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Mobile money – market insights : India

Date post: 29-Nov-2014
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A short overview of market and regulatory conditions for mobile money in India
13
Tarun Ravindran [email protected]
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Page 1: Mobile money – market insights : India

Tarun Ravindran [email protected]

Page 2: Mobile money – market insights : India

Mobile Money Ecosystem

Market Situation in India

Challenges for M-Payment in India

Page 3: Mobile money – market insights : India

Platform/technology Providers (M-payment)

Telecom Operator

Banks

Banks

Agent Network Managers (ANM)

Distributors/Business Correspondents/Agents

Front End product platform providers

Customer

Telecom Operator Operator & Bank tie-up in a strategic business model (revenue share etc.)

Bank-led model. Operators are just dumb-pipes (to carry USSD msg, sms etc). No exclusive tie-up of bank with operator.

For profit organizations that are allowed to manage the last-mile agent network

Agent network at last mile who are conduits for cash-in, cash-out, collecting KYC info, maintaining territory and customer detailsd

e.g. POS product vendors

Page 4: Mobile money – market insights : India

Mobile Money Ecosystem

Market Situation in India

Challenges for M-Payment in India

Page 5: Mobile money – market insights : India

1. Mobile Operator view

High End Users

Smart Phone and GPRS Users

Migrants (From Small towns to Cities)

Government generated labor employment

>100k

>50k & Youth

>8k to 15 K

<2 k

Value in INR per month

Potential Mkt in India

Page 6: Mobile money – market insights : India

Mobile user market divided broadly in 4 segments as figured in previous slide. The most viable market segment for M -payment is the 3rd block i.e. Migrant population). Migrant population is the segment of people who have migrated from villages/towns to the big cities (Huge population segment of India) for earnings and support their families back home. The main problem they face is sending the earned money to their relatives back home in the absence of bank accounts at both recipient and senders end. Transferring money through intermediaries is also very expensive and risk prone.

The M Payment Offers an interesting and (possible cost effective) method of remitting money (Cash – out) at much more affordable price, almost real time and with reasonable security to the end Users. The goal of operator is to ‘generate another revenue generating stream’ that can be sustainable and profitable

Page 7: Mobile money – market insights : India

Nearly 69% of the Indian population is unbanked. Case in point being that there are ~600000 villages in India that do not have Banks, hence making it impossible for the village population to have a bank account. Moreover the Banks’ current distribution channels are insufficient to reach out to this segment, however the mobile operators’ distribution channel have been able to penetrate this segment. This distribution channel can be exploited by banks to increase penetration. The banks see the mobile operator distribution channel as the means for FINANCIAL INCLUSION goal and to acquire new banking customers. M Payment is a means for attaining this goal

2. Bank view

Page 8: Mobile money – market insights : India

Mobile Money models : World Over 2 models are seen

Operator Driven:- Operator Owns the customer

Bank Driven :- Customer Owned by Banks

In India it is a bank driven model and the regulations are driven by RBI (Reserve Bank Of India)

Page 9: Mobile money – market insights : India

RBI M -Payment Regulations in India : -

RBI has allowed 38 banks for Mobile Banking in India (only a few out of these have actually applied for the licenses)

Different Models and Licensees

Since the largest customer segment requires Cash-Out as a basic facility, the banks stand to gain in the current regulatory environment. The operators are Unclear at the moment at the viability of the business case for the other models shown above.

Sr No Models Example Remark Licensee

1 Closed

Within Entity. Cash-in by customer and in return

can redeem Voucher from the business entity No Cash-out Allowed Operators allowed

2 Semi-Closed Bill Payments, Utility payments Ticket etc. No Cash-out Allowed Operators allowed

3 Semi-Open

Any POS terminal. Customer Cash-in can be used

to pay at any POS terminal No Cash-out Allowed Operators allowed

4 Open Cash-Out Allowed Cash-Out Allowed Only Banks allowed

Page 10: Mobile money – market insights : India

Mobile Money Ecosystem

Market Situation in India

Challenges for M-Payment in India

Page 11: Mobile money – market insights : India

Operators:

Unable to address major target segment (migrant population& unbanked population) on its own. More dependant on tie-ups with banks.

Business case does not appear clear at the moment - risks being used by banks as a dumb-pipe

Unclear ROI

Operators sees regulatory framework in favor of banks

Banks

Meeting KYC (Know Your Customer) norms impacting customer acquisitions

Risk of increasing NPA (Non-Performing Assets)

Inefficient Delivery Models (last-mile network of agents for cash-out, cash-in, ensuring KYC norms)

No. of Transactions are inefficient – most of the cash-in remittances are cashed-out all at once at the recipient.

Page 12: Mobile money – market insights : India

Market has ~ 150 technology providers offering m Wallet based applications

Core-banking solution providers ‘tweaking’ their product for m-payment (e.g.Infosys product ‘Finacle’ was used for Bharti’s m-payment solution

Differentiating your platform is the key (e.g. interworking experience with various BSS systems, scalability & proven robustness)

Page 13: Mobile money – market insights : India

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