International business assignment 8

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Principles for BoP Market InnovationKelly Poppe-GaleSeptember, 2012

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Overview

• Mobile Money Transfer Industry

• BOP Classification and Demographics

• BOP Opportunity

• Market for Mobile Money Services

• Models for MMS partnerships

• Kenya

• Afghanistan

• Phillippines

• 12 Principles for BOP Innovation

Mobile Money Transfer Industry

• Reaching the Unbanked• Technology Dependent Banking

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BoP Consumers

• Population of 4 billion

• They are brand conscious

• They are value conscious

• A higher percentage of money is spent on luxury goods

• They do not own their homes or real estate and therefore do not invest money there

• 85% of residents of one city in India own television sets, blenders, and gas stoves

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Why BoP Markets for MMT?

• Consumers are:– connecting and

networking– Readily accepting of

advanced technology• Only 4%

penetration of existing companies

Safaricom and M-PESA

• Only MNO in Kenya at launch• Vodaphone owned 40%• Targeted the Unbanked• Population was technologically

prepared• Kenyan Government does not

require bank accounts

M-PESA Success Factors

• Simplicity

• Immediate functionality

• Differentiated fee structure

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Vodaphone, Roshan and M-Paisa

• Roshan was leading MNO in Afghanistan

• Targeted Microfinance Loans Market

• Low Literacy• High Consumer

education needs

USAID/Microenterprise Access to Banking Services

(MABS) - Philippines

• Smart Communications• Globe Telecom• Targeted large

population of rural banks

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Recurring Considerations

• Importance of trust in agents

• Volatile market conditions

• Need for education of consumers

• Customer Due Diligence (CDD)

• Know Your Customer (KYC)

• Anti-Money Laundering (AML)

Regulatory Considerations

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12 Principles of Innovation

• Free accesses to the platform

• Subscription • Flat fee • Tiered transaction

basis.

1. Create a new price-performance envelope

12 Principles of Innovation

2. Offer Hybrid solutions• Match existing structures

for similar services • Offer options when possible

3. Design scalable solutions for ease of adaptation in similar BOP markets

12 P

rinc

iple

s of

Inno

vation

4. Reduce Resource Intensity

5. Design Products for Functionality

6. Develop a logistics Infrastructure

7. Deskill work

Principles of Innovation

8. Inform Customers about product usage

– Transactions– Fees

9. Design products for durability and reliability

10.Research heterogeneity of the population

11.Develop low cost distribution methods

12.Use a systems approach; design platform for ease of new feature introduction

Principles of Innovation

Market Factors

• Literacy• % consumers with

Bank Accounts• Competition• Agent Network

Development• Availability of

Technology• Current Business

Practices

Potential New Players

Grameen BankObopayNokia

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Recommendations

• Complete a cultural analysis of market

• Determine Government Requirements

• Study consumer behavior

• Adopt best model

Conclusions

• Choose partners carefully

• Best model currently is that of Safaricom in Kenya

• Modify for market conditions and adopt best practices from other models

References

Mas, I., & Ng'weno, A. (2010). Three keys to M-PESA's success: Branding, channel management and pricing. Journal of Payments Strategy & Systems, 4(4), 352-370.

Mas, I., & Radcliffe, D. (2011). Scaling mobile money. Journal of Payments Strategy & Systems, 5(3), 298-315.

Merritt, C. (2011). Mobile money transfer services: The next phase in the evolution of person-to-person payments. Journal Of Payments Strategy & Systems, 5(2), 143-160.

De Sousa, S. (2010). The role of payment systems in reaching the unbanked. Journal Of Payments Strategy & Systems, 4(2), 145-155.

Jack, W., Suri, T., & Townsend, R. (2010). Monetary Theory and Electronic Money: Reflections on the Kenyan Experience. Economic Quarterly (10697225), 96(1), 83-122.

Abdalla, S. (2011). Stock market development and economic growth in Sudan (1995-2009): Evidence from Granger Causality Test. Journal of Business Studies Quarterly, 3(2), 93-105.

Boşcor, D. D., & Brătucu, G. G. (2010). Base-of-the-pyramid global strategy. Bulletin Of The Transilvania University Of Brasov. Series V: Economic Sciences, 311-16.

Majumder, M. (2012). A Critical Approach in Understanding Bottom of the Pyramid Propositions. Journal of Management & Public Policy, 3(2), 18-25.

Prahalad, C. K. (2005). The Fortune at the Bottom of the Pyramid. Wharton School Publishing, Upper Saddle River, NJ.

References

Griffin, R. W., & Pustay, M. W.   (2010).   International Business.   6th Ed.   Upper Saddle River, NJ.

International Finance Corporation, (n.d.) M-money channel distribution case – Afghanistan. World Bank Group. Retrieved September 27, 2012, from: http://www.ifc.org/ifcext/gfm.nsf/AttachmentsByTitle/Tool6.9.CaseStudy-M-PaisaAfghanistan/$FILE/Tool+6.9.+Case+Study+-+M-Paisa+Afghanistan.pdf