Four country mobile money study for the ifc
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Four-country mobile money study for the IFC . Presented by:. Sonja Oestmann, Director of Consulting . Some key findings upfront. In developing countries m-money is an alternative to cash while in a developed country m-money is a complement to existing e-payment options

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Four country mobile money study for the ifc

Four-country mobile money study for the IFC

Presented by:

Sonja Oestmann, Director of Consulting

Some key findings upfront
Some key findings upfront

  • In developing countries m-money is an alternative to cash while in a developed country m-money is a complement to existing e-payment options

  • Greatest opportunity for m-money is at stage where m-money provides an alternative means to the traditional existing financial services; this is also where it has biggest development impact

  • While there are also good opportunities in the developed world for NFC-enabled mobile phones (e.g., public transport, retail payments), there is stronger competition from the card industry

  • M-money seems to require major economies of scale to be viable – either through dominant player or through interoperable platform

  • We will show a model that situates each country on a development path & partnership model

  • Progression of ideal business partnerships:

    • MNO-centric

    • Bank/MNO partnership

    • Interoperability and multi-stakeholder collaboration

Overview of presentation
Overview of presentation

  • Objectives of study, context & key questions

  • Parameter analysis & qualitative research

  • Major money flows in m-money sub-markets

  • User and non-user survey findings

  • Business model analysis – required partnerships

  • Insights from Kenya & Japan – are they unique or replicable developments?

  • Our hypothesis about m-money development paths & needed partnerships

Scope of the study
Scope of the study






Agent networks

Regulatory environments

Existing major money flows (demand outlook)

User survey findings

Business models

Parameter analysis

Opportunity analysis

Sri Lanka


Understanding of m money
Understanding of m-money


What makes m-money distinct to credit or other payment cards?

Phone is owned by more people

Is an interactive device

Allows remote, non-face-to-face payment without an additional device (whereas a card requires the Internet or a phone for remote payment)

Has other functions as well (e.g., communication) compared to a card’s key purpose as a money payment instrument

  • m-money: Financial services and transactions made on a mobile phone only

  • electronic money: A broader concept, refers to payments made using prepaid and NFC (contactless) cards, debit cards, loyalty cards, ATM cards, gift cards and store cards, incl. mobile phones

  • M-money is a subset of e-money

Parameter analysis
Parameter analysis

  • Based on extensive literature research, a total of 50 parameters were identified

  • The parameters with the greatest impact on mobile money are:

    • Regulation – assessed based on Porteous’ regulatory environment model

    • Existing financial access – assessed based on ATMs, POS, debit and credit cards, and the size of the unbanked market

    • Existing mobile market situation – assessed on dominance of an operator and investment capacity

    • User perceptions – is there a need to use mobile money?

8 key categories of


Enabling regulation
Enabling regulation

Enabling regulatory environment


2. Low certainty; High openness

  • 1. High certainty; High openness




Sri Lanka

4. Low certainty;

Low openness

3. High certainty;

Low openness






Existing mobile market situation
Existing mobile market situation

The mobile market parameter influences the mobile money sector mainly in two ways:

  • The competitiveness and health of the sector basically determines the appetite and capacity of MNOs to invest in a m-money business

  • The dominance of a single operator can be conducive to a m-money business, whereas a more competitive market needs to address the thorny issue of interoperability early on to create economies of scale

  • However, uncompetitive mobile markets with strongly dominant operators are the exception rather than the rule

Differentiation of m money market opportunities
Differentiation of m-money market opportunities

Potential m-money markets

Illustrative example: Brazil

P2P: 84% of pop. is urban

G2P: 150 million payments a year, but MSD no incentive to switch

Public transport: 16.8 billion trips in 2008, but depends on NFC-enabled phones

Bill payment: efficient and cheap existing channels; 88% usage of correspondent banks is for bills

Huge demand for retail credit, micro-finance from unbanked

  • P2P transfers

  • Government-to-person (G2P) payments

  • Public transport payments

  • Bill payments to major utilities (e.g., electricity and water), postpaid mobile accounts, fixed phone subscribers, pay TV (cable and/or satellite)

  • Payroll payments from small companies in the informal sector

  • Retail payments

  • Business-to-business (B2B) payments

  • Credit and microfinance

  • International remittances

  • Savings

Business models key questions
Business models – key questions

  • Which players have the clearest and strongest incentive to develop m-money services?

  • What is the main value proposition for potential clients: lower-cost services; better, more convenient, and different services; or targeting services to a specific group, for example the unbanked or rural population?

  • What is possible in each country, in terms of the following:

    • Regulation. Is the most incentivized player also allowed to provide m-money services?

    • Demand. Is the market large enough to warrant the cost and investment of establishing an m-money service?

    • Partnership requirements. Can the incentivized player establish an m-money service by itself or does it need major partnerships?

Opportunity analysis
Opportunity analysis

Significant & unrealised opportunity

Unlikely to be any m-money opportunity

Potential opportunity, but challenging

Summary of methodology
Summary of methodology

Opportunity? Yes/ No/ Maybe

Insights from other countries
Insights from other countries

  • Why Kenya, Japan and the USA?

