For this reason, In Vietnam market, mobile money is a new business opportunity for all parties includes operators, financial institutions, and payment companies.. Objective and aim of th
Trang 1VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS
TRAN THI THANH NGA
MOBILE MONEY BUSINESS DEVELOPMENT
AT VIETNAM MOBILE SERVICE
(VMS- MobiFone)
MASTER OF BUSINESS ADMINISTRATION THESIS
Trang 2VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS
TRAN THI THANH NGA
MOBILE MONEY BUSINESS DEVELOPMENT
AT VIETNAM MOBILE SERVICE
(VMS- MobiFone)
Major: Business Administration
Code: 60 34 05
MASTER OF BUSINESS ADMINISTRATION THESIS
Supervisor: Dr Tran Doan Kim
MBA Ha Nguyen
Trang 3TABLE OF CONTENTS
ACKNOWLEDGEMENTS i
List of Figures ix
List of Tables xi
List of Abbreviations xii
Introduction 1
1. Research Problems 1
2. Objective and aim of thesis 2
3. Research questions 3
4. Scope of work 3
5. Data resource 4
6. Methods 4
7. Significance of thesis 4
8. Thesis limitation 4
9. Expected results 5
10. Structure of thesis 5
Chapter 1: Mobile money theoretical overview 6
1.1. Mobile Money (MM) 6
1.1.1. The convergence of Mobile service and financial service 6
1.1.2. What is Mobile money service? 7
1.1.3. Opportunities for Mobile money services 9
1.2. Benefit of Mobile money services 13
1.2.1. To Mobile operators 13
1.2.1.1 Direct benefits 13
1.2.1.2 Indirect benefits 13
1.2.2. To Customers 15
1.2.3. To Banks 17
1.2.4. To Others 18
1.3. Models for Mobile money business 19
1.3.1. Operator - Centric 19
1.3.2. Bank – Centric 21
1.3.3. Payment Company centric 23
1.4. Key success factors for mobile money business 24
Trang 41.4.1. Regulation 24
1.4.2. Product 25
1.4.3. Promotion 27
1.4.4. Distribution channel management 28
Chapter 2: International MNOs 30
mobile money business deployment 30
2.1. Entry mobile money strategy for MNOs 30
2.1.1. Market strategy 30
2.1.1.1 Market analysis (preliminary assessment) 30
2.1.1.2 Marketing strategy 31
2.1.2. Partnership model 43
2.1.3. Technical and IS analysis 46
2.1.4. Distribution agents 49
2.1.4.1 The important of agent networks 50
2.1.4.2 How big should an agent network be? 50
2.1.4.3 Characteristics of a good agent network 53
2.1.4.4 Mobile money agent network model 56
2.1.4.5 Main obligations are contractually imposed on agents 58
2.1.4.6 Incentivizing mobile money agents 58
2.2. Mobile money case study – M PESA (Kenya) 61
2.2.1. Market situation 61
2.2.2. M-PESA Mobile money business 63
2.2.3. M-PESA key successful factors 68
Chapter 3: The case of Vietnam mobile service company 70
3.1. Introduction of Vietnam Mobile Service Company 70
3.1.1. Overview about Mobile Market 2010 70
3.1.2. About Vietnam Mobile Service Company (VMS) 72
3.1.2.1 Foundation and Development of VMS 72
3.1.2.2 Company Structure 73
3.1.2.3 Business Activities 74
3.2. Mobile money – Opportunities for VMS? 75
3.2.1. Market analysis 75
3.2.1.1 Opportunities of mobile money services to bank the unbanked 75
3.2.1.2 How should Mobile money in Vietnam be? 77
3.2.1.3 How to pricing the unbanked? 78
Trang 53.2.2. Regulation condition 82
3.2.3. Technical and IS 84
3.2.3.1 VMS current technical and Information system 84
3.2.3.2 Technical applied for mobile money 85
3.2.4. Distribution channel 86
3.2.4.1 VMS Distribution channel 86
3.2.4.2 Develop mobile money distribution channel 89
3.2.4.3 Incentive policies 92
3.3. Research Findings 94
3.3.1.1 Customer’s need 95
3.3.1.2 Products’ specifications 98
3.3.1.3 Pricing 100
3.3.1.4 Distribution channel interest and commission 101
3.4. Discussion 103
3.4.1.1 Customer’s demand 103
3.4.1.2 Products offering and pricing 104
3.4.1.3 Retailers’ interest 105
3.4.1.4 Conclusion 105
Chapter 4: Mobile money services business development proposal for VMS107 4.1. Mobile money business development proposal for VMS 107
4.1.1. Partnership model 107
4.1.2. Market strategy 108
4.1.2.1 Products 109
4.1.2.2 Marketing 111
4.1.2.3 Service pricing and agent commission 112
4.1.3. Distribution 117
4.1.4. Business organizational structure 121
4.2. Risks & challenges for VMS when deploy mobile money services 123 4.3. Recommendations for Theory 126
4.4. Recommendations for Further Research 126
REFERENCE 127
APPENDIX 1 127
APPENDIX 2 135
Trang 6LIST OF FIGURES
Figure 1.1. Mobile Money services 9
Figure 1.2. Top recipients of remittances 11
Figure 1.3. Mobile money revenues forecast 12
Figure 1.4. Value drivers of mobile money to MNOs 15
Figure 1.5. Example MPESA Cost of non-bank domestic transactions 17
Figure 1.6. Compelling reasons for key stakeholders to invest in Mobile money 18
Figure 1.7. Operator Centric Model 19
Figure 1.8. Strength and challenges to MNOs in Mobile money 21
Figure 1.9. Bank Centric Model 22
Figure 1.10. Strength and challenges to banks in Mobile money 23
Figure 1.11. Payment network Centric Model 23
Figure 2.1. Relative value of MNO in mobile money services 32
Figure 2.2. Potential Service Roadmap for Mobile Money and Payment Services 34
Figure 2.3. The use of mobile Money in Philippines 36
Figure 2.4. The use of mobile Money in Kenya 36
Figure 2.5. Main mobile money services& fee structure of some current providers 37
Figure 2.6. Branchless banking provider cheaper than the cheapest informal option for money transfer 38
Figure 2.7. Money transfer pricing models 39
Figure 2.8. Money transfer entry level pricing in selected markets 40
Figure 2.9. M Pesa domestic money transfer pricing vs transferred amount (USD) 40
Figure 2.10. The Operator’s Role in the Value Chain 43
Figure 2.11. Value for MNOs and Banks 44
Figure 2.12. Agent model for MNOs 57
Figure 2.13. Kenya economic situation 61
Figure 2.14. Kenya Financial Access 61
Figure 2.15. Sanfaricom market share 62
