The Vodafone CR dialogues The Vodafone CR dialogues

The VodafoneCR dialogues

economic empowerment through mobile

The VodafoneCR dialogues

ContentsIntroduction 01

Mobile phone banking and low-income customers: EvidencefromSouthAfrica,byCGAP 02

A sense of balance:Asocio-economicanalysisofairtimetransferservicesinEgypt,byForumfortheFuture 05

Mobile-enabled transactions for the base of the economic pyramid:Abriefreviewofthe2006‘state-of-play’,bytheWorldResourcesInstitute 11

Thisseriesofpapers–TheVodafoneCRdialogues–exploreskeyissueswefaceinmanagingourrelationshipswithsociety.Ouraimistoconsidernewideasandstimulatedebate.

IfourCRreportfocusesonourmostmaterialissues,theVodafoneCRdialoguesexplorethemindepth.Theyalsoextendourengagementprogrammebecauseweinvolveexpertsandstakeholdersoneachissueinordertoenrichthedebate.

TheVodafoneCRdialoguescovertopicsthatarespecifictothetelecommunicationsindustry(suchasprivacyoraccessibility)andalsothosethatreflecttheprocessesofacorporateresponsibilityprogramme(suchasstakeholderengagementorassurance).Weaimtofullyexploretheseissuesandthereforevaluegreatlytheopinionsofothers.

Wewelcomeyourthoughtssopleasesendusyourcommentsorideasto:

responsibility@vodafone.com

Wewouldliketothankthefollowingorganisationsfortheirhelpinproducingthispaper.

�VodafoneGroupPlcEconomicempowermentthroughmobile

Introduction

Introduction WelcometoourthirdCRdialogue,oneofaseriesofpapersdesignedtoexploreissuesthatarespecifictoourindustry(suchasprivacyandaccessibility)andalsothosethatreflectapproachestocorporateresponsibility(suchasstakeholderengagementandassurance).Ouraimistoshareourlearningsandthelearningsofotherswithaswideanaudienceaspossibleandtoprovideaforumtoconsidernewideasandstimulatedebate.Wewelcomeyourthoughtsandactivelyencourageyourinvolvementinthediscussion.

Webelievethatthemobileindustryhasgreatpotentialtogeneratepositivesocialandeconomicdevelopmentparticularlyforindividualsinthedevelopingworld.IndeedtwoyearsagotheoverwhelmingamountofevidencearoundthisresultedinourfirstSIMreportwhichoutlinedthebroadimpactthatmobilephoneshavehadindevelopingcountries.Sincethenthedebatehasmovedforwardandthepotentialformobilestoactasconduitsforbankingservicesisnowbeingexplored.

VodafonehasbeeninterestedinmobilebankingandmicropaymentsforsometimenowandoursuccessindevelopingM-PESA,amicropaymentsolution,istestamenttoourlong-termcommitmentinthisarea.M-PESAhasbeendevelopedasapartnershipwiththeUKDepartmentforInternationalDevelopment(DfID)andisexpectedtolaunchinmarketsacrossAsiaandAfricashortly.

Itisclearfromthecombinedresultsofthethreereportsoutlinedinthispaper,thatthepotentialformobilebankingtoassistpeopleonlow-incomeisenormous.Ifsuccessfullymanagedwehopeitwillhaveadramaticandpositiveeffectonthelivesofpeoplewhocurrentlylackaccesstotraditionalbanks.Thisiswhywesupportknowledgesharingandwanttoworkwithotherstoexplorenewwaystoreachthosewhoneedtheseservicesmost.

TheCRdialoguebeginswithasummaryofarecentlyreleasedstudytitled‘Mobilephonebankingandlow-incomecustomers:EvidencefromSouthAfrica’.IwouldliketotakethisopportunitytothanktheConsultativeGrouptoAssistthePoor(CGAP)foragreeingtosharethisstudy,whichwasdesignedbyCGAPandproducedthroughapartnershipbetweenCGAP,theUnitedNationsFoundation,andtheVodafoneGroupFoundation,withimportantcontributionsfromSouthAfrica’sFinMarkTrust.ThestudyshowsthatpoorpeopleinSouthAfricaareusingmobilebankingservicesandvaluethemhighly.Italsoidentifiesthechallengesinbringingmobilebankingtomorepoorconsumers,includingtheneedtobetterunderstandpoorpeople’sperceptionsofbanking,technologyandmobile-banking.

ThesecondreportisasummaryofourworkwithForumfortheFuturetounderstandthesocialandeconomicbenefitsofaspecificproduct,AirtimeTransfer,whichhasbeenwidelyavailableandusedinEgyptsinceSeptember2004.Thekeylearningfromthiswasthat,inadditiontotheeconomicbenefitthat‘sharing’airtimebrings,thesocialbenefitisalsoconsiderable,particularlyforfamilies,whichareoftenseparatedforeconomicreasons,andwhomightotherwisebeunabletokeepintouch.

Finally,wehaveaskedtheWorldResourcesInstitute(WRI)tooutlinethevarietyofwaysthatmobiletelephonesarecurrentlybeingusedtodeliverdifferenttypesoffinancialservices,includingmobilepurchasing,electronicmoneyandelectronicbanking.Thisreportexploreswaysinwhichtraditionalbusinessmodelsarebeingchallengedandoutlinesthecommercialopportunitiespresentedbyservicingthebase-of-the-pyramidmarket.

Inordertobesuccessfulwemustlistentoourcustomersandadaptourofferingstosuittheirneeds.In2005therewere�.4billionmobilephoneusersindevelopingmarkets,theWRIestimatethattherewillbe3billionby20�0.Individualswhowerepreviouslysilentandignoredcannowbeheardandindustrymusttakeaccountofthis.Thesethreereportssuggestthatthismeanschallengingtraditionsandadaptingexistingbusinessmodelsinordertoprovidereal,relevantbenefits.

It’sachallengewelookforwardtoembracing.

Charlotte Grezo

Charlotte GrezoDirector of Corporate Responsibility

CharlottejoinedVodafoneinJanuary200�witharemittoestablishaGroupCorporateResponsibilityfunction.ThisincludesworkingwiththeGroup’ssubsidiariesandaffiliatestoestablishthepoliciesandprocessestomanageCorporateResponsibilityattheGrouplevel.Charlotte’sroleistoleadCRfortheVodafoneGroup;toensuretheachievementofthestrategicgoalonresponsiblebusiness,promotethevaluePassionfortheWorldAroundUsandtoensurethatthecommitmentsmadeintheVodafoneCorporateResponsibilityReportaredelivered.SheisaTrusteeoftheVodafoneGroupFoundationandtheVodacomFoundation.DrGrezohasservedonarangeofGovernmentCommitteesandtaskforcesincludingACCPE(AdvisoryCommitteeonConsumerProductsandtheEnvironment)andtheSustainableProcurementTaskforce.CharlotteGrezojoinedVodafonefromBPwhereshewasDirectorofGlobalEnvironmentalIssues.

2VodafoneGroupPlcEconomicempowermentthroughmobile

1 Wetermthedeliveryofbankingservicesthroughmobilephones‘mobilebanking,’or‘m-banking.’Thetermsmobilepayments(‘m-payments’)andmobilecommerce(‘m-commerce’)arealsoused,butusuallytorefertotheuseofmobilephonestomakeretailpaymentsandperson-to-persontransfersonly.

2 GSMAssociation.“GSMHitsTwoBillionMilestone.”16June2006.3 BAI2005.TowerGroup2004.BoozAllen2004.4 FinmarkTrust.FinscopeSouthAfrica2005andFinscopeBotswana2004.5 Thecompletereportprovidesadetaileddescriptionofthestudymethodology,includingimportantinformationaboutitslimitations.SurveyswereconductedinJulyandAugust2006.6 Porteous,David.MakingFinancialMarketsWorldforthePoor.PreparedforFinMarkTrust.October2004.

Asmobileusageexpands,somayopportunitiestobanktheunbanked.Withm-banking,low-incomepeoplenolongerneedtousescarcetimeandfinancialresourcestotraveltodistantbankbranches,oftenlocatedfarfromlow-incomecommunities.Andsinceanm-bankingtransactioncostsfarlesstoprocessthanatransactionstransactionatanATMorbranch,3bankscanmakeaprofithandlingevensmallmoneytransfersandpayments.

Mobileisalreadyreachingtheunbankedpoor:inSouthAfricaandBotswana,one-thirdofpeoplewithoutbankaccountsownamobilephoneorhaveaccesstoone.4Manyofthesepeoplearepoor.M-bankingthereforeholdsgreatpromise.Butquestionsremainaboutwhetherpoorcustomerswilladoptm-banking.Forexample,willlow-incomecustomersviewbankingthroughtheirmobilephonesasreliable?Willlimitedschoolingandunfamiliaritywithtechnologyslowtheiradoptionoftheservice?

Thispaperpresentsthefirstpublicfindingsonhowlow-incomepeopleviewandusem-banking,usingresultsfromasurveyof5�5low-incomeindividualsinSouthAfrica.5Threehundredofthosesurveyeddonotusem-banking,while2�5arecustomersofWIZZIT,astart-upmobilebankingproviderthattargetsthe�6millionSouthAfricanswholackorhavedifficultyaccessingformalbankingservices.WIZZIToffersabasiccurrentaccountaccessibleviamobilephoneandaMaestro-brandeddebitcardthatcanbeusedatATMsandbranchesoftwomajorbanks.WIZZIThasaccumulated50,000customerssincebeginningfull-scaleoperationsin2005.

Whilethefindingsofthisstudyarenotrepresentativeofalllow-incomem-bankingusersandpotentialusersinSouthAfrica,theyareencouragingandpointtoimportantchallengesandopportunitiesforthoseseekingtoincreaseadoption.Low-income WIZZIT customers value the m-banking service for its affordability, ease of use, and security.RespondentsindicatedtheyuseWIZZITbecauseitis“cheaper”(70%),“safe”(69%),“convenient”(68%),and“fast”(68%).Ofallbankingchannels,m-bankingfallsclosesttowhattheWIZZITuserssurveyedsayistheiridealwayofdoingbanking.Nineoutof�0surveyedsaythem-bankingserviceis“notexpensive”or“inexpensive”forthebenefitsitgives.Incontrast,theseuserssaybankbranchesandATMshavehighfeesandlongqueues,poorcustomerservice,andcarrytheriskofrobbery.

ThecostofanaveragebasketoftransactionsappearsconsiderablycheaperthroughWIZZITthanthroughtheleastcostlyfull-serviceaccountsofferedbySouthAfrica’s‘BigFour’banks.WIZZITalsoappearslessexpensivethantheMzansiaccount,anentry-levelaccountdesignedbySouthAfrica’sbanksespeciallyforlow-incomecustomers.Forthesamebasketoftransactions,WIZZITchargesaboutUS$6permonth,whiletheBigFourbankschargeUS$9withthecheapestfull-serviceaccountandUS$8withtheMzansiaccount.FinMarkTrusthasdetermined2%ofincometobethemaximumpoorpeoplecanaffordtopayforaccesstobasictransactionbanking.6Atthesecosts,WIZZITfallsbelowthethresholdofwhatwouldbeaffordabletothepoor,whilethefull-serviceandMzansiaccountsareaboveit.

Perhapsbecausetheyperceiveittobelowercost,convenientandsecure,WIZZIT’scustomersconductmorebankingtransactionspermonthusingtheservice(9.3permonth)thannon-usersconductatallotherchannelscombined.WIZZITcustomersprefertousetheirmobilephoneoverotherchannelstopayforpre-paidelectricity,transfermoney,buypre-paidairtime,checkaccountbalancesandpaystoreaccounts.

Gautam IvaturyCGAP

GautamIvaturyisamicrofinancespecialistwiththeConsultativeGrouptoAssistthePoor(CGAP),aglobalresourcecentreformicrofinancestandards,operationaltools,training,andadvisoryserviceswhosemembers–includingbilateral,multilateral,andprivatefundersofmicrofinanceprogrammes–arecommittedtobuildingmoreinclusivefinancialsystemsforthepoor.IvaturymanagesCGAP’sTechnologyProgramme.BeforejoiningCGAP,hewasVicePresidentofFinanceandAdministrationatSKSMicrofinanceinIndia,aninvestmentanalystatInternationalFinanceCorporation,andco-foundedastart-upeducationtechnologyventure.IvaturyalsoworkedasaninvestmentbankeratDonaldson,Lufkin&Jenrette(nowCreditSuisse).HehasaMaster’sdegreeinInternationalAffairsfromJohnsHopkinsUniversity.

Mark PickensCGAP

MarkPickensisamicrofinanceanalystworkingwithCGAP’sTechnologyProgramme,withresponsibilityforshapingstrategyaroundbranchlessbankingandfrontiermarkets.PriortojoiningCGAP,heconsultedforbanksandmicrofinanceinstitutionsinBosnia,Cambodia,andMadagascar,helpedgrowaleadingNewYorkCitymicrolender,andwasseniormanagerinanaward-winningInternetstart-upnewsportal.HebeganhiscareerwithDevelopmentAlternatives,Inc.,aconsultingfirmspecialisinginsolutionstosocialandeconomicdevelopmentchallenges.HehasaMaster’sdegreewithaspecialisationinmicrofinancefromColumbiaUniversity.

