Mobile Money Africa

MMA: Some Mobile Money players are actually managing their services like a Product.Is it really a product or services?
GENCER :I think the more important question is: Is a mobile financial offering a transformative new business or simply a new channel for distributing existing services/products? For instance, mobile banking may be viewed as a new channel to reach banked customers with their online banking services 24×7. New mobile payments offerings, like mPesa, are transformative businesses since they offer a new set of products and services to unbanked customers that have been unable to have access to financial services in the past. This means a lot more than just extending existing banking services to new customers. It implies a brand new infrastructure and way of reaching a very large set of people with a new business model (tailored for a wide-set of low-income individuals.) The level of complexity involved with setting up the business extends from regulatory considerations to new marketing and agent channel setup. The business model and strategic implications of offering such a business will impact the way non-financial institutions (like MNOs) will interact with their customers moving forward. I liken this to PayPal on steroids… because it involves regional payments offerings, with new regulatory considerations around electronic money as well as cash-in and cash-out, for a set of customers that have never been served previously.

MMA: Mobile payments is transforming the way people react with money in parts of Africa,do you think such successes can be replicated all over Africa?
GENCER: Anyone who has been in payments for any set of time will argue “the devil is in the details.” As such, every country, every market will need to be carefully scrutinized to see whether 1. there is a customer need for a mobile financial services offering, what the current behavior is , whether it can be modified over time, and what the offering will be; 2. the regulatory dynamics will allow for it; 3. the business case makes sense to pursue; and 4. there are a set of entities that will be able to successfully execute on a plan.
The rule of thumb is, if there is an existing way of making payments and it’s reasonably secure, convenient, cost-effective, and ubiquitous, that market may not be a market ripe for mobile financial services. However, in markets where there is a need to overcome a pain point around money movement/services (in one of those areas), those markets will be good targets.

MMA : Is Mobile money a hype?
GENCER : Yes, there is a lot of hype around Mobile Money. Is it justified? Mobile money can mean many things… mobile banking, mobile remittance, mobile payments (proximity and remote), or mobile microfinance. My strong view is: In the developed world where banked customers have excellent means for transacting today, I don’t see a strong customer value proposition beyond the “sexiness” of the concept. People will adopt, but not en masse. Nor will mobile financial services significantly impact their lives. There are a few exceptions to this rule in the developed world where mobile payments make sense: 1. Transit and micropayments based on cash (where cash has been predominately used and the payment method is painful today); and 2. To serve the unbanked who are predominantly cash-based customers and do not have effective payments instruments available to them.
In emerging markets, the hype is more justified where 4 billion people live on less than $8/day. Enabling electronic money movement by reaching these people through the most ubiquitous device in the world (mobile phones) has the ability to change the financial lives of these individuals while significantly impacting the economies of these markets by connecting them to financial assets globally for the first time in history.

MMA :MNO vs Bank Model,which is best for Africa?
GENCER :I don’t see that there is an “either/or” answer here regarding MNO vs. Bank. I will focus on emerging markets for this question. First of all, again, markets vary, but my general point is: MNOs and banks are working and will continue to work together because they need each other. MNOs are needed as the entities that will connect with the masses of unbanked customers directly (banks don’t have the financial motivation to serve these customers directly.) MNOs will provide the virtual bank accounts, the retail footprint, and the marketing/education for customers on the services. Their partner banks (or alternative financial institutions) will do all the money reconciliation and settlement, potentially holding the funds as an aggregated merchant account (similar to the PayPal model), as well as offer the compliance and regulatory support around mobile financial services.
Another question to consider is: To what extent will large, global banks WANT to get involved with the unbanked in their various markets? These entities may decide not to participate for fear of negative brand and business impacts associated with improper KYC and regulatory compliance issues while serving unbanked customers through MNOs. PayPal grew rapidly because they had no fear of getting it wrong 10 years ago. A similar mindset will be needed in this market by a financial institution who has less to lose and much to gain.

MMA :Africa is lagging behind in capacities to deploy Mobile Money,what options are open to players in Africa?
GENCER : I actually think Africa is in the perfect position for mobile money because the financial services industry is not as developed there as elsewhere. As such, similar to what happened with mobile telephony vs. fixed wire, Africa is in the perfect position to leapfrog traditional banking infrastructures with mobile financial services. I see this as an advantage since other developed markets have a “good enough” solution for consumers today which will prevent true consumer adoption of a new system (no need). This is why so much innovation is currently happening in Africa.