Figure 2.16. How people in Kenya sent money before M-PESA 63
Figure 2.17. How people in Kenya sent money after the introduction of M-PESA 63
Figure 2.18. Posted customer tariffs for M-PESA 65
Figure 2.19. M-PESA Agents Model 68
Figure 3.1. Mobile market development 70
Figure 3.2. Mobile market APRU 71
Figure 3.3. Mobile market share (2009) 71
Figure 3.4. VMS Organization Structure 74
Figure 3.5. Total subscribers 74
Trang 7Figure 3.6. Revenue 74
Figure 3.7. Price of banking services vs branchless banking 79
Figure 3.8. Price of mobile money transfer via informal options vs branchless banking 80
Figure 3.9. Number of Providers that charge specified method of pricing 80
Figure 3.10. Transaction pricing of main mobile money services 80
Figure 3.11. Vietnam money transfer pricing 81
Figure 3.12. Vietnam money transfer pricing for unbanked 82
Figure 3.13. Technical system connection 84
Figure 3.14. SIM Menu image 86
Figure 3.15. VMS distribution channel 86
Figure 3.16. MobiFone shops images 87
Figure 3.17. Authorized agents images 87
Figure 3.18. Point of sales images 88
Figure 3.19. Distribution model 92
Figure 3.20. Research samples by gender and habits 94
Figure 3.21. Research samples by regions and income 95
Figure 3.22. Consumer habit of send/receive money 96
Figure 3.23. Customers behavior and attitude to bank account services 97
Figure 3.24. Consumers demand on bank account services 97
Figure 3.25. Consumers interests in mobile money services 98
Figure 3.26. Consumers interests in M wallet services by MobiFone 98
Figure 3.27. Mobile money services interested rate 99
Figure 3.28. Factors’ importance when deciding to use mobile money 99
Figure 3.29. Current money transfer services transaction/ fee 100
Figure 3.30. Expected mobile money transfer services transaction/ fee 101
Figure 3.31. Expected mobile money fee break down 101
Figure 3.32. Current revenue of retailers and their attitude toward join mobile money services 102
Figure 3.33. Expected gross revenue of retailers when provide mobile money services
103
Figure 4.1. Some main VMS mobile money product describe 110
Figure 4.2. Mobi-cash organizational structure models 121
Trang 8LIST OF TABLES
Table 3.1 VMS & MPESA calculation on retailers’ gross revenue 105
Table 4.1 VMS mobile money product development progress 110
Table 4.2 VMS mobile money price and commission 113
Table 4.3 VMS price and commission analysis for round trip transaction 115
Table 4.4 Mobi-cash retailer revenue analysis 117
Trang 9LIST OF ABBREVIATIONS
2G: Second Generation 3G: Third Generation AML: Anti-money laundering ARPU: Average Revenue per User CFT: combating the financing of terrorism GPRS: General Packet Radio Service GSM: Global System for Mobile communications GSMA: The GSM Association
KYC: Know your customer ICT: Information and Communication Technology IP: Internet Protocol
MNO: Mobile Network Operator MVNO: Mobile Virtual Network Operator NFC: Near Field Communication
PC: Personal Computer SBV: State bank of Vietnam SMS: Short Message Service VoIP: Voice over Internet Protocol
Trang 10INTRODUCTION
1 Research Problems
Mobile phones have transformed telephony far exceed its needs during the past fifteen years The mobile phone device have for a long time been equipped with many functionalities which have inspired the development of value added mobile services, the use of mobile phones as access devices, and mobile commerce in general These developments lead to a great numbers of lucrative opportunities to mobile phone device merchants and service providers In fact, there are more mobile phones than any other device that can be used to market, sell and provide products and services now
The growth and penetration of mobile services across the world has been a phenomenon In 2006 the ITU estimated 79% of the world’s population had the potential to access mobile services and by the end of
2009 figures indicate over 4.6 billion cellular subscriptions are in use giving the mobile phone penetration rate of the world to 68,2%
Penetration in developed markets is about 100% of the population and is rapidly increasing in the developing markets Penetration in the developing economies can reach the bottom of the economic pyramid In Vietnam now, according to General Statistics, by the end of Aug 2010, all operators own 142,2 billions subscribers which equal to about 165% the population Vietnam is a really rapidly increasing mobile market
Because of the commonplace of such phones now, a new opportunity appears: mobile money, which allows cash to travel as rapidly as a text message All over the developing world, people always purchase vouchers
to top up their calling credit at corner shops The small retailers act rather
Trang 11like bank branches after the starting of mobile money services allows
They can take your cash, and (by sending a special kind of text message) credit it to your mobile-money account Then money (again, via text message) can be transferred to not only other registered users, who can withdraw it by visiting their own local corner shops but also to people who are not registered users; they receive a text message with a code that can be redeemed for cash
The Mobile money issues then become an interesting topic recently
Juniper Research predicts that consumer demand for mobile money transfer services will see users exceed 500 million globally by 2014 The world has recently experienced a number of mobile money transfer services launches in multiple markets with a variety of new payment solutions These implements bring many new benefits to consumers and operators and banks who involve
