Building an Open EcosystemAsian Banker Summit, Hong Kong, 8th April

Chakrapani GK

2

Over a 150 Mobile Payment Projects in LTA, Africa and MEA. Mostly in early stages.

Very few have the scale and chances of network effect due to silo limitations of the solution

Duplications of cost in technology, infrastructure and agent networks

Lack of interoperability will raise fundamental questions around consumer convenience & profitability for the payment operators

Pace of Progress Remarkable. Yet, Questions Remain…

Company Confidential

150+ mobile payment initiatives announced<10 effective service providers in global scale

Consumer

Consumer account Issuer

Payment network

Merchant acquirer

Merchant

• m-payments as a stand alone revenue stream & retention tool

• Targeting the unbanked in developing nations

• Often focused on mobile as new channel for existing customers to access banking

• Less focused on new customer acquisition, which is against gov’t agenda

Operator-led Bank-led

• Int’l card network: Visa, MC, AMEX

• Int’l remittance players: Moneygram, Western Union

• Add’l revenue and new customers

Network-led

These entities are starting to understand complexity and limitations on differentiating through [proprietary] payment services

• Platforms: PayPal,,

• Internet leaders: Google, Amazon

• Potential entrants: Apple

• Looking for growth

Next-Gen player

* source: INNOPAY ‘mobile payments 2010’

Do it alone or Ecosystem ?

Other devices Merchant

s

Banks

F. I. Operator

s

Nokia

Consumers

For Everyone, Anytime …on Any Network, Any Mobile5©

2008 Nokia

V1-Filename.ppt / YYYY-MM-DD / Initials

Existing Device

Side-Load or Download

New Device

Out of Box Support Pre-load

Any Device

SMS/IVR

SIM Tool Kit

Store Value `

` Deposit & Withdraw

money

Person to Person Money Transfers

Pay utility bills

Pre-Paid SIM

Micro-loan

Ticket/Transport

Government Services

Disbursement/ Repayment

…

Person to Merchant Money Payment

For Everyone, Anytime …on Any Network, Any Mobile

Operating model - Roles and responsibilities of the partners

LPSP has commercial relationships with all members of the ecosystem – customers, agents, merchants. LPSP defines and operates the service

Bank provides access to its retail and merchant network. The bank also provides wholesale banking capabilities. Leverage Bank relations with Post Office, Agents etc as distributors to reach more customers

Nokia enables customer acquisition through its channels. Also develops mobile access layer to connect with the Platform & have a preloaded application on its devices

Operator enables customer acquisition through its channels. And offers a range of use cases and bearer channels.

Technology Platform provider develops core functionalities and delivers operates and supports the platform and IT systems6

Local Entity: LPSP

Payment Service Operator, License

Technology PlatformR&D, IT, scheme rules

BankRetail Network

Wholesale banking

Distribution/

retail partner/

Operator

NokiaMarkets,

MFS

1

1

2

4

3

6

Contractual relationships

Nokia perimeter of influenceBank perimeter of influence

2

3

NokiaPreloading

4

Bank PartnersPost Office, Agents 5

OperatorDistribution

Retail and Agent NW

5 6

Arguments against interoperability

MNO arguments• I am a large MNO, I have much less to gain than do the small MNOs , who would otherwise struggle against my market power

• There will be no benefit of interoperability: someone on my network can already send money to someone on another network

• It will cost a lot of money to develop the software and support services and create no benefit to the existing users

Economic arguments• It will put up the cost of the whole MFS ecosystem by adding a layer of complexity

Arguments against interoperability

What is mobile financial services interoperability?

Is it:• Not having to know to which bank or MNO a person you want to send money to

is subscribed?• A shared agent network?• Sharing infrastructure to provide MFS in a single country? In multiple countries?• The ability to roam with my wallet and use it in another country?• Sending money from Singapore to Indonesia? From Smart Money to G Cash?

From Smart Money to someone on Sun ? From Gcash to someone outside of the Philippines?

• A merchant not having to have three POS phones to accept money from three mobile money schemes?

• Having the same USSD codes on all the networks in a country?• Having the Nokia Money service on a Samsung phone?

“The sum of activities aimed at bringing a heterogeneous set of mobile money schemes together to maximise the network effects of mobile financial

services”

What is mobile financial services interoperability?

The interoperability effect in theory

In this example, there are four networks (a,b,c,d) of varying sizes, but without interoperability.

The most links between users in a single network is six (network b).

a b

c d

Nodes 2, Connections 1

Nodes 5, Connections 10

Interconnecting these networks creates one large network with many more connections

a, b, c, d interconnected2

)1()1( 2

nodesnodessconnection

Traffic between nodes is proportional to the square of the users connected

0 k

50 k

100

k15

0 k

200

k25

0 k

300

k35

0 k

400

k45

0 k

500

k

0 Bn20 Bn40 Bn60 Bn80 Bn

100 Bn120 Bn140 Bn

Interconnections among nodes

Nodes

Connect

ions

2

)1()1( 2

nodesnodessconnection

Nodes 10, Connections 45

• Revenue of each network will increase from pure on-net revenue, to on-net plus share of cross-network revenues

• In all scenarios:• The % uplift in transactions will be smallest for the network with the

biggest share, so it looks like they have the least to gain;• However, the actual value of the increase in revenue is always greatest for

the largest network• But, the actual value of the gain made by the largest network is always

smaller than the sum of the actual value gained by all the other networks• Rational networks should all embrace interoperability, if valuing on

pure dollar basis• The most reasonable argument for not doing so is that the largest network

gains less than the gain of all the other networks combined

Launching an ecosystem which is device and partner agnostic will result in exponential growth in transactions

Even very dominant networks have more to gain from interoperability

Where we are nowtaking the idea of ubiquitous “Money with Your Mobile” into reality

• Commercial pilot started March 2010

• in Pune region, India as 1st step for India wide roll-out

• In partnership with Yes Bank and Obopay• Top-up, bill payments and money

sending core features• Pilot expansion to Chandigarh; Nashik• Extended by merchant payment + ATM

use• www.mobilemoneyservices.co.in

• 2011• Union Bank of India (UBI) signed• Scaling now - Expect to rollout in

50+ cities in India by end-2011 & drive rural expansion & financial inclusion goals from 2012

11 © 2010 Nokia confidential

• Rich Consumer User Experience• Any Bank/Unbanked, Any network, Any Device• Network effect and Scale• Joint Sharing of Critical Assets (Retail,

Distribution and Platform)• Leverage individual brand trust and global

footprint• Build a sustainable and profitable business

This is the time….to Collaborate….Banks, Operators, Payment Providers and Nokia

12 © 2011 Nokia

chakrapani.gk@nokia.com

Thank You