MMA : The MPESA Model seems to be a major attraction for Mobile Money players,are we seeing a one-size-fits all emerging?
GENCER : No. When it comes to payments, every market differs significantly because consumer behaviors around finances are considerably unique from one market to the next (as well as other factors including regulations, market dynamics around the ecosystem of players, etc.) From my experience at PayPal, every market was scrutinized carefully to understand how people interact with money, payments, etc. as well as the regulatory aspects of the country. How consumers paid for things even in Italy differed significantly from their habits in the US.
In Kenya, there are over 6.6 million consumers using the mPesa network. In Tanzania, the adoption rate is lagging significantly. There is no “one-size-fits-all” approach, but there are certain principals that are emerging that should not be overlooked. There will be methodologies employed and ways to scale mobile money services so that it can be cost-effective. Localization will always be critical, however.

MMA : What roles can firms like mpay connect play in the emerging ecosystem?
GENCER : We are just at the beginning of this very exciting industry. Innovations around mobile financial services are emerging worldwide on the disparate projects that are taking place. mPay Connect is a bridge for those ideas, people, and businesses. Every week, we reach out to mobile financial services colleagues world-wide to understand best practices and bring those important principals, ideas, and partners back to our clients seeking to enable mobile financial services.

MMA : Do you see Mobiles winning the cash King in Africa in coming years?
GENCER :Two things to keep in mind here: 1. Old habits die hard (especially when it comes to financial behavior); and 2. Cash can’t fight back. Old habits will die and cash won’t fight back when a significantly better alternative to existing financial services exists.
But, I think the real question here is “what does success look like in mobile financial services for Africa.” If, through mobile financial services, we can have a significant positive impact on the GDP of African countries and enhance the economic means of Africans through sustainable, replicable and profitable businesses, then we will have “won.”

MMA: Thank you for your time.

Meneske Gencer, former Director of Paypal Mobile,Director at Mpayconnect.
mPay Connect provides strategic, product planning, and business development consulting services to clients interested in offering mobile financial services to their customers. mPay Connect is experienced in serving clients with banked and unbanked customers world-wide.

Zenith Bank has again demonstrated its leadership position by pioneering the Near Sound Data Transfer (NSDT) technology of Tagattitude Inc in Nigeria.
At the just concluded Card Expo, held at the Civic Centre, Lagos, Zenith Bank showcased an ATM which allows anyone with a mobile phone make the same transactions which were heretofore only available to card holders.

With NSDT, anyone with a mobile phone can make ATM transactions, POS transactions and enjoy other banking services. The service works on any mobile phone on any network.

In Nigeria, there are over 60 million mobile phone subscribers while there are far less than 15 million card holders.
Zenith Bank has just concluded a pilot run of the technology in partnership with Tagattitude Nigeria, and plans to introduce the product to the market soon.

Mobile financial services continues to be the topic on everyone’s lips, both those in the banking and mobile sectors. There are many Companies that see the huge potential of this new service and are actively pursuing strategies to get a foothold in the market. Africa and other developing parts of the World are especially seen as key battle grounds for mobile financial services. Some countries in Africa have already shown that this mobile financial services can be a huge success, none more so than Kenya with M-Pesa. The service caught the Banks by surprise and has now surpassed the Banks in terms of number of users and number of transactions. Is this likely to be the case all over Africa? IS this also going to be the case in Nigeria, the biggest mobile telecoms base, by subscriber?

Already in Nigeria Money Box Africa has already applied for and been granted license by CBN (Central Bank of Nigeria) to provide mobile based financial services. MTN and Zain have made applications to provide mobile financial services and as expected by many, the Banks have gone crying to CBN not to grant the two mobile operators license. Is this the right approach by the Banks to try and fight off competition? Can this approach be good for Nigerian consumers’ long term and should the operators be granted these licenses?

Firstly, CBN granted Money Box Africa license to operate mobile financial services. This was done despite the fact that no regulation/regulatory framework was in existence at the time. To CBN’s credit it has now been widely reported that a regulatory framework now exists. However, will part of any regulation mould itself in the image of Money Box’s services since this existed before any regulation or will Money Box have to make some changes to its services to comply with regulation? While this poses and interesting conundrum, it is small fry in comparison to the battle that has now commenced between the operators and the Banks.