For this reason, In Vietnam market, mobile money is a new business opportunity for all parties includes operators, financial institutions, and payment companies And MobiFone can take this opportunity as well
With this study, I want to get a well understanding and analyst the opportunity of Mobile money business on VMS-MobiFone
2 Objective and aim of thesis
This research is implemented to obtain the two purposes:
• Study about the Mobile money - the opportunities and benefits of it
in Vietnam mobile market in general and for VMS-MobiFone in particular Learn from successful cases and have a small initial research on these services
Trang 12• Develop business proposal for VMS-MobiFone: find the suitable models with current situation of VMS and develop a business proposal recommendation
With these above objectives, this thesis aims at giving a basic theoretical foundation of Mobile money implementation in general and how to apply to VMS-MobiFone in particular
3 Research questions
The researcher will go to find the answer for questions below:
• What is Mobile Money? Is it a good opportunity?
• What are the models of Mobile money implementation?
• What are the key success factors?
• Is Mobile money an opportunity in Vietnam for the mobile operator
• How to implement to VMS- MobiFone?
4 Scope of work
For the theoretical foundation, this thesis will study the mobile money theory in the world of Mobile operators since 2007 when mobile money was first soundly successfully implemented in Kenya and became
a worldwide phenomenon
For the case study, this thesis will focus on some main factors of mobile money implement strategy to study like: market strategy (product and pricing), partnership model and distribution channel settlement because they are the most key challenges factors and also the vital success factors of the strategy All of VMS-MobiFone current situations of Mobile money initial from 2005 until now are put into study
Trang 135 Data resource
For the theoretical part, data sources are textbooks, researches, articles from internet since 2007 As for the case study, data is obtained from questionnaire, interview customers and internal data
of opportunities to success
8 Thesis limitation
The biggest limitation of this thesis is due to the freshness of Mobile money all over the world in general, and in Vietnam in particular, therefore few academic reviews have been applied and proved And there has been no trial implementation of these by Vietnam operators so far
Another limit is from wide of the issue This thesis cannot cover all the theoretical issues of Mobile money Thus, later this study, this thesis only focus on the distribution channel settlement analysis and focus on this when design action plan to implement Mobile money in VMS-MobiFone
Trang 14The last but not least, this research collects data by experimental research, which content questionnaire survey and statistical analysis
Therefore, it contents some common limitation of this methodology such as:
10 Structure of thesis
Apart from the executive summary, introduction, references and appendix, this thesis concludes four parts as follow:
Part 1: Mobile money theoretical overview
Part 2: International MNOs mobile money deployment
Part 3: The case of Vietnam mobile service company
Part 4: Mobile money services business development proposal for VMS
Trang 15Chapter 1: Mobile money theoretical overview
1.1 Mobile Money (MM)
1.1.1 The convergence of Mobile service and financial service
Penetration of mobile services across the world is increasing rapidly
In 1990 there were just over 11 millions mobile phone users worldwide
Today, over 4.8 billion mobile subscribers over the world (ABI, Q1 2010)
At the same time, the possibility to integrate mobile and financial services is becoming more apparent According to a recent survey conducted by Edgar Dunn & Company and the GSM Association (GSMA), with current status of regulatory environment improvement, in 2012, 7% of the subscriber in developed countries and 4% in developing countries will make at least one cross-border remittance This means over 248 million subscribers using mobile money transfer services
Today, financial access for the poor is still an issue in many developing countries It’s by far fewer than global mobile penetration rate of approximately 70% There are currently only around 0.5 million bank branches globally with about 1.4 million ATM's compared to more than 4.8 billion mobile subscribers worldwide
Moreover, bank transfer and money remittance institutions fee is expensive for small denomination transfers, limiting the ability of workers to distribute funds to their relatives, especially when sending small amounts
As World Bank reports, because of retail premises and staff costs increase overheads, commissions for remittances are so expensive It is estimate at an average 15% per transaction and increasing to over 25% for remittances below $100
With above numbers, mobile money services are expected to make it easy for the current average size of a remittance transaction by migrant
Trang 16workers - approximately $US200 (with 12-14 transactions per year) – the number conducted by World Bank They are such simple, low value services including the provision of cash-in and cash-out of the transferred value
Conclusion: Mobile-financial merging creates opportunities for MNOs and
financial institution and consumer as well It also consists of the need to fit financial regulation to new services, service providers, customers and especially the risky initiate with mobile money
1.1.2 What is Mobile money service?
Numerous terms are being used to describe the ways mobile phones facilitate financial services like: mobile banking, mobile payments, mobile transfers, etc So, what is mobile money?