Mobilephonebankingandlow-incomecustomers:EvidencefromSouthAfrica

The following is an executive summary of a longer study designed by the Consultative Group to Assist the Poor (CGAP), and produced through a partnership between CGAP, the United Nations Foundation, the Vodafone Group Foundation, with important contributions from South Africa’s FinMark Trust.

Bankingthroughmobilephoneshasbeencommonindevelopedcountriesforyears.Buttherealpotentialof‘m-banking’�maybetohelpgivemillionsofpoorpeopleaccesstofinancialservicesforthefirsttime.Earlierthisyear,themobilephonebecamethefirstcommunicationstechnologytohavemoreusersindevelopingcountriesthanindevelopedones.2Morethan800millionweresoldindevelopingcountriesinthepastthreeyears.

Authors

Awareness of m-banking is low, and non-users have negative perceptions about banking and m-banking that are restricting their rate of adoption. MostpeopleinSouthAfricahaven’theardofm-banking.Althoughnon-usersliveinthesamemunicipalitiesasWIZZITusers,65percentofnon-userssurveyedwerenotfamiliarwiththeterm“cellphonebanking.”Amongsurveyrespondentswhowerefamiliarwithm-banking,only�%namedWIZZITasaprovider.Thismaybeonereasonwhynon-usersperceivem-bankingascostly.Non-usersguessedthatanaverageWIZZITtransactionwouldcostUS$�.70,whereasWIZZITactuallychargesbetweenUS$0.�3andUS$0.66pertransaction.ButonceinformedthatamonthlyaverageforfeesmaybeaboutUS$2.62,74%ofnon-userssaidthiswouldbe“affordable”or“inexpensive”.8

Asignificantnumberofnon-usersarepessimisticaboutm-banking.Onlyaboutoneinthreerespondedthatm-banking“willmakebankingmoreaffordable”andlessthan40%saidm-banking“willbeassecureasotherbanks”.ATMsareseenasconvenientandaffordableandbankbranchesassecure,althoughtherearecomplaintsof“highfees”and“longqueues”.

Attitudestowardsbankingingeneralareanotherchallenge.About84%ofnon-userswhoareunbankedsaytheywouldliketoopenabankaccount,butmanyseemtobelievethattheirincomeandemploymentstatusexcludesthemfrombanking.Sixty-fivepercentofunbankednon-userscitealackofregularincomeasthemainreasonfornothavingabankaccount,and60%citealackofemployment.

Significant numbers of WIZZIT customers are low-income, but they occupy the upper end of South Africa’s low-income population on income and assets, and are more financially and technologically sophisticated.ThesurveyresultsdonotrevealwhethermostofWIZZIT’scustomersarelow-income,orwhethermostareaffluent,butWIZZITdoeshavealargelow-incomecustomerbase.Forty-threepercentofWIZZITuserhouseholdssurveyedfallbelowSouthAfrica’spovertylineofUS$257permonthforafamilyoffive,andafurther�2%haveincomesupto�50%ofthepovertyline(whichlikelymeansthattheyarestillvulnerable).

Thoughpoor,thesurveyedusersarebetteroffthanmostotherpoorSouthAfricans.Only6%ofWIZZITuserhouseholdsare‘destitute’accordingtoaLivingStandardsMeasure(LSM)categorisationbasedonhouseholdassetsandincome.Bycomparison,�6%ofallSouthAfricanhouseholds,and23%ofnon-userhouseholds,fitthisdescription.Whileonly�5%ofWIZZITuserssurveyedreportedbeingunemployed,40%ofnon-usersand27%ofallSouthAfricanshavenojobs.AndonlyaquarterofWIZZITuserssurveyedwouldbedescribedas“financiallyunsophisticated”byFinMarkTrustintermsoftheirattitudes,knowledgeandbehaviourtowardsfinancialservices,asopposedto93percentofnon-usersand45%ofallSouthAfricans.

Comparedtonon-userswhoownmobilephones,WIZZITusersarealsomorelikelytousetheirmobilephonesforadvancedtasks,suchasusingitasadiary(62%ofusers,�9%ofnon-users)andplayinggames(64%ofusers,39%ofnon-users).

Although users and non-users say they are open to using new technology, they still value human interaction. AlmostallWIZZITuserssurveyed(97%)saidthattheyare“preparedtousetechnology.”Eight-onepercentofnon-userssaidthesamething.Butothersurveyresultssuggestthatusersandnon-usersstillhavedifficultywithtechnology,andmaypreferhumaninteraction.Fifty-onepercentofnon-usersand49%ofusersagreewiththestatementthat“youwouldratherdealfacetofacewithapersonratherthananelectronicdevice,evenifthedeviceisfaster”.AndthemostcommonreasonwhysomeWIZZITuserssurveyedhavestoppedusingtheserviceisbecausethey“don’tunderstandthetechnology”(27%).Thethirdmostcommonreasonisthatusersfindtheservice“toocomplicated”(23%).7

Mobilephonebankingandlow-incomecustomers:EvidencefromSouthAfricacontinued

Table�:CostofusingWIZZITvstraditionalbankaccountorMzansiaccount Transactions Same transactions Same WIZZIT users w/ Big Four full- transactions conduct service account with Mzansi

Rand US$ Rand US$ Rand US$Bankfeescharged/mo 36 5 55 7 49 6Airtimefees/mo 2 0 0 0 0 0Transporttobank/mo 7 � �� TOTALMONTHLYCOST 45 6 66 9 60 8ANNUALISEDCOST 537 70 790 �03 7�8 94Annualcostasdaysofincome 7.5 �� 0 Annualcostas%ofannualincome 2.�% 3.�% 2.8%

Table2:AveragebasketoftransactionsconductedbyWIZZITuserspermonth Electronic Set up Set up Buy Balance Cash Cash Money Pay Mini- Pay store bank debit stop Check Total airtime inquiry withdrawal deposit transfers electricity statement accounts transfer order order deposit

Allbankingtransactions �2.8 3.7 2.7 �.7 0.8 0.8 0.7 0.7 0.5 0.4 0.35 0.2 0.�TransactionsusingWIZZIT 9.3 2.6 �.9 �.3 0.7 0.5 0.4 0.5 0.5 0.5 0.3 0.� 0.�

7 RespondentswhostoppedusingWIZZIThadeducationandemploymentlevelssimilartocurrentusers,andweremorelikelytobeLSM5andliveinhouseholdswithhigherincomes.8 WIZZIT’sUS$2.64estimateisbaseduponcustomersusingelectronicdepositandcashbackatmerchantsformostoftheirwithdrawals.Usersinthisstudyconductedmorecashdepositsand

ATMwithdrawals.

0 20 40 60 80 100Users Non-users (cellphone) Non-users (no cellphone)

You try to avoid technology as much as possible

If you could, you would make more use of technology

Cellphone/mobile banking will makebanking more affordable to use

With cellphone banking, your money will be as secure as with other banks

Cellphone banking can be trusted if backed by a bank

Cellphone banking can be trusted if backed by a cellphone company

Table3:Perceptionsamongusers(2�5),non-userswithmobilephones(�49)andnon-userswithoutmobilephones(�5�)

Forexample,thestudyrevealsthatsomeSouthAfricanswhoareunemployedandearnnopersonalincomeseemtobelievethattheydonotneedbankingservices,cannotaffordthem,orareineligibletohavethem.Withaclearerunderstandingofthisunemployedandunbankedsegment,m-bankingprovidersmaydiscoverbetterresultsinbrandingtheirserviceasasafer,moreconvenientpaymentmechanism–ratherthanasabetterbankaccount.Qualitativeresearch,suchaswithfocusgroupdiscussions,maybehelpfulinisolatingcriticalvariables.

Ultimately,allpoorpeopleneedfinancialservicestoincreasehouseholdincomes,buildassets,andbecomelessvulnerabletocrises.Withmillionsofmobilephonesalreadyinpoorpeople’shands,CGAP,UNFandVGFseetremendouspotentialinthepowerofnetworkoperators,banksandnewentrantstodeliverfinancialservicesthroughthischannel.

Thefullreportcanbeaccessedatwww.cgap.organdwww.unfoundation.org

ConclusionsThisstudyhasyieldedseveralinsightsfromoneofthefirstinitiativesdedicatedtoofferingm-bankingservicestothepoor.Itshowsthatm-bankingservicesarevaluedbypoorpeopleinSouthAfricaandmaybemoreaffordablethantraditionalbanking.Italsosuggeststhatm-bankingprovidersmustbuildgreaterawarenessoftheirservices,andmustfindtherightbalancebetweenahumantouchandtechnologytoappealtomorelow-incomecustomers.

Moreimportantly,thestudysuggeststhatlow-incomem-bankingusersinSouthAfricatodayareearlyadopterswhoarewealthierandmoretechnologicallyandfinanciallysophisticatedthanmostpoorpeopleinthecountry.Byidentifyingthatperceptionsaboutbanking,m-bankingandtechnologymaybeasimportantasincomelevelsindeterminingtherateofadoption,thestudyarguesforadeeperexplorationoftheseperceptionsandhowtheymaybeusedtosegmentthelow-incomemarket.

Mobilephonebankingandlow-incomecustomers:EvidencefromSouthAfricacontinued

ForumfortheFutureisaUK-basedsustainabledevelopmentcharity.Ouraimistoshowthatasustainablefutureisbothpossibleanddesirable.Weworkwithforward-lookingorganisationsinbusinessandthepublicsectortofindpracticalwaystobuildafuturethatisenvironmentallyviable,sociallyjustandeconomicallyprosperous.Ourpartners–whichincludecompanies,localauthorities,regionalbodiesanduniversities–workwithustoidentifyandovercomebarrierstomoresustainablepractice.Weidentifyopportunitiesforsustainablebusinessandchangethewayleadingcompaniesoperate,promotinggreenprocurement,encouragingethicalmarketingandfosteringinnovation.

Introduction Mobilephonesarehavingatransformativeeffectacrosstheglobe.Theyofferaccesstopeople,goodsandservicesandeconomicopportunitiesonascaleinthedevelopingworldthatismuchgreaterthanbefore.Theyconstituteanopportunityformoresustainablesocialandeconomicdevelopment,andnewmobile-basedservicesarecontinuallyappearingtosupportthis.

Person-to-personairtimetransferisonesuchservice,allowingmobilesubscriberstosendandreceiveairtimeforasmallfee.Intheorythebalancetransferservice(BTS)�isamechanismfortheefficientsharingofairtimewithinanetwork,makingmobileservicesmoreaffordable.BTShasbeenintroducedintomanydevelopingworldmarketssuchasthePhilippines,SouthAfricaandKenya.AlthoughanecdotalexamplesofthepositivesocialandeconomicimpactsofBTSareemerging–suchasitsabilitytoenableairtimetobeusedasaninformalformofelectronicmoney–therehasbeenlittlesystematicresearchtodate.

ThispaperprovidessummaryfindingsofastudyofthesocialandeconomicimpactsofBTSinEgypt.Afullreportispublishedseparately2.VodafoneEgyptlaunchedBTSinSeptember2004andthisstudyisbasedonprimaryresearchconductedbetweenJanuaryandJuly2006.3Duringthistime,weconducted:

James GoodmanHead of FuturesForum for the Future

JamesisresponsibleforFuturesworkattheForum,usingstrategicfuturesthinkingtohelporganisationsaddressemergingandlong-termsustainabilityissues.Hehasworkedextensivelyonthesocialandenvironmentalopportunitiesofthedigitaleconomy,andwasaleadauthorof“MakingtheNetWork:sustainabledevelopmentinadigitalsociety”.

Vedant WaliaSustainability AdviserForum for the Future

Vedantworksinthebusinessprogrammemanagingcorporatepartnerships,providingstrategicadviceandconductingresearch.Keyfocusareasincludeinnovativebusinessmodels,newfinancingmethodsforsustainabilityandimplementationstrategiesacrosssectorswithafocusonfinancialservices,transportandglobalbusinessinemergingeconomies.Heisparticularlyinterestedinexploringthesynergiesbetweennewtechnologies,productsandbusinessmodelsthatcanhelpdeliversustainablepro-poordevelopment.

AsenseofbalanceAsocio-economicanalysisofairtimetransferservicesinEgypt

Sixfocusgroups,eachwitheightBTSusers,inthreedifferentlocationsandcoveringbothgenders,withdifferentsocio-economicgroupsandages

Sixfollow-upinterviewswithfocusgroupparticipants

Fourinterviewswithphoneshopdealersandfourinterviewswithairtimeresellers

Anationallyrepresentativequantitativesurveyof700BTSusersand300non-users.

Key findings WehavedevelopedfivepropositionsbasedontheresultsofourresearchintothesocialandeconomicimpactsoftheBTS:

Balance transfer increases access to mobile servicesthroughenablinguserstoobtainfreeorpaidforairtimeremotely

Balance transfer improves affordabilitybyallowingairtimetop-upsinsmallerincrementsandaccesstofreeairtime

Balance transfer creates commercial opportunitiesforresellersofairtime,providingaviableandflexiblebusinessopportunityforawiderangeofmicroentrepreneurs

Balance transfer use supports social networksthroughreinforcingexistingrelationshipsandredistributingairtimewithinfamilyorfriendshipnetworks

Balance transfer is not used as a proxy currencyduetosignificantcostandculturalbarriersaswellasalackofawareness,buthasthepotentialtosupportmobilepaymentsandmobilebankingservices.