MTN and Zain have applied to operate mobile financial services. ON the face of it there shouldn’t be an issue with them looking to expand the services they provide. However, there is a lot wrong with this and Nigerian mobile users should be concerned. To date the operators continue to provide relatively poor service. There is no doubt that there are factors beyond their control that contribute to this, but operators seem to be milking these as reasons to continue to offer poor service. There are many things that operators can d to improve the services but they choose not to for fear it will affect their huge cash mountain and their extremely healthy bottom line. The issue that should be of most concern is that the operators, if granted the licenses, will be looking to use the infrastructure they currently have that have proved to be inadequate for providing basic mobile telephony to provide mobile financial services. Before CBN considers license applications from any operators it should get assurances that infrastructure will be improved sufficiently enough to provide good service. It should also obtain a plan of action to improve the infrastructure. This should really be the role of NCC but………Granting them the licenses without improvements to the infrastructure will be a disaster for consumers. There will be incomplete transactions galore and trying to resolve this will prove very expensive, assuming the operators can set up a customer services department that actually sympathises with the customer’s plight and look on the customer as a nuisance.

What about the Banks? Nigerian Banks to date have been reasonably successful, stable, and happy with their lot. This has made them extremely complacent and lazy. Zenith Bank may be excluded from this because its founder and CEO recognised that there are potential synergies and set up Visafone. EFINA’s (Enhancing Financial Innovation and Access) undertook a survey in 2008 on banking and financial services. The survey suggests that an incredible 79% (68 million) Nigerians and un-banked. It also reported that 61% of the un-banked would like to have bank accounts. The survey went further by asking people of their perception of Banks and 40% said that Banks force them to keep minimum balances. The survey is a must for anyone that wants to know more about the poor state of financial services in Nigeria.

The Banks are doing handsomely well from those that have bank accounts. This is largely due to high charges for transactions. The Nigerian banking model is very heavily dependant on retail banking, hence the requirement for account holders to have minimum balances in their accounts. This model is very early 20th century and Nigerian Banks need to radically update this. Further, there is no real competition among Banks for customers. Many of the charges across the board in all Banks are not hugely different and do not offer real choice.

Banks in Nigeria have tremendous opportunities to make themselves the biggest financial institutions in Africa. They need to target the un-banked, including those in rural areas. They also need to make their products and service much more attractive to existing and potential customers. This can be achieved in various ways, but should include reduction in their charging structure. They also need to cease the crazy policy of having high minimum balances. There are also complementary products and services that Banks can provide to retain existing customers and attract new ones. One of this is mobile banking, mobile financial services and prepaid debit and credit cards.

Nigerian Banks were well aware of the potential of mobile financial services prior to the operators becoming interested, but chose to ignore it. Nigerian Banks also have mobile banking services but choose to be selective in the customers that can have access to the service and why be selective about prepaid cards when there is little risk and there is potential of further revenue.

The current battle between Banks and operators over mobile financial services is one the Banks can win quite easily if the develop a strategy that will enable them to provide services to the un-banked. This should not have been a contest at all but the Banks complacency has made it into one. The Banks need to develop a strategy for mobile financial service and implement it ASAP and the battle will be over. The bottom line is that given a choice of using mobile financial services offered by a Bank and one offered by an operator, most Nigerian’s will opt for the Bank. They are likely to view the mobile operators offering with some suspicion and scepticism. It will be a case of ‘as if they haven’t taken enough from us already’. Simply asking CBN not to grant mobile operators licenses can only be a temporary measure, one that the Banks should take advantage of and develop their own mobile financial services.

Finally, as mentioned further up in this article, the CEO of Zenith Bank saw the potential convergence of telecoms and financial services and acted quickly. What is to stop a consortium of Banks acquiring M-TEL and taking the fight to the operators? The first observation will be to point out all that is wrong with M-TEL, but it is much cheaper than starting from scratch. Nigerian Banks need to diversify and telecom is as good as any sector to diversify into.

