1st East African Finance Conference
Addis Ababa
migration to cash-less
mode of payments
Munir Duri, CEO Kifiya
December 2016
1
agenda
Why Migrate
Challenges & Factors
Learning of what it might take
Context: Ethiopia
why migrate
burden of cash usage on
economies represent as much
as 1.5% of the GDP
Convenience
Secure for the
customer
modern economies increasingly use
and are dependent on effective
large networks: telecom, energy,
road, water ….. payment networks
aids the journey to financial
inclusion for both Urban and
Rural segments
cost saving for customer and
businesses if at scale and if
usability addressed
Transparency
Traceable
into the economy
improve market linkages
and creates an efficient
market place
3
journey to cashless
CASH-LESS
CASHLITE
REPLACE CASH WITH DIGITAL INSTRUMENTS
SCALED USE OF DIGITAL
INSTRUMENTS
Creating
ACCESS
digital accounts
Cash
Heavy
Optimized
Cash
Electronic Transactions
Over the counter
transactions
Bulk Payer Transition
Government & Large Buyers
Utility
Usability
Scale
Access
Usage
CASHLESS
BITS & BITES
BECOME STATE
UTILITY
Regulator
issues
settles
in bits and bites
Differentiating and addressing utility and usability:
introducing many to few payments, increasing
adoption and usage
4
framing the challenge to migration to cash-less mode of payment
Central Banks issue FIAT
currency:
issued as state utility for free
Cash has no cost
to customer
Buyer pays to merchant
in cash and receive face
value equivalent worth
of good and services
Payment instruments are
issued and merchants
acquired by enterprises and
cost usually transferred
Card | Mobile carries
cost to customer
Buyer pays to merchant
using payment instruments
and merchant and
customer bears charges
and commissions
5
development to date: we have come a long way
From ATMs, POSs, Online e-Commerce, Mobile Phones (Wallets), Smart Phones (m-Commerce) to BITCOIN
still cash transactions dominates
Kenya
In spite of having successful mobile
money deployments [MPESA]: 85% of
the transaction is still over the
counter
Europe
82% of transaction in Germany are
made in cash [only 53% in value
terms] showing small value
transactions carry volume.
India
India has been leading the way in payment
technologies and services, currently
introducing new business models. Still over
80% of transaction is cash
There is general consensus that we need to figure out on how to multiple transaction in all verticals, channels and
instruments: HOW?
6
migrating to cash-less: basic factors affecting migration
Access to Financial
Services
Marco Economic,
Cultural Factors &
Context
Merchant |
Agent @ Scale
Technology &
Infrastructure
7
Incumbents must take the lead
 Banks, MFIs, Cooperatives,
Telcos
Ensure SCALE
UTILITY
Drives ADOPTION
migrating to cash-less: understanding and differentiating utility and usability
USABILITY
Disruptors must take the lead
 PSP, MMSP, FINTECH, mCom
Local Context & Factors
8
context: Ethiopia
 Population of 90m + evenly spread over an area of 1.1 m sq. km
 Telecom network infrastructure covering close to 80% of the
country, with over 40 million mobile subscribers [32m active].
Target is by 2017 to reach 50 m active subscriber base
 Road network of 25,000 km, Rail network of 5,000: linking
people and trade
 Active drive for rural electrification
 Does not have simple and affordable means to effect
payment for goods and services digital [electronically]
 close to 32% of the urban population does not have an
active bank account
 MSME drive but need access to finance and linkages to
markets
 82% of the rural population doesn’t have access to formal
financial service: a safe place to save, access to credit
 SHFs do not have access to non-traditional risk coping
mechanisms
 SHFs don’t have easy access to markets
 MSME drive but need access to face and markets
 Access to Rural Clean Energy
Macro Economic Conditions
Demographic
Potential: Urban + Rural
Utility
Access
Usability
Utility
Access
Usability
9
context: digital payment landscape
RTGS Function
• Inter-bank HV-LT
• Tax Payments
ACH Function
• Check
Function
ET
• Interoperability
Switch
• Routing
Challenges
• Confusion on role
National Bank of Ethiopia
Challenges
Banks connected only at HQ Level
National Payment System
[RTGS & ACH]
Banks have yet to interconnect
branches
OCSCO
PSS
DECSI
Dashen
OMO
Abyssinia
Banks
Very capable system
120 000 referenced data
Does not do scoring or rating
No MFIs connected
CBE
Wegagen
NBE Credit Reference Bureau
ACSI
MFIs
TELCO
Utility increasingly present
Agent Services
Bulk Payments
Merchant Services
Mobile Payments
Retail Payments
e-Commerce
Digital Payments
m-Commerce
Innovative Payments
Card Payments
Innovative Payments
Usability largely not present
10
jointly we have to figure out …..
 Governments must take lead: creating incentives and drive
 Regulators must create an enabling environment
 Banking Industry must play the incumbent provide the utility to scale
 Innovative Industry must bring in usability for scale adoption
Developing the Business Model
Building appropriate technologies
and Infrastructure
Governments Lead and Regulators
Enable
 How to transfer savings on
cost to customer
 Build business model that
bring value proposition to
customers and providers
 Create a complimentary
ecosystem with many
stakeholders that is
sustainable and viable
 that enables development and
distribution of innovative
products and service
 that will create the plumbing
for issuance and settlement
 that can drive the cost of
distribution and access to
become affordable
 Drive for a Digital Economy
Strategy
 Set of enabling regulations
 New models within policy
frame works:
 Incentives for drive and
adoption
11
Thank You