The concept of “mobile money” alters across the industry as well as it covers a large scope of overlapping applications In general, people consider mobile money as the services that allow electronic money transactions over
a mobile phone – describe services that connect customers financially through mobile And we can refer it to as mobile financial services, mobile wallet and mobile payment
In this paper, I want to introduce mobile money as a broader term that includes all types of monetary transactions executed via mobile phones A list of mobile money applications have developed majorly including:
Mobile banking - use of a mobile phone to remotely access a bank
account, primarily for account balance checkup and bill payment services; most mobile banking applications are considered as a new delivery channel to existing bank customers Transformative models
integrate unbanked populations into the formal financial sector;
Mobile Money Transfer (MMT) - Remittance - person-to-person
application whereby consumers are able to send and receive monetary
Trang 17value by using that mobile device - or more simply put, to transfer money electronically from one person to another using a mobile phone Both domestic transfers as well as international, or cross-border, remittances are money transfer services;
Mobile Commerce (Mobile Payments): Mobile payments refer to
person-to-business payments that are made with a mobile phone instead of focusing person-to-person money transfers like MMT
Mobile proximity payments involve a mobile phone being used to
make payments at a point-of-sale (POS) terminal In these cases, the communication between the mobile phone and the POS may set up through contactless technologies, such as Near Field Communication (NFC) Using the phone as an alternate payment channel for goods sold online or pay bill via banking/mobile account is involved by
Mobile remote payments/ bill payments
So, mobile money allows for any mobile subscriber – whether banked
or unbanked – to deposit value into their mobile account, send value via a simple handset to another mobile subscriber, and allow the recipient to turn that value back into cash easily and cheaply It’s believed that successful mobile money services originate as simple transfer products, but will become more sophisticated by the time and will enable lower cost savings, credit and insurance than traditional branch or ATM banking
There are some other terms that are often used in association with, or interchangeably with, e-money, mobile financial services include:
Electronic Wallet (eWallet): Refers to the cash value that is stored on
a card, phone, or other electronic device
Electronic Vouchers: Refer to definition for electronic wallet
Trang 18 Mobile Wallet (mWallet): An electronic wallet that is stored on a
phone GSMA provides the following more specific definition:
“mWallet is a data repository that houses consumer data sufficient to facilitate a financial transaction from a mobile handset, and the applicable intelligence to translate an instruction from a consumer through a mobile handset/bearer/application into a message that a financial institution can use to debit or credit bank accounts or payment instruments.”
Stored Value: Refer to definition for electronic wallet
Figure 1.1 Mobile Money services
1.1.3 Opportunities for Mobile money services
Mobile network operators started exploring the concept of mobile payments in 2000 with little success, so mobile money is not a new concept
in the telecom industry However, the environment for mobile money solutions, bringing together different industry groups, such as banks and operators have been dramatically improved by the recent advances in
Trang 19handset functionality, chip and mobile network technologies, and the upgrades to point-of-sale infrastructure
Then, the industry globally acknowledges the social and economic benefits that mobile money brings, especially to developing countries where have many physical limitations of financial services infrastructure Billions
of people in remote, rural areas touch a less expensive, more convenient alternative financial service It means that the wide reach of mobile phones enables more people to access financial services quickly and easily
Firstly, in emerging countries traditional financial services usually haven’t been reached or accessed by a large proportion of the population
It’s often that in developing countries the banks are unable to provide such a service to the whole population (not more than 30% of the populations in visible markets are banked and the branch’s physical footprint is not dense enough) Therefore, cash is king, and sending money to relatives is a significant need and of course very complex there Moreover, the population
in these countries has gotten the lack of convenience and a large of time consumption when other alternative informal solutions (such as sending via
a bus driver) have used For this reason, Mobile money is a new solution that can keep low-income and rural consumers’ money safe while giving them an affordable and flexible solution The mobile operator has a great opportunity
to “bank the unbanked”, including customers at the “Bottom of the Pyramid” These customers often earn less than USD 2 per day and cannot
be reached by banks whose acquisition costs are much higher
Secondly, the mobile subscribers outnumber the banking account holders In 2009, there is an estimation of 1 billion people in developing
countries who have mobile phones, but do not have access to formal financial services By 2012, this number is projected to rise to 1.7 billion,
Trang 20in which, it’s projected that up to 290 million unbanked people in developing markets could become potential users of mobile money services by 2012 According to the GSMA - the trade association for mobile operators, the number of mobile phone users has exceeded credit card users by 2 to 1, and has outnumbered the use of automated teller machines (ATMs) by 2,000 to 1 With the above figure, we can see that the number of mobile penetration rate is by far more than the financial penetration rate in the developing countries
Thirdly, the immense amount of remittance in developing countries is
a driven factor of Mobile money services According to the World Bank,
recorded remittances to developing countries were estimated at US$315.7 billion in 2009 — 2.6 times the value in 2002 and forecast to reach US$360
in 2011,making an attractive opportunity for Mobile money services Mobile money transfer therefore extends remittance services to billions of the under banked population As provided in Figure 1.2 below, it is also a good opportunities for mobile money business that Vietnam is one the countries in the top 20 remittance received ones
