7. • Pay interest on small deposits, thereby encouraging savings and defraying the damaging effects of
high inflation which is prevalent in a number of emerging economies.
• Create attractive savings products through term‐deposits
• Provide direct lending to users through agents and indirect lending through MFI’s and their agents.
This ability to create a multi‐tiered hierarchy is important in achieving reach and scale in micro‐
lending as it has long been recognized that local organizations that work closely with community
groups have the best success in understanding the user and providing support for their activities,
specially where the borrowers have no credit history or even collateral.
• Lower the cost of operation to lower the interest rate that users pay. In India, for example, user
lending from mainstream banks can vary between 9% for a secured asset to 18% for unsecured
loans, while established non‐banking financial institutions in the MFI business lend at rates between
24‐35% and money lenders between 0.5% and 1% per day! Due to the small ticket size and short
tenor of MFI loans, operational costs can actually be high which when coupled with access to more
expensive capital, translate to very expensive rates to the end user. Therefore bringing more people
into formal banking will have a huge benefit to the end user.
• Provide a direct model that brings transparency to government disbursements
• Provide micro‐insurance products with small regular premium collections as a viable alternative to
expensive large ticket products. For example India has farmer insurance for as little $1 per week,
however the cost of collecting the $1 is as high as $0.25
Drive consumer awareness and initial use
Usage of mobile money services will involve consumers changing their behavior. Moreover, the change
will typically involve a task that is critical to them today: a ‘life valuable’ use case. However, changing
consumer behavior in this way can be a daunting marketing challenge. Key to successful adoption is first
driving the awareness required that the service exists; fostering education around how it works;
developing or leveraging a brand that consumer trust; and creating security and comfort around the
new service and technology‐‐as well as incenting first usage. However, the good news is that there are
examples where this has been done, and when done well, became ‘viral’ with consumers using word of
mouth to tell each other of a new and better way to do things.
A very small percentage of consumers today have used their phones to make purchases, outside of
digital content (ring tones, phone minutes, etc.), and mobile money usage is in its early stages of
adoption in most markets. However, this is changing fast as more and more people become comfortable
with using their phones for almost everything including ,mobile banking. Mobile money services are also
being deployed very quickly with over 200 projects currently either in the market, or being launched
shortly according to the GSM Association. The country that has had the greatest success story to date
has been Kenya, where over 15 million users are now mobile money subscribers, and nearly 25% of the
country’s economy is transacted through mobile money. That success, in large part, was due to
consumer awareness. m‐Pesa, which is a subsidiary of the largest phone carrier in the market, spent a
lot of time and resource to drive awareness and first usage of the service, and in the process educated
the market. A big part of their efforts involved of their agent networks, as both a point of presence to
get the word out in a local market, and an educational storefront. Marketing campaign around the
country, and incenting consumer usage and agent commissions also played critical roles.
9. Building Blocks for an Open Collaborative Model
In most countries of the world where the need is greatest, success of mobile payment system similar to
Kenya’s will be extremely difficult to replicate because of fragmented mobile markets that challenge the
creation of a ubiquitous agent and merchant network. In emerging markets with a large number of
participants, the investment for any single entity will be huge and those that do invest will struggle to
scale if they try and do everything themselves. Once a network is established (critical mass of agents,
merchants, users, financial offerings), the Open Collaborative Model will encourage highest value, more
choice, more innovation and more utility. It is therefore vitally important to ensure that the basic
building blocks for an open collaborative model are developed in concert.
The Benefits of a collaborative model
The clear benefits of a collaborative model are the swift, successful and lasting development of a new
market that brings a new source of revenue and profit to the ecosystem partners and a dramatic effect
on the economy and the consumers in that market. Working in tandem, partners can help users start
with simpler, immediate needs and graduate to savings, micro loans and micro‐insurance products.
10. How to get involved
In a world where half the adult population lacks affordable and convenient access to simple banking
services, collectively we have an opportunity to significantly expand access to financial services with
mobile money. We not only owe it to the underserved to move quickly in delivering solutions that can
extend access and improve their lives. In addition, the private and public sectors also stand to benefit
greatly, accelerating the move from developing to developed nations. What is at stake is inclusive
growth and empowerment of the poor facilitated by a self‐sustainable framework.
In order to meet the potential of mobile money solutions, an open collaborative network must be
established. Building the right ecosystem is hard work, as each actor has their own interests. However, it
is important to do so to achieve the economics and scale required to address the potential of
significantly expanding access to financial services. Once a network is established (critical mass of
agents, merchants, users, financial offerings), the Open Collaborative Model will encourage the highest
value, more choice, more innovation and more utility, and as a result have the highest impact.
Today, there is already great interest from the private sector in investment for mobile financial services.
Yet these investments, absent an open collaborative approach will achieve only a fraction of their
potential. We recommend the creation of funded initiatives that will champion, conceive and execute a
collaborative ecosystem, as outlined in this paper, tocountries that have the need, motivated players,
and the regulatory environment to make it a real success. What this mean is:
• Private sector solutions need to support true interoperability, shared merchant acceptance, and
an Open Collaborative Model.
Governments and regulators need to also play a role:
• Public and private partnerships to increase awareness and aid in on boarding of first time bank
users
• National ID systems which lower cost and time of enrollment and reduce security risks.
• Government utilization of mobile money services for disbursements
For those involved or that wish to get involved or learn more contact us at:
partnerwithus@obopay.com