Balancetransferhasmanysocialandeconomicimplications.However,wehavefoundthatthesocialaspectsaremorevisibleatpresent–particularlyintermsofreinforcingexistingfamilyandfriendshipnetworksandbuildingsocialcapital–astheserviceisnotdeliveringonitsfullpotentialforenablingeconomicactivity.BTScanprovideeconomicbenefitsdirectlythroughcreatingincomeearningopportunities,orindirectly,throughallowingmorelow-incomeindividualstoaccessmobileservicesorasanenablerforimprovingaccesstofinancialservicesforunderservedgroups.Wepresentsomeoptionstodevelopthispotentialattheendofthispaper.

WenowbrieflyoutlinehowtheBTSworksandcategorisebroadusergroupsbeforeexaminingeachofourfivepropositionsinmoredetail.

The balance transfer service VodafoneEgyptisoneoftwomobileoperatorsinEgypt,agrowingmarketwithapproximately2�%mobilepenetrationinJuly2006–90%ofwhichareonprepaidtariffs.4VodafoneEgyptoffersdifferentprepaidtariffswithvaryingpricingandusagestructuresbutallthesetariffsrequireairtimerechargecardssoldindenominationsstartingfrom�0EgyptianPounds(LE)/US$�.73–withoutaddedsalestax–goingupinincrementsto200LE/US$34.84.5Aftersalestaxandvendorcommissions,retailpricesforthecardsstartat�3-�5LEforthe�0LEcard,goingto��4-��8LEfora�00LEcard.The�0LEcardhasrapidlygrowntobethemostpopularsinceitsintroductionin2005,indicatingthepricesensitivityoftheEgyptianmobilemarket.The200LEcardhasamuchlowermarketpresenceandwasnotmentionedbyanyrespondentsinthisstudy.

Inordertoensurerevenuelevelsaremaintainedinlow-incomemarkets,manyoperatorsrequireprepaiduserstoconsumeairtimewithinafixedtimeperiod.PrepaidsubscribersinEgyptcanonlyusetheirphoneswithin‘validity’periodsprovidedbytherechargecardtheyusetotop-uptheirairtime.A�00LE/US$�7.42rechargecardgivesthebuyer90LEworthofairtimeandfourmonths’validityinwhichtouseit.Lowerdenominationcardshaveshortervalidityperiods.TheBTSservicewasintroducedbecauseofseveralinstanceswherethevaliditysystemdidnotmatchamobileuser’sairtimeconsumption,eitherleaving‘light’userswithtoomuchairtimeattheendoftheirvalidityperiodorcausing‘heavy’userstorunoutofairtimeearlyonintheirvalidityperiod,forcingmanytorationtheirmobileuse.BTSenablesuserstoredistributeairtimeaccordingtotheirneeds.

1AirtimetransferisreferredtoastheBalanceTransferService(BTS)byVodafoneEgypt.WeusethetermBTSthroughoutthisreport.2Afullreportthatcontainsmoredataandanalysisaswellasaseriesofcasestudiesisavailableatwww.forumforthefuture.org.uk3Thisstudyreferstotariffplansandbalancetransferservicesthatwereavailableduringthisperiod.TheBTSandVodafoneEgypttariffplanshavechangedslightlysincethecompletion

ofthisstudy.4Source:VodafoneEgypt5Allcurrencyconversionsusedinthisstudyarebasedonratessuppliedthroughwww.XE.cominOctober2006.Theexchangerateusedis1US$=5.742LE.

Authors

Thebalancetransferprocessisdescribedinthefigurebelow.ItusesthestandardVodafonebalanceenquiryIVR(interactivevoicerecognition)costing0.2LE/US$0.03pertransaction.BTShasbeendesignedtobeeasytouseforthemajorityofEgyptians.Itdoesnotrelyonliteracy,abilitytousetextmessagingorotherfeatures,butisbasedonasimpleautomatedvoicecallwithapre-recordedmessagegivinginstructionsonwhichbuttontopressforfixedairtimeamountsof5,�0or�5LE.

Profiling BTS users BTShasprovedtobeoneofthefastest-growingvalue–addedservicesintroducedintotheEgyptianmobilemarket.Forty-fivepercentoftheVodafoneEgyptcustomerbasehadusedtheservicebetweenSeptember2004–05andfiguresfromJuly2006show5�,624LE(US$8,994)beingtransferredin4,400transactionsinthatmonth.6Inourqualitativeresearch,BTSwasthefourthmostmentionedmobileserviceaftercalls,missedcalls,andtexts.Theserviceisveryimportanttomanyusers.Onerespondentevenclaimed“PeoplewoulddemonstrateinthestreetsiftheBTSwaswithdrawn.”

Weinterviewed�,000Vodafonecustomers–700BTSusersand300non-users–acrossEgyptbetween�3and26July2006.7Comparedtonon-users,BTSuserstendedtobeyounger,single,morelikelytobestudentsandmorelikelytobefemale.Therewerenosignificantdifferencesaccordingtosocio-economicclassificationsA/B,C�,C2andD/Eorregion.Inordertoinvestigateuserprofiles,wesegmentedBTSusersintofourbroadcategories.Thetablebelowpresentsabriefdescriptionofeachcategoryaccordingtosignificantsocio-economicanddemographiccharacteristics.

ThefindingsrevealthatBTSisnotaveryregularlyusedserviceformostusers–the‘lightusers’category,whichmakesup58%oftheBTSuserbase,onlysendsandreceivesairtimeonceinathree-monthperiodandeven‘heavyusers’onlysend7timesandreceive�0times.

Table�:Thebalancetransferprocedure

Customer A

CustomerAnotifiedofsuccessfultransferduringcall

CustomerBsentconfirmationmessageincludingsenderdetailsandamounttransferred

Vodafone

Customer B

Call868,enteroption�,2,3for5,�0,�5LE,keyinCustomerB’snumber

Sender Receiver

Table�:Thebalancetransferprocedure

Customer A

CustomerAnotifiedofsuccessfultransferduringcall

CustomerBsentconfirmationmessageincludingsenderdetailsandamounttransferred

Vodafone

Customer B

Call868,enteroption�,2,3for5,�0,�5LE,keyinCustomerB’snumber

Sender Receiver

Proposition one: Balance transfer increases access to mobile services Balancetransferusersingeneralusetheirphonesmorethannon-users,makingandreceivingmorecalls,textsandmissedcalls,astable3belowshows.HeavyusersofBTSmakeandreceivemorecallsandsendandreceivemoretextsthananyoftheotherBTSusergroups.

Itislikelythatheavierusersofmobileservicesareattractedtobalancetransfer,asitallowsthemtomaintainaccesstothenetworktowardstheendofvalidityperiods.BeforeBTSwasavailable,peoplewouldoftenrunoutofairtimewhilestillintheirvalidityperiod.Sincecardsarerelativelyexpensive,thiswouldmeanrationingoutairtimeuntiltheywereabletoaffordanothercard,ineffectlimitingtheuseoftheirmobilephone.Onerespondentclaimed:“Inthepast,IhadtotrytomaintainmycreditwhichIgetfroma�00LEcard,throughoutfourmonths.SoIwastalkingforonlyoneortwominutesperday,butnowIspeakasmuchasIwant,bypaying�0LEor�5.”

Therefore,BTSisassociatedwithheaviermobileusage.Evidencefromoursurveysupportsthis.WeaskedBTSuserswhethertheythoughtthatusingBTSmeantthattheyusedtheirmobilephonesmore.Themajority–55%–saidthatitdid,withonly2%disagreeing.Heavyusersandreceiversweremorelikelytoagree,with69%and73%respectivelysayingthatBTSmeanttheyusedtheirmobilesmore.

Balance transfer users spend more on their mobiles ItisnotsurprisingthatBTSusersspendmoreontheirmobilephones,giventhattheyusethemmore.Intermsofoverallspendonrechargecardsoverthelastthreemonths,BTSusers(�99LE/US$34.66)spentalittlemorethannon-users(�78LE/US$30.9).However,whentheBTSusergroupissegmentedaccordingtoourtypology,wecanseethatheavyusers(230LE/US$40.06)andsenders(223LE/US$38.84)spendsignificantlymoreonrechargecardsthennon-users(seetable4onpage7).SomeoftheairtimethatsenderspurchaseviarechargecardsislatersenttoothersusingBTS,ineffectredistributingsomeofthatairtimearoundthemobilenetwork.Heavyusersalsotransferalotoftheairtimetheybuy,butreceivesubstantialamountsofairtimeusingBTS.

Table3:MobileusagehabitsamongstBTSusersandnon-users

BTS Non- Heavy Rece- Light Average times/week user user user Sender iver user

Giveamissedcall 22.3 �6.� 22.3 22.6 26.6 20.8Receiveamissedcall 23.4 �7.3 2�.8 23.4 27.6 22.�Callsomeonetotalk �4.2 �3.8 �7.6 �7.� �3.7 �3.2Receiveacalltotalk �8.8 �8.5 22.7 2�.� �9.4 �7.4Sendatext 8.4 4.5 �2.3 9.3 9 7.4Receiveatext 8.9 5.7 ��.8 8.8 9.3 8.2

Table3:MobileusagehabitsamongstBTSusersandnon-users

BTS Non- Heavy Rece- Light Average times/week user user user Sender iver user

Giveamissedcall 22.3 �6.� 22.3 22.6 26.6 20.8Receiveamissedcall 23.4 �7.3 2�.8 23.4 27.6 22.�Callsomeonetotalk �4.2 �3.8 �7.6 �7.� �3.7 �3.2Receiveacalltotalk �8.8 �8.5 22.7 2�.� �9.4 �7.4Sendatext 8.4 4.5 �2.3 9.3 9 7.4Receiveatext 8.9 5.7 ��.8 8.8 9.3 8.2

AsenseofbalanceAsocio-economicanalysisofairtimetransferservicesinEgyptcontinued

Table2:CharacteristicsoffourbroadBTSusersegments

Category ‘Heavy users’ ‘Senders’ ‘Receivers’ ‘Light users’

Percentageoftotal �0% �2% 20% 58%sampleN=700 (68people) (86people) (�39people) (407people)Timessentorreceived Sentairtime:7 Sentairtime:7 Sentairtime:� Sentairtime:�airtime(averagein Receivedairtime:�0 Receivedairtime:� Receivedairtime:9 Receivedairtime:�previous3months)Genderdifference Morewomen MoremenDistributionacross Morebetween�3-2�, Fewerbetween�3-2�, Slightlymore�3-2� Morepeopleagedover30agegroups fewer45andover more45andover andfewerover30Socio-economicclassification MoreSECC� MoreSECA/B MoreSECD/E SlightlymoreSECC2Occupation Morefull-timeworkers Fewerstudents,more andslightlymorestudents housewivesandretirees Morepart-timeworkers

6Source:VodafoneEgypt.7Respondentswereselectedrandomlyfrommobilephonenumberlists.UsersweredefinedaspeoplehavingusedBTSwithinthelastsixmonths.

BTS enables remote airtime top-upsRemotetransferofairtimetofriendsandfamilyisanimportantwayofmakingsurethattheycanstayintouch.Examplesincludeemergencysituationsorwhereapersonisunabletophysicallyaccessshopsthatsellrechargecards.Forinstance,someonewhoworkedonashipandcouldn’tbuyrechargecardsreceivedairtimefromfriendsusingBTSandcouldstayintouch.WeheardofmanyanecdotalexampleswhereBTSwasusedtosendtop-upsinanemergency.

Airtimeisalsosharedremotelywithinclosefamilyandfriendgroups.Weheardanexamplewheretheuserfacedfinancialdifficultiesandwasregularlysentairtimebyhissisterwholivedinanothertown.BTSprovidestheabilitytoobtainairtimefromfamilyandfriendsorthroughcommercialdealersandresellers(exploredlaterinthispaper)andthusmaintainaccesstomobileservices.

Proposition two: Balance transfer usage increases the affordability of mobilesMobiles are a vital – but costly – toolAlthoughourfocusgroupparticipantsgaveusastrongmessagethatmobilephoneswereanessentialtoolforliving,inourquantitativesurveywecanseethatpeopledonotthinkthattheyaregettingmorethantheypayfor.Mobilesareseenasavitalbutcostlytool.

Overall,aroundhalfofoursurveyrespondentseitheragreedorstronglyagreedwiththestatement“Ispendtoomuchmoneyonmymobile”(50%),withslightlyfewerdisagreeingorstronglydisagreeing(3�%).Onanothermeasure,themajorityofrespondents–54%–thoughtthatthebenefitsandcostsofmobilewereaboutthesame.Twenty-sixpercentsaidthebenefitsoutweighedthecostsand20%saidthecostsoutweighedthebenefits.

