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CONFIDENTIAL Mobile Money Market Sizing Toolkit

Mobile money market sizing toolkit

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Page 1: Mobile money market sizing toolkit

CONFIDENTIAL

Mobile Money Market Sizing

Toolkit

Page 2: Mobile money market sizing toolkit

1

Mobile Money Toolkit

• Objectives& Definitions

• Market analysis

–Sizing the market (direct & indirect)

–Estimating product mix

–Estimating unbanked access

–Stress-testing the numbers

• Macro tools

–Business plan framework

–Conducting Primary Market Research

• Best practice research guide

• Surveys and facilitator guides

–MMU database

–Market screening frameworks

• Appendix

–Philippines market documents

Page 3: Mobile money market sizing toolkit

2

Overview of this document in the context of the toolkit

• This toolkit is designed to help a variety

of organisations conduct research and

analysis about the market for Mobile

Money. The toolkit contains analytical

frameworks, research tools as well as

data to help inform the analytical work

Objectives of the toolkit

Version history

• Version 1.0 was developed in March

2009

Key contacts:

• Mark Pickens

Note: This document is confidential

and should only be used outside

GSMA/CGAP with prior approval

Users of the toolkit

• GSMA/CGAP users looking at particular

markets

• Coffey International in assessing

applicants for funding

• Local market participants may elements

useful

CGAP

Page 4: Mobile money market sizing toolkit

3

Key Definitions (1/2)

* Users of remittance services that do not require an account are considered “unbanked”. Note: World bank definition may include this category

Source:Team definitions

Key terms Definition

Emerging

markets

• For MMU purposes any market that has a GDP per capita of less than USD 15,000

Unbanked• Analysis; anyone who does not have formal access to financial services as per

World Bank composite measure in “Finance for all” (see next slide for detailed

definitions)

• Research; anyone who does not have an account of any kind (deposit, cheque,

savings, salary, credit, postbank etc)*

“Previously

” Unbanked

• Users of Mobile Money who had no other access to financial services (i.e. no bank

account of any kind) prior to becoming Mobile Money users

“Otherwise

Unbanked”

• Mobile Money users who have no other formal access to financial services (i.e. no

bank account of any kind)

Unbanked-

mobiled

• People who have no formal access to financial services (i.e. no bank account of any

kind) but who do have access to a mobile phone

Sub $2/day• Income segment of people who earn less than USD2/day per person (not ppp

adjusted)

• Any financial service delivered over a Mobile Phone. Includes Mobile wallet,

p2p,G2p and B2p transfers and remittances, payments (including airtime), savings,

credit, insurance, etc

Mobile

money

Page 5: Mobile money market sizing toolkit

4

Key Definitions (2/2)

Source: Team definitions

Key terms Definition

• Segment of users who have some access to financial services (eg a bank account )

but who still rely on informal mechanisms for other financial services (eg borrows

from loan-sharks, save “under the mattress” or rely on informal money transfer

mechanisms)

Under-

banked

Page 6: Mobile money market sizing toolkit

5

World bank definition of “Financial Access”

World Bank “Finance For All” – extract

Financial inclusion, or broad access to financial services, implies an absence of price

and non-price barriers in the use of financial services; it is difficult to define and measure

because access has many dimensions. Services need to be available when and where

desired, and

products need to be tailored to specific needs. Services need to be affordable, taking

into account the indirect costs incurred by the user, such as having to travel a long

distance to a bank branch (p.22)

Financial inclusion, or broad access to financial services, is defined here as an absence

of price or non-price barriers in the use of financial services. Of course this does not

mean that all households and firms should be able to borrow unlimited amounts at prime

lending rates or transmit funds across the world instantaneously for a fraction of 1

percent of the amount. Even if service providers are keenly competitive and employ the

best financial technology, prices and interest rates charged and the size of loans and

insurance coverage on offer in a market economy will necessarily depend on the

creditworthiness of the customer (p.27)

It is easier to measure the use of financial services since use can be observed, but use

is not always the same as access. Access essentially refers to the supply of services,

whereas use is determined by demand as well as supply (p.28)

Source: World Bank – “Finance for all”

Page 7: Mobile money market sizing toolkit

6

Mobile Money Toolkit

• Objectives& Definitions

• Market analysis

–Sizing the market (direct & indirect)

–Estimating product mix

–Estimating unbanked access

–Stress-testing the numbers

• Macro tools

–Business plan framework

–Conducting Primary Market Research

• Best practice research guide

• Surveys and facilitator guides

–MMU database

–Market screening frameworks

• Appendix

Page 8: Mobile money market sizing toolkit

7

There are 4 primary elements in sizing the market

Source: Team analysis

Description Objectives

Sizing the overall

market

• Sizing the direct market potential

– Estimate the number of potential

Mobile Money users

– Bottom-up modelling of overall

ARPU

– Total market revenue potential

• This is the primary methodology for sizing the

Mobile Money market in terms of users and

revenues

A

Estimating the

product mix

• Estimate size of financial service

flows by product category for each

market

• Estimate MM take-up rates & fees

• Calculate the overall revenue

potential and product mix

• This methodology can be used to estimate

relative potential for different mobile money

products and services based on revenue pools

• This approach can also be used as an

alternative method to help size the overall

market revenues by product category

C

Estimating un-

banked “access”