(Source: World Bank remittance report 2010)
Figure 1.2 Top recipients of remittances
Last but not least, in developing markets in general and Vietnam in particular the younger generations is also a high potential segment, given
their willingness to accept to new technologies Financial services always
Trang 21cannot be accessed as they are not old enough but are actively involved in virtual gaming transactions Convenience will provide a main motivation for them to try new services Lower income workers are also likely to take up mobile money services, as they are not well served by the large banks
Across the world, it is estimated that 176 mobile money deployments will have been launched by the end of 2010 (94 live deployments, 82 planned deployments) driven largely by the desire to capture high value customers
Forecast by GSMA, the potential of delivering mobile money services
to unbanked customers generates both US$5 billion in direct revenues and US$2.5 billion in indirect revenues per year to mobile operators by 2012
Direct revenues are based on transaction fees for delivering services (in line with current market rates), and indirect revenues conservatively account for reductions in churn, increases in ARPU and acquisition of new subscribers
Conclusion: With the
above reasons, we can see that emerging economies are an especially important growth area for mobile money service And Vietnam is not an exception
Mobile money services are especially attractive because of the population’s limited access
to traditional banking services, owing to a number of common reasons
Source: GSMA mobile money report 2010
Figure 1.3 Mobile money revenues forecast
Trang 22Without an adequate infrastructure to enable online banking, institutions and providers are enabling more sophisticated services directly through the mobile handsets
1.2 Benefit of Mobile money services
By merging the banking and mobile technologies, mobile money are ready to offer to consumers and make it easy for those who have little access to financial services It also creates many benefits to the operators, banks and payment companies
1.2.1 To Mobile operators
To Mobile operators, Mobile money brings many benefits in both direct and indirect like: increased ARPU, increased data traffic, increased customer acquisition, increased customer retention, new revenue channel (e.g., share of fees), reduced operation costs, up-sell mobile content and postpaid service and enhanced brand image etc
1.2.1.1 Direct benefits
The direct benefits of mobile operators come from many sources of revenue include commission on transactions, potential subscription fees and the monetization of the float which are paid by end users That revenue increases with the increase of customer using services and transaction volumes And the monetize float conducts revenue for operators via short and long term investments with the rates are around 12%-15% So, the operators should increase float deposits by incentive usage and enrolment rather than cash out
1.2.1.2 Indirect benefits
Apart from the above direct benefits, Mobile money has some indirect benefits Mobile Money services offer sizable value generation
Trang 23opportunities to mobile operators in emerging countries, including the rise
of APRU, reduction of churn rates and opportunity to up-selling and new customer acquisition:
- A new market sizing study by CGAP and GSMA found that the average revenue per user (ARPU) of mobile money customers is 74%
higher than that of non-mobile money customers And some statistic from implemented countries show that direct revenue generation expected with a potential 5% to 10% ARPU increase after several years This is particularly important as operators are expanding into developing markets where ARPU
is traditionally low
- Mobile money services were also shown to help reduce customer churn which is one of MNOs’ most significant challenges Customer retention can improve when MNOs offer mobile financial services;
especially among customer segments expect more sophisticated services
- Current customers and bank customers can be also provided the opportunity to up-selling and new customer acquisition by Mobile Money
Offering new mobile financial services may help Telecom companies may enlarges their reach to a new segment of customers Increased market share from the new customer group would also open up opportunities to cross sell telecom services, thereby spurring revenue growth
Besides, Mobile operators may also save billing costs associated with prepaid and postpaid subscribers when customers can pay via their mobile, MNOs don’t have to pay commission to the retail distributors of mobile top-up vouchers That top up and/or payment process of customers is also more convenient They can do themselves from their mobile like a 24/7 open shop Based on some research projections, potential savings can be a reduction of 4% in the cost of sales
Trang 24Source: GreenWich White paper 2009
Figure 1.4 Value drivers of mobile money to MNOs
1.2.2 To Customers
The extending mobile money to other emerging countries, especially
in Africa and Asia, would have a huge impact to customers
Firstly, it’s clear that mobile money provides a starting point to formal financial services for the billions of people lacking access to savings accounts, credit and insurance
Secondly, mobile money provides a faster, cheaper and safer way to transfer money than other alternatives like slow, costly transfers via banks and post offices, or bus driver
Mobile money can reduce costs of transferring money because it utilizes a network of local agents rather than more expensive bank branches
The cost of remittances can be lower as Mobile technology removes the need for physical points of presence and ensures a timely and secure
method of transaction This concept of 'mobile money' is extremely
attractive to low income users in emerging economy
One international example is the number World Bank estimates that
Trang 25the flow of formal remittances surges by 50-70% in the case of remittance commission charges diminish by 2-5%, boosting local economies And this reducing the cost of each individual remittance would enable the delivery of lower value remittances than today’s average transfer value of US$200
Vietnam is one of top 20 remittance receiving money with the fee of average transfer value of US$200 remittance is around 10% (by the figure
of WB) The development of Mobile money is promising to reduce it in the near future