Making mobile use more affordableAffordabilityisamajorbarriertoincreasingthetakeupofmobileservicesinlow-incomemarkets,wheretheabilitytopayisseverelyrestrictedbeyondthetopsocio-economictierofthepopulation.Mobileoperatorshavetakenanumberofstepstoaddressthislow-incomemarket,includingofferingprepaidtariffswithlowentrycosts.Low-incomecustomersoftenhavesporadiccashflowandareusuallyondailyorweeklywages.Oneofthemostcrucialissuesisenablingsuchcustomersnotonlytopurchaseahandsetandline,butalsotomanageairtimecosts.Ahighvaluedenominationcard,suchasthe�00LE/US$�7.42rechargecard,isbeyondthereachofmany,andawidevarietyoftechniquesareusedtomanageairtimecostsamonglow-incomeusers.Theuseofmissedcalls,textsandcarefulmanagementoftariffsiscommon.

Balance transfer improves affordability Theabilitytotop-upairtimeinsmallincrementsenableslow-incomeuserstomanagetheirairtimeconsumptioninlinewiththeirrestrictedandunpredictablecashflow.BTSenablesuserstotop-upairtimeinsmallerincrements(5LE/US$0.87)thanpossiblebyarechargecard(�0LE/US$�.73).SinceBTSwasintroduced,customershavebeenabletospreadthecostoftheirairtimebyregularlytoppingupsmallincrementswhentheirfundsallow.

Inoursurvey,usersviewedBTSasanimportanttooltomaketheirmobileusemoreaffordable.Fifty-sevenpercentofBTSusersthoughtthatBTSmadeusingmobilesalittle(25%)oralot(3�%)moreaffordable,withonly4%thinkingtheoppositeand39%thinkingitmadenodifference.Eightypercentofreceivers–agroupthathasmorelow-incomeusersandreliesonBTStoobtainasignificantproportionoftotalairtime–thoughtBTSimprovesaffordability,indicatingthatBTSplaysavaluableroleinenablingaccesstomobileservicesforsomelower-incomeusers.

Manyuserspurchaseairtimeusingbalancetransferfromresellersanddealers.Althoughsomeuserswillpurchaseairtimefromfriendsandfamilyinexchangeforcash,themainsourceofpurchasedairtimeisthediffusenetworkofsmall-scaledealersandresellersthatofferairtimeviaBTSwithasmallprofitmargin.

Fifty-sevenpercentofheavyusersand68%ofheavyreceivershaveboughtairtimeusingBTSfromaphoneshop

Resellers8areusedbyfewerpeople(23%ofheavyusersand28%ofheavyreceivers),indicatingthatdealersdominatethecommercialBTSmarket

Low-incomeBTSusers(SECD/E)havedonethismore(5�%)thanmoreaffluentconsumers(33%ofSECA/B).

Remotetop-upusingBTSalsotookplacecommercially.WefoundmanyBTSuserscallingtheirlocalmobilephoneshoportrustedresellerandaskingforatransferofairtime,promisingtovisitlatertopay.Almosthalfofheavyusersandreceivershaddonethisatsomepoint,andaroundafifthofthesamegroupsdidthisoftenorveryoften.

Proposition three: Balance transfer creates commercial opportunities for users. Inaseriesofin-depthinterviewswithdealers,BTSemergedasausefulsourceofrevenuebutwasnotsignificantcomparedtothemainrevenueearners–rechargecards,linesandhandsets.

Inthefocusgroupsandthroughsubsequentin-depthinterviews,weidentifiedseveralmicroentrepreneurswhohavebuiltviablebusinessesonBTS.Theseairtimeresellersoperateaninformalserviceasasourceofsupplementaryincome,andtransferairtimeusingBTSatasmallprofit.Thequantitativesurveyfoundasmallbutsignificantnumberofinformalresellers.Peoplewhosaidthattheyhadsoldairtimeataprofitmadeup�.4%ofBTSusers,or�0people.Thismayappearinsignificant,butifextrapolatedtotheBTSuserpopulationasawhole,couldmeanapproximately40,000to50,000informalresellersthatareactivelysellingairtimeatprofittosomedegree.

Thereissignificantvariationinthiscategory,whichcouldincludeindividualswhohaveoccasionallysoldairtimetoacquaintancesonanad-hocbasisanddonotpursueitasabusinessopportunity.However,afewindividualshavestartedtoofferBTSasacommercialserviceonaregularbasis.Theaverageamountofprofitwas35LE/US$6.09inonemonth,equatingtoeitheraloworverylowproportionoftotalmonthlyincome.However,significantlyhigherfiguresabove200LE/US$34.84emergedinourin-depthinterviews.Thedataisunreliable,especiallysincemanywerereluctanttorevealfiguresforaninformalgreymarketactivity,butitisclearthatsomeresellershavebuiltlivelihoodsonBTS.

Table5:Agreementwiththestatement“BTSmakesusingmobilephonesmoreaffordable”Table5:Agreementwiththestatement“BTSmakesusingmobilephonesmoreaffordable”

Table4:AveragespendonairtimerechargecardsandBTSsent/receivedinthreemonthsCategory Average spend on Average amount of Average amount of recharge cards (LE) airtime received (LE) airtime sent (LE)Heavyusers(68) 230 44 33Senders(86) 223 6 3�Receivers(�39) �73 39 9Lightusers(407) �68 8 9Non-users(300) �78 - -

8AresellerisdefinedasanindividualthatsellsairtimeusingtheBTSserviceataprofitandwhoisnotlinkedwithamobiledealerorphoneshop.Thisexcludestransfersmadeatfacevalue,eveniftheairtimeissold.

A lot more affordable A little more affordable No difference A little less affordable A lot less affordable

Heavy user

Sender

Receiver

Light user

46% 27% 25% 2%2%

38% 21% 39% 1%

45% 35% 16% 2%2%

23% 23% 49% 3%3%

Itisverydifficulttoaggregateresultsandquantifywhatproportionofthetotalbalancetransferredisfromresellerstocustomers.Aswementionedearlier,commercialbalancetransferseemstobedominatedbysmall-scaledealersratherthanresellers.However,ourin-depthinterviewsrevealthattheresellerbusinessmodelhasstrongpotentialtoprovidepro-poorlivelihoods;itissuitedtooperatingin‘base-of-the-pyramid’marketsduetolowentrybarriersintheformofacceptablestart-upcosts,beingeasytouseandtheflexibilitytointegrateintodifferentlifestyles.Potentially,anyonewhohasamobilephonecanbecomeasuccessfulreseller.Oursurveyidentifiedonehousewifewhowasmakingaprofitfromsellingairtime.

Resellersobtainairtimeeitherbypurchasingarechargecardatretailprices–andthusincurringadministration,salestaxandothercharges–ortoalesserextent,throughvaliditytransactions.9Atthemoment,resellersarepayingtheadditionalcostswithintherechargecardsystemastheyareessentiallyretailcustomersratherthanairtimedistributors.Thisincreasestheircostsandunderminesthepro-poorbenefitsoftheirbusinessmodelastheyhavetochargehighermark-upstostayprofitable.Mostwillbeforcedtochargeupwardsof6.50to7LEfor5LEofairtime.�0Iftheywerebroughtintotheofficialairtimedistributionnetwork,thiswouldsignificantlyimproveboththeirbottomlineaswellastheaffordabilityofairtimeincrementstotheirendcustomers.

Proposition four: Balance transfer use supports social networks Egyptianmobilephoneusersthinkoftheirmobilesasinvaluablesocialtools.Inoursurvey,overall76%ofBTSusersand77%ofnon-usersfeltthatusingmobilephonesstrengthenedtheirrelationshipswithfamilyandfriends,withonly6%ofusersand4%ofnon-usersthinkingtheopposite.

BTS strengthens relationships within existing social networksAlthoughrespondentsinoursurveywerelessemphaticaboutthesocialroleofbalancetransferthantheywereaboutmobilephonesingeneral,theystillsawtheserviceasatooltostrengthenrelationships.Overall49%ofBTSusersthoughtthatusingtheservicestrengthenedrelationships,withanother50%thinkingthatitmadenodifference.BTSalsoallowspeopletosendlow-valuegifts,forbirthdaysorduringfestivals.Overall29%ofBTSusershaddonethis,and4%saidtheydiditoftenorveryoften.

BTSusersmostlyexchangeairtimewithintheirexistingsocialnetworks,closefriendsinparticular.Forexample,astable6shows,5�%ofBTSuserssendairtimetoclosefriendsmostand4�%receiveairtimefromclosefriendsmost.

11%14%

Receive from most

Send to most

Close friends

Children

Sisters

Brothers

Cousins and other family

Spouse

Parents

StrangersColleagues

BTS USER

Table6:WhoBTSuserssendandreceiveairtimewithmost.

11%14%

Receive from most

Send to most

Close friends

Children

Sisters

Brothers

Cousins and other family

Spouse

Parents

StrangersColleagues

BTS USER

Table6:WhoBTSuserssendandreceiveairtimewithmost.

Thereisvariationbetweenthedifferentusergroupsandaccordingtosocio-economicanddemographicprofile.

Womensendandreceivemorewiththeirsistersandparents

Olderagegroupssendandreceivemorewiththeirchildren,andyoungeragegroupsmorewithclosefriends

Peoplefromhighersocio-economicgroupssendandreceivemorewiththeirparentsandclosefriends

Lowersocio-economicgroupsreceivemorefrom‘strangers’–inrealityphoneshopdealersandairtimeresellers.

Mobiles are valued by womenWomenvaluemobilephonesforincreasingfreedom(52%ofthewomensurveyedsaidthatmobilesgavethemmorefreedomwithonly5%sayingtheopposite).TherewasacontrastbetweenfemaleBTSusers(56%agreeing)andnon-users(33%agreeing).Infocusgroupswithyoungerwomen,wefoundthattheyareadeptatnavigatingtraditionalgenderrolestoobtainfreeairtime;askingforairtimefrommalefriendsratherthanfemalefriends,knowingthattheirmalefriendswereunlikelytowantanythingbackinreturn.

Especiallyforyoungpeople,theexchangeofairtime,alongwithexchangeofmissedcallsandothermobile-basedbehaviour,hasbeenabsorbedintonormalsocialinteraction.Mobilesformuchoftheyouthareapartof‘youthculture’andbalancetransferisanessentialpartofthat.

Tosendsomeoneairtimetoavalueof5,�0or�5LErequiresacertainamountoftrustthattheairtimeoritsequivalent–moneyperhaps,orafavour–willbereturnedatsomepointinthefuture.Sendingandreceivingairtimereaffirmsthattrust.Arespondentsaid:“SayInowsenthimthe5LEandhe’sinneedofitbecauseheisbrokeandcan’tevenbuyarechargingcard,thenIcansendhimandhereturnsitbackwheneverpossible,noproblem.”

Proposition five: Balance transfer is not used as a proxy currency Thereareseveralemerginginitiativeswheremobilesarebeingusedasachanneltodeliverfinancialservices.��Theoretically,aperson-to-personbalancetransfersystemoffersaplatformforconductingfinancialtransactions,evenifithasnotbeenexplicitlydesignedtodoso.Airtimehasthepotentialtobecomeaproxyorvirtualcurrency;itsharesthesamecharacteristicsasmoney–mediumofexchange,storeofvalueandunitofaccount–andtheabilitytotransferitelectronicallymakesitaviablepaymentmechanism.�2Anecdotalevidencefromotherregionssuggeststhatinformalad-hoctransactionsusingairtimeasaformofelectronicmoneyarecommoninKenya(usingtheSambazaairtimetransferservice)andSouthAfrica(usingtheMe2Uservice).�3

Inourfocusgroups,wedidencountersomeisolatedinstanceswhereparticipantshadusedairtimeinexchangeforgoodsorservices.Butthisseemedtobetakingplaceonlyinspecificcircumstanceswhenthevendorwantedairtimetouse:theairtimewasnotactuallytreatedasacurrencyorasbarter.

Wetestedthisinourquantitativesurvey,askingrespondentswhethertheyhadeverboughtsomethingusingairtime.Mosthadnot,but�%oflightusers(fourpeople)and4%ofreceivers(sixpeople)saidtheyhad.Onlyonepersonsaidthattheydidthisoftenorveryoften.

Cost barriers to using airtime as a proxy currencyWehadexpectedtofindmoreusageofairtimeformobilepaymentsasEgypthasmanycharacteristicswhichwouldmakesuchanactivityvaluable,particularlyforlongerdistancetransfers.Therearefewalternativesthatcantransfercashasefficiently,safelyorcheaplybecauseofthehighuseofcashfortransactions,verylimitedpresenceofelectronicpaymentsystemsandlowlevelsofbankpenetration,combinedwithincreasingmobileownership.

ThereareseveralbarriersthatneedtobeaddressedbeforetheBTScanactasachannelformobilepayments.Themostimportantcostbarrieristhecurrentpricestructureswithinairtimedistribution.Atpresent,thereisasignificant

9Avaliditytransactionentailssplittingarechargecardintoairtimeandvalidityportions–a100LEcardwillnormallyprovide90LEofairtimeandfoursmonthsofvalidity–andthensellingonlythevaliditywhileretainingtheairtime.Acustomerwillbuya100LEcardfromtheresellerandthentransferbackmostoftheairtime,evenallofit,andretainthevalidity.Thecustomerwilltypicallypay30LEfortheservice,whichcoversallchargesandtaxesandprovides5to10LEprofitfortheresellerinadditiontoairtimeatalowercostthanthroughbuyingrechargecards.Theresellergetsairtimewithoutincurringanyextracharges.

