Increasing access to finance using mobile
banking services:
What are the factors MFIs should consider before
engaging in m-banking solutions?
Malith Gunasekara
Senior Consultant
[email protected]
www.e-mfp.eu
Introduction to ShoreBank
International
SBI advises its partners – all types of financial institutions in emerging
economies – in inclusive finance
Utilizing commercial finance practitioners
Focusing on the fundamentals of banking and
financial institutions
Delivering innovative and market-driven products
and services
Building capacity in our partners’ ability to increase
access to finance locally
Sustaining long-term partnerships
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www.e-mfp.eu
Presentation Overview
How can MFIs successfully prepare for entering the
mobile banking market?
Review Landscape
• Who are the competition and other market players?
• What are the options for an network of agent operators?
Market research
•What is the market demand and need?
•What is the value add of the proposed services? For MFIs? For customers?
Internal Capacity
• Where are the key gaps in the MFI’s internal capacity?
• What internal systems are necessary for mobile banking?
Investment and resources
Technology
Market strategy
Business case
Products
Marketing and awareness
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• What investment is required and who will provide the investment?
• What technology is appropriate for the strategy?
• Who are the available vendors?
• What type of platform is needed?
• What are key concerns or challenges in implementing this strategy?
• What type of partnership or implementation structure is most
sustainable for the MFI?
• Which products are demanded?
• Which products should be offered by MFIs and via mobile banking?
• How can the MFI generate awareness and rapid, to-scale uptake
among customers?
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Review Landscape
Who are the
competitors?
• Courier
companies
• Money transfer
agents
• Other informal
means
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Who are
market
players to
consider?
• Financial
institutions
• Retail network
• Telcos
What is the
existing
network of
agent
operators?
• Leverage existing
branch network
• Supplement
branch network
What is the
regulatory
environment?
• Are non-banks
allowed to offer
banking services,
and to what
extent?
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Market Research
What is the need? What is the demand?
• Long term success will require developing products that help
consumers build and save wealth
• Consider the portion of the population without a bank account and
with access to mobile phones
• Consider the current costs and convenience of financial
transactions
What is the value add?
• For customers
• For the financial institution
What is the best way to conduct market research?
• Focus groups are often more effective than
a quantitative survey
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Internal Capacity
Infrastructure
Staff
Knowledge
Training
• Real-time
communication
is necessary for
mobile banking
– upgrade
systems, must
have a good
core banking
system
• Efficient cash
management
systems
• Experts in retail
banking,
marketing,
mobile
technology, and
cash
management
• Best practices
from mobile
banking efforts
• Sourcing
technical
assistance from
international
experts
• Training agents
to understand
mobile
transactions,
cash
management,
and customer
service
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www.e-mfp.eu
Resources and Investment
• Mobile banking/ agent banking requires committed investment, both
internally and from outside investors
o Ex: KBS in India expanding branchless banking services
required a strong backend system
• New initiatives require buy-in from top management, but resources
may come from outside
o Ex: In Pakistan, a MFB wanted to acquire software that costs
$6-7 million to do branchless banking, but its Board rejected
this
• The amount of investment required can be very high
o An MNO-led model in East Africa spent $30 million scaling their
service
o Another telco in Uganda has spent $10.5 million
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Technology Requirements
• MFIs need to be able to understand the technology and have the
capacity to negotiate flexibility for functionality with the vendors
• What technology is appropriate?
o Flexibility, functionality, and cost effective
• Consider and weigh vendor options
o Early negotiations are crucial, as mobile banking services are often
locked into a specific vendor
• Off-the-shelf solutions vs. ability to cater to MFI and products
Technology is not a panacea for all issues and is only as good as the
people using it and benefiting from it; its value to the MFI and customer
is related to their trust and its functionality
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Develop Market Strategy
• Developing a “go to market” strategy requires understanding of the
product, placement, pricing, and promotion
• Marketing strategy can include phased roll outs with different market
segments
• Institutional platform needs to be developed for effective marketing
• Leveraging another platform – financial institution, telco, or third
party operator – can help expand reach
• The agent network itself is a key part of marketing, messaging, and
branding
• Must protect FI’s clients and personal client data
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Business Case
Can mobile banking be a profitable business?
• Can a FI form a profitable partnership with a larger bank or
Telco?
o Ex: A leading provider in East Africa charges fees that are
too high for MFIs to profitably partner
o Ex: Large telcos may buy a bank
• How large does an MFI have to be to do it alone?
o Ex: MFB in Pakistan debated partnering v. individual
provision (requires investment in network and platform)
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Products
• Development of products depends on the business case
• Complementary products can leverage mobile banking data and
clients – mobile banking and MFIs are not competing
• MFIs can leverage an existing mobile banking platforms to disburse its
own loans
o Ex: MFIs in East Africa can leverage existing platforms
• MFIs are strong in providing credit, and mobile banking can offer other
services
• Currently, m-banking providers do not provide credit but allow for
transfer and savings, so they are not competing with the MFIs
o Ex: A bank in Pakistan (transfer, storing money) and an MFI that
SBI is working with (can bring in new users as credit clients)
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Marketing and awareness
Creating awareness among the target market about the available
services and products is an important cornerstone for success
Marketing delivery channels:
• Village meetings
• Sponsorship of local events
• Marketing van with audio-visual
capabilities
• Print, television, billboards
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Branding:
• “Reaching the unreached”
• “Your local bank at your
doorstep”
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The Potential of
Mobile Banking:
Financial Inclusion
Outreach of Mobile Banking Providers (From CGAP FN 66)
• In eight branchless banking pioneers, 37% (on average 1.39 million) of
active clients were previously unbanked.
• In five of the eight cases, the branchless banking provider reaches
more previously unbanked people than the largest MFI in the same
country: on average 79% more.
• The same five providers grew rapidly, needing on average three years
to acquire more unbanked clients than the largest MFI in the same
market.
• Mobile banking is cheaper than traditional banking, but the price
advantage may not be as wide as one might anticipate. On average,
branchless banking is 19% cheaper than comparable products offered
by banks via traditional channels.
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www.e-mfp.eu