshopsofferingremittancesandexistingMTOs.AspeopleattheBOPhavebeenusedtoandaremorecomfortablewithentrustingtheirmoneytoa(1)Pawnshop‐MTOora(2)friend/relativevisitingtheplaceoftheirrecipient(CKS,2009).Telco‐bankpartnershipshavetostresstheircomparativeadvantagebyraisingawarenessonthebenefitsofm‐moneyandthesecurityofitssystem.

Marketingm‐money,however,haslargelybeenfocusedoninternationalremittances.But,asthispaperhasshown,moresignificanttotheBOParedomesticremittances.Thisisbecauseflowofinternationalremittanceshastendedtogotomoreaffluentsegmentsofthepopulation,whereasdomesticremittancesflowfromurbanareastopoorerprovinces.Furthermore,thereisminimaltransactionalcostsavingswithinternationalremittances,sinceallofthemarealllinkedtoformalbankingchannels.Withdomesticremittances,however,moredirecttransfersarepossible,withoutnecessarilygoingthroughformalfinancialchannels,andtherearegreatercostsavingsfromfees(seeTable2).Infact,domesticm‐moneytransfershavehadlargervolumesintermsoftransactionsandamounts.

Developingtheneededskillsandconfidenceisalsoanimportantchallengetoovercome.Theexistingproceduresforusingm‐moneyshouldbereviewedwiththeBOPinmind.AnexamplewouldbethesystemgeneratedSMSform‐money;consideringtheliteracyleveloftheBOP,thestructuringofmessagesshouldbeeasyenoughtounderstandandthatoptionstohaveitwritteninthenative

172%regularlydothis,3%havedoneit,butdonotdosoregularly.

languageordialectoftheBOPmayfacilitateeaseinuse.Moreover,EncouraginguseofthissystemwouldneedtoconsiderhowpeopleattheBOPgainskillstousenewtechnologiesandprocesses.Inthis,socialnetworkshaveanimportantroletoplay.

Limitedcash‐outcentersandretailoutletsthatacceptm‐moneymayrestricttheattractivenessofusingm‐moneyasrecipientsstillhavetoconvertthemtocash.PawnshopsareheavilyfavoredbytheBOPforlocalremittancesduetotheirminimalrequirementsandcustomersfeeltheydonothavetodressnicelytovisitsuchvenues(Iglesias,2009).Toaddressthis,them‐moneycentersshouldnotbeintimidatingtoBOPcustomersandshouldprovidehelpfulinformationonm‐moneyuse.Inthis,villageconveniencestoreshaveproveninthepasttobevaluableallies,especiallywithrespecttoelectronicloading.

Policyissues

Thesuccessofm‐moneyinreachingtheBOPistiedtothetelecommunicationpoliciesthataddresstherequiredinfrastructure,availableservicesandapplications(Ahmad,2006).Important,aswell,arebankingpoliciesthatalsoaffecttheregulatoryenvironmentofm‐moneyuse.Withm‐moneyservicesofferedbyGlobeandSMART,thePhilippineCentralBank(BSP)istechnicallyregulatingBancodeOro(BDO)(abank),andG‐Exchange(amoneytransferagent),andnotthetelecommunicationcompanies(SMARTandGloberespectively).InthecaseofG‐Xchange,thecompanyhasbeenregulatedbytheBSPasaremittanceagentsinceitsestablishmentin200519.ItiscoveredbyBSPCircularsandhastocomplywithAnti‐MoneyLaunderinglaws.Amongtheregulatoryimplicationsoftheselawsaretheneedtoverifytheidentityoftheusers,andlimitationsontheamountsthatsubscriberstotheservicecantransact.

ThiswouldhaveimplicationsontheBOPifsuchpoliciesaffectstheamountsthepoorareabletoremitorrestrictaccesstotheservicealtogether.TheLIRNEasiasurveyhasrevealedthattheaveragemoneysentpermonthbyexternalmigrantsabroadtotheBOPrespondentsis$90,anamountthatdoesnotexceedtheAMLAmonthlyloadlimitofPhp100,000setbytheBSP.AMLArestrictionsthen,maynotbeanissuefortheBOPsincetheydonotmovelargevaluespermonth.Theymay,however,bemoreaffectedbytheknow‐your‐customer(KYC)regulationsforbanking,astheymayhavedifficultyinobtainingproperidentificationcards,documentsandotherrequirements,thatwerenotrequiredwhengettingaprepaidmobilephoneline.Thechallenge,forpolicy‐makersistoencourageaccesstothesaiddocuments,whichmayalsobebeneficialforotheractivities.

Finally,animportantpolicyconsiderationisalwaystheprotectionofthecustomer.Unlesscustomersareassuredthattheirtransactionscanbesecured,theywillnotbeconvincedtousingm‐moneyasanalternativetothepresentmodesthattheyuse.InthePhilippines,theBSPhasalreadyruledthatm‐moneyisnotconsideredadepositandhencedonotearninterest.Oneimplicationisthatitisnotinsured.Nonetheless,theCentralBankdoesrequirethattheamountofm‐moneyincirculationshouldalwaysbebackedupwithanequalamountbyitsissuer.Italsorequiresproperredressmechanismsbeputinplaceaswellassecureinformationsystemsandrecordsmanagement.

Withgoodpolicies,thecentralbankcanencouragetheuseofm‐moneyamongbusinessesandconsumers.Technically,theideaistoregulatetheplayingfieldofm‐moneyandnottheplayers,soastoextendreachtotargetcustomersevenattheBOP.

19GXIwasset‐upayearafterGlobedevelopedtheGCashservice.

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