10Resellerprofitmarginswereestimatedwitharangeofvariables.Seefullstudyformoredetails.11SeepaperbyWorldResourcesInstituteinthispublicationforanoverviewofcurrentexamples.12Porteous,David(2006)“TheenablingenvironmentformobilebankinginAfrica”,DFID.13Ibid.

discountincashcomparedtoairtimebecauseofadministrationcharges,taxesandcommissionpayments.90LEofairtimeloadedontoaphonecosts��5LEaftertaxesandcharges.Ifauserwantstoexchangethisairtimeforcash,the25LEdifferenceinvaluewillneedtobeabsorbedbytheuser.Thismakesituneconomicforhighvaluetransactionsorforregularuse.

Cultural barriers to adoption Thislowusageofairtimeasaproxycurrencymayinpartbeduetoaperceptionofairtimeasmoreofasocialresourcethananeconomicone,particularlyforhigherincomeusers.Oncetheairtimehasbeenbought,itcanberedistributed,butnormallyinreturnformoreairtime,tobereceivedlater,orasagift.Veryrarelyisairtime‘cashedin’.Inoursurvey,only4%ofBTSusershadeversentairtimeinreturnforcash(notataprofit)andonlyafewmore(7%)hadeveraskedsomeoneelsetosendthemairtimeinreturnforcash(again,notataprofit).

Theconceptofofferingairtimeinsteadofcashtobuysomethingmightimplythatthebuyerdidn’thavethecashtopay,leadingtoanegativeconnotationanda‘lossofface’.Thisissuewasraisedrepeatedlyinourfocusgroupdiscussions,withsomereferencestohowsuchpaymentswerenotappropriateinEgypt.Essentiallythisisasignificant,butaddressable,barrierthroughawarenessraisingandmarketingofairtimeasaproxycurrency.Focusgroupparticipantsweremorepositiveaboutusingairtimeasaproxycurrencyifitwaswithinaformalisedandwell-marketedframework.

TherewasalsoappreciationofthesecuritybenefitsofhavingvirtualmoneythatcouldnotbestolenifprotectedthroughaPINsystem.

Attitudes to mobile banking servicesAlthoughitwasnottheprimaryfocusofourresearch,wedidexplorethepotentialofusingmobilesasabankingchannelinourfocusgroups.

Mobilebankingmetwithalukewarmresponseinsomeofthefocusgroups.Thekeyissuesseemtobeamistrustofincludingathirdpartyintherelationshipbetweenthecustomerandthebankandconcernsoverthesecurityofthesystem.However,therewaspositivediscussionoftime-savingpotentialandincreasedsecurity.

Options to enhance the positive socio-economic impacts of BTS WenowsketchoutsomepotentialwaysinwhichtheBTScanenhancethesocialandeconomicbenefitsofmobilephonesinEgypt.Thesearebroadrecommendationsandneedtobedevelopedfurtherwithregardstofeasibility,marketviability,regulatoryissuesandsoforth.

Using BTS to improve the affordability of mobile servicesAtthemomentBTSisnotofficiallyusedasanairtimedistributionchannelbyVodafoneEgypt.AllcommercialsaleofairtimeviaBTSbydealersandresellersisnotwithintheformaldistributionnetwork,whichisentirelybasedonprintedrechargecards.However,thefixedcostsassociatedwithprintinganddistribution,currently0.55LE/US$0.09inEgypt,makeituneconomictoofferverylowvaluetop-upsthroughrechargecards.BTSisalreadyoperatingasaperson-to-personformofe-refill.Extendingittoallowvendorstoelectronicallysellairtimeinverysmallincrementstocustomersasanalternativetocardswillimproveaffordabilityandformalisetheexistingdealerandresellercommercialbalancetransfermarket.BTScanfurtherimproveaffordabilityifsmallerincrementsbelow5LEareallowedandvaliditytransfersarepossible.�4

BTS is a viable means to distribute airtime but must be able to operate on commercial scales.AwiderangeofmobilesubscribersareusingBTSasaformofe-topup,indicatingthattheEgyptianmobilemarketwillbecomfortablemovingtoane-refillairtimesysteminthefuture.However,forthedealersandresellersthatofferBTS,theserviceistooslowandcumbersome,andoftenfailsduringheavynetworktraffic.InordertodevelopBTSasaplatformforbuildingfurthervalue-addedservicesorasasignificantchannelfordistributingairtime,itneedstoofferdifferentwaystoconducttransactions,perhapsbyaddingastreamlinedSMS-basedsystemtotheexistingserviceoradedicatedcommercialservice.Otherwisedistributorswillprefertouserechargecards.

Dealers and resellers have existing trust-based relationships with customers that can help introduce new value-added mobile services. Mostresellersservespecificsmallneighbourhoodclienteles,withmarketingthroughwordofmouthandarosterofregularcustomers.Resellersbuilduptrustwithcustomersandareabletoofferserviceslikeremotetop-uporairtimeoncreditthatdependonacertaindegreeoftrusttowork.Resellerscanpotentiallybecomeinvolvedinawidernetworkofmobile-enabledserviceslikem-paymentsormobilebanking.

Enhancing commercial opportunities BTSoffersahighlyadaptablebusinessmodelthatisfitforoperatinginbaseofthepyramidconditions.Itoffersbenefitsbothtomicroentrepreneurs,intheformofincreasedincome,aswellastotheircustomers,byenablingthemtopurchasesmalldenominationtop-ups.Bothaccessandaffordabilityarefurtherincreasedbyanexistingtrustrelationshipthatallowsremotetop-upsandtheprovisionofairtimeoncredit.

Bring resellers into the official airtime distribution network.Keepingresellersoutsidetheofficialdistributionnetworkcompromisestheirpro-poorpotential.ResellersareunabletoearnenoughrevenueandhavetoonlyuseBTSasasourceofsupplementaryincomewhilecustomersarepayinghigherpricestomaintainthinresellermargins.

Ifexistingresellers,andotherpotentialnewentrants,werebroughtintothedistributionnetwork,theywouldbeabletoobtainanddistributeairtimemuchmoreefficiently.Bycuttingouttheretailmargins,theycouldpurchaseairtimeatwholesalepricesandbeabletodistributethemforlowermark-ups,improvingaffordabilityfortheirend-customers.SMARTinthePhilippinesfollowsthismodelforitsSMS-basede-refillsystem,withanetworkofover800,000resellerswhoearna�5%commissionfromairtimesales.Competitor,GlobeTelecom’s700,000strongdistributionnetworkwillsoonalsoearnincomefromactingasagentsforitsG-Cashe-moneyservice.�5

Thisalsosignificantlyincreasestheavailabilityofairtimeinmoreremoteareas;comparethePhilippineswithapopulationof89millionandservedby�.5millionretailersofairtimewithEgypt,whichhasabout�0,000officialairtimeretailoutletsforits72millionpeople.

The pro-poor benefits of BTS can be enhanced through targeted initiatives. OperatorssuchasVodafonecantargetspecificresellermarketsasawaytodistributeairtimewhileprovidingpro-poorincomegenerationopportunities.Thiscanincludeprovidingdiscountedairtimetospecificgroupslikeruralwomen’sco-operativesorunemployedyouthineconomicallydeprivedareas.

Using BTS to facilitate financial transactions and delivery of mobile banking servicesAlthoughBTShasexpandedrapidlyinEgypt,wewereunabletofindmanyinstancesofairtimebeingusedasaproxycurrencytobuygoodsandservices.Thismaybeduetoalackofawareness,astheoperatorhasnotmarketedairtimeinthisway.However,costbarriersalsoplayastrongpart:therelativelylowamountsofairtimethatcanbetransferredandthesignificantdifferenceinairtimefaceandcashvalueundermineitsviabilityforregularusage,particularlyforhighervaluetransactions.

Cultural interpretations of mobile payments, mobile banking and other value-added services must be more carefully researched.Inourfocusgroups,theideaofintroducingmobilepaymentsandmobilebankingwasmetwitharangeofresponses.Mostcrucially,thereisasensethatofferingtopayviaairtimeratherthancashgivestheimpressionthattheuserispoor,andisforcedtouseairtime.InordertosucceedinEgypt,m-paymentswillneedtomanagethisissuethroughmarketingcampaignsandensuringthatthesystemisrolledoutwidely.CashalsoseemstohavemorerespectthanvirtualpaymentsinEgyptiansociety.AlthoughusersarehappytoparticipateinBTStransactions,perhapsevenremotely,implyingasignificantdegreeoftrustinboththetechnologyaswellasthedistributor,therearemorereservationsaroundsecuritywhenitcomestom-commercetransactions.

There may be potential to introduce mobile banking services for microfinance clients.Egypthasanascentmicrofinanceindustrywithlargeunfulfilleddemandforfinancialservices.RoughestimatesindicatethattheEgyptianmicrofinanceindustrycouldpotentiallyhavebetweentwoandthreemillionclients,ofwhichapproximatelyonly220,000arecurrentlybeingserved.�6MobilebankingcouldplayaroleinhelpingEgyptianmicrofinance

14TheBTSserviceenhancementsfromAugust2006includeflexibleamountsbetween1-50LEandvaliditytransferat1LEperday.15SeeWorldResourcesInstitutepaperonpage11formoredetails.16UnitedNationsDevelopmentCapitalFund.http://www.uncdf.org/english/countries/egypt/index.php

�0VodafoneGroupPlcEconomicempowermentthroughmobile

institutionsincreasetheiroutreachandsignificantlyscaleuptheiroperations,perhapsusingasimilarmodeltoM-PESAinKenyaorpartneringwithsomeofthepioneeringcommercialbanksinEgypt,suchastheNationalBankofEgypt,thatareprovidingmicrofinanceservices.

Remittance services from key markets may have strong potential.Egypthasasignificantremittanceeconomy–around3.9%ofGrossNationalIncomeisfromoverseasworkers�7andthereareconsiderabledomesticremittancesfromurbanworkerstoruralareas.IfelectronicmoneyserviceswereintroducedontotheBTSplatform,allowinginternationalremittancesmightthenenablecheaper,fasterandmoreaccessiblecashtransfersalongwithsubsequentsocialandeconomicbenefits.

Conclusions BTShasbecomeintegratedintomobileusagehabitsforasmallbutsignificantsegmentofEgyptianusers,andisusedmoreoccasionallybyawiderrange.Itisprimarilyusedasasocialresourcetoshareairtimewithinexistingfamilyandfriendshipnetworks,beingusedinwaysthatalignwithdominantculturalbehaviourssuchasgenderrelationships.

BTSalsoplaysanimportanteconomicroleinincreasingtheaffordabilityofmobileservices.Ineffectitenablesaninformalairtimerechargesystemthroughwhichuserscanpurchasesmallincrementsofairtimecommerciallyfromdealersandinformalresellers.

ThismeansthatBTSalsoprovidessomecommercialopportunitiesforairtimeresellers.BTSoffersaviablebusinessmodelforbase-of-the-pyramidconditionsandcanpotentiallydeliverbenefitsformicroentrepreneurs,theirlow-incomecustomersandoperatorslikeVodafoneEgypt.

Thepositivesocio-economicimpactsofBTScanbeincreasedthroughtargetedinitiatives,buttheymustreflectlocalculturalandoperatingcontexts.Thisresearchaddstothebodyofevidencethatshowslow-incomeconsumersassophisticatedusersofservicesandhowtechnologiesareutilisedinunique‘local’ways.

This is an abridged version of a fuller report which includes case studies and more data from the survey. Please visit www.forumforthefuture.org.uk to download a copy.

17WorldDevelopmentIndicators2006,WorldBank.

��VodafoneGroupPlcEconomicempowermentthroughmobile

William J. Kramer World Resources Institute

WilliamJ.KramerisDeputyDirectoroftheDevelopmentThroughEnterpriseprogramme.Hisworkinavaried30-yearbook-centredbusinesscareer,duringwhichhecreatedKramerbooks&afterwords,thefirstbookstore/cafe,ledhimtoestablishanon-profitorganisationexploringtherelationshipbetweennewknowledgeandeconomicdevelopment.AtWorldResourcesInstitutehisworkalsoincludesthedevelopmentofeducationandtrainingmaterials,andleadingintensivelearningseminars.HehastaughtacourseonsustainabledevelopmentattheUniversityofMarylandGraduateSchoolofPublicAffairs,andlecturedatnumerousuniversitiesandcollegesonthebaseoftheeconomicpyramid(BOP)issues.

John PaulWorld Resources Institute

Johnhasworkedonissuessurroundingtheintersectionoftheprivatesectoranddevelopment.ForfiveyearsatWRI,heresearchedandwroteextensivelyaboutthewaysinformationandcommunicationtechnologiescanimpactdevelopment.Hehasworkedasadeveloper,moderatorandcontributortoNextbillion.net,andhasbeenaconsultantfortheUSAIDLastMileInitiative.JohnalsospentayearlivinginIndia,workingforn-LogueCommunications,aprivatesectorcompanythatworkswithindependententrepreneurstoestablishinternetkiosksinruralvillages.JohnhasperformedfieldresearchinNepalandKenya,andwrittentwofull-lengthcasestudiesbasedonresearchconductedinIndiaandNepal.AgraduateofCarnegieMellonUniversity,(BS,MechanicalEngineering),heiscurrentlyanMBAstudentatCornellUniversityJohnsonSchoolofManagement.