Besides, about domestic remittances, there are considerable numbers
of instances show that rather than spend a day travelling by bus to the nearest bank, recipients in rural areas can spend their time doing more productive things One of them is the result in Kenyan Mobile money implementation shows that as soon as the Kenyan households started mobile money the incomes of using M-PESA have increased by 5-30% and the mobile money opportunity is also increasingly understood and appreciated by consumers In Kenya, for instance, FSD Kenya found that four out of five M-PESA users believe that not having access to M-PESA’s services would have a “large negative impact” on their lives In detail, users view M-PESA to be faster (98%), more convenient (97%), and more secure (98%) than the informal methods that are often used to send or receive money One other example is in the Philippines where CGAP found approximately 90% of mobile money users view their money to be safe and would recommend the services to family and friends Because mobile money services become more sophisticated consumers will continue to benefit such as extending speed, convenience, and security to a broader range of products such as savings and credit
Trang 26Figure 1.5 Example MPESA Cost of non-bank domestic transactions
Thirdly, mobile money also provides many other functions such as payment, savings in a secured way instead of keeping and carrying money with many risks around
■ Across all consumer groups (banked, under-banked, unbanked)
Mobile capabilities can increase banking penetration of untapped markets at
a relatively low acquisition cost
Trang 271.2.4 To Others
It is widely accepted that increased access to mobile telephony in developing countries brings considerable benefits to the economies of those countries Beside MNOs, banks and customers, it also create benefits such as: it can be used as bill collection or payment ways for other distributions
to reduce cost and time, revenue inflow for merchants etc And for regulations, mobile money also brings benefit of management when creating transition remittances from informal to formal remittance channels (more visibility of money flows)
Figure 1.6 Compelling reasons for key stakeholders to invest in Mobile
money
Conclusion: This is an opportunity for all parties involve, thereby
countries get utilities from socio-economic benefits All consumers benefit from new mobile money transfer services, especially those who have so far only limited or no access to financial services Financial regulators’ aims of
Trang 28providing improved financial access can be achieved across all consumer groups, competition, innovation and a decrease of informal remittance channels The mobile and financial industry can offer new innovative services and generate new revenues
1.3 Models for Mobile money business
Mobile money applications have been illustrated under many models
Operator-centric and bank-driven models are two of the most common ones, given the fact that these industries have control over a mass customer base
However, there are a growing number of new parties such as handset manufacturers, payment companies and card issuers entering this market
As technology advances, different mobile money applications create different business models According to each country and mobile network operators the mobile money ecosystem will develop in different ways since
no single model is able to fit all markets It also depends on a wide range of factors, including the market composition, openness of regulatory regimes, maturity of related industry sectors, market dominance of the participants and potential cooperation within the value chain
1.3.1 Operator - Centric
In this model, operators are in the best position to offer mobile money services as one of the value-added service This is especially good as operators increasingly embrace 3G, which requires new data services to generate revenues Sources: GSMA, E&Y analysis 2009
Figure 1.7 Operator Centric Model
Trang 29As their own service offering, MNOs have been independently deploying mobile money applications, providing prepaid top-up services, mobile money transfer and mobile payment services through its billing platform
Operator-centric models are commonly adopted in developing markets such as Africa for mobile banking serving the unbanked segments
A representative case is the M-PESA money transfer service, developed by Vodafone in Kenya The operator, Safaricom, positions itself as a financial service provider under its own brand, although it does not manage the financial side of the service It partners with a local bank, which manages the M-PESA account and is legally responsible for the financial liabilities
In Philippines, G-Cash is another instance of operator-led approach for mobile money Globe manages G-Cash as a stand-alone account, not associated with bank accounts Its role does not exist like not only a bank but also a provider of a payment solution, responsible for financial aspects
Actually, the success of Globe depends on the provision of e-money regulation which allows mobile operators to adopt the role of financial companies This model works well in the Philippines due to a number of factors including the large unbanked population, popular and cheap SMS and the massive demand for remittance
In Vietnam market now, there still no operator begins with this business
Trang 30Strength of MNOs Challenges to MNOs
They own the Mobile subscribers
They own large distribution channel
They are experts in mass marketing
Their systems are designed to perform millions of transactions per second while keeping costs to
Also, in the beginning, the amount of individual transactions is smaller than traditional banking in comparison So, the major participants in transformational mobile banking models are likely to be only banks with the strategy, brand and capacity to reach out to unbanked customers
Meanwhile, banks are less actively expanding their core banking products over the mobile channel
The majority of developments of mobile money services of banks thus have been around simple mobile banking facilities that permit account enquiries or transfer of funds
Banks deploy these solutions as an extension of their traditional banking services
Trang 31Bank-led models prevail in Africa as major banks look at mobile banking as
a competitiveness necessity to expand their service reach For example, First National Bank in South Africa has rolled out mobile banking since 2002 as
a key differentiator in its retail banking strategy The bank developed the applications in-house while it also worked with a third-