    • Kenya is the most successful m-money developing country

    • Japan is the most successful m-money developed country

    • The USA has been added as a known reference point

  • Will developments in these countries become trends in the four developing and emerging market countries that we studied?

  • This also helps to orient the four countries into the wider context of developments in the m-money space.

Kenya key drivers
Kenya – Key drivers

  • Overview

    • Over 9.4 million customers, over 18,000 agents, USD 5.27 billion in P2P transfers since launch in 2007, over 13% of the Kenyan GDP was transferred by M-PESA.

  • Dominant mobile operator

    • When M-PESA was launched in 2007, Safaricom had over 70% of the mobile market in Kenya.

    • This allowed it to launch the service quickly to a large subscriber base. This had enormous benefits in terms of marketing and economies of scale.

    • The impact of M-PESA on Safaricom has been to consolidate its position as the dominant operator in Kenya.

  • Regulatory environment

    • While banks are tightly regulated, non-banks have been allowed to enter the m-money space relatively freely, with little regulatory oversight. Non banks are permitted to perform various payment functions virtually unregulated

  • Changing demand

    • M-PESA is increasingly being used as the platform for a whole range of services that would, in a developed country, be provided by banks.

Japan key drivers
Japan – Key drivers

  • Overview

    • Electronic money is highly advanced. Japan has the most widespread use of e-money, with the largest number of subscribers.

  • Dominant service providers

    • Like Kenya, the Japanese mobile sector has been dominated by a single operator, NTT DoCoMo. Its market share has been 50% or greater for a number of years.

    • The development of e-money and specifically the FeliCa NFC standard (a proprietary standard owned by Sony) was driven by dominant players in each segment of the value chain.

  • Population density

    • High population density meant that many workers take public transport in order to get to work.

  • Role of government

  • Japanese government played a significant role in bringing the private sector players together. The Japanese Government, via its shareholding in NTT, owns 63.12% of NTT DoCoMo and only sold its shares in Japan Railways East in 2006.

Common drivers in kenya japan
Common drivers in Kenya & Japan

  • Dominant players: Both countries have dominant players that were able to capture a large market share; in the case of Japan, the dominance includes not only the mobile operator, but also the dominance throughout the value chain: exclusivity of proprietary NFC technology, and dominance through the leading credit-card company in Asia, JCB, and the East Japan Railways, which is the dominant player for public transport in and around Tokyo.

  • Massive addressable markets: 2.3 billion monthly transactions for public transport in Japan (compared to 858 million in the USA and very fragmented); while the numbers for Kenya are much smaller – 14.4 million unbanked adults – they are massive compared to the overall country: 14.4 million unbanked adults represent 77.4% of all adults in the country.

  • Helpful regulatory situation: inboth countries regulation does not hinder m-money developments; in Japan there were some government support: the Japanese Government, via its shareholding in NTT, owns 63.12% of NTT DoCoMo and only sold its shares in Japan Railways East in 2006. It was supportive of the move towards NFC as a standard technology for payments.

  • Single killer application: Initially P2P in Kenya and public transport in Japan, which then allowed the addition of other services.

  • Large acceptance network for m-money: M-PESA in Kenya has more than 18,000 agents, which it was able to establish fairly quickly; and with East Japan Railways a sizeable acceptance network used by a large proportion of inhabitants of Tokyo and surrounds. Tokyo is the largest city in the world with over 35 million inhabitants.

Usa m money vs e payment
USA – M-money vs e-payment

  • In comparison to both Japan and Kenya, the penetration of m-money is insignificant.

  • However, in terms of electronic payment instruments and including debit and credit cards, the USA is one of the most advanced economies in the world.

  • The mobile market in the USA was historically a fragmented and diverse market, spread across a large geographic area

  • Replicability

    • "The current U.S. model cobbles together the existing infrastructures of mobile operators, the bank network, and payment service providers. The challenge is that there are many alternative payment methods and no differentiating factors or obvious substantial benefits that consumers can see yet from mobile payments" .

Best partnerships strategies
Best partnerships & strategies

  • Hypothesis of progressive development of the MNO-centric model:

  • Business models evolve – an analysis of the competitive environment must be dynamic, not static;

  • M-money ventures are linked to certain stages of financial development:

    • MNO-centric: Kenya & Nigeria;

    • Collaboration between MNO & Bank: Sri Lanka & Thailand;

    • Single Platform: Brazil, USA and Japan


Single platform (collaboration between multiple players – seamless interoperability

Increasing financial sector development


Collaboration between MNO & Bank



Innovation & differentiation

Cost leadership


M money demand curves
M-money demand curves

  • Orange curve is m-money demand in developing economies - for low-cost, low-speed, infrequent transactions, such as P2P transfers.

  • The orange curve becomes dotted because demand changes from low-cost, low-speed, and infrequent to high-speed and high-volume as represented by the blue curve.

  • The Bluecurve starts off dotted because developed countries already have substantial financial infrastructure, thus demand for low- cost, low-speed, infrequent transactions is low.

Mobile Money Demand Curves





Relative demand high speed, high volume transactions

Relative demand for low cost, low speed, infrequent transactions



Sri Lanka


Developed economies

Developing economies




Level of Infrastructure Development







Multiple partners

Thank you q a

Thank youQ&A

Sonja Oestmann