Mobile-enabledtransactionsforthebaseoftheeconomicpyramid:Abriefreviewofthe2006‘state-of-play’

IntroductionIntheefforttocreatefullyinclusivefinancialsystemswhichreachallsocio-economicstrata,includingthebaseoftheeconomicpyramid(theBOP),informationandcommunicationstechnologies(ICTs)areincreasinglybeingdeployed.ICTs,andinparticular,mobilephones,areprovidingameansbywhichtoprocessnumeroussmalltransactionsefficientlyandaffordably,thusenablingalargerprivatesectorroleinservicedelivery.Hardwarecostsandnetworktransmissioncostsarebothfallingrapidly.Newtechnologies,suchasWi-fi-enabledcellphones,Wi-max,voice-over-internet(VoIP),andlow-power/high-qualityservers,showpromisetodelivermobiletelephonyandwide-bandcapabilitytoincreasinglyremotemarkets.�

Inthisbriefreviewofthestate-of-playasofmid-2006,weexplorearangeoftechnologies,enterprises,andbusinessmodelsthatdeliverfinancialservicesacrosscommunicationsnetworks,andinparticular,mobilephonenetworks,withafocusontheirapplicationtoBOPmarkets.Weprovideaflavouroftheenterpriseandproductset,touchlightlyonthedevelopmentoftheproductand/orserviceandexplorewhatbusinessmodelsareworkingandhighlightpromisingpilotsandfullcommercialroll-outs.Wherepossible,webrieflyanalysewhethertheproduct/servicesrespondtomanifestBOPneeds,andpointtopositivesocialandeconomicimpacts.Finally,weoffersomeobservationsabouthowtomakenewproductsandservicesdirectedtowardtheBOPsuccessful,bothforthecompaniesandforthecustomers.

Deployment of servicesMobiletelephonesarecurrentlybeingusedinavarietyofwaystodeliverfinancialservices.AsdefinedbyourcolleaguesatCGAP,theseservicesfallgenerallyintothreecategories:mobile-purchasing(m-commerce),electronic-money(e-money),andelectronicbanking(e-banking).2

M-commerce.Largelydeployedtodayintheadvancedindustrialcountries,particularlyJapanandtheNordiccountries,itislimited,forthemostpart,tosmallpurchases,suchaspublictransportationandvendingmachines.Inthesetypesofpaymentsystems,themobilephoneisordinarilyreplacingadebitorcreditcard.Asitisatpresenta‘top-of-the-market’applicationprimarily,wewilltouchonitonlylightlyinthisreview.

E-money.Allowsstorageofcashvaluesonmobiles,eitherthrougha‘realvalue’systemora‘virtualvalue’equivalentinairtimecredit.Itisgrowingrapidlyoutofprepaidtext-messagemobilephonecardsystems.Inthisreport,wefocusonthePhilippinesexperience.

Banking channel.Mobilephonesareincreasinglyutilisedasplatformsfortransactingbusinesswithfinancialinstitutions,andforaccessingbankaccounts,whetherchecking,savings,orloan.Balancesinaccountscanbeaccessedforanumberofpurposes:purelyinformational,makingpaymentsonbankloans,transferringmoneyfromoneaccounttoanother,selectivebill-paying(e.g.,toutilitycompaniesandretailstores).Thee-moneyandbankingchannelscrosspathsfrequently,asinthecaseofmobilephone-basedrepaymentof,ordepositsto,microfinanceinstitutionloans.TheAfricanexamples–M-PESA,WIZZITandothers–offermultipleperspectivesforthesetypesofservicesandproducts.Weincludeinthiscategorynewsystemsevolvingforthetransferofremittancesfromonecountrytoanother,suchastheExchangeWallet.

Micropayments are the key; technology is the enablerAsignificantelementinthesuccess(orfailure)ofanyproductsisthecapacitytohandlelargenumbersofsmalltransactionsefficientlyandprofitably.Acrossthethreecategoriesofservicesdescribedabove,onefindsthreemajortypesofpaymentsystems:credit-based,account-based,andstoredvalue.Credit-basedsystems,derivefrom,andrelyon,thematuresystemoftraditionalcreditcards:buy-then-pay.Thesecond,account-based,employthesomewhatmorerecentsystemofdebitcards,whichdirectfundstobemovedfromonedepositoryaccounttoanother:pay-then-buy.Debitcards,likecreditcards,requireconnectionto,andapprovalfrom,acentralnetworkwhichcanauthenticatethetransaction.Stored-valueisanevenmorerecentinnovation,andfunctionsmuchlikecurrency.Cashisloadedontoanelectronicwallet–acard,usually–andallowsfortransferoftheappropriateamountwithoutfurtherapproval.Itfoundearlyandwidespreadapplicationintransitpaymentsystemsandthe‘giftcard’industry.

Telephonecompaniesarehistoricallywell-suitedbythenatureoftheirenterprisetounderstandthenatureofmicropayments.Theevidenceisalreadycompellingthattheyarerespondinginnovativelytothebusinessopportunitiespresentedbymicropayments.HandsetproducersandnetworkmanufacturersareincreasinglyawareofthepotentialoftheBOPmarket,andareactivelydevelopingandmarketingBOP-targetedgoodsandservices.TheEmergingMarketHandsetProgramattheGSMAssociationisagoodcaseinpoint.Ittookonlyaboutayearfrominceptiontomarketdeliveryoffirstproducts–theMotorolaC��3andC��3ahandsets.

Atthesametime,boththetelecomandfinancialserviceindustriesarerespondingpositivelytoinnovationandenergythatiscomingfromoutsidetheirownclosecircles,from,forexample,technologyentrepreneurs,whoareseizingonthecapabilitiesoffast-evolvingchipsetsandapplyingthemtonewfunctions.Alongtheway,allthestakeholdersarerevolutionisingaccesstofinancialservicesfortheBOP.

Toconclude,itisworthnotingthatthenumberofmobilesubscribersindevelopingcountriesgrewmorethanfive-foldbetween2000and2005,reachingmorethan�.4billion.Theestimateofworldwidesubscriberstodayisjustover2billion;developingcountriesaccountsfor70%oftheglobalmarket.3Theestimateisthattherewillbe3billionmobilephoneusersby

1Foradiscussionoflow-costruraltelephonysystems,seehttp://www.nextbillion.net/blogs/2006/05/09/a-new-model-for-rural-connectivity2MobilePhonesforMicrofinance,CGAPBrief,April2006.3www.itu.int/ITU-D/ict/statistics/at_glance/cellular05.pdf

Authors

20�0.Theindustryhasmuchofthegrowthcurveaheadofit,andasfunctionalityincreases,thesizeofthemarketisfurtherenlarged.4Industryanalystsandexpertsagreethatthebiggestchallengesfacingthisexplodingsectorarenotthetechnologies,butthebusinessmodelsusedtoservethegrowingmarkets–agoodlead-in,then,toadiscussionofsomeexamples(indicative,butnotexhaustive)ofmobilefinanceinemergingmarkets.

Case studies from emerging markets

WIZZIT, MTN Banking and FNB, South AfricaInSouthAfrica,20-25%ofthepeoplewhohaveneverhadabankaccounthaveaccesstoacellphone.5FinMark,aBritish-backednon-governmentalorganisationthatlooksatwaysfinancialmarketscanhelpthepoor,estimatesatleasthalfofallbankaccountsinSouthAfricawillbeadministeredviacellphoneswithinfiveyears.6Threecompanies–WIZZIT,MTNBankingandFNB–havelaunchedmobilefinancialservicesaimedatthismarket.

WIZZIT7wasfirsttomarketinNovember2004.ThroughapartnershipwithSouthAfricanBankofAthens,customersareabletouseSMStopayforgoods,transfermoneytofriendsandfamilyandtopupthecreditontheirpre-payphones.Accountholderscanalsohavetheirsalariesdepositeddirectlyintotheircellularaccounts,andcandepositcashatPostOfficesandsomebankbranches.

WIZZITdoesnotrequireuserstohaveabankaccountandiscompatiblewithearlygenerationandpay-as-you-gocellphones.AccountholdersareissuedMaestrodebitcardsthatcanbeusedatanyATMorretailer.WIZZITchargesper-transactionfeesthatrangefrom99c(US$0.�5)toR4.99(US$0.78)anddoesnotchargeamonthlyfeenorrequireaminimumbalance.

Theservicehasprovedparticularlysuccessfulduetoitsunconventionalmarketing.Thecompanyemploysover2000“WizzKids”–typicallyunemployeduniversitygraduatesfromlow-incomecommunities–topromotetheproductintownshipsandruralcommunitiesandhelpun-bankedcustomersopenaccounts.ThecompanyislookingtoexpandintoKenya,Botswana,Namibia,ZambiaandMalawi.CustomersandmanagementofWIZZITconfirm(anecdotallyatthisjuncture)thesocialimpactofseekingoutunemployedindividualsandprovidingthemmeaningfuljobsthatempowerothermembersofthecommunitythroughcommunicationsandaccesstofinancialservices.WIZZITisontargettoreachprofitabilityandtoserve�00,000customersbytheendof2006.

ThroughajointventurebetweentelecomMTNandStandardBank,MTNBanking8isalsoprovidingbankingservicesthroughcellphonesinSouthAfrica.CustomersopenaMobileMoneyaccountoveranMTNcellphone,andalltransactionscanbedoneoutsidetheconfinesofatraditionalbank.AccountholdersalsoreceiveaMobileMoneyMasterCardthatcanbeusedtomakepurchasesorwithdrawmoneyfromanyATMinSouthAfrica.

MTNBankingmayeventuallyexpanditsservicesintoothersub-Saharancountrieswhereitalreadyofferscellphoneservices,suchasNigeria,Uganda,CameroonorRwanda.

UnlikeWIZZIT,whichworksonanynetworkwithanymodelphone,MTNBankingcustomersmusthaveacompatiblecellphonethatusestheMTNcellularnetwork.Althoughthereisnomonthlyfee,thestandardR3feepertransferistoohighforsomemicrotransactions,reducingtheservice’svaluetothosewithlowerincomes.

MTNBankingisnottheMTN’sonlyforayintotheBOP.InUganda,thetelecomhaspartneredwiththeGrameenFoundationandlocalmicrofinance9institutionstoreplicateBangladesh’ssuccessfulvillagephoneprojectinAfrica.MTN’sVillagePhoneproject�0hasgivenmorethan2,000entrepreneursaccesstostart-upcapital($230)whichincludesacarbatteryorsolarpowerpanel,awirelesshandset,ausermanualandafixedlinededicatedSIMcardthatcanbeloadedwiththeprepaidairtime.

Finally,FirstNationalBank(FNB)��haslaunchedacellphonebankingservice,butonlyforusebyitsexistingcustomers.FNBexpectstheelectronicbankingchanneltoincreasethenumberofits‘Mzansi’entry-levelaccountsforlow-earnerswhohaveneverhadabankaccountbefore.LikeWIZZIT,theFNBprogrammehasnospecialrequirementsintermsofhandsetmakeormodelorSIMcardtobeused,andtheservicecanbeusedonanycellphonenetwork.FeesarecomparabletothosefromMTN.

TherapidemergenceofvirtualbankingthroughWIZZIT,MTNBankingandFNBdemonstratesagrowingbeliefamongbankingandtelecomprofessionalsthatthereisabigmarketintheun-banked,andthisisencouragingcompetition.Sincetheirlaunch,allthreeinitiativeshaveexceededtheirinitialsubscribergoals.Asvolumesgrow,thebanksplantodevelopnewapplicationsaimedattheunderservedmarkets.

M-PESA, Kenya In2005,Vodafonepartneredwithitslocaltelecomaffiliate,Safaricom,toprovidefinancialtransactionsovercellphonesinKenya.TheM-PESA�2servicewaspilotedasapublic-privateventure,asapartnershipwiththeUKDepartmentforInternationalDevelopment(DfID)(providingmatchingfunding),theCommercialBankofAfrica(providinglocalbankingservicesandinterfacetotheregulatorysystem),andthemicrofinanceorganisation,Faulu(providinglocalexpertise).

Throughthepilot,existingmicrofinanceclientsreceivedacellphonethroughwhichtheycouldelectronicallymakepaymentsontheirloans.Eachphonewasequippedwithaspecialsubscriberidentitymodule(SIM)card�3thatallowsthetransactionstotakeplace.

Severalservicesareavailableinadditiontoloanrepayments.M-PESAusersareabletodepositorwithdrawcashfromauthorisedM-PESAagents,typicallyasmallstoreownerthathasenoughcashonhandtocompletethetransactions.Clientsarealsoabletomakeperson-to-personmoneytransfers,purchaseairtimeforre-saleorpersonaluse,andreceiveaccountstatements.

Pilottestingconfirmedseveralimportantbenefitstousers.