Sources: GSMA, E&Y analysis 2009
Figure 1.9 Bank Centric Model
party provider to deploy a SMS messaging gateway The service, accessible from all mobile networks, has moved from a “first to market” product to a significant transaction channel, with millions of transactions worth hundreds of millions of rand per month reported by the bank
In Vietnam market now, many banks implemented mobile banking services which support banking services with web tools and mobile SMS in combination (Your bank account is connected with your Mobile account
Then you can top up your mobile from the money in your bank account, you can pay bill also You can make transaction via internet with the KYC via mobile SMS.) However, this still a value added service for bank customers, not for millions unbanked and the money transaction still base
on web tools Recently, Dong A bank has wished to co-operate with MNOs
to buy and resell mobile SIM with the special SIM toolkit which had already integrated Mobile money service functions But still it just provides
to Dong A customers
Trang 32Strength of Banks Challenges to Banks
They have been dealing with money since there was money – they are experts in cash management
They are compliant to financial regulations
They are trusted when provides financial related services
Limited Reach (to unbanked millions)
Expensive Cost per transaction
Stringent KYC rules
Figure 1.10 Strength and challenges to banks in Mobile money
1.3.3 Payment Company centric
There are increasing numbers of payment network join this business because of the opportunities in mobile payment These independent service companies have been active in the online payment space, providing secure payments between customers
or between customers and merchants
Sources: GSMA, E&Y analysis 2009
Figure 1.11 Payment network Centric Model
For example, Payment networks are expanding their big existence in the internet payments market to the mobile market In detail, a mobile checkout for use on phones with a browser has recently been introduced by PayPal, allowing users to check balance, transfer money and find places to shop The company is leveraging its considerable online auction user base
to expand its payment services to a much broader range of customers
Trang 33In China, mobile payment service providers like UnionPay, YeePay and Taobao are the strongest backers of mobile payment services, each of which maintains a network of partnerships with banks, merchants and mobile operators However, partnerships were mostly negotiated on a province or city basis, causing the service providers to maintain a limited network of partnerships in a small geographical region
Meanwhile, a number of payment solution companies are active in Africa deploying mobile transfer and cross-border remittance services For example, WIZZIT and Crandy are developed independently of operators and target the lack of access to banking infrastructure in this region
In any of this model, in order to get a successful business, it requires
a very good partnership among members
1.4 Key success factors for mobile money business
The success of mobile money transfers rests on their fulfillment of customers’ needs and the offer of a better solution than was previously available
There are many challenges must be met when implementing mobile money business Here I just make some analyst on very main and important ones include: dealing with regulation issues, product strategy, successful promotion campaign, distribution channel management and technical system
1.4.1 Regulation
For many business people, there is an almost instinctive negative action to the world “regulation” But the regulation is essential to create and maintaining an enabling environment for business, and mobile money is no exception MNOs introducing mobile money transfers face regulatory
Trang 34constraints with regard to financial regulation
Since there were many successes mobile money deployments all over the world that helped provided the poor and unbanked ability to reach financial services, WB and IFC has created many efforts to help MNOs, banks and payment institutional in many countries deals with regulator to get the approval in mobile money business, including Vietnam
Regulation is the prerequisite factor to any who intend to deploy mobile money business and it decided the strategy they choose from partnership model to product strategy The job of implementer is to enhance regulation to get access to financial services through mobile and it should
be forefront of the strategy Then, all services in the mobile financial offering should be based on a nationwide set of standards that are agreed to and approved
With mobile money, “the first concern of the regulator is to maintain, and if necessary restore, public confidence in financial services and markets” (according to UK regulator Dominic Peachey) But in other hand, regulators are very interested in developing financial nationwide due to national socio-economic development, enabling wide range of payment choices and addressing AML/CFT concern by moving cash into more visible, formal channels – that is what mobile money can helps
Since then, in order to deal with regulation issue, business provider must show the solution for fraud; money laundering concern and KYC rules (know your customer) They also have to build strong relationships with government and regulatory bodies so solves any issues raised over the time
1.4.2 Product
When the mobile money business is allowed to launch, the initial step
Trang 35is product strategy development This part doesn’t aim to show how to develop product strategy but just focus on some important points of the products that can help the business successful
Think about how hard it must be for a poor, undereducated person to get her head around mobile money She is likely to be new to banking, and may never have used her mobile phone for anything other than talking into
Now she is told that, to deposit money into this new type of account, she must go along to the corner shop where she buys her rice and cooking oil and which now seems to sport a flash new logo of a bank she may not have heard about, she must give the clerk her phone number and her cash, she must wait to get a text message on her phone, and then she can just walk away When she wants to retrieve her money, she can just go back there, press buttons on her mobile phone, but this time she must remember a secret code (she needs to prove that the account really is hers), and the store clerk will give her the cash – really, he will!
