by Kabir Kumar: Wednesday, October 8, 2008
I have been tracking the mobile banking/branchless banking space in India for a few years - since the business correspondent guidelines were issued. India drafted those guidelines in the spirit of significantly ramping-up access to finance for poor people. The guidelines put Indians in the lead on branchless banking regulation in the South Asia region. Two years have passed and we have yet to see those guidelines translate into a dramatic change in the access to financial services picture in India. There are new companies and more experimentation with correspondents and innovative solution providers but banks have simply not been aggressive about pursuing branchless channels.
The Reserve Bank of India issued final mobile banking guidelines on Wednesday and banks are again front and center. Should we expect these guidelines to dramatically alter the picture of financial access in India? Are the unbanked winners or losers? Well….
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This is an excerpt from a recent CGAP paper, Banking on Mobiles: Why, How, for Whom? In it, Kabir Kumar and Ignacio Mas examine the business case and deployment options around mobile banking for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.
There are significant regulatory factors that define the competitive field for mobile banking, and providers would do well to consider them carefully. Key regulatory factors that need to be considered include the following:
Cash-in/cash-out: Regulatory restrictions on banks to outsource cash-in/cash-out functions to third party retail establishments. These restrictions or lack of clear regulation on use of agents play a role in determining how banks can use existing retail networks—including the operators’ distribution—for cash-in/cash-out points. Restrictions may relate to who can become a banking agent (e.g. in India it has to be a not-for-profit organization), agents’ licensing requirements (e.g. in Brazil agents engaging in deposits and withdrwals must be individually approved by the Central Bank), and the nature of the contract between the bank and the agent.
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by Jim Rosenberg: Tuesday, October 7, 2008
 The promise of mobile web services, including WAP-based banking in developing countries is well established. Mobile banking, simply put, is transactions over a mobile network (via text message or connection to a data service) with a cash-in/cash-out agent (such as a local merchant or post office). This is a core piece of CGAP’s work. We share the belief that increased access to the online world can help transform the offline world (what some inelegantly call Meatspace). That has been true in wealthier nations and it is proving true in emerging markets. The need and the demand seem clear. Last month, Google and HSBC backed a plan to bring broadband backbone connectivity to telecoms and internet service providers in poor places. The venture is called O3b (”Other Three Billion”) and is easier said than done (remember Iridium, the failed satellite phone project?). As the Christian Science Monitor trimly puts it: “Are 16 satellites the answer to reaching 3 billion people?”
But…what if the entire way we get connected will be different in a few years time? Today’s telecom headlines include details of an effort to transmit wireless communications over visible light:
Boston University’s College of Engineering is launching a program, under a National Science Foundation grant, to develop the next generation of wireless communications technology based on visible light instead of radio waves. Researchers expect to piggyback data communications capabilities on low-power light emitting diodes, or LEDs, to create “Smart Lighting” that would be faster and more secure than current network technology. (via Cellular News)
When it comes to getting connected, there is no shortage of mobile phones on this planet. The part of the UN that deals with telecom issues tells us that by the end of this year there will be some four billion mobile phone connections. Many of the handsets being sold around the world are still the basic, cheap models that do voice and text messaging. One of the more popular models in India even features a flashlight, which makes me think there’s a sales slogan in there somewhere (mobile phones can go where electricity cannot) or something silly like that.
The connectivity story in rural, poor places is changing fast. An increasing share of handset sales in Africa and Asia are capable of fast data speeds, enabling more robust services that are web-based. If O3b gets off the ground, it will enable millions of people to leapfrog copper wires and rudimentary mobile handsets, right to broadband web. If Boston University’s program succeeds, then that’s one more way to close that digital divide.
by Jim Rosenberg: Monday, October 6, 2008
This is an excerpt from a recent CGAP paper, Banking on Mobiles: Why, How, for Whom? In it, Kabir Kumar and Ignacio Mas examine the business case and deployment options around mobile banking for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.
From a technical standpoint, three critical questions need to be answered: How do you transmit data from and to the phone? How do you secure the data so that it cannot be retrieved or tampered with during transmission? How do you manage the user interactions, including the presentation and capture of data to/from the user?
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by Jim Rosenberg: Thursday, October 2, 2008
This is an excerpt from a recent CGAP paper, Banking on Mobiles: Why, How, for Whom? In it, Kabir Kumar and Ignacio Mas examine the business case and deployment options around mobile banking for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.
So far we have discussed the commercial strategy considerations surrounding the development of a mobile banking proposition. We now turn to the main implementation decisions a bank faces. The key aspects relate to the following:
- The customer experience the bank wishes to construct
- The electronic data security framework that limits the banks’ liability and protects customer privacy
- The roles and activities the bank wishes to undertake itself versus what it will outsource to partners or vendors
- The degree of service interoperability the bank wants to offer its customers (interworking with other banks, operators, bill payers, etc.)
