Mobile money, mobile banking University meets Microfinance Frankfurt School of Finance and Management Michael Klein July 4, 2013
Mobile money, mobile banking
University meets Microfinance Frankfurt School of Finance and Management
Michael Klein July 4, 2013
Examples of “Sprinters”
• Telesom (Somaliland)
• Easypaisa (Pakistan)
• UBL Omni (Pakistan)
• Orange Money (Madagascar)
Success for mobile money is possible
• In countries with – different income levels
– low or high levels of financial inclusion
– widely differing mobile phone penetration
• In telco markets – with very different market shares of
mobile providers
– with or without competition among mobile providers (14 “sprinters” in 10 countries)
Patterns of success
• Telcos are the typical provider • Low investment costs (e.g. $1 million), significant operating
costs; Revenue generation; cash flow positive after 2 years in several cases
• CEO support, separate business unit; Full-time staff above 10, even 50 employees
• Strong marketing – awareness and sign-up push by agents – “immediate transaction” after sign-up
• Focus on 1 or 2 core products e.g. P2P transfers • Cash-in cash-out network with active agents; Cash
management support for agents (“wholesalers”) • Adapt to local circumstances
Unbundling Banking
• Exchange of forms of money
• Storing money
• Transferring money
• Investing money
Unbundling Banking The case of M-PESA
• Exchange of forms of money – exchange of money between two owners (“cash merchants”)
• Storing money
– on the servers of M-PESA and cash in banks (“money in “e”-form, stored in server, not “wallet”)
• Transferring money
– via SMS
• Investing money
– Risk of loss; prudential regulation (capital and liquidity)
Same approach of analysis whether “telco” or “bank”-based
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Some macro-financial concerns
• Impact on Monetary Aggregates – Fully backed by cash – Credit extended
• Dealing with runs
– Keep cash in “vault” – Invest in central bank paper – Invest in bank – Invest directly
Anti-money-laundering
• Strategic posture: Encourage people to leave the cash economy
• Graduated KYC requirements
– Identity check
– Transaction limits: amount, frequency
– Suspicious Transaction Reporting