The WEF's Mobile Financial Services Project

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Ross Morgan
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1 THE WORLD ECONOMIC FORUM AND MFS Project overview The WEF's Mobile Financial Services Project "The Mobile Financial Services Readiness Project assesses the institutional, market and end-user elements that contribute to the adoption of mobile financial services and the overall goal of financial inclusion for the poor " Sjoerd Nikkelen Goals Audience Deliverables Columbia Business School New York November, To establish a comprehensive and actionable assessment of MFS readiness at the country level To track and measure progress over time Key Policy Makers Business Leaders MFS Community MFS Readiness Scorecard per country Outreach to create awareness and promote insights from scorecards WORKING GROUP HAS COME UP WITH A SCORECARD VETTED BY EXPERTS Total of parameters in total THERE ARE A BILLION UNBANKED PEOPLE WITH A MOBILE PHONE Expected to be. billion in two years Mobile Financial Services Readiness Index Sub-pillars No Formal Banking Mobile Phones Institutional Regulatory Proportionality A. Financial Sector B. Telecom Sector C. Regulatory Flexibility and Coordination Market Consumer Protection Market Catalysts Market Competitiveness A. A. Government Leadership A. Financial Sector Competitiveness B. Enforcement & Administration B. Data Collection and Monitoring B. Telecom Sector Competitiveness C. Non-government cooperation C. Interoperability... Service Diversity & Innovation A. Service Diversity B. Sophistication of Mobile Services C. Innovation End User Agent Development & Distribution A. Mobile Penetration B. Distribution Model C. Licensing Processes End-User Empowerment & Access A. Financial literacy B. Financial Inclusion C. (Un)met Needs Adoption 8 Subscription & Usage A. Service Subscription B. Usage and Impact Source: ITU 'The World in ', 'CGAP Mobile money by the numbers' by M. Pickens CURRENTLY ACTIVE MOBILE MONEY DEPLOYMENTS IN XX COUNTRIES And 89 more are being planned CURRENT FOCUS ON PAYMENTS SERVICES SUCH AS MONEY TRANSFER AND BILL PAYMENT Limited savings, credit and insurance offerings MFS DEPLOYMENTS OVER TIME # 8 OFFERED MFS SERVICES # e e 8 Domestic Merchant International Bank Prepaid MFI Loan Electricity Money Payment Money Account Service Disbursement Purchase Transfer Transfer Management Payment Bill Loan Bank Salary Corporate Insurance GP Payments Repayment Transfer Disbursement Payments Payments Source: GSMA Mobile Money Tracker Source: GSMA Mobile Money Tracker Other

2 THREE CLUSTERS OF COUNTRIES IDENTIFIED ALONG THE MATURITY CURVE Preliminary overview of characteristics LACK OF DATA LIMITS DEFINING WINNING POLICIES AND DECISIONS Two efforts to bridge the evidence gap in coming weeks "Action needed before MFS can scale" "Policies in place, time to scale up" "Scale in payments, ready for the next step" I Survey amongst regulators and experts to take stock of regulatory and agent aspects II Approach MNO'S to start building evidence base of subscription and agent numbers Distribution Market Limiting outsourcing to agents Stringent banking license rules Lack of well scales agent Geographic roadblocks No incentives for incumbent operator Limited innovation in banking sector Dedicated MM regulation in place Dedicated agent regulation in place Lack of well scaled agent Lack of aggregators Incentives not yet right No incentives for incumbent operator Limited competition Coherent agent regulation Strong consumer protection AML / CFT in place Sophisticated distribution Competition in the street Multiple deployments Partnerships between banks and MNO's Small profits being made Survey addresses relevant aspects of regulation and agents The use of agents Anti money laundering / combating of terrorist financing Foreign exchange Taxation Survey will address financial regulators in developing countries Focus on comparability versus depth AFI considered important partner in this regard given the many contacts in the regulatory space Allow partnering institutions to adjust and add to questionnaire to create incentive Insight into subscription uptake and agent numbers key missing element to study success and readiness The amount of information that is disclosed strongly varies per operator and deployment Initial study of all public sources provides a very high level first shot of numbers Few operators disclose details on subscription and agent # Deployments that data was found for End User Lack of trust Lack of financial literacy Strong informal alternatives Source: Preliminary WEF analysis Strong informal alternatives Need for education Initially already banked Gradually penetrating the unbanked Subscribers 9 Agents 8 MANY PARTIES ENGAGED TO MAKE THIS REALLY HAPPEN Overview of key constituents APPENDIX Organization Focus / Description Recent Activities Committed to improve financial access to the poor since Pittsburgh Summit in September 9 Launched nine principles for innovative financial inclusion Will erect Global Partnership for Financial Inclusion Housed at the World Bank, CGAP is an independent policy and research center dedicated to advancing financial access for the world's poor. Research on branchless banking and policus Published Financial Access report Global Network of financial inclusion policy makers in developing countries Brought together policy makers of developing markets Launched Data Working Group Working with a wide range of public and private partners to help make microfinance particularly savings accounts widely accessible to poor people throughout the developing world. Launched Mobile Money deployments in Haiti Focus on creating a safe place to save 9 SCORECARD TO BE POPULATED FOR A SET OF COUNTRIES AFRICA, ASIA AND LATIN AMERICA NEARLY ALL OF THE WORLD S UNBANKED LIVE IN AFRICA, ASIA AND LATIN AMERICA Identify key-drivers Determine suitable for country readiness metrics per driver Select countries for readiness scoring Comments Drivers have to cover all in- and cross-country MFS aspects Relative weigh of drivers based on country analysis List of metrics should be comprehensive but not to complicated Metrics must be quantified based on existing and available data Country selection will be based on high level scoring of country readiness In next stage score card and country readiness to be further detailed Example Inputs Existing country indexes MFS case studies Experts WEF stakeholder network Existing country indexes Databases Existing country reports Experts WEF stakeholder network