Graham Orodje, CEO of Taurus Mobile contributed this piece from London.
graham-orodje@taurusmobile.com

Nigeria with only 18 million Bank accounts and 62 million Mobile Phone subscribers is posed to be Africa’s biggest market for Mobile Money in coming months.Despite the late start of Mobile Money in Nigeria, the strong compelling needs of the millions of unbanked populations will propel it to enviable heights that will surpass kenya’s seemingly achievements with 6.5m subscribers with MPESA in coming years.

With four world class Mobile operators, 25 large commercial Banks and 840 micro Finance Banks and an addressable market of 140 million people and newly released guidelines for Mobile money by the National finance regulator, The Central Bank of Nigeria, the stage is set for Africa’s most populous Nation to commence Mobile money roll outs.

The mobile operators are positioning themselves for a significant share of the market. MTN Mobile money platform will go live in coming weeks while the likes of Zain are working towards a launch too. It is not too clear yet the plans of operators like Glo and Etisalat in the evolving mobile money ecosystem in Nigeria. From the Banking sector, UBA Group and Zenith are looking like top contenders. Zenith Bank recently conducted public demonstrations of Mobile money transfers with technology provider, Tagattitude Nigeria at the Card expo event in Lagos.

Despite all the technology and marketing budget that will be thrown into these ventures by the Banks and mobile operators, agent networks will play a significant role in the success of these enterprises. While the operators which are known for low value and high volume transactions with very useful experiences in managing transactions through agent networks for pre paid cards distributions, same cannot be said of Banks with little or no experiences in Banking through agents. Banking through agents is a novel in Nigeria.

Agent Banking is popular in Peru, Brazil, Kenya and Phillipines. In Agent Banking, it is basically a technology play for Banks. They provide the technology that enable Banks and their customers to interact remotely in a trusted way through existing local retail outlets. Without the likes of large retails store chains like shoprite, Dunns or UK’s telcos,the players will have to make do with what is available, the eateries and gas stations. Mr Biggs is a very prominent eatery with over 907 outlets in major urban and semi urban towns across the length and breath of Nigeria while the gas stations are present in cities, towns and rural areas.

These outlets will perform cash in / cash out points for Mobile money, serve the customers, may enroll customers and implement simple KYC while the Banks manage the technology platforms. The advantage of using these channels are,cash are available in the merchants kitty from shop sales,the cost of setting up brick and mortar Branches are significantly reduced, agent provides the space, energy and trained manpower to provide services to customers.

Set up time is also significantly reduced. An agent can be set up and running in 5 hours while it will take average of five to six months to commission a Bank Branch.

Experiences has shown that agent Banking can help Banks decongest Brick and mortar Branches, expand into new commercially unviable territories, create a virtual Bank and tapping into new customer segments that were previously left behind.

Though it is not all sweet honey pot banking through agents. Risk such as security, ID manipulations and Point of transactions frauds are issues that the Banks will have to tackle through such third party relationships. With adequate risk management, robust technology platform and proper training and monitoring systems, Nigerian Banks may be on their way to joining the likes of Lemon Bank in Brazil without a single Bank Branch while working through over 5,000 bank agents. Welcome to the future.

Emmanuel Okoegwale

Interview with Morten Hofstad, Head of Business Development for MENA

MMA: How is Luup’s technology able to empower millions of Africans which are currently under Bank?
Morten: LUUP have develop a platform through the past 10 years. This platform is independent of cards, mobile phone. This is a independent platform for the unbanked community. LUUP is the only player in the world building a global platform for mobile money remittances. We offer the African continent a network of sending countries with the LUUP platform.

MMA: Many Mobile Money providers are focused on the technology without much considerations for the regulatory aspects.How are you positioned for AML and KYC issues in Mobile Money?
Morten: LUUP was the first company in Europe to be granted the E Money License. LUUP technology is build based on KYC, AML, and offer a excellent monetary systems for local authorites. LUUP is coming with a bank mind and doing partnership with financial institutions based on this.

MMA: can the platform work cross border in view of some Banks,having African networks?
Morten: Yes, LUUP works cross boarder and can offer account to account systems and account to cash systems (MTO)

MMA: Device management is a key issue in Mobile money and many Africans use low end phones. How compatible is your technology to Low cost hand set.
Morten: Our systems support SMS and Java, independent if there is a new or old mobile handset.

