Towards Financial Inclusion in the Caribbean - Mobile Payments Solution ea Yaw Ching ulfillment of: Financing for Development Course by World Bank
Jan 19, 2017
Towards Financial Inclusion in the Caribbean - Mobile Payments Solution
By: Rhea Yaw ChingPart Fulfillment of: Financing for Development Course by World Bank
Agenda1. Current State of Affairs 2. Qualifying the Opportunity3. The Payments Solution4. A Multilateral Approach to Success
Current State of Affairs
“The Caribbean’s ability to sustain levels of economic growth and social progress has been affected by the ongoing adverse impacts of the global
economic crisis, declining foreign direct investment, increased indebtedness, the lack of adequate transportation, energy and information and
communications technology infrastructure networks, limited human and institutional capacity and continuous climate vulnerability.”
Summary Third International Conference on Small Island Developing States
Unlocking sustainable growth for your business means participating in the overall economic and social development of the Caribbean namely….
Enabling progressive Infrastructure • Enabling a resilient, innovation-based ecosystem
Promoting Economic Resilience • Solutions that promote equal rights to economic resources
Fostering Social Inclusiveness • Creating a conduit for local content, creativity and innovation
We must unleash Caribbean potential by creating a vibrant ecosystem of social and economic opportunity
Accessleads to
Opportunity which leads to
Equalitywhich leads to
Prosperity
Financial Accessleads to
Economic Opportunity which leads to
Income Equalitywhich leads to
Universal Prosperity
“Meeting our region’s development goals requires an overhaul in the way financial resources are accessed, organized, allocated and mobilized. The principle that every individual and business participate meaningfully to the agenda must underpin the
creation of this new democratized ecosystem.” – Rhea Yaw Ching
The Current Ecosystem is
BROKEN
60% of Adults in the Caribbean do not have a bank account
Source: Mobile Money Live/GSMA, ICT Pulse 2014
Note: Trinidad and Tobago – 76%
Not enough money Do not need an account
Family member already has an account Accounts too expensive
Source: Mobile Money Live/GSMA
Financial Institutions too far
away
Lack of required documents
Why?
There is also inadequate access to financial services,
#ATMs per 100,000 pop #Bank Branches per 100,000 pop -
20.0
40.0
60.0
80.0
100.0
120.0
140.0
HaitiJamaicaGuyanaDominican RepublicSurinameTrinidad and TobagoBarbadosAruba Saint Vincent and the GrenadinesSt LuciaDominicaBelizeBahamasGrenadaAntigua and BarbudaSaint Kitts and Nevis#REF!
High Income Country Avg.
Source: World Bank 2013 / IMF Financial Access Survey 2009
High Income Country Avg.
Reference: CGAP’s market archetypes for financial inclusion
There is also a strong correlation between access to financial services and GDP
Overall, the financial inclusion scorecard is poor
St Kitts and Nevis
Bahamas Antigua and Barbuda
Grenada Belize St Lucia Barbados St Vincent and the
Grenadines
Trinidad and Tobago
Jamaica Guyana Haiti0
10
20
30
40
50
60
70
80
90
100
65.93
52.9 52.6944.78
42.27 40.8737.66
29.8
22.03 20.88 19.66
7.62
USACanadaUK
Singapore
Spain
Note: average value from 2004 to 2012Source: Asia Development Bank, World Bank
Factors1. ATMs per 100,000 adults2. Commercial Bank Branches per 100,000 adults3. Borrowers from Commercial Banks per 1,000 adults4. Depositors with Commercial Banks per 1,000 adults5. Domestic Credit to GDP
Note: St Kitts and Nevis, Bahamas, Antigua seen as skewed due to large offshore financial sector
Trying to analyse the problem using current
lens(will lead to the wrong diagnosis)
Trying to solve the problem by using current
tools(will only get us so far)
Trying to build solutions in silos
(will never give us scalable results)
Trying to maximise value by addressing half the
market (has proven to be unsustainable)
The Current Payments Conundrum
• Capital heavy and expensive.
• Layered with manual, administrative and operational costs
• Multiple value-chain players.
• Narrow Innovation Focus
• Processing is highly complex to meet all governance and safety/soundness requirements
• Electronic Payments (incl. cards) are targeted by criminals
• Institutional “cartel”
• Short Investment Horizons
• Geographically bounded
• Limited open network or interoperability
EXPENSIVE COMPLEX LIMITED
A Mobile Financial Services Ecosystem creates a cost efficient, scalable platform to reach everyone
Percentage of the population in select Caribbean countries that use financial/banking services and own mobile/cellular phones
Source: ICT Pulse
Qualifying the Opportunity
The M-Payments Opportunity is worth US$8 Billion annually
20M Market Size
12M Unbanked
6M Under-Banked
>100% Mobile Penetration
Growing smartphone penetration
$US 12B Documented Remittances to the Caribbean60% of all bills paid in cash
High Internet Access and Usage
49% of Remittances go through informal channels
The potential extends beyond just payments
Public Sector/Gov’t Easier payment solution for Citizens (e.g. taxes or fees), Mechanism for G2P transfers (e.g. pension or subsidies)
Retail Instant and convenient remote or proximity payment for goods for both B2B and B2C stakeholders
Money Transfer Low cost alternative for P2P transfers and remittances as well as opportunity for directed remittance funding
FMCG Provides a mechanism to distribute Promo cash prize winnings
Agriculture Provides farmers with away to purchase agricultural supplies and get paid for produce/crops
NGOs Provides a mechanism to both receive funds (grants and donations) and distribute directed aid
The Solution
Is…
An efficient, convenient, affordable, accessible, user-friendly and protected way to send and receive money or make and receive payments.
SMS Gateway
Payment Processing
Bank /Bank Network
Low-End Mobile Phone
Smartphone
Point of Sale Terminal
ATM
Computer Browser
Mobile Network Operator
Internet-Based Web Services
Terminal Network
Product Portfolio 1. Domestic Transfers2. In-Network Payments3. International Remittances4. Payment Gateway
Customer Segments
1. Low Income Adults with no bank account2. MSME Owners operate in a cash environment3. Middle Income Adults with bank a/c 4. MSMEs / Entrepreneurs with bank a/c
Distribution Channels1. Agent Network2. Financial Institution Distribution Network3. Mobile Operators Top Up Network4. Other Retail Outlets
Communication Channels1. Peer to Peer Community-based Communication2. Digital Communication esp. Social Media 3. Advocacy-based
Business Model Principles
26
This model can only work if…Private Sector Stakeholders:
1. leverage the entire Caribbean for Critical Mass
2. use their disribution network and in-house resources to multiply points of presence in order to reach everyone
3. Everyone shares the reward of success by sharing the burden of financial risk across all parties
4. agree part of the solution… and that means competitors too!
5. agree to full interoperability in order to reach everyone
27
This model can only work if…Governments of the region play their role in de-risking the venture by:
1. being anchor users of the solution (for social services payments for example)
2. Facilitating proactive regulatory discussions
3. Facilitate greater access to grant funding for the social good component of the venture
4. Support the creation of blended finance options through policy reform
The biggest obstacle to success can be coined in two words: status quo.
Success is dependent on evolving our inefficient but comfortable systems to an empowered resilient, innovation-
driven ecosystem.
THANK YOU