MORE THAN HALF OF THE BANKED POPULATION ASIA, AFRICA AND THE ME LIVES ON

FINANCIAL SERVICES THERE IS A WEAK CORRELATION BETWEEN USAGE OF FIN.

IRREGULAR AND UNPREDICTABLE EMERGING MARKETS HAVE LESS PHYSICAL BANK

3 MORE THAN HALF OF THE BANKED POPULATION ASIA, AFRICA AND THE ME LIVES ON <$ A DAY THERE IS A MODERATE RELATIONSHIP BETWEEN GDP / CAP AND USAGE OF FINANCIAL SERVICES THERE IS A WEAK CORRELATION BETWEEN USAGE OF FIN. SERVICES AND URBANIZATION INCOME LEVELS ARE VERY LOW AND INCOME IS IRREGULAR AND UNPREDICTABLE EMERGING MARKETS HAVE LESS PHYSICAL BANK BRANCHES AND ATM S PER ADULT THE GAP IN ACCESS TO PHYSICAL BRANCHES AND ATM S IS CLOSING SLOWLY 8

ON AVERAGE, BRANCHLESS BANKING SERVICES ARE 9% CHEAPER THAN

IMPORTANT BARRIERS FOR ACCESS 9 IN THE DEVELOPING WORLD,

MFS PROVIDERS INDICATED % OF ACTIVE USERS PREVIOUSLY

PLANNED HALF THE GROSS PROFIT CONTRIBUTION OF MOBILE MONEY

4 ON AVERAGE, BRANCHLESS BANKING SERVICES ARE 9% CHEAPER THAN BANKS MINIMUM REQUIRED BALANCE AND DISTANCE TO BRANCH IMPORTANT BARRIERS FOR ACCESS 9 IN THE DEVELOPING WORLD, MOBILE CELLULAR PENETRATION WILL REACH 8% END STUDY AMONGST MFS PROVIDERS INDICATED % OF ACTIVE USERS PREVIOUSLY UNBANKED CURRENTLY ACTIVE MOBILE MONEY DEPLOYMENTS, 89 MORE PLANNED HALF THE GROSS PROFIT CONTRIBUTION OF MOBILE MONEY FROM INDIRECT EFFECTS Number of Deployments Series Series 8 9 e e Launch

5 SIGNIFICANT REDUCTION IN CHURN WHEN CUSTOMERS SUBSCRIBE TO MOBILE MONEY

Global Developments in Financial Inclusion

2011/GFPN/WKSP/005 Session 1 Global Developments in Financial Inclusion Submitted by: Alliance for Financial Inclusion (AFI) Workshop on Microfinance Best Practices Ha Noi, Viet Nam 7-8 April 2011 Global