MMA: Luup’s footprints Globally?
Morten :LUUP is well established in Europe, a global agreement with Deutche Bank, working with MTO’s and banks. Latest on international remittances is our expantion of the Arrow service with National Bank of Abu Dhabi. LUUP is the only player in the industry offering a technology platform for a international network of mobile payments with a solid bank mindset.

MMA: What should Africans expect in coming months or years from Luup?
Morten: Luup will be offering sending Africa a network of banks internationally that is hooked up to be remitting money to Africa. LUUP platform will enables African to do domestic transfers and bill payments with the same platform.

MMA: What stands Luup’s technology out and what milestones had been achieved? In Europe or elsewhere?
Morten : Luup was first European company to be approved the E money license. LUUP was the first mobile payment system to be launched in Middle East, LUUP will be the first system to launch international remittances on the mobile phone to Africa and at the same time offer a domestic payment platform.

Interview was conducted by Emmanuel Okoegwale on 6th July, 2009.

Mr. Morten Hofstad and Mr. Ahmed Al-Naqbi.

Abu Dhabi – July 1, 2009: The National Bank of Abu Dhabi (NBAD), the number one bank in the UAE, and leading mobile payment provider Luup International Ltd, TODAY announced they plan to provide a mobile money transfer service across the bank’s international network
NBAD enjoys the largest overseas network of all UAE banks, with 42 overseas units located in 9 countries on four continents.

The new service will be a valuable addition to the already popular Arrow mobile payment service provided by NBAD, via Luup’s mobile payment platform. Arrow, the SMS based payment service, allows customers to access their bank accounts via mobile phones to pay, send, and receive money around the clock.

Utilising Luup’s mobile payments solutions and NBAD’s powerful local, regional and international reach, the planned service will offer customers a fast, secure and reliable means of sending money internationally regardless of their mobile phone or network. Initially, the service will be available to NBAD customers but it is planned that it will be offered to a wider audience.

Luup enables banks, corporate customers, exchange houses and institutions to offer mobile payment processing, mobile payment interfaces and virtual mobile phone accounts. Luup will use its existing technology and expertise to develop this service for NBAD.

Luup and NBAD expect to announce further details on the initiative later in the year.

“Our market leading Arrow service has already proved to be a great success with customers, who have embraced the speed and convenience of mobile payments. Adding this service to Arrow will allow our customers to send money to each other, wherever they are, simply by using their mobile phone,” said Mr. Ahmed Al-Naqbi, Senior Manager, Channels and Electronic Banking Services at NBAD.
“Working with Luup to deliver mobile payments to our customers has added an exciting new dimension to our business; one that that we believe has huge further potential and we are already working on more products and services for our Arrow customers that we’ll announce as soon as they come online.” Mr. Ahmed Al-Naqbi added.

Morten Hofstad, Head of business for Luup in the MENA region said: “With over 7 billion mobile phones on the globe by 2015 mobile payments will undoubtedly playing a key role in the future of financial services. NBAD was quick to see the potential of mobile technology and by working with Luup is now is in a great position to capitalise on the benefits that mobile payments offer. This is an exciting development and we are delighted to continue to work with NBAD to provide innovative solutions for the bank and its customers.”

Press Release submitted by Emmanuel Okoegwale

EVP - Global Technology Partners, LLC

MMA: International Credit Card Processors with their new technology are catching up fast in Africa and Nigeria, how is the Global Technology Partners (GTP) card model different from others in the market now?

The primary difference in the models will be that the GTP platform will open up full banking services to ALL Africans, not just the “bankable” Africans. With over 10 years of experience in the US markets, the GTP family of affiliated companies now provide payroll services for large companies as Wal Mart, Radio Shack and Walgreens and many more, saving these companies millions of dollars a year by using a prepaid card. GTP is a boutique processor (100% prepaid experts) that work closely with banks to implement successful programs leveraging our experience. With our card to card transfer feature, one family member can be in Lagos with a card, the other in the UK, Italy or France and send money in real time through the GTP system. The system allows for a “real time” transfer of up to $10,000 USD a day for only $2 or whatever fee the bank sets. (USD). The consumer will see significant savings for not having to use the traditional money transfer/remittance companies. Each consumer will receive an SMS alert that the funds were sent, and that the funds were received on each of their cell phones by SMS and the funds are loaded onto the Visa card for immediate use at an ATM or POS merchant. The GTP system was built strictly for prepaid. We do not have to integrate with the banks as many of our competitors do, so if the bank is a current Visa issuing member, we can have them marketing their custom Visa prepaid card in less than 90-120 days. Most of our competitors take 5-10 months. GTP handles the program mostly in a turn key fashion for the bank, making it an easy integration for the financial institutions. System security and compliance are paramount to the GTP system; we staff a full time compliance officer to work closely with the banks for all KYC and AML requirements. The GTP system is also currently being integrated with a mobile provider to allow full functionality on your mobile handset to use on WAP enabled phones or by SMS to move funds. We will also allow mobile top up from texting to a certain number and the amount of top up will be deducted from your Visa card balance and the top up PIN will be sent by SMS. This will eliminate the use for mobile scratch off top up cards.