These four aspects are intimately linked, and in some cases directly determined by the technical platform selected by the bank.
The technical choices depend on the kinds of customers the bank wishes to reach. We therefore start with a description of the main technical options that banks need to consider. Our aim is not to provide a technical recipe book, but to provide enough understanding to illustrate, in subsequent sections, how technology choices can condition the customer experience, the bank’s operational processes, the relative bargaining power between bank and mobile operator, and service interoperability.
by Jim Rosenberg: Wednesday, October 1, 2008
As promised, here is the video and presentation from today’s webinar that Kabir Kumar and Ignacio Mas lead, based on their recent paper: Banking on Mobiles: Why, How, for Whom?
Thanks to all of you who joined us in person or online.
Presentation: CGAP Mobile Banking Webinar (881kb pdf)
Video: CGAP Mobile Banking Webinar (requires RealPlayer)
Background
The promise of mobile banking is well known; harder to find are examples of solid implementation and mass roll out beyond payments and transfers. In Banking on Mobiles: Why, How, for Whom? CGAP examines the business case and deployment options for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.
This is an excerpt from a recent CGAP paper, Banking on Mobiles: Why, How, for Whom? In it, Kabir Kumar and Ignacio Mas examine the business case and deployment options around mobile banking for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.
Having looked at the building blocks—the special features of mobile phones and how they might support a bank’s various strategic objectives—we now construct three different deployment scenarios, shown in the table below. These are based on the degree to which the mobile channel is geared toward retaining existing or acquiring new customers, and in the latter case whether these new customers are obtained by expanding the market or winning them over from competitors. We offer these as archetypes to illustrate three extreme cases that, in combination, span the range of strategies a bank might pursue.
Three mobile banking scenarios
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Cool value add
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Easy bank
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Virtual bank
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Strategic objectives for the provider
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Retain and grow value from existing customers
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Increase market share (take customers from the competition)
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Increase penetration (target new-to-banking or underserved people)
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Role of mobile channel
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Mobile is a complementary channel, with most customers using it only for specific purposes
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Mobile and other channels co-exist, but are targeted (perhaps not exclusively) to different segments
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Mobile is likely the only channel for most (if not all) customers
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Value proposition for customers for use of the mobile channel
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Service enhancements:
¨ Enhanced customer control over own finances (e.g., alerts and notifications)
¨ Greater targeting of messages and services from the bank (e.g., using location awareness)
¨ 24/7 availability of service
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Convenience:
¨ Less but more relevant services
¨ Ubiquity of service
¨ Simple, easy to use
¨ Low cost
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Reduced barriers to access:
¨ Very low transactional costs
¨ Availability of service in areas not traditionally covered by banks
¨ Use of retail outlets rather than branches (where they may not feel welcome)
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Right now, CGAP’s Kabir Kumar and Ignacio Mas are leading a discussion based on their recent paper: Banking on Mobiles: Why, How, for Whom?
Access the webcast at: http://webcast-ext.worldbank.org/streaming/live.ram
Submit your questions by commenting on this blog post or just write to me at jrosenberg@worldbank.org.
-Jim
Wed. Oct. 1 from 09:30 to 12:45 from Washington DC | all times US Eastern (GMT -5).
9:30 – 10:30
Why: The logic of branchless banking
How: Developing and managing branchless banking channels
11:00 – 12:45
For whom: choices for banks, operators’ role, customer adoption
The good, the bad, and the ugly of m-banking
Background
The promise of mobile banking is well known; harder to find are examples of solid implementation and mass roll out beyond payments and transfers. In Banking on Mobiles: Why, How, for Whom? CGAP examines the business case and deployment options for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.
We will archive and share the video later.
by Jim Rosenberg: Tuesday, September 30, 2008
This is an excerpt from a recent CGAP paper, Banking on Mobiles: Why, How, for Whom? In it, Kabir Kumar and Ignacio Mas examine the business case and deployment options around mobile banking for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.
Earlier we have highlighted the key potential benefits of using mobile phones to deliver banking services: lower cost of deployment for the bank, and choice and control by the user. The potential benefits of mobile banking need to be related to banks’ own strategic drivers. There are some basic core strategies banks may follow to promote and protect growth. We illustrate how mobile phones may support each strategy, with reference to the potential benefits of mobile phones discussed above. Table 1 provides a summary of the arguments. These are reinforcing, but banks may need to prioritize among these to be able to develop a coherent, focused strategy.
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