Time-saving and convenience:ThesystemhasreducedthetimeittakestorepaytheirFaululoans,asthetransaction,completewithconfirmation,isimmediate.Clientshavealsosavedtimeandmoneybyreducingtheirvisitstobanks,andhavereceivedtheaddedconvenienceofeffectivelylonger‘bankinghours’.

Safety and security:TheM-PESAsystemreducestherequirementtocarrysignificantamountsofcash,thusreducingthepotentialforloss.M-PESAwasdevelopedtobanktheun-banked.Accordingtooneclient,“…they[thelowincomepeople]willnolongerhavetostoretheirmoneyunderthemattress…butinM-PESAwhichisasafe…”�4

Reduction of default rates:Astransactionscanbecompletedduringalongerbusinessday,andatmoreconvenientlocations,thesystemhasencouraged–andenabled–morepromptandregularloanrepayment,anoutcomewithclearbenefitstothebankinginstitutions.Asasidebenefit,theregularFaululendingcirclemeetingscouldmoveawayfromdiscussionsofrepaymentissuestoaddressotherconcernsandissues.�5

Mobile-enabledtransactionsforthebaseoftheeconomicpyramid:Abriefreviewofthe2006‘state-of-play’continued

4ThesizeandcharacteristicsofBOPmarketsisdiscussedextensivelyinTheMarketoftheMajority:Poverty,ProfitandUnmetHumanNeeds,WorldResourcesInstitute/InternationalFinanceCorporation,tobepublishedFebruary2007.

5http://www.kalahari.net/BK/product.asp?toolbar=none&sku=27978928&format=detail6http://www.nextbillion.net/newsroom/2005/11/02/cell-phones-plug-africas-poor-into-mobile-banking7http://www.wizzit.co.za/Wizzit_index.htm.CurrentnumbersconfirmedbyauthorinpersonalcommunicationwithBrianRichardson,CEO,August2006.8http://www.mtnbanking.co.za/9http://www.nextbillion.net/node/142910http://www.mtnvillagephone.co.ug/index.htm11https://www.fnb.co.za/personal/transact/accessyouraccounts/cellHowDoI.html12‘Pesa’means‘money’inSwahili13CurrentcostoftheSIMcardisUSD$2.14SecondPilotReview,Microsave,April2006.15Interestingly,thePilotReviewhighlightedsomeconcernsthatthemobilesystemwouldnegativelyimpactthe‘groupcohesion’thatoftencharacterisesmicrofinancelendingcircles.

Theintroductionofthisnewtechnologysuggestsare-thinkingoftheruleswhichattendmicrofinanceloanparticipation.Intheviewoftheauthorsofthispaper,abroadeningoftheagendaformicrofinanceorganisations,fromanexclusivefocusonloanstowardsfullfinancialservicesliteracyandempowerment,willproveapowerfulpositiveimpactoftheseefforts.

Thesmallpilotprovedtothesatisfactionofthejointventurepartnersthevalueofmobile-basedfinancialservicestocustomersandmerchantsalike.Italsovalidatedthetechnologyfortheseniorproviders,VodafoneandSafaricom,andgavethemtheopportunitytoimprovetheunderlyingplatform.Nonetheless,usersofM-PESAhavebeenslowtoadoptotheravailableservicesbeyondloanrepayment,indicatingalingeringlackoffamiliarwithandtrustofthenewtechnology.�6Theservice,andthephonesonwhichtheservicewasdelivered,wereprovidedfreetotheclientsduringthepilot.Fullcommercialacceptancewillbedeterminedduringtheroll-out.

Somepracticalandmarketchallengeswererevealedinthepilotprogramme,anumberofwhichareapplicabletoothermobile-basedsysteminitiatives.Inthepilot,M-PESAplacedalimittothetotalamountthatcouldbewithdrawnatanyonetime,withtheresultthatclientswererequiredtoseekoutmultipleagentsforlargetransactions.Thenumberandavailabilityofagentsavailableduringthepilotwaslimitedanditslowedthesystem’sadoption,althoughrecruitingnewagentsprovednottobeaproblem.ReceivingcustomerinformationandreplacinglostSIMsalsowasfoundtobeaninconvenience.Thesespecificissueswereaddressedasthepartnersmovedfrompilottofullroll-out.

Inacommercialmode,theprogrammeplanstotargetthe200,000-300,000usersofmicrofinanceservicesinKenya.Itwillalsoseektobecometheplatformofchoiceforthenearly$500millioninremittancesthatarereceivedannually.�7PartnershipswillbekeytoM-PESA’sexpansion.Thesepotentialpartnersincludebanks,SMEs,agriculturalcompanies,andotherbusinesseswheremovingtoacashlesssystemaddsvalue.Expansionintoruralareaswilloccurwherecellularcoverageisavailable.TheKenyanroll-out,nowunderway,maybefollowedbyexpansionintoTanzaniaandotherAfricanmarkets.

Celpay, Democratic Republic of Congo and ZambiaAnotherSouthAfrican-basedcompanyisprovidingmobilecommercesolutionsdirectlytobanks.CreatedbyCelTel�8in2003andpurchasedbySouthAfricanFirstRandBankin2005,Celpay�9isafinancialservicescompanyoperatinginboththeDemocraticRepublicofCongo(DRC)andZambia.Thecompanyprovidesmobilebankingandpaymentsolutionsforbankslookingtoofferaccesstofinancialtransactionservicestotheircustomers.TheservicesareaccessedthroughtheuseofGSMcellphonesandPOSdevicesusingmobileoperatorsasthedeliverychannel.

UtilisingtechnologyprovidedbythemobilebankingandtransactingsolutionscompanyFundamo20,Celpayallowsregisteredcustomerswithanexistingbankaccounttousetheircellphonesformerchanttransactions,monthlybillpayments,andfundtransferbetweenparticipatingphones.

CustomersregisteringforCelpayreceiveanewsecureSIMcard,addingamenutotheircellphonesthatfacilitatesthepaymentsandprovidingaccesstotheirCelpayaccounts.MoneycanbeaddedtoCelpayaccountsviatransfersfromabankaccount,orbydepositingcashorachequeataparticipatingCelpaypartnerbank.TransfersmadeusingCelpayarefreetothepayer,whilethepayeeischargedasmallfeeforeachtransaction.

IntheDRC,Celpayiscurrentlypartneredwithfourlargetradebanks:CommercialBankofCongo(BCDC),RawBank,theInternationalBankforAfricainCongo(BIAC),andtheCongoleseUnionoftheBanks(UBC).Thecompanyisresponsibleforover3milliontransactionsamonthinthecountry.2�

Smart Communications and GlobalTelecom’s G-Cash, PhilippinesSmartCommunicationsisthePhilippines’leadingwirelessservicesproviderwith22.5millionsubscribersonitsGSMnetworkasofsummer2006.22Thecompanylaunchedtheworld’sfirstelectroniccashcardlinkedtoamobilephonein2000throughapartnershipwithMasterCard.TheSmartMoneyserviceenablesuserstotransfermoneyfromabankaccounttoaSmartMoneyaccount.SubscriberscanthenuseaSmartMoneycardlikeadebitcardtopayforavarietyofgoodsandservicesatanetworkofretailstoresandrestaurants,andtransfermoneyfromoneSmartMoneycardtoanotherviaSMStexting.

AlthoughSmartMoneyisbeingmarketedprimarilytothetop-of-the-pyramidbecauseitrequirestheusertohaveanexistingbankaccount,thecompany’srapidgrowthisduelargelytoitsBOP-orientedbusinessmodel.SmartBuddy,thecompany’spre-paidGSMproduct,isusedby99%ofSmart’ssubscribers.CustomerscanactivateanaccountforaslittleasP�00(US$�.80),andtopupelectronicallyusingtheSMS-basedSmartLoadserviceinincrementsassmallasP30.ThelowdenominationshaveopenedupanentiresubsetoftheBOPmarket,enablingSmarttoretaincustomerswhomaytemporarilybeunabletoaffordhighertop-upamounts.

Smartsellsitsairtimethroughmorethan800,000smallmerchantsthatmarketpredominantlytolow-incomepopulationsincommunitiesthroughoutthePhilippines.ManySmartLoadretailersareestablishedneighbourhoodstoresthatareabletosellre-loadstopeoplelivingunderthepovertylinebyextendingtheirexistingon-creditpurchasingmodelalreadyusedforstaplesandsachets.Housewivesandstudentsactingasrovingagentsarealsoearningincomeasretailers.PasaLoadpushestheservicefurtherdownthepyramid,byallowingcustomerstotransferunitsaslowasP2tootherSmartcellphones.

Smart’ssensitivitytolocalbusinesspracticesatthesmall-andmicro-enterpriselevelallowedthemtocapitaliseonanexistingdistributionnetworkthattheydidnothavetocreatebythemselves.Thecompanyprovedtheviabilityoftargetinglower-incomemarketsegments,encouragingfurtherpricecompetition,andcatalysinganewmarketforsellingusedhandsets.Bypayinga�5%commissiononre-loadsales,Smarthasalsosignificantlyincreasedtheincomeoflocalretailers.

Thecompanyplanstocontinuefocusingdown-marketasitgrows.Futureplansincludeintroducinglower-costhandsets,andloweringthecostofinfrastructureexpansionintoareasthatwerepreviouslyuneconomicaltoserve.Smartalreadyallowscustomerswithabankaccounttotransfermoneyandmakepaymentsthroughthecellphone.IncreasedmobilebankingactivityfromSmart(thecompanyalreadyhas3millionSmartMoneysubscribers)coupledwithmoreinclusionoftheBOPinformalbankingchannelscouldresultinnewopportunities,particularlyintheareaofremittances.

StrongcompetitionforthecellphonebankingmarketinthePhilippinescomesfromGlobeTelecom’sG-Cash23service.Launchedin2004,theservice’sText-a-Paymentfeatureallowsuserstosendandreceivecashandmakepayments,includingbillpayments,donations,andonlinepurchases,viaSMStexting.G-Cashalsoenablesthetransferofdomesticandinternationalremittances.GlobechargesaflatfeeofPhp�0foranytransactionbelowPhp�,000,anda�%feeforanytransactionabovethatamount.

LikeSmart,usersoftheservicemustbeasubscriberofthetelecom’snetwork.UnliketheSmartMoneyfeature,however,usersarenotrequiredtohaveanexistingbankaccounttoregisterfortheservice.

Globe’sreachhasrapidlyexpandedthroughitswidenetworkofpartners,includinggovernmentagencies,utilitycompanies,ruralbanks,cooperatives,insurancecompanies,universities,andcommercialestablishments.AsofMarch2006,therewereapproximately�.3millionG-CashregistereduserstransferringaboutUSD$�00millionperday.Globeboastsavastdistributionnetworkof700,000airtimeloadingretailersthroughoutthecountry,manyofwhomwillsoonbeabletoprovideG-Cashtotheirclients.24

BothSmartandGlobeareusingtheirmobilecommercesolutionstoexpandtheircustomerbase.Althoughtherearefiveactivemobilebrandsinthecountry,Smart(witha59%marketsharein2005)andGlobe(36%)controlmostofthecellularmarketinthePhilippines.25Betweenthetwocompanies,morethan�.5millionindependententrepreneursareengagedinresaleofairtimeandfacilitationofmobilefinancialservices.Thisrepresentsasignificantemploymentsourceforthecountry.

16SecondPilotReview,Microsave,April2006.17http://www.nextbillion.net/newsroom/2006/02/22/remittances-dwarf-aid-investment-in-kenya18http://www.celtel.com/19http://www.celpay.com/20http://www.fundamo.com/21http://www.fundamo.com/index.asp?pgid=4522www.smart.com.phCurrentnumbersverifiedinpersonalcommunicationwithRamonIsbertoVP,SmartCommunications,August2006.23http://www.myglobe.com.ph/24http://www.chemonics.com/projects/content/GCash.pdf25RobinSimpson,GlobeTelecom’sG-CashaMobileCommerceSuccessStory,Gartner,March2005.

Remote Transaction System, UgandaCellularnetworkshavealsobeenusedtoenablefinancialtransactionswithoututilisingmobilephones.In2002,HewlettPackardformedapartnershipwithanumberofmicrofinanceorganisationsandcommercialpartners26workinginrelatedareastoexplorehowtechnologycouldbeusedeffectivelytohelpscalemicrofinance.WhatemergedfromtheeffortwasaRemoteTransactionSystem(RTS)27thatsupportsbothgroupandindividuallending,onlineandbatchofflineprocessing,andbackofficesynchronisation.

TheRTSisbasedontheuseofsturdyhand-helddevicesthatcancommunicateoverGSMcellularnetworks.Combinedwiththeuseofsmartcardsgivenouttoclientsandmicrofinanceagents,thesystemallowstocollectcrucialfinancialdatainthefieldandsubsequentlytotransferthedatadirectlyintotheMFIs’computerisedfinancialmanagementsystem.TheRTSeliminatestheneedtoprepare,transport,andenterhand-writtenreports,reducingcostsforruraloperations.

FollowingthecompletionofthepilotinMay2005,theMFTdisbanded,passingalongtheintellectualpropertyrightstotheRTStoSevakSolutions.28Thenewcharitablenon-profitorganisationisnowpromotingglobaldisseminationofthetechnologybyprovidingopen-sourcelicenceagreementstointerestedparties.Inaddition,SevakSolutionsiscontinuingthedevelopmentoftheRTSandrelatedtechnologies,andsupportstheRTSusercommunity.