MMA: Can you please give us an assessment of prepaid card Business in Africa, generally?

GTP brought the first Prepaid Visa “Classic” card to West Africa in December of 2007 with BIB bank in Ouagadougou, Burkina Faso (Africards Visa Card) who sponsored the program. BIB won the award for bringing the newest technology in card programs to the region. BIB’s card program has been highly successful and consumers are enjoying the benefits of having the first Prepaid Visa “Classic” re-loadable card in the region that can be used worldwide. The prepaid market in Africa is still in its infancy stages. The more aggressive banks are beginning their prepaid programs now and GTP feels that they will be the dominant and successful players in the market as they will continue to learn and adapt to the consumer needs. The processor plays an important role to assist the bank as a partner, not as a vendor. Many of the current prepaid cards are not Visa classic cards and cannot be used “out of country” or do not have the money remittance or mobile features as the GTP product. The current cards in Africa are generally only used for payroll type cards without the feature rich add ons.

MMA:How is GTP Limited positioned to give value and change the Market dynamics?

Since GTP is a Visa approved International processor, we work with the banks to create a financial model that works for the consumer. Our experience has taught us that the consumer must see the value proposition in the product before they will give it a test drive. It’s also imperative to have value added features tied into the card for additional consumer benefits. Our goal is to save the consumer on money remittance and provide alternate options to provide more convenience in their life. Prepaid cards typically provide a solution, to an existing problem for consumers, making their life easier while saving money.

MMA: Many users have reservations for prepaid cards when it comes to security, what are you offering that will give Users, rest of mind?

It’s the prepaid card that gives this security to the consumer. Consumers would rather shop online with a prepaid card and NOT their credit card or debit card as that could compromise their primary banking account cards or have issue with identity theft. With prepaid, you load the value onto the card and use as you wish. Visa also stands behind the product and should the card ever be lost or stolen, we replace the card with the balance that was on it before.

MMA: Your footprints in Africa

GTP has been working in Africa for more than 3 years now and was the first to enter the prepaid sector with the features our system deploys. We are working with many major financial institutions to bring this product and technology to the continent. We performed our pilot in Burkina Faso, and have begun implementation with the CTMI for the West African region. We have other banks we are working with in Cameroon, Mali, Mauritania, Senegal, Nigeria, Gambia and Kenya. (And others)

MMA: Nigeria roll out plans and local partners?

GTP is in current discussions with various large Nigerian banking partners and cannot disclose these partners at this time. We will be able to make an announcement within the next 30 days as to who these partners will be.

MMA:Benefits for financial Institutions, merchants and end users

Under the current worldwide financial crisis, financial institutions are looking for additional income streams to strengthen their balance sheets. The Prepaid sector provides the bank a new consumer and a new income stream, thus increasing their deposits and increasing the banks profitability. Merchants will have more POS machines making it more convenient to the consumer to make additional purchases without having to carry so much cash. The end user will save money with the money remittance card to card transfer capability. Being an American based company, we are in the process of issuing a Visa card to the Nigerians in America, tied in with the card issued in Nigeria for a turn key card solution for Nigerians in America and in Nigeria. We will than develop the same process for the UK, France and Italy.

MMA: How Does Visa deliver better value than other Prepaid cards?