• Estimate how many incremental

people can be provided with

financial access by reducing cost to

serve through Mobile Money

• This approach would primarily be used to

illustrate the potential for extending financial

access to unbanked people

• The approach can also be used as an

alternative method to estimate the size of the

mobile Money revenues and subscribers

D

Sizing the

indirect benefits

• Sizing of the indirect benefits • This section provides a way to estimate the

indirect benefits of Mobile Money to an MNO–

these can be a significant driver of a business

case

B

Page 9: Mobile money market sizing toolkit

8

Sizing the direct market potential

Source: Team analysis

• Market analysis to

estimate MM take-up

rates based on similar

markets

• Develop take-up

scenarios based on likely

market development

• Apply take-up rates to the

addressable market, as

well as to the “unbanked”

share of the market

• Validate through market

research if possible

Estimate potential mobile

money usersDerive MM ARPU

Estimate total market

revenues

Steps

End-

products

• Estimate of a range of

total mobile money

subscribers over time

• Top-down: Market

analysis to estimate MM

ARPU as % of total ARPU

based on similar markets

• Bottom-up: Estimate

actual usage per

subscriber of key services

at a given set of pricing

assumptions

• Estimate the total ARPU

per customer

• Validate through market

research if possible

• Estimate of MM ARPU per

subscriber

• Calculate the total market

revenues based on the

expected Mobile Money

users and the expected

ARPU

• Estimate what share of

these revenues each

player in the business

model will capture

(depends on business-

model & product mix –

see “financial service flow

sizing”)

• Break-down of total MM

revenues per player in the

ecosystem

1 2 3

A

Page 10: Mobile money market sizing toolkit

9

Low end - Baseline scenario (to be developed locally)

2

7

35Best in class**

26Top segment

7.8Weighted Average

Middle segment

Lower segment

<1Bank models

• Choose an adoption rate

which best applies to

expected local market

conditions

• E.g., The weighted average

of all analysed cases

(7.8%) is applied to all

markets

High end – Aggressive scenario (to be developed locally)

8

26Leaders

Others

• Choose an

aggressive take-up

scenario which is

reasonable

• E.g., Average

adoption rate across

markets after

weighting for

“leadership”: 16.8%

Adoption rates, % Market share,%

MMU take-up rate ranges are derived based on existing

cases and potential market development

* Not included in calculation for average MM adoption rates; adoption rate for bank-led models based on total mobile subscribers in country

** Actual value for best in class MNO, not an average

Source: Press search; company websites; Gartner; Sida; CGAP; Merryll Lynch; McKinsey analysis; Interviews

Estimated take-up rates from case-data

Average adoption rates, %

5248

Asia

5050Africa

5446

Middle

East31

69Americas

4951

Eastern

Europe

Leaders

Others

ILLUSTRATIVE

2

7

35Best in class**

26Top segment

7.8Weighted Average

Middle segment

Lower segment

<1Bank models

A1

Page 11: Mobile money market sizing toolkit

10

Adoption rates are applied to banked & unbanked mobile subscribers

to estimate the overall market potential

* Extrapolated based on CAGRs

Source: Informa World Cellular Information Service, Wireless Intelligence

Europe: Eastern

94Middle East

332Africa

260Americas

872Asia Pacific

143

Unbanked Mobile

subscribers 2012*, m

Unbanked Mobile Money

subscribers 2012*, m

Total Mobile subscribers

2012*, m

Mobile Money subscribers

2012*, m

33

49

75

88

15

23

35

41

362168

Africa

446Americas

2,155Asia Pacific

278Europe: Eastern

175Middle East

519

Estimate the total Unbanked Mobile Money subscriber potential by applying

the adoptions rates to total unbanked mobile subscribers per region

Estimate the total Mobile Money subscriber potential by applying each

adoption rate to total mobile subscribers per region

8

12

68

56

44

147

25

20

18

26

A1

16.8High end

7.8Low end

Adoption rates were

applied to the total # of

mobile subscribers

Adoption rates

%

High end

Low end

Estd Global MMU

subs, m

135Low end

290High end

Page 12: Mobile money market sizing toolkit

11

* Ovum report shows distribution of transactions form 100-35,000 KSH, tightly bunched around 500-2500 with a long tail

** Safaricom website shows “User-to-User” 30 KSH, “Money-to-Non-User” 75-400 KSH, “Withdraw-cash-from-User” 25-170 KSH; average transaction

of ~500 KSH so assume lowest of flat fees; assume 80% of usage is user-to-user

Source: Ovum Report, Safaricom website, McKinsey Experts, Team Analysis

MM APRU is derived from cases and local market

experience

A2 ILLUSTRATIVE

“Top-down” Derive MM ARPU from reported market data1

1.5

20

5

~15

~0.5

~0.5

• Take total value of transactions (USDB/year)

• Divide by assumed avg transaction size (USD)

• Divide by # users (at time of reporting) (m)

• Output is average # transactions per user per year

• Divide by assumed avg fee per transaction (USD)

• Total users ARPU (USD/month)

“Bottom-up” Build MM ARPU using local market knowledge2

• Take average user’s frequency of usage for each MM

service (# uses/month)

• Weight each frequency by % of users using the service

• Apply average fee per MM service (USD)

• Active users ARPU (USD/month)

• Apply assumed non-active discount (% of total users)

• Total users ARPU (USD/month)

2-4

5-50%

0.1-0.8

1.9

~60%

~1.0

MMU ARPU,

USD/month

1.0High end

0.5Low end

Page 13: Mobile money market sizing toolkit

12

This allows us to estimate the

total MMU market value

The MMU subscribers and ARPU for each scenario drives

a total market revenue estimate for a given market

Total MMU market size*

USDb/year

3.5High end

0.8Low end

High end estimate: Apply high-end ARPU to the

aggressive take-up rate MMU subscribers

Low end estimate: Apply low-end ARPU to the

baseline MMU subscribers

* NOTE: ARPU numbers are monthly, revenue numbers are annual

Source: Team analysis

A3 ILLUSTRATIVE

MMU ARPU,

USD/month

290High end

Estd Global

MMU subs, m

(Take-up: 16.8%)

High end 1.0

MMU ARPU,

USD/month

135High end

Estd Global

MMU subs, m

(Take-up: 7.8%)

0.5High end

X

X

Page 14: Mobile money market sizing toolkit

13

There are 4 primary elements in sizing the market

Source: Team analysis

Description Objectives

Sizing the overall

market

• Sizing the direct market potential

– Estimate the number of potential

Mobile Money users

– Bottom-up modelling of overall

ARPU

– Total market revenue potential

• This is the primary methodology for sizing the

Mobile Money market in terms of users and

revenues

A

Estimating the

product mix

• Estimate size of financial service

flows by product category for each

market

• Estimate MM take-up rates & fees

• Calculate the overall revenue

potential and product mix

• This methodology can be used to estimate

relative potential for different mobile money

products and services based on revenue pools

• This approach can also be used as an

alternative method to help size the overall

market revenues by product category

C

Estimating un-

banked “access”

• Estimate how many incremental

people can be provided with

financial access by reducing cost to

serve through Mobile Money

• This approach would primarily be used to

illustrate the potential for extending financial

access to unbanked people

• The approach can also be used as an

alternative method to estimate the size of the

mobile Money revenues and subscribers

D

Sizing the

indirect benefits

• Sizing of the indirect benefits • This section provides a way to estimate the

indirect benefits of Mobile Money to an MNO–

these can be a significant driver of a business

case

B

Page 15: Mobile money market sizing toolkit

14

Mobile Operators will benefit from significant indirect benefits when

deploying Mobile Money

Possible indi-

rect benefits Rationale

Churn

reduction

• People who use MM services are likely to be

more sticky since they get more utility out of

the SIM and have stored value on the SIM

• Churn of banking customers tends to be

lower than Mobile

• Lack interpretability can help reduce churn,

especially for market leaders (note to be

discussed

• MM churn rates can be more than

20% below non MM users

Range of impact (examples)

Reduced

channel costs*

• Cost savings as top-up sales can bypass

traditional channels

• Possible savings of 2–3% of channel

top-up sales margins when people

top-up from mobile-wallet instead of

channel

Market share

increase

• A compelling MM solution can help attract

subscribers by establishing a stronger value

proposition

• Some operators have increased

market by up to 8% since launching

MM

ARPU Increase• MM allows consumers to buy top-up in

smaller increments – driving up ARPU

• MM users are likely to use the MM SIM as

their primary SIM

• MM is a functionality which may attract

higher-end subscribers with more usage

• ARPU of mobile money users can be

more than 20% higher than non-users

* Not sized since this lever may not be relevant to all markets

Source:Interviews, company websites, Press clippings, Team analysis

B

Page 16: Mobile money market sizing toolkit

15

A high level sizing of the indirect benefits gives an indication

of what MM is worth to an operator

Total benefit to MNO of

rolling out Mobile Money

$

Indirect

1

2

Example indirect benefit sizing methodology

Source: Team analysis

3

Value of reduced churn - example1

Reduced customer base churn revenue (of telco)*

• # Mobile Money users Nr subs

• Current churn of telco’s customer base (weighted avg) %/month

• Forecast reduction of churn in MM adopting segment %

• Value of churn reduction in # subs Nr subs

• Current telco’s customer base ARPU (weighted avg) $/month

Increased ARPU - example2

Higher phone usage revenue

• Current telco’s customer base ARPU (weighted avg) $/month

• Marginal increase in phone’s usage (voice/data) %

• Marginal ARPU $/month

• # Mobile Money users Nr subs

Added subscribers - example3

• ARPU

• New customers as % of total MM customers

• Incremental subscribers attracted through MM

• ARPU*incremental subscribers = total value

$/month

%Nr of subs

$

• ARPU * churn reduction = $ value $

B

$• Marginal ARPU*Mobile Money users = $ value

Page 17: Mobile money market sizing toolkit

16

There are 4 primary elements in sizing the market

Source: Team analysis

Description Objectives

Sizing the overall

market

• Sizing the direct market potential

– Estimate the number of potential

Mobile Money users

– Bottom-up modelling of overall

ARPU

– Total market revenue potential

• This is the primary methodology for sizing the

Mobile Money market in terms of users and

revenues

A

Estimating the

product mix

• Estimate size of financial service

flows by product category for each

market

• Estimate MM take-up rates & fees

• Calculate the overall revenue

potential and product mix

• This methodology can be used to estimate

relative potential for different mobile money

products and services based on revenue pools

• This approach can also be used as an

alternative method to help size the overall

market revenues by product category

C

Estimating un-

banked “access”

• Estimate how many incremental

people can be provided with

financial access by reducing cost to

serve through Mobile Money

• This approach would primarily be used to

illustrate the potential for extending financial

access to unbanked people

• The approach can also be used as an

alternative method to estimate the size of the

mobile Money revenues and subscribers

D

Sizing the

indirect benefits

• Sizing of the indirect benefits • This section provides a way to estimate the

indirect benefits of Mobile Money to an MNO–

these can be a significant driver of a business

case

B

Page 18: Mobile money market sizing toolkit

17

Estimating service revenues by product categoryC

Estimate the value of all retail financial service flows

Estimate take-up rates &

fees for Mobile Money

products

Calculate total market

revenues and product mix

• Mobile Money product mix

by service category (in

terms of total flow & fees

for each service category)

End-

products

• Breakdown of total financial

service flows by product

category (including

unbanked potential)

• Total Mobile Money

revenue estimate by

product category

• Estimate the value of all

retail financial service flows

• Estimate the “unbanked”

proportion of these flows by

scaling up the cash/informal

sectors to relevant products

• Estimate potential adoption

rate for MM from these

various service flows

• Estimate fees per service

accrued by different

players in the ecosystem

Top-down

Approach

• Estimate the overall

market opportunity

1 2 3

Mrkt

research

Approach

• Launch targeted survey in

your market to understand

current usage of informal

financial services in

unbanked mobile segment

• Evaluate per service:

– usage frequency

– average value

transacted/stored

– average fees

• Estimate the overall

market opportunity

Page 19: Mobile money market sizing toolkit

18

Top-down Approach: Estimate the total “banked”

financial service revenue flows

Cash

Source: Team analysis, Interviews

Domestic

Transfers

International

Remittance

Deposits

Loans

Existing flow Definition Possible sources

Total economy FS flows

(illustrative)

• Value transacted on 5 e-

payment instruments &

scaling for cash component

• Total value of cash

transactions = M0 * GDP/M1

• Total value of domestic

payments & remittances

(p2p, g2p, b2p etc)

• Remittance volumes (inflows

and outflows)

• Total value of domestic

deposits

• Total value of outstanding

domestic loans and credit

• World Bank; Payment Systems

Group; outcomes of the 2008

global survey - appendix

• MGI Global Financial Stock

Database, IMF's International

Financial Statistics

• National Central banks

• World Bank; Outlook for

Remittance Flows 2008-2010

• National Central banks

• Worldbank

• Assume xx% of all flows

• National Central banks

• Worldbank

Non-cash

Payments

C1

ILLUSTRATIVE

Page 20: Mobile money market sizing toolkit

19

Top-down Approach: Estimate the “Unbanked”

financial service flows as a proportion of the total

Cash

Source: Team analysis, Interviews

Domestic

transfers

International

Remittance

Deposits

Loans

Existing flow

Total economy FS flows

(illustrative)

Non-cash

Payments

Unbanked FS flow

(top-down indicative) Assumptions

Relevant to unbanked

• Pre-existing payment flows are all

“cash” for unbanked people (none in

electronic payments system)

• Unbanked segment is not accounted

for in formal e-payments flows

• Unbanked segment does account for

a share of total cash flow

• Unbanked share of income &

remittances can be derived by taking

the unbanked share of GDP (~2%)

and applying this to cash & transfer

flows

• Distribute total amount in relative

proportions as per “banked” (e.g,

28% and 72% in example)

• Unbanked share of Int remittance

flows (based on %GDP, ~2%)

• “Unbanked deposits are based on

residual value in MM accounts (calc

as 5% of total value transacted)

• Very small – could be sized from

Micro finance flows (if known)

C1

28%

72%

2%

Unbanked share of GDP

2%

Relative Cash/Transfers %

Page 21: Mobile money market sizing toolkit

20

Mrkt research Approach: Build the “Unbanked” financial

service flows through primary analysis of current usage

Cash

Source: Team analysis, Interviews

Domestic

transfers

International

Remittance

Deposits

Loans

Existing flow

Total economy

FS flows

(illustrative)

Non-cash

Payments

Unbanked FS

flow (top down

indicative)

C1

Unbanked FS flow (mrkt

research – Country A),

USDM/year

0

8

0

68

224

161

MM services included

from survey results

• Cashless transactions in

restaurants, groceries,

supermarkets, malls

• Payment of bills

• Airtime purchase

• Transport access

• Receive salary/payment

• Money sent

• Money received (dom.)

• Airtime sent/received

• Money received (int.)

• Storing value

Relevant to unbanked

Page 22: Mobile money market sizing toolkit

21

Estimate the Mobile Money fees

Source: Team analysis, Interviews

Existing flow

Loansn/a

Fees (indicative

ranges), %

Rationale (note must be adapted to local

markets)

Non-cash

Payments

1 • Same potential as cash replacement (below)

Cash1 • Based on average of reported fees for all

cash-replacing products

Domestic

Transfer

2-3 • ~1.5% cash-in, ~1-1.5% cash out (SMS excl.)

International

Remittance

0.5-

1.5

• ~0.5% as reported in market research• ~1.5% based on MMT work (total is 4-6% of

which MNO capture ~1/3

Deposits0.5-

1.5

• ~0.5% as reported in market research

• ~1.5% assumed potential interest spread

• TBD

C2

Page 23: Mobile money market sizing toolkit

22

Estimate the Mobile Money product mix flows and revenues

Source: Team analysis, Interviews

Product

Cash

Domestic

Transfer

International

Remittance

Deposits

Loans

Non-cash

Payments

MM take-up

%

MM fee

%

Revenues

by product

USDm

Total flow

USDb

53,534

8,597 9,105

43,740

473 593

5,317 5,413

4,042

MM flows by

product

USDm

C3 ILLUSTRATIVE

Page 24: Mobile money market sizing toolkit

23Source: Philippines Unbanked Consumer Insights Survey - Feb-Mar 2009, (n=400); Team analysis

MM fee,

%

MM revenue,

USDm/year

0.3%

0.8%

1.5%

1.1%

0.3%

0.7%

2.0%

0.9%

5

0

20

1

10

0

1

1

MM flows,

USDm/year

Receive

money (int)

Cashless POS

& remote payments

Send

money

Receive

money (dom)

1,932

Store money

Buy airtime

Receive salary

Send &

receive airtime

98

134

1,157

1,399

598

85

132

Cash

Domestic

Transfer

International

Remittance

Deposits

Product

Check estimate with targeted market research resultsC3

EXAMPLE

Page 25: Mobile money market sizing toolkit

24

There are 4 primary elements in sizing the market

Source: Team analysis

Description Objectives

Sizing the overall

market

• Sizing the direct market potential

– Estimate the number of potential

Mobile Money users

– Bottom-up modelling of overall

ARPU

– Total market revenue potential

• This is the primary methodology for sizing the

Mobile Money market in terms of users and

revenues

A

Estimating the

product mix

• Estimate size of financial service

flows by product category for each

market

• Estimate MM take-up rates & fees

• Calculate the overall revenue

potential and product mix

• This methodology can be used to estimate

relative potential for different mobile money

products and services based on revenue pools

• This approach can also be used as an

alternative method to help size the overall

market revenues by product category

C

Estimating un-

banked “access”