In positioning a mobile money service with prospective customers, the provider faces four key challenges: explaining what it does, why it’s better than the alternatives, and how it works, all while reassuring them that indeed it can be trusted to work
Many research from current deployments show that one of the most crucial and basic elements to making mobile money services a success is
ease of use and reliability However, mobile operators, banks and payment
providers have struggled to convince consumers that the new services are better than those in use today In other cases, customers simply do not see the need for the payment functionality to be developed A lot of work still needs to be done to promote customer acceptance
Trang 36Moreover, to entice consumers, especially the low income group, the
price of mobile money services needs to be less expensive than traditional channels A mobile money platform run on WAP or mobile
internet will incur expensive data plans, and thus impede user acceptance
As such, an SMS-based service appears to be a more economical solution
As it reaches scale in the longer term, NFC may prove to be the generation platform for mobile money services
next-Besides those important points above, many recent benchmarks confirm that successful launches of mobile money have taken into consideration the following key success factors:
Addressing the basic unmet market needs in terms of money transfer and payment services
Addressing the weaknesses of alternative existing solutions
Developing a relevant pricing model that makes the service affordable to targeted customers
Free deposits, with no minimum balance requirements
An ability to send money to non-customers
Enabling ATM withdrawals
1.4.3 Promotion
Even though existing mobile money offers some encouraging benefits, such as increased transaction volume and customer retention, there must be a solid business case to launch the service Payment revenues are declining rapidly because of increasing regulation Achieving profit from the services may not ascertain profits for the mobile operators, as the small
Trang 37transaction charges will only prove their worth in high volume And that high volume comes from a campaign aim to change customers’ behavior
That is educating consumers to use and trust mobile money service
Many experiences from successful deployment show that strong branding and simple messaging is a good promotion strategy They market and advertise all services under one brand
Besides, it is vital for a mobile money entry strategy to choose appropriate promotion channel: billboards, TV advertisement, events or poster, leaflet, or even word of mouth Those channels should be used suitable with target market in each period of product launching phase And MNOs shouldn’t forget that agents are also an ideal channel to market the service
1.4.4 Distribution channel management
As mobile network operators around the world are discovering, mobile money is a complicated business Far more complex than traditional mobile value added services, mobile money platforms require that operators tackle a host of difficult strategic issues and operational challenges One of the most difficult of these is the need to put together an agent network
Less tangibly, but equally importantly, agents are the front-line, human face for an operator’s mobile money service When users have questions, they are as likely to pose them to their local agent as to a call centre And customers will have questions, given that mobile money is unlike any service they will have used before Indeed, it is typically agents who teach users how to perform transactions using the mobile phone – even transactions which can be performed without the participation of the agent
Conversely, if an agent makes a mistake, or commits fraud, it may be
Trang 38difficult to for users to distinguish between the agent and the service he represents For these reasons, building a good agent network is an essential precondition to launching a successful mobile money service
In this part, we don’t discuss on how to build a good agent networks but the following is some important points to concern:
Simple and transparent retail pricing
Frequent and consistent monitoring of retail agents
Scalable agent distribution structure for liquidity management
Easy and quick customer registration, with rewards for agents
Maintaining a balanced growth of customers and retail agents
Trang 39Chapter 2: International MNOs mobile money business deployment
2.1 Entry mobile money strategy for MNOs
In this study, the author researched on numbers of mobile money deployment practices around the world to find out successful and appropriate models for MNO mobile money entry strategy
In order to implement successful mobile money project, MNOs should have a clear vision of the challenges they will face when considering an entry to this market Many analysis and feedback gathered through implemented projects together with interviews with industry leaders recommend the relevant strategies to fulfill the potential of mobile money The strategy is contributed by some elements include:
market strategy, partnership model, technical & IS analysis, and distribution channel management
2.1.1 Market strategy
The first important part in a mobile money entry strategy is defining the market strategy The market strategy is defined via two steps:
preliminary assessment and marketing strategy
2.1.1.1 Market analysis (preliminary assessment)
Key tasks of this preliminary assessment is to take a market study on socio economical, mobile market and financial market (banks, microfinance, money transfer) to find out the opportunities or challenges of mobile money services These qualitative and quantitative market analyses help us to answer those questions: “should we deploy mobile money in this market?”, “is it competitive?” and “how should the implement plan be?”
Trang 40The key point here is where the banking penetration rates are not more than 30% and the mobile penetration rate is much more positive, the mobile money operator has a great opportunity to “bank the unbanked”, including customers at the “bottom of the pyramid” – who cannot be reached by banks whose acquisition is much higher Therefore, a mobile money value proposition should target all customer segments that do not have full access to banking services
These limited banking services can be seen in countries where some
of those following factors appear: (1) High cost associated with maintaining bank accounts; (2): Inadequate infrastructure; (3): High minimum income requirement to open account; (4): Premium image encouraged by Banks discourages some low income segments; (5): There is a widespread belief that the costs are high and very complex to understand
The value proposition and urge usage can be improved by several services which must equally address specific market needs and operators should seek to identify needs of every business and consumer segment by applying a comprehensive market survey (qualitative customer study, customer journey analysis )
And it would be greater opportunities if the mobile money services can set a fee for these kinds of branchless banking services cheaper than current banking services This pricing policy can be set base on research of others alternative fee for mobile money
2.1.1.2 Marketing strategy
a Product development
When the mobile money business is allowed to launch, the initial step
is product development Mobile money services can be composed by many