Visa is the primary brand in Africa. In the West African region, Visa and its member banks have more ATM machines than any other network.
Regulatory compliance for cards is a major challenge, what are your strategies in this direction. GTP works with the banks under the rules of each specific country along with the Central Bank. The cards do require a form of government issued ID and a signed application to mitigate AML and Know Your Customer requirements. Our platform is a flexible system that can be modified to allow for velocity changes to comply with local law.

MMA : Market positions in US

Our CEO Mr. Bob Merrick founded FSV Payment Systems that is now the 3rd largest processor for prepaid cards in the US. We began GTP about 4 years ago as our International division to expand into the underserved regions and GTP has made Africa a strategic growth initiative for Africa for the next 5 years. At GTP, we are prepaid experts and not a group that provides multiple banking services as most competitors. Prepaid is a new channel for financial institutions and there is a certain spirit that will separate the winners from the losers. We at GTP feel that with our experience, our banking partners will be the leaders among their competitors.

MMA : Is GTP Limited looking at opening a local office or working through partnership
GTP has formed a local company in Abidjan, Cote d’Ivoire and is currently opening an office in Abidjan. We will also be opening an office later in the year in Lagos, Nigeria and Accra, Ghana. We are currently discussing the idea of forming a new company and bringing in an African partner to assist us in these operations for an equity position in this new company in an exclusive nature for the entire continent of Africa.

MMA: Is Nigerian Market ripe for mass prepaid cards adoptions?

Definitely. The GTP prepaid platform with its feature rich advantages will transform the way Nigerians conduct their financial business. I see Nigeria as a prime market that will be the top market for prepaid in Africa.

MMA: Product Lines.
GTP product lines include the basic general spend reloadable Visa Card, an International Money Remittance Visa Card, Visa Payroll Cards, Travel and Expense Cards, Vendor Payment Cards and Consumer/Merchant Gift Cards

MMA: Any plans for Financial inclusion for the unbanked and Microfinance in Nigeria?
We are in current discussions with many microfinance groups in Nigeria and others across Africa. This product will revolutionize the manner in which the unbanked can now enter the financial mainstream and be able to remit money at a very low cost.

MMA : Lastly, what should Nigerians expect?
Nigerians should expect by 3rd Qtr of 2009 to have a Visa prepaid product that can be issued to almost anyone regardless of their financial stature and enter the worldwide financial mainstream. They will now have the “options” that the other developed nations take for granted. No bank account will be needed; the card IS your bank account. In the United States alone it is estimated that by 2010 there will be more than 7 billion transactions and $175 billion in volume with a 15 percent growth rate. The reloadable prepaid card has grown at a 40 percent annual rate. It is this industry expert’s opinion that Nigeria will see a similar growth rate or even higher rate when banks begin to connect to processors as Global Technology Partners (GTP) to offer this feature rich product to the Nigerian consumer with all the value added services, mobile interfaces and card to card features. For more information you can visit www.gtplimited.com or email websales@gtplimited.com.

David E. Dearman
Executive Vice President
Global Technology Partners, LLC
ddearman@gtplimited.com
001-501-339-4472 (USA)

Serge Doh
International Business Dev.
Global Technology Partners. LLC
sdoh@gtplimited.com
+1 9186059498

Aiaze Mitha

In spite of the upward trend in global remittance propelling remittance flows into Africa beyond the $38 billion mark in 2008 (out of a total market size of nearly $280 billion), the proportion of people living on less than $1 per day in Africa still stands at 45%, the highest in the world.

The significance of remittances in poverty alleviation is not into question: remittances have proven to bring macro-economic and household impacts in North African countries such as Morocco and Algeria, in addition to being a relatively stable source of income compared with other international aid and external flows pouring into sub-Saharan Africa. The question is rather: is the industry prepared to harness new technologies to further grow remittance flows into the continent, foster economic development and ultimately enable Africans to pay less for remits?

Any attempt to address this question should first discuss the specificities of the African market.

Africa is characterized by a weak financial system and a highly dynamic mobile industry. Access to the formal banking sector is limited, in most cases under 10%, at the exception of countries such as Nigeria, South Africa, Kenya, Egypt or Morocco, which have historically developed a sophisticated banking system. Migration patterns are complex and their implications for remittance need to be properly understood. Urban-rural remittances are a continent-wide phenomenon with their own dynamics. Intra-regional remittances follow different patterns and are underpinned by ethnic considerations. While remittances are deeply rooted in communities’ cultural habