M-Banking and M-Payments in Asia Pacific

M-BankingandM-PaymentsinAsiaPacificPresentationtotheIFCJakarta,Indonesia20thAugust2008JohnUreDirectorTRPCPteLtd(Singapore)AssociateProfessorandDirectorTelecommunicationsResearchProjectUniversityofHongKong50%oftheworld’spopulationhasamobilephoneandtheycarrythemeverywhere=anyone,anywhere,anytime–2002=mobilephonesfixedphones–2008=halftheworld’spopulationhavemobilephonesWirelessandmobiletechnologiesdevelopingatarapidpace=cheaper,smaller,morefunctionsTelecomregulationsmoreliberal=mobilesectionverycompetitive–Technologyneutralopensthedoortocellular,WiFi,WiMax,etcSpectrummanagementmoreflexible=morefrequencies,morewirelessnetworks,morecapacityMNOsandbanksexploringwaystoworktogether–Initiallyalotofmutualsuspicion,e.g.KoreaPlayersintheeco-system(s)needtoseeadvantages,includingpolicymakers,MNOs,banks,merchants,vendorsandcustomersStakeholdermodelsandincentivesPolicy-makers:‘capture’theinformaleconomy,encourageremittances,micro-credits,efficientcashlesscommerce,etc–Whodrivespolicy?CentralBank?MinistryFinanceorTelecoms?MNOs:cost-cutting(e.g.OTAreloads),growthedistributionnetwork,customerretention,smstraffic,leverageotherservices,m-commercerevenueshare(dependinguponthemodel),etc.MNOs:‘Accessmodel’and‘Hybridmodel’–Accessmodel:revenuesfromSMStransportlayer;OTAreloads;dealingwithmerchants/contentproviders–Hybridmodel:revenuesfromtransactionsmanagement(maybethirdpartyplatform);banking(floatliquidity,security,laundering,financialregulations,etc)–Setupcosts?$5mtostartwithcapacityof5milliontransactionspermonth–SmartandGlobe(Philippines)lowadditionalcapexforhandling50-100million–APRUshigherfortargetgroupsforSmartandGlobecfothermobileusers[SeeinfoDev(2006)Micro-PaymentsSystemsandTheirApplicationtoMobileNetworks]StakeholdermodelsandincentivesBanks:extracashfloat(e.gBankd’Ororeceived$10millionfrom2.5millionSmartcardusers),newcustomers,transactionscommissions,ultimatelynewservices/applications–Butmostlymicropayments(NB.OTAtop-upsandairtimetransfersbetweenaccountsthekeydriversinPhilippines)–InPhilippines1millionoutof2.5millionadoptedaDebitCardfacilityCardIssuers:steppingstonetoM-Walletandmorem-commerce–Debitcards=minimalriskoffraudThirdPartyPaymentPlatforms:opportunitytooutsourcetransactionsmanagement=(i)MNOspaynothingbutenjoyarevenueshareorcommission;(ii)TPPPattract/markettocontentproviders?Merchants:lesscash,morecustomers,butinthecaseofNFCcardreadersarerequired–interoperabilitynotyet!TechnologyIssuesManydifferentmobiledevices/standards:willm-bankingapplicationswork?–OSforcellphones2.5G,3G,3.5G,3.75G–OSforsmartphonessuchasiPhone,Nokia-Symbian,WindowsCE,AndroidforGphone,Linux,etc–OSforPDAssuchasBlackberry,Palm,Treo,iPaq,etc–OSfor‘Netbook’computers:AcerOne,AsuseePC,HP’sJornada,etc–SMStext-basedinterfaceorJavaappletsdownloads,etc?–andwhatextrachargesdoMNOsaddoninthesecases?–Somebankspreferdownloadableapplicationstocompensateforawidevarietyofdevices(alsoproducebetterpresentationofgraphicsandfunctionality)thanservicescalledupoverthephone’sbrowser.–ButdoMNOshavetherequiredsoftwarelicencestoofferdownloading?Thismayrestrictthenumberofnetworksinvolved.CommercialIssuesM-bankingaschannelextension=anotherservicedeliverchannel(B2C)–MobilehandsetasmobileATMM-bankingasconsumeritem=customerchoice(C2C)–Competitioninthefutureamongretailbanks,althoughmaynotbeveryprofitable–CustomerswillusetotransferfundstoeachotherM-bankingasbusinesstool=corporatemarket(B2B)–Useofmobiledevicesacrossthesupplychaintocutcostsandaddtoefficiency,e.g.,bookairlinetickets,payinvoices,etcM-bankingasmarketforgrowingthecardbusiness=m-wallet–Creditanddebitcardaccountsviamobilephone,e.g.SmartMoney/MasterCard/5Philippinesbanks–UniversalSIM+NFCphones=needforcardreadersCommercialIssuesM-bankingasmarketextension=competefornewcustomers–Over40%Indonesianssubscribe(mostlyprepaid)toamobilenetworkandthemarketgrowsfast–upfrom30%in2007M-bankingassocialcommitment=bankingandcredittotheunbanked–Experimentswithmicro-credits,e.g.G-CashinPhilippines(Globe+RuralBankersAssociationofthePhilippinesundertheUSAID-fundedprogrammeMicroenterpriseAccesstoBankingServices=RBAP-MABS).–Useoftext-basedauthorizationsforfundstransfersusingcorrespondingbankagentsinvillagesquitesuccessfulinIndianfarmingcommunities;SouthAfricaandKenyaareothergoodexamples;Chinahashugepotential,etc.=‘bottomofthepyramid’approach–KYCissuescanbeahurdletoearlyadoptionCommercialissuesM-bankingforremittances–globallythroughofficialchannelsaround$250billion(WorldBank)–Indonesia$5.7billionin2006?(IMF)–UnofficiallymaybeanythinguptodoublethisthroughinformalchannelsForexample:Malaysia-Indonesia2002=$0.4billionthroughformalchannelsMalaysia-Indonesia2006=$0.26billionthroughformalchannelsImplication1=switchtoinformalchannelsImplication2=opportunityforMNO-bankalliancestooffercheap,convenientandsecuremoneytransfers[Source:WorldBank(2008)TheMalaysia-IndonesiaRemittanceCorridor,WorkingPaperNo.149,see]RegulatoryandSecurityIssuesRegulatory(M-ba