• Estimate how many incremental

people can be provided with

financial access by reducing cost to

serve through Mobile Money

• This approach would primarily be used to

illustrate the potential for extending financial

access to unbanked people

• The approach can also be used as an

alternative method to estimate the size of the

mobile Money revenues and subscribers

D

Sizing the

indirect benefits

• Sizing of the indirect benefits • This section provides a way to estimate the

indirect benefits of Mobile Money to an MNO–

these can be a significant driver of a business

case

B

Page 26: Mobile money market sizing toolkit

25

Estimating the incremental financial access provided by Mobile

Money

Source: Team analysis

Steps

Build "affluence

curves"

Apply "cost-to-

serve"

Estimate

addressable

group

Estimate the

incremental

access via MM

• Estimate the

incremental

population

theoretically

servable

through lower

"cost-to-serve"

mobile channel

(use range of

cost-t0-serve

reduction

scenarios)

• Calibrate this

theoretical

addressable

group to include

only those who

own a mobile

and then apply

a take-up

assumption to

this target

population

• Calculate

incremental

access to

financial services

through mobile

money

D

1 2 3 4

• Build income

distribution curve

to identify who

can reasonably be

served by current

banking system

(or use proxy

curves provided)

End-

products

• Estimate of

theoretical

access provided

by Mobile

Money

• Estimate of the

total potential

access provided

by Mobile

Money

• Estimate of

expected

incremental

access provided

by MM

• Income

distribution curve

for target region

Page 27: Mobile money market sizing toolkit

26

0

5

10

15

20

25

30

35

40

0 10 20 30 40 50 60 70 80 90 100

Asia Pacific

Africa (limited

sample)*

Americas

Europe:

Eastern

Middle East

Populationpercent

Daily income/capita$

Affluence curves have been developed to establish

the income distribution for a range of markets

* Income distribution data for Africa sample is based on Nigeria data only (South Africa excluded, all other countries not available)

Source: Euromonitor, Team analysis

D1 PRELIMINARY

Page 28: Mobile money market sizing toolkit

27

Key data for select markets can help determine which market proxy

is most relevant for a given market

Region

Population

2012,

Million people

Americas

Asia

Eastern

Europe

Middle East

Africa 1,004

597

3,581

357

247

GDP per

capita 2012,

USD/person

Mobile sub-

scribers* 2012,

%

Unbanked

share of GDP

2008, %

Financial

Service access

2008, %

1,898

6,889

3,150

13,517

7,730

52%

75%

60%

78%

71%

25%

22%

18%

21%

27%

23%

37%

41%

43%

38%

* Mobile subscribers is based on discounted count of total # SIMs per market. Number of SIMs discounted by Wireless Intelligence formula

Source: WMM, Global Insight; Wireless Intelligence; World Bank; Finance For All; Team analysis

D1

Page 29: Mobile money market sizing toolkit

28

The income distribution can be linked to the “cost to serve” based

on assumptions about the share of GDP that goes to Financial Services

0 10 10020 30 40 50 60 70 80 90

Populationpercent

0.

0.01

0.010

0.011

0.012

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

Financial service revenue and cost to serve$

Source: Team analysis

0

1

2

3

4

5

6

7

8

9

10

11

12

0 10 10020 30 40 50 60 70 80 90

Populationpercent

Daily income per capita$

• Assume that Financial services account for X% of income (based on proxy market)

• The share of income determines the Financial services revenue for a given income band

• Assume that Financial services are offered to the point where Marginal Cost = Marginal Revenue

(ie the revenue curve = the cost curve at each point)

• A reduction in the cost to serve enables offering financial services to lower income bands (based

on same income share of GDP). Hence more people are accessible

D2 ILLUSTRATIVE

BA

A

B

C

MC = MR

C

C

Page 30: Mobile money market sizing toolkit

29

By estimating the local cost to serve reduction it is possible

to determine the theoretical access made possible by mobile money

40 50 60 70 80 90

Populationpercent

0

0.01

0 10 10020 30

0.010

0.011

0.012

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

Traditional

cost-to-serveA

MM

cost-to-serve

• Current FS access

(%)

• Cost to serve

reduction (%)

– Current cost to

serve estimate ($)

– MM cost to serve

($)

• New theoretical

financial access (%)

• Increase in

Financial access

Source: Team analysis

Theoretical access

possible through

reduced cost to serve

D3 ILLUSTRATIVE

Inputs

Daily income per capita, $

A

B

B

DC

C

D

Page 31: Mobile money market sizing toolkit

30

0 10 20 30 40 50 60 70 80 90 100

Populationpercent

0

0.01

0.010

0.011

0.012

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

Steps for estimating the increased financial access

Traditional

cost-to-serve

Source: Team analysis

1 Estimate current access to

financial services (eg 40%)

2 Use current access to plot

line to show where current

Cost to serve could lie

3 Estimate the cost to serve

reduction opportunity (e.g.,

50% reduction)

4 Estimate the number of

additional people who can

now access financial

services (eg 62%)

5 Map the total mobile

penetration (eg 52%)

Theoretical access possible

through reduced cost to

serve

1

0 Choose an income curve

D4

2

MM

cost-to-serve6

4

3

Total theoretical access

(62%) minus mobile

penetration (52%) = MM

potential access = 10%

6

Calculation

s

0 Daily income per capita, $

5

ILLUSTRATIVE

Page 32: Mobile money market sizing toolkit

31

Mobile Money Toolkit

• Objectives& Definitions

• Market analysis

–Sizing the market (direct & indirect)

–Estimating product mix

–Estimating unbanked access

–Stress-testing the numbers

• Macro tools

–Business plan framework

–Conducting Primary Market Research

• Best practice research guide

• Surveys and facilitator guides

–MMU database

–Market screening frameworks

• Appendix

Page 33: Mobile money market sizing toolkit

32

Subscribers

Revenues

Reality testing the numbers – test the key numbers against other variables

to see if they make sense

Source: Company reports, Literature search, Team analysis, World bank data

High end

of range

Low end

of rangeVariables

• Projected mobile money users as share of total

“unbanked” populationx% x% 5-8%

• Implied increase in “% banked” (ppts) x% x% 3-5%

• Share of total unbanked mobile segment x% x% 10-15%

Indicative

ranges

• Mobile Money ARPU as share of total ARPU x% x% 10-15%

• Total MM take up rate as % of total subscribers x% x% 5-25%

User input

Cost

• MM cost to serve per user (technical)

• MM marketing & agent costs as % of technical

costs x% x%

Indirect • MM churn and ARPU vs non-MM usersx% x% ~20%

x% x% ~$2-4

1x-4x

Page 34: Mobile money market sizing toolkit

33

Mobile Money Toolkit

• Objectives& Definitions

• Market analysis

–Sizing the market (direct & indirect)

–Estimating product mix

–Estimating unbanked access

–Stress-testing the numbers

• Macro tools

–Business plan framework

–Conducting Primary Market Research

• Best practice research guide

• Surveys and facilitator guides

–MMU database

–Market screening frameworks

• Appendix

Page 35: Mobile money market sizing toolkit

34

KEY QUESTIONS FOR A BUSINESS PLAN (1/2)

Source: McKinsey

Executive

summary

• What is the basic business idea, target customer segments, and value

proposition?

• To what extent will this service reach the “unbanked”

• What does the organizational business look like and who will lead the

business?

Market/competitor

analysis and own

positioning

• What is currently happening in the market?

• What are the key success factors for MM success?

• Who are current and future competitors?

• What is positioning compared with key competitors’?

Product and

customer value

proposition

• What services are offered at what prices?

• What take-up rates are expected for different services?

• What partnerships/cooperations are needed?

• Where does the value to the customer lie, especially to the unbanked?

• What evidence is there to suggest there is a consumer demand?

• How can advertising and promotions support the customer value?

Key questions (Examples)

Business-model

organization and

processes

• What business model will be deployed, have partnerships been agreed?

• What type of technology will be deployed?

• How will the service be distributed, how will the agent network be built,

what is value proposition for the agents?

• What organization and resources are needed?

• What are the core business processes?

ILLUSTRATIVE

Page 36: Mobile money market sizing toolkit

35

KEY QUESTIONS FOR A BUSINESS PLAN (2/2)

Source: McKinsey

ILLUSTRATIVE

Management team

• Which people will manage the future business?

• How can the right people be attracted and retained? (Banking and mobile

experience is important)

Opportunities

and risks

• What is the position of the regulator with regards to this opportunity?

• What risks are involved with the market entry and how can they be

controlled?

Financial planning

and ROI analysis

• What are the expected financial results over the next five years?

• What are the costs of deploying MM? (technical, marketing, channel

costs etc)

Key questions (Examples)

Implementation

road map

• What are the key milestones in building the new business?

Page 37: Mobile money market sizing toolkit

36

Mobile Money Toolkit

• Objectives& Definitions

• Market analysis

–Sizing the market (direct & indirect)

–Estimating product mix

–Estimating unbanked access

–Stress-testing the numbers

• Macro tools

–Business plan framework

–Conducting Primary Market Research

• Best practice research guide

• Surveys and facilitator guides

–MMU database

–Market screening frameworks

• Appendix

Page 38: Mobile money market sizing toolkit

37

Consumer insight research will develop a better understanding

of current and potential users and inform market sizing-estimates

Source: GSMA RFP, Interviews

Research approach

Provide insights

regarding current and

potential MM users for

business planning

• Attitudes towards

traditional banks

• Usage of alternative

informal channels &

services

• Adoption barriers/funnel

Inform market sizing

estimates

• Unbanked share of MM

users, adoption rate,

churn and reload effect

• Provide understanding of

MM service-flows and

latent demand

• Focus groups

– Use a structured facilitator guide to manage flow of focus groups

while assisting agency in targeting answers on specific areas of

interest (see appendix)

– Can use a “survey-lite” of 30-40 close-ended questions for

respondents to complete pre-group (see appendix)

– Launch pre-design of quantitative survey to assist with customer

segmentation, language/local knowledge input and

hypothesis/options development

• Survey

– Use targeted sampling to address specific segments, but assess

incidence through random sampling to size population/opportunity

– Target ~200 respondents for each relevant customer segment to

ensure a 6-7% margin of error on each answer (n=100 is ~10%)

– Pre-draft core analysis/insights to help with planning option set

per question and ensure each questions relevance/impact

– Ensure flow of question leads with easy/non-intrusive questions

(e.g. daily mobile usage) pry into personal financial questions

once respondent is “warm”

Research Objectives

Page 39: Mobile money market sizing toolkit

38

There are 6 key steps in conducting the primary market research

Design and run focus

groupsDevelop hypothesis

Refine close-ended

~30-40 minute surveyLaunch fieldwork

Ana-

lyse

data

Syn-

thesize

in-

sights

• 2 x focus groups with

unbanked MM users

and non-MM users

• Moderator notes to

focus 2 hours on

– Telco usage

– FS usage

– Mobile money

usage & perception

• Debrief with TNS team

& McKinsey Manila

team in attendance

• Attain observations of

group experiences

• Bolster understanding

of linguistic, emotive

nuances related to FS

and MM

• Develop storyline -

hypothesis using

indicative findings from

group

• Build well-phrased

questions with context

of language and

emotive reactions

• Define target segments

– MM users, no other

formal banking

access, urban/rural

– Non-MM users, no

formal banking

access, mobile

– <$2/day, mobile

• Ensure key q.s are

directly comparable w.

existing surveys if

relevant

• Target ~1000 responses

with proportionate urban-

to-rural representation:

– MM users = 400

– Non-MM users = 400

– <$2 day = ~200

• Process involves door-to-

door screening followed by

30-40 minute interview

• ~30 interviewers (4 teams)

trained to use prompt

cards, record answers &

drive flow of conversation

* Dialects for fieldwork: Tagalog, Ilocano, Ilonggo, Cebuano, and Bicolano

Field-team briefing, Manila, 27 Feb

• Validation of

market sizing

assumptions

• Testing and

validation of key

hypothesis

• Consumer

insights to help

inform the “go to

market” strategyFocus Group moderator guide Close-ended 30-40 min survey

Page 40: Mobile money market sizing toolkit

39

The research should be designed to test a specific set of hypothesis

about the market

Segment sizing

Usage

Trial

Access

Awareness &

understanding

Latent Demand

Examples of MMU Consumer narrative

Screening section• The Unbanked mobiled are a significant group: As many as X % of low-

income groups are unbanked but do own a mobile phone.

• The sub$2/day makes up approximately X% of this group

Sect C• Unbanked consumers have a strong underlying demand for financial

services, but most currently rely on informal alternatives

Sect E• Unbanked consumers are generally aware of MM services and tend to

know the MNO brands better than the banks

• Many unbanked consumers do not fully understand the MM service

Sect E

• People are often reluctant to try MM because they find it difficult or they

don’t see the services as something “for people like me”

Sect C,D,E,F

• People need to have access to the agent network if they are going to

sign up for the service, agents are much more ubiquitous than banks, but

they are still far from the levels of air-time vendors

• Those who do use MM start with simple services at first but do have

needs for more advances services if they can be made relevant to them

Sect D

Sect D,E• People who have good experience with MM tend to become loyal users,

but the slightest service disruption can lead to abandonment of the service.

Loyalty

Survey section

Implications for

accelerating MM to

the unbanked

See consumer Survey in

appendix

Page 41: Mobile money market sizing toolkit

40

Primary market research tools

Description

• Facilitators

guide for focus

groups with

unbanked MM

users and non-

MM users

• Moderator notes

to focus 2 hours

on

– Telco usage

– FS usage

– Mobile money

usage &

perception

Focus Group

moderator guide

Close-ended 30-

40 min survey

Focus group facilitators guide Consumer adoption survey

Description

• Defines target

segments

– MM users, no

other formal

banking access,

urban/rural

– Non-MM users,

no formal

banking access,

mobile

– <$2/day, mobile

• Standard

questions to

ensure

consistency

These documents are

provided separately

Page 42: Mobile money market sizing toolkit

41

Mobile Money Toolkit

• Objectives& Definitions

• Market analysis

–Sizing the market (direct & indirect)

–Estimating product mix

–Estimating unbanked access

–Stress-testing the numbers

• Macro tools

–Business plan framework

–Conducting Primary Market Research

• Best practice research guide

• Surveys and facilitator guides

–MMU database

–Market screening frameworks

• Appendix

Page 43: Mobile money market sizing toolkit

42

The MMU database contains key data for 147 markets

• Key data for 147 markets e.g.;

– Macro data

• Population

• Economy

• Income

• Demographics

– Mobile Penetration

– Financial access

• Access to financial services

• Unbanked population

– MMU Population Data

– Financial flows

Source: Ranges of sources detailed in database appendix

This spreadsheet is

provided separately

Page 44: Mobile money market sizing toolkit

43

Mobile Money Toolkit

• Objectives& Definitions

• Market analysis

–Sizing the market (direct & indirect)

–Estimating product mix

–Estimating unbanked access

–Stress-testing the numbers

• Macro tools

–Business plan framework

–Conducting Primary Market Research

• Best practice research guide

• Surveys and facilitator guides

–MMU database

–Market screening frameworks

• Appendix

Page 45: Mobile money market sizing toolkit

44

Markets with high mobile penetration relative to financial access

penetration may by “ripe” for Mobile Money

* Mobile penetration can include double counting due to multiple SIM-cards, this is not adjusted

Source: Wireless Intelligence, World Bank, WMM

0

10

20

30

40

50

60

70

80

90

100

110

120

130

0 10 20 30 40 50 60 70 80 90 100

Turkey

Germany

Vietnam

Philippines

Mexico

Pakistan

Saudi Arabia

Indonesia

United States

India

China

Malaysia

Peru

Poland

Argentina

Colombia

SpainUkraine

Access to financial services%

Mobile penetration*%

United Kingdom

France

Thailand

Brazil

• Mobile

penetration

exceeds the

access to

financial services

in most markets

>1 bn

<0.1 bn

0.1 bn – 1 bn

Size = population

Page 46: Mobile money market sizing toolkit

45

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Poland

Kenya

AlgeriaMorocco

Uganda

Iraq

Nepal

0 10

China

110 120 130 140 150 16020 30 40 50 60 600 610 620 63070 760 770 780

India

IndonesiaBrazil

Pakistan

Bangladesh

Nigeria

MexicoPhilippines

Vietnam

Turkey

Ethiopia

Thailand

Myanmar

100

South

Africa

Ukraine

Colombia

Argentina

Tanzania***

Sudan

80 90

Unbanked Population**

mn

Mobile vs. Banking Reach*

Mobile / banking penetration and size appear to be important criteria in

determining readiness for Mobile Money

B A

C

B Quick Risers

• High to very high mobile

vs.. banking reach

A Major Potential

• Large unbanked

populations

• High mobile vs. banking

reach

C Giants

• Relatively low mobile vs..

banking reach

• Very large unbanked

population in absolute

terms

* Mobile Penetration (net of multi-sim proxy) vs.. % banked, average ratio of mobile penetration to banked share across markets shown is ~2

** Average of unbanked population across markets shown is ~90 mn

*** Tanzania potential does not seem to be observed in the market.

Source: Wireless Intelligence, World Bank, WMM, Global Insight

PRELIMINARY

D Unclear potential

• Low mobile & banking

penetration

D

Page 47: Mobile money market sizing toolkit

46

There are a lot of markets in the “B & D” segments

* Mobile Penetration (net of multi-sim proxy) vs. % banked, average ratio of mobile penetration to banked share across markets shown is ~2

** Average of unbanked population across markets shown is ~30 mn

Source: Wireless Intelligence, World Bank, WMM, Global Insight

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10 100 110 120 130 140 150

Myanmar

20 30 40 50 60 600

Tanzania

Nicaragua

Armenia

160

Kenya

Pakistan

Ethiopia

Nigeria

Georgia

Belarus

Iraq

610 620 63070 760 770 78080 90

Romania

Ukraine

MexicoPhilippinesArgentina

South Africa

Unbanked Population**mn

VietnamAlgeria

Bangladesh

IndonesiaChina

Brazil

India

Mobile vs. Banking Reach*

0

B A

C

Question marks:

Sudan

Thailand

Colombia

South Africa

Uganda

Iraq

Algeria

Morocco

Uzbekistan

Nepal

Peru

Poland

Malaysia

Guatemala

Niger

Senegal

Zimbabwe

Sri Lanka

Rwanda

Bolivia

Chile

Cuba

Tunisia

Honduras

Sierra Leone

El Salvador

Paraguay

Jordan

Bulgaria

D

Page 48: Mobile money market sizing toolkit

47

Macro factors per archetype/segment are fairly inconclusive

A

B

C

Quick Risers

• 14 countries including

Philippines, Kenya,

Tanzania, Argentina

Major potential

• 2 countries

• Pakistan, Nigeria

Giants

• 5 countries

• China, India,

Indonesia, Brazil,

Bangladesh

D Unclear potential

• 85 countries (see

page 2)

308

543

3,105

987

Total

Population,

mn

Average

Mobile

Penetration,

%

47

61

46

48

43

60

45

48

Urban

Population

Share, %

Access to

Financial

Services,

%

18

32

14

41

Gini Co-

efficient

39

45

37

42

Direct Credits

% of total

Non-Cash

Payments*

39

55

55

57

Total cash

payments as

% of GDP*

22

45

43

35

* Initial team estimates

Source:World Bank, Wireless Intelligence, WMM, Global Insight, CIA World Fact Book

PRELIMINARY

Page 49: Mobile money market sizing toolkit

48

Data on select markets

0

1

7

14

28

28

30

30

30

46

46

48

53

54

54

58

65

66

71

75

76

78

83

89

92

93

98

Russia

123Ukraine

115Poland

112Argentina

Thailand

South Africa

Algeria

Turkey

Colombia

Brazil

Philippines

Morocco

Mexico

132

Iran

Indonesia

Egypt

Iraq

Pakistan

Kenya

China

Nigeria

Bangladesh

Tanzania

India

Sudan

Uganda

Congo, DRC

Nepal

Ethiopia

Myanmar

Vietnam

Mobile

penetration

GDP/capita

$

934

5,340

2,192

2,058

4,022

953

868

3,166

1,689

475

427

1,050

1,463

437

179

340

187

423

12,258

4,199

13,943

7,914

4,355

5,828

4,843

9,933

4,351

7,958

1,787

2,656

9,605

11,530

n/a

17,210

7,790

5,410

8,720

n/a

11,350

5,470

7,560

2,690

n/a

17,010

1,070

n/a

2,200

n/a

n/a

2,280

n/a

4,350

n/a

n/a

n/a

3,590

n/a

n/a

n/a

n/a

n/a

n/a 19

14

20

20

15

48

5

32

15

42

10

12

17

40

29

25

28

26

43

41

49

31

46

59

28

66

24

n/a

n/a

n/a

n/a

"Median

Household

Income ($)"

% With Access

to financial

services

Prepaid share

Q3 2008, % ARPU, USD

88

99

94

99

99

99

83

99

97

99

70

99

98

99

96

97

48

98

85

97

97

80

85

83

97

86

90

73

56

93

91

7

3

13

10

3

14

10

5

17

11

5

15

10

14

8

17

7

12

19

7

12

Source: Wireless Intelligence, World Bank, WMM, Global Insights, EIU, Euromonitor

PRELIMINARY

Page 50: Mobile money market sizing toolkit

49

Additional ideas for data to explore (1/2)

Additional ideas

• Market gaps: (eg market share of

independent privately owned banks or

telcos)

• Saving propensity: savings rates,

consumer consumption as % of income

• Access to credit: Prepaid as % of total

mobile market

• Telco & Banking competitiveness:

Herfindahl-Hirschman Index

• Environmental risks: Crime statistics,

inflation rates

• Size: Unbanked population

• Demographics: Age distribution, family

size

• Banking reach: Geographic bank/ATM

penetration, Rural population %

Rational

• Will the private sector fill the gap (if there is one)?

• Are there indicators of propensity to save vs the

consumption patterns?

• What share of population lacks access to credit?

(Prepaid can be an indicator)

• How competitive are the banking and telco industries?

• Are there environmental factors which may indicate

people need safe savings options?

• How many unbanked people are there?

• What is share of young vs old people? Does size of

family indicate the need for saving?

• Does the banking system reach people who need it?

PRELIMINARY

Page 51: Mobile money market sizing toolkit

50

Additional ideas for data to explore

Additional ideas Rational

PRELIMINARY

Domestic remittances

Domestic migration

flows

ATM infrastructure

Regulatory environment

Alternative channels

• What is value of domestic remittance flows?

• Are there large domestic migration flows?

• What is ATM penetration?

• Does regulatory environment allow Mobile

Money?

• What are alternative channels?