Mobile Banking in 2020 - Mobile World Congress Report

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Present report was presented at Mobile World Congress this year, showing the outlook for mobile banking by 2020! - how a younger world, more internet, crime, and activist governments will affect mobile banking penetration.


  • 1.Mobile Banking in 202015 Feb. 2010Stephen F.

2. CGAP Technology Program12 active projects in 9 countries, 12 policy diagnostics Research, policy and advisory Experimentation and communications Co-funded by the Bill & Melinda Gates FoundationProject Locations Areas of Focus Clients: what are the drivers of large-scaleadoption and usage? Providers: what are the incentives foroffering services to large numbers of poorpeople? Governments and regulators: how canthey develop (1) safe and enablingregulations (2) policies that promoteadoption? 3. Mostly payments and transfers, but strong desire for savings+ Payments and transfers are key. Data shows demand and uptake for a wider range of services. CGAP, GSMA, and McKinsey analysis 4. Reaching low-income, unbanked people in large numbers Active users, in millions 4.54 3.53 2.5 mobile banking2microfinance 1.51 0.50 Kenya Philippines South AfricaCGAP analysis comparing numbers of unbanked clients reached by leading mobile banking services to similar-sized microfinance institutions. 5. Branchless banking is 26% cheaper than banksPrice as % of 50.0%transactionvalue 45.0% Bank price as % of (USD, PPPadjusted)transaction value 40.0% (PPP adj) BB price as % of8 use cases 35.0% transaction value- send money (PPP adj)- receive money 30.0%- short-term saving- asset purchase 25.0%At the average- bill pay 20.0% transfer value ($43),- transactional banking BB charges $1.7 vs - M-PESA bundle 15.0%banks $2.4(2008)- Kenya bank user 10.0% 5.0% 0.0% 0 50100150 200 250300 350400 450 Transaction value (USD, PPPadjusted)Based on comparison of 16 branchless banking providers across 10 countries and 8 banks across 4 countries. 6. Scenarios for Branchless Banking in 2020 Four Forces Demographics Governments Crime Internet Four Uncertainties Who is allowed to play? How much will mobile banking go beyond payments? How will competition play out? How would a service failure affect market confidence? 7. 1. Demographics a younger, more urban world CGAP 2008 Source: U.S. Census Bureau International Data Base Clients in 2020 will include a large number of todays youth. Young people have limited capacity to spend on new services, but ahigher propensity to adopt new technology. More people live in cities than in rural areas. (United Nations, 2008) 8. 2. Governments - more focused, less coherent 170mn 99mnG2P99mn microloans G2P vs. microloansGovernment actions will likely be driven from a variety of motives and different agencies, not necessarily guided by a coherent strategy. CGAP analysis, Mixmarket data, Financial Access 2009 Survey 9. 3. Where money goes, so does crimeCash crime, whereindividuals, banks ormerchants who carrycash are vulnerable torobberyE-crime, where newforms of crime targetelectronic deliverychannels CGAP 2009 One interviewee described it as the nightmare scenario, and the only thing they could imagine derailing the growth of mobile financial services. 10. 4. Internet = more providers and sophisticated offeringsRIM 850, 1999 (basic browsing) vs. Samsung B100, 2009 Gartner 2009(GPRS/Java) Web interfaces will improve the user experience compared to USSDor SMS. Internet access will enable solutions that do not depend on chip(SIM card) security solutions. 11. Uncertainty 1: Who is allowed to play? 12. Uncertainty 2: Going beyond payments?YearCountryProviderInitial offering Next wave1999 Brazil bill paymentcredit2004 Philippinesmoney transfersavings and credit 2007 Kenyadomesticsavings and remittances credit 2009 Pakistan bill paymentsavings and credit 13. Uncertainty 3: How will competition play out? Western Union (2008), FDIC, World Bank Will competition spur more services, innovation, and lower marginsand prices as it has in the past decade for banks and remittancecompanies? 14. Uncertainty 4: How would failure affect confidence? A high-profile failure could diminish: the trust of consumers the appetite of industry the openness of regulatorsUS Library of Congress Consumers, even poor consumers, appear willing to make the transition tousing electronic channels as long as they trust the provider. 15. The Bangladesh scenario Private sector Government Large microfinance institutions can Regulatory certainty through the issuance contribute their credit expertise andof transparent regulations and licensing distribution networksprocesses Channeling a large share of government Banks are critical to the safety andpayments through electronic channels soundness of the financial sector andbuilding a more secure and efficient delivery provide essential treasury, foreignsystem exchange and banking expertisePromote fair competition to ensure that Mobile operators offer a new wide innovation is encouraged and to avoid themonopolization of the payments system reaching network for wireless communication to enable real-timeStrengthen the national identification transactional supportsystem to ease Know Your Client (KYC)requirements and helping to provide further Technology solution providers offer a protections against money laundering and range of the hardware and software other abuses of the payments system necessary to innovate 16. How will you respond to forces and uncertainties?Scenario 1Scenario 2Scenario 3Scenario 420102012 20142016 20182020Winning requires playing a long game. Partnerships and alliances will be critical. Services should reflect customer needs. Governments can foster innovation and channel payments. 17. Advancing financial access for the worlds