UAE Exchange Wallet UAEExchangeWalletisaglobalmoneytransfersystem,establishedfirstintheUnitedArabEmiratestoallowIndianstowiremoneyhometoIndianbanksusingtheircellphone,andneitherthesendernorrecipientneedstovisitabank.ThesendercallsupExchangeWalletonhisphone,entersaPINnumber,indicateswhetherthefundsshouldbesenttoabank,WesternUnionofficeoranotherExchangeWalletcustomer,andsendsthemoneyovertheInternettoitsdestination.ThecompanyisthebrainchildofSamPitroda,apioneeringfigureintheIndiantelecomindustry,andnowthefounderandChairmanofC-SAM,withofficesinChicago,ILandIndia.C-samhasawideproductofferingcoveringahostofbrandedandsecuremobiletransactionplatformproductsbothforfinancialandnon-financialsectors.29

Business briefsThissectionpresentsshortcapsulesintroducingavarietyofmobile-basedfinancialservicesbeingintroducedaroundtheworld.Thereisverylittleinformationavailablepublicly–inprintformorontheweb–aboutmostoftheseinitiatives.Takentogether,however,theysuggesttherangeandvitalityofeffortsinthisdomain.WeprovideURLstoinformationresourceswhereavailable.

Bangladesh GrameenPhone(GP),Bangladesh’stopmobileserviceprovider,recentlypartneredwithDutchBanglaBanktoprovideitsuserswithamobilebankingservice.Theserviceallowscustomerstousetextmessagesontheirmobilephonestopaytheirphonesbillbydebitingagainsttheiraccountsdirectly,checktheiraccountbalance,changetheirPINcode,andperformotherbankingfunctions.GPofferstwoservices,oneavoicemail-basedsystemandtheotheranSMStext-basedsystem.

http://www.financialexpress-bd.com/index3.asp?cnd=8/�0/2006&section_id=7&newsid=33770&spcl=no

http://www.grameenphone.com/modules.php?name=Content&pa=showpage&pid=5�8

BrazilBancodoBrasilandBrazilianwirelessoperatorVIVO,EverSystemslaunchedMobileBankinginFebruary,2006.Initialreportsindicatethatthepartners“areveryimpressedandsatisfiedwiththeusability,performanceandsecurityofMobileBanking.There’salottocelebrate!”BancodoBrasilcustomersarenowabletousetheircellphonestoaccessaccountinformation,andperformcomplexfinancialtransactions.ThebankreportsthatthesefunctionscanbecarriedoutwithauthenticationandsecurityfeaturesidenticaltothoseofInternet-basedbanking.

http://brew.qualcomm.com/brew/en/developer/resources/news/archives/2005/nov_2005.html

Colombia Bancolombia,Colombia’slargestbank,startedamobilebankingserviceinJune2006,whichallowscustomerstomakepayments,moneytransfers,andinformationrequestsbymobile.TheserviceisknownasBancoMovil.BancolombiaispartneringwithComcelandOla,twocellularphoneserviceproviderstoprovidetheservice.

AccordingtoJorgeLondoñoSaldarriaga,thepresidentofBancolombia,thebank’snewserviceisspecificallytargetedatthosecustomers–orwould-becustomers–whodonothaveeasyaccesstophysicalbankinginfrastructure:“Thebankwillarriveinareaswherewedon’thaveofficesorATMs,butwewilltakeadvantageofcellularphonetechnologywhichcoversalltheterritory.”

http://www.la-republica.com.co/noticia.php?id_notiweb=634�6&id_subseccion=��&template=noticia&fecha=2006-08-04

India – ABN AmroABNAmrohasprovidedmobileservicesince2004.Theirproduct,Mpower,usesSMStexting.Customerscanaccessawidevarietyofservicesincludingbalanceandtransactioninquiries,shareholdingsindemataccounts(‘dematerialised’account,usedforpurchase/saleofstocks),fundstransferstoABNAMROandotherbanks,billpresentmentandpayment,chequeinquiryandstoppaymentrequests,openingonlinefixeddepositaccounts,requestsforchequebooksandstatements,andrequestsfornewPINnumbersandtochangePINnumbers.MpowerassignsauniquePINtothemobilephonenumberregisteredatthebankforsecuritypurposes;ifthephoneisstolenandsomeonetriestoaccessthecustomer’saccount,thesystemblocksalltransactionsafterfivefailedattemptsataccess.

http://www.epaynews.com/index.cgi?survey=&ref=browse&f=view&id=�0832378706222�52�2&block=

http://www.abnamro.co.in/ProductsnServices/Consumer/Services/mobile_banking.html

Kenya TheCooperativeBankofKenyaoffersfivebasicservicesviamobile:accountbalanceverification;purchaseand/ortransferofairtimefromtwocellproviders,SafaricomandKencell;directsalarydeposit,withSMSimmediateverification;mini-statementsofthelastthreetransactions,withcurrentbalance;utilitybillpayment.Eachservicecosts30Ksh,orapproximatelyUS$0.40pertransaction,whichseemsafairlyhighbarrierforlow-incomecustomers.

http://www.co-opbank.co.ke/epayments.php?cat=6&sub=72

Nigeria InFebruary2005,GlobacompilotedamobilebankingprogrammeinNigeria.Justonemonthlater,Globacomannouncedthatitwasreadyforacommerciallaunchofitsservice.InAugust2006,pressreportsindicatethatthe‘GloM-Banking’serviceisaveragingover200,000transactionsaday,whichindicatesstrongmarketacceptance.Mobilebankingsubscriberscancheckbankaccountbalances,viewthelastfivetransactionsontheaccount,transferfundsfromoneaccounttotheotherinthesamebank,andrechargeaprepaidlineofcredit.

AccordingtobankofficialstheGlobacomserviceisthefirstofitskind,allowingbankcustomersto‘interface’withavarietyofbanks.Asof2005,thefollowingbanksparticipatedintheprogramme:FirstBankNigeriaPlc,GuarantyTrustBank,ZenithBank,Afribank,OceanicBank,WemaBank,CharteredBank,PlatinumBank,PrudentBank,StandardTrustBank,UniversalTrustBank,BondBank,GulfBank,NationalBank,FirstCityMonumentBank,UnitedBankofAfrica(UBA),ContinentalTrustBank,DiamondBank,EIBInternationalBank,EquitorialTrustBank,MagnumTrustbank,UnionBankandAcessBank.Tousetheservice,acustomermustregisteratanyoftheparticipatingbanks.Oncetheserviceisactivated,thecustomerwillreceiveawelcometextmessageonhismobilephone.Fromhere,toaccesstheservice,thecustomerwillneedthePINissuedbythebank.

http://www.mobileafrica.net/n�40.htm

http://www.sunnewsonline.com/webpages/features/suntech/2006/aug/�6/suntech-�6-08-2006-00�.htm

26http://www.hp.com/e-inclusion/en/project/uganda2.html?jumpid=reg_R1002_USEN27http://www.nextbillion.net/files/RTS.pdf28http://www.sevaksolutions.org/29http://www.c-sam.com,http://timesofindia.indiatimes.com/articleshow/1051551.cms

South Korea Whilenotadevelopingcountry,SouthKoreahasadoptedmobilebankingwithenthusiasm.AccordingtoBusiness Week,asof2004,asmanyas58�,000Koreansmadeabout4millionbanktransactionsusingtheirmobilephones.“AllofSouthKorea’sretailbanksnowoffermobilebanking,andeverymonth,morethan300,000peoplebuynewphonesequippedwithaspecialslotwheresubscriberscanpluginatinymemorychipwiththeirbankingdataandanencryptioncodeforsecuretransactions.”

Already,tensofthousandsofrestaurantsandstoreshaveterminalsthatreadcreditcardinformationfromphonesviainfraredbeams,lettingcustomersavoidthehassleofswipingcards.AndSeoulcommuterscanhavebusandsubwayfaresdeductedfromtheiraccountsbyflashingtheirphonesastheypasstheturnstiles.

Carriersbenefittoo.Theygainanewrevenuesource–subscriberspayamonthlyfeeof70¢fortheservice–andanewwaytokeepcustomersfromdefectingtorivaloperators.LGhasevenusedtheservicetoexpanditsretailpresence:Thecompanynowsellsphonesandsignsupnewsubscribersat2,800bankbranches,inadditiontoits580storefronts.“Thishasbecomeapillarofoursalesdrive,”saysLG’sHyun.AsofAugust,LGhadsold�.�millionbanking-readyhandsets.

Anotherplus:Theservicegetsanewsetofcustomershookedonusingtheircellphonesformorethanvoicecalls.Whereasothertrendynewmobileservicessuchasmultimediae-mail,videoclips,andmusicdownloadsappeallargelytotheyoung,bankingismostpopularamongpeopleintheir30sand40s.Tobetterservethesenewcomers,SKTelecom(SKM)maysoonstartofferingticketsalesandshoppingservicestoitsmobilebankingclients.“Bankingwillbeanotherleapforwardforourdataservice,”saysChaJinSeok,vice-presidentinchargeofthemobilefinancialdivisionofSK.

Korea:Mobilebankingtakesoff.http://www.businessweek.com/magazine/content/04_39/b390�068.htm

Lessons being learnedOurintentionherehasbeentopulltogetherarangeofactivitiesfromaroundtheworld,andfromabroadrangeofstakeholders,toprovideevidenceoftherevolutionunderway.Whileeveryoneislearningastheygo,onecandrawsomeearlylessons.

First,inBOPmarkets,asinallmarkets,thefirstruleisto‘knowthecustomer.’TheBOPhassufferedbothfromalackofappreciationasanaccessibleandworthymarketandfromanacutelackofharddataonlow-incomeindividualsaseconomicactors.TheexperienceintheITsector–andnewresearch–isbeginningtoelevatethoseinbase-of-the-pyramidmarketstotheirfully-justifiedpositionasrealcustomers,onaparwithotherhigher-incomepopulationmarkets.

Second,toachievesuccessintheBOP,newbusinessmodelsareprovinganecessityfortheBOP–awillingnessandabilitytomoveawayfromtraditional‘A’marketmodels(highgrossmargin,highunitcost)andadapttotheeconomicrealitiesofthe(nowmorefullyunderstood)consumers.Asacorollary,BOP-specificproductsandservices(asopposedtostrippeddownversionsoftop-of-the-marketproductsandservices)designedaroundbetterknowledgeofthecustomer,andbasedonpurpose-builtadvancedtechnologyseemtobefindingtraction.

Third,successfulentrantsarebuildingfromthegroundup,engaginglocalcommunitiesdeeplyandareappreciatingthepotentialsizeandstrengthofthemarketandthuscommittingforthelonghaul.

Suggested further readingCastello,SergioA.InnovativeTechnologiesinMicrofinanceforLatinAmerica:BuildingEffectiveDeliveryChannels.5April2004.

CGAP.MobilePhonesforMicrofinance.CGAPBrief.April2006.

CGAP.UsingTechnologytoBuildInclusiveFinancialSystems.CGAPBrief.April2006.

CGAP.UsingTechnologytoBuildInclusiveFinancialSystems.FocusNoteNo.32.January2006.

Cracknell,David.ElectronicBankingforthePoor.MicroSaveBriefingNote#3�.

Cracknell,David,Ngurukie,Corrinne,andMurka,George.M-PESAPilot-TestReviewforFaulu/Vodafone.MicroSave.January23-27,2006.

Firpo,Janine.BankingtheUnbanked:Technology’sRoleinDeliveringAccessibleFinancialServicestothePoor.SEMBAConsulting.

Helms,Brigit.AccessforAll:BuildingInclusiveFinancialSystems.CGAP.2006.

Magenette,NicolasandLock,Digby.WhatWorks:ScalingMicrofinancewiththeRemoteTransactionSystem.IncreasingProductivityandScaleinRuralMicrofinance.WorldResourcesInstitute.August2005.

McGrath,JamesC.Micropayments:TheFinalFrontierforElectronicConsumerPayments.FederalReserveBankofPhiladelphia.June2006.

Mohiuddin,ShamarukhandHutto,Julie.ConnectingthePoor.ProgressivePolicyInstitute.March2005.

Smith,Sharon.WhatWorks:SmartCommunications–ExpandingNetworks,ExpandingProfits.ProvidingTelecommunicationsServicestoLow-incomeMarketsinthePhilippines.WorldResourcesInstitute.September2004.

TheWorldBank.InformationandCommunicationsforDevelopment.GlobalTrendsandPolicies.2006.

Women’sWorldBanking.UsingPalmPilotstoManageLoans.June2005.

Wright,GrahamA.N.,Hughes,Nick,Richardson,Brian,andCracknell,David.MobilePhone-BasedE-Banking:TheCustomerValueProposition.MicroSaveBriefingNote#47.

Vodafone Group Plc

Registeredoffice:VodafoneHouseTheConnectionNewburyBerkshireRG�42FNEngland

RegisteredinEnglandNo.�833679

Tel:+44(0)�6353325�Fax:+44(0)�635457�3

www.vodafone.com

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