Towards Financial Inclusion in the Caribbean - Mobile Payments Solution

By: Rhea Yaw ChingPart Fulfillment of: Financing for Development Course by World Bank

Agenda1. Current State of Affairs 2. Qualifying the Opportunity3. The Payments Solution4. A Multilateral Approach to Success

Current State of Affairs

“The Caribbean’s ability to sustain levels of economic growth and social progress has been affected by the ongoing adverse impacts of the global

economic crisis, declining foreign direct investment, increased indebtedness, the lack of adequate transportation, energy and information and

communications technology infrastructure networks, limited human and institutional capacity and continuous climate vulnerability.”

Summary Third International Conference on Small Island Developing States

Unlocking sustainable growth for your business means participating in the overall economic and social development of the Caribbean namely….

Enabling progressive Infrastructure • Enabling a resilient, innovation-based ecosystem

Promoting Economic Resilience • Solutions that promote equal rights to economic resources

Fostering Social Inclusiveness • Creating a conduit for local content, creativity and innovation

We must unleash Caribbean potential by creating a vibrant ecosystem of social and economic opportunity

Accessleads to

Opportunity which leads to

Equalitywhich leads to

Prosperity

Financial Accessleads to

Economic Opportunity which leads to

Income Equalitywhich leads to

Universal Prosperity

“Meeting our region’s development goals requires an overhaul in the way financial resources are accessed, organized, allocated and mobilized. The principle that every individual and business participate meaningfully to the agenda must underpin the

creation of this new democratized ecosystem.” – Rhea Yaw Ching

The Current Ecosystem is

BROKEN

60% of Adults in the Caribbean do not have a bank account

Source: Mobile Money Live/GSMA, ICT Pulse 2014

Note: Trinidad and Tobago – 76%

Not enough money Do not need an account

Family member already has an account Accounts too expensive

Source: Mobile Money Live/GSMA

Financial Institutions too far

away

Lack of required documents

Why?

There is also inadequate access to financial services,

#ATMs per 100,000 pop #Bank Branches per 100,000 pop -

20.0

40.0

60.0

80.0

100.0

120.0

140.0

HaitiJamaicaGuyanaDominican RepublicSurinameTrinidad and TobagoBarbadosAruba Saint Vincent and the GrenadinesSt LuciaDominicaBelizeBahamasGrenadaAntigua and BarbudaSaint Kitts and Nevis#REF!

High Income Country Avg.

Source: World Bank 2013 / IMF Financial Access Survey 2009

High Income Country Avg.

Reference: CGAP’s market archetypes for financial inclusion

There is also a strong correlation between access to financial services and GDP

Overall, the financial inclusion scorecard is poor

St Kitts and Nevis

Bahamas Antigua and Barbuda

Grenada Belize St Lucia Barbados St Vincent and the

Grenadines

Trinidad and Tobago

Jamaica Guyana Haiti0

10

20

30

40

50

60

70

80

90

100

65.93

52.9 52.6944.78

42.27 40.8737.66

29.8

22.03 20.88 19.66

7.62

USACanadaUK

Singapore

Spain

Note: average value from 2004 to 2012Source: Asia Development Bank, World Bank

Factors1. ATMs per 100,000 adults2. Commercial Bank Branches per 100,000 adults3. Borrowers from Commercial Banks per 1,000 adults4. Depositors with Commercial Banks per 1,000 adults5. Domestic Credit to GDP

Note: St Kitts and Nevis, Bahamas, Antigua seen as skewed due to large offshore financial sector

Trying to analyse the problem using current

lens(will lead to the wrong diagnosis)

Trying to solve the problem by using current

tools(will only get us so far)

Trying to build solutions in silos

(will never give us scalable results)

Trying to maximise value by addressing half the

market (has proven to be unsustainable)

The Current Payments Conundrum

• Capital heavy and expensive.

• Layered with manual, administrative and operational costs

• Multiple value-chain players.

• Narrow Innovation Focus

• Processing is highly complex to meet all governance and safety/soundness requirements

• Electronic Payments (incl. cards) are targeted by criminals

• Institutional “cartel”

• Short Investment Horizons

• Geographically bounded

• Limited open network or interoperability

EXPENSIVE COMPLEX LIMITED

A Mobile Financial Services Ecosystem creates a cost efficient, scalable platform to reach everyone

Percentage of the population in select Caribbean countries that use financial/banking services and own mobile/cellular phones

Source: ICT Pulse

Qualifying the Opportunity

The M-Payments Opportunity is worth US$8 Billion annually

20M Market Size

12M Unbanked

6M Under-Banked

>100% Mobile Penetration

Growing smartphone penetration

$US 12B Documented Remittances to the Caribbean60% of all bills paid in cash

High Internet Access and Usage

49% of Remittances go through informal channels

The potential extends beyond just payments

Public Sector/Gov’t Easier payment solution for Citizens (e.g. taxes or fees), Mechanism for G2P transfers (e.g. pension or subsidies)

Retail Instant and convenient remote or proximity payment for goods for both B2B and B2C stakeholders

Money Transfer Low cost alternative for P2P transfers and remittances as well as opportunity for directed remittance funding

FMCG Provides a mechanism to distribute Promo cash prize winnings

Agriculture Provides farmers with away to purchase agricultural supplies and get paid for produce/crops

NGOs Provides a mechanism to both receive funds (grants and donations) and distribute directed aid

The Solution

Is…

An efficient, convenient, affordable, accessible, user-friendly and protected way to send and receive money or make and receive payments.

SMS Gateway

Payment Processing

Bank /Bank Network

Low-End Mobile Phone

Smartphone

Point of Sale Terminal

ATM

Computer Browser

Mobile Network Operator

Internet-Based Web Services

Terminal Network

Product Portfolio 1. Domestic Transfers2. In-Network Payments3. International Remittances4. Payment Gateway

Customer Segments

1. Low Income Adults with no bank account2. MSME Owners operate in a cash environment3. Middle Income Adults with bank a/c 4. MSMEs / Entrepreneurs with bank a/c

Distribution Channels1. Agent Network2. Financial Institution Distribution Network3. Mobile Operators Top Up Network4. Other Retail Outlets

Communication Channels1. Peer to Peer Community-based Communication2. Digital Communication esp. Social Media 3. Advocacy-based

Business Model Principles

26

This model can only work if…Private Sector Stakeholders:

1. leverage the entire Caribbean for Critical Mass

2. use their disribution network and in-house resources to multiply points of presence in order to reach everyone

3. Everyone shares the reward of success by sharing the burden of financial risk across all parties

4. agree part of the solution… and that means competitors too!

5. agree to full interoperability in order to reach everyone

27

This model can only work if…Governments of the region play their role in de-risking the venture by:

1. being anchor users of the solution (for social services payments for example)

2. Facilitating proactive regulatory discussions

3. Facilitate greater access to grant funding for the social good component of the venture

4. Support the creation of blended finance options through policy reform

The biggest obstacle to success can be coined in two words: status quo.

Success is dependent on evolving our inefficient but comfortable systems to an empowered resilient, innovation-

driven ecosystem.

THANK YOU