8- Prepaid, Finanical Inclusion and a World Beyond Cash for APPU - FINAL

Prepaid, Financial Inclusion and a World Beyond Cash

Juanita WoodwardPrincipal, CTD Connecting the Dots

APPU Executive Committee MeetingPostal Financial Services Working Group

Colombo, Sri Lanka16 September 2014

- Digitizing payments and financial inclusion - High cost of cash handling - Mobile provides connectivity

Payments Landscape

Recent Financial Inclusion initiatives that provide card-based solutions:

Source: The Opportunities of Digitizing Payments, World Bank, Better than Cash Alliance, Bill and Melinda Gates Foundation, August 2014

Digitizing payments supports a financial inclusion agenda in all forms, including international and domestic remittances, by: • Helping to overcome the cost and physical barriers• Offering the opportunity to scale up access to financial services

using mobiles phones, retail POS and other access points, especially when supported by sound consumer protection

• Promoting women’s economic empowerment by facilitating greater account ownership and asset accumulation and increasing women’s economic participation

Digitizing Payments and Financial Inclusion

India: Launch to open accounts for 75M poor households

Nigeria: Launch of eID Prepaid card to 13 million citizens

As of July 2014, commuters can only pay with Oyster cards, prepaid tickets, or contactless payment cards for a London bus ride. No cash.

With only 1% cash transactions at time of conversion, the annual government savings from this cash to digital currency : GBP 24M (USD 39M)

Source: BBC, McKinsey – Forging a Path to Payments Digitization, May 2013

The Cost of Cash• A prevalence of cash allows for a shadow economy – one that is not taxed, monitored

by the government, or included in the GDP. Cost of Cash

% of GDP Annual Cost of Cashper household (USD)

Finland 0.10% $110Australia 0.38% $430US 0.47% $490Russia 1.10% $245

• Cash generates a cost, mainly borne by banks and merchants and passed on to businesses, government and households

• High cash usage hinders the evolution of a digital economy.

High cost of cash handling

Source: TechinAsia website, Apple Pay website

Mobile provides connectivity

Smartphone manufacturers are bringing high quality, low cost models to the market. The youngest, fastest-growing smartphone maker is Xiaomiin China.

Apple Pay will launch next month in the US following the releases of the new iPhone 6 and iPhone 6 Plus in US.

Payments on Apple Watch coming October 2015

Consumers now have many choices for Smartphones and lower cost models will speed up Smartphone penetration.

Asia

Understanding Prepaid Cards: Benefits and Many Applications

• Different than a debit or credit card; no account or credit check is required

• The value is stored on the card; if lost or stolen, easily replaceable

• Buy goods at POS or online• Pay money to other people, friends and family • Withdraw from ATMs or other POS access locations• Reloadable cards can be topped up by

cash, through employer or government social welfare benefits program

• Promotes better budget and control

Understanding Prepaid cards

Source: Global Prepaid Opportunity, 2012 Global Prepaid Sizing Study, Boston Consulting Group

Prepaid cards offer many applications The prepaid opportunity is projected to

reach US$ 822 billion by 2017, driven by its unique and practical ability to solve any payment need.

Growth in the prepaidopportunity is driven by a number of factors including: - Meeting the needs of the

unbanked/underserved- Governments demanding better

financial transparency by mandating electronic payments

- A new attitude towards moneymanagement among bankedconsumers who are looking tosegment their spend on top oftheir existing payment cards

General Purpose Reloadable (GPR) Card

Government Benefits

Travel Card

Gift Card

Online Purchase Card

P2P Payments

Corporate Payroll

Teen/Youth Programs

and more . . .

Prepaid at Post Offices MasterCard examples of Prepaid programs

Corporate Prepaid CardNeed for a non-personalized corporate expense card loaded in USD, with global ATM, POS and online access. Limit load is US$20,000.

Social Benefit CardNeed to enhance efficiency in repetitive social welfare disbursements, while limiting expenditure to food and pharmacy.

Travel CardMasterCard Cash PassportAUD, NSZ, USD, GBP, EUR, HKD, JPY, CAD, SGD, THB

Travel Card USD, EUR and CHFHomeSend (MasterCard JV) : online access to transfer funds to a mobile phone

Asia

Case Study: South Africa Social Services Agency (SASSA)

and MasterCard

The Situation

The mandate of the South African Social Services Agency (SASSA) is to ensure the provision of comprehensive social security services to South African citizens who are vulnerable or living in poverty.

In 2011, the organization recognized that delivery against their mission was compromised by a variety of resource and logistical limitations that made them vulnerable to widespread waste, fraud and abuse.

Source: MasterCard Government Services & Solutions Case Study, 2013

South Africa Social Services Agency and MasterCard

Performance Under PressureAlthough the timeframe for project roll out was originally 6 months, the incumbent payment partner who lost the bid insisted that the new solution provider take responsibility for running the SASSA program immediately. This required the new team to assemble the necessary partners, design, develop, certify the new technology and begin registering recipients in only 2 months.

The Solution A MasterCard was developed thatauthenticates cardholder identity andauthorizes spend using a single chip that canbe instantly issued. The hybrid chip solutionincorporates biometric identification andloading of funds with traditional spendingand fund access functionality.

Innovation through TechnologyNet 1 brought 20 years of experience developing the biometric technology that was used in the solution. Together, Net 1 and MasterCard were able to integrate Net 1’s Universal Electronic Payments System (UEPS) biometric technology with MasterCard EMV chip technology to create a solution that successfully operated in both online and offline environments—and allowed cardholders to complete the entire registration and card issuance process anywhere in less than ten minutes!

A Winning Partnership of Talent, Technology and Know-howIn January 2012, the RFP was awarded to Cash Payment Services (a subsidiary of Net 1), who partnered with Grindrod Bank. As the designated issuer, Grindrod Bank turned to MasterCard as its payment partner of choice.



SASSA Solution HighlightsGovernment Savings• Reduced expected administrative

costs by at least $375 million over five years

• Reduced cost per grant from an average of $3.33 to only $1.66 flat

• Found 7,734 cases of fraud and corruption, recovering nearly $6 million in a third of tried cases

• Uncovered 150,000 bogus receipts, and saved $15 million with agency's campaign to have beneficiaries re-register recipients in person for grants

Efficiencies of Scale and Reach• Streamlined the entire social grant

distribution process and consolidated 7 social programs into one consistent payment program

• Registered and distributed 150,000 cards per day at program peak

• Delivered payments faster and more accurately whether in urban centers or in rural areas, throughout the country’s nine provinces

• Offered instant issuance of the card, saving registration and waiting time

Program Transparency• Created the first comprehensive national Social Security database• Dramatically reduced waste, fraud and abuse by incorporating biometric registration



Social ImpactBrought financial inclusion to one-in-three adults—a 50% increase—as of 2013.

Source: SASSA Annual Report, 2013


AsiaThank You

Juanita WoodwardPrincipal, CTD Connecting the Dots

[email protected]

Tel: +65 6468 3050Mobile: +65 9170 8224

8- Prepaid, Finanical Inclusion and a World Beyond Cash for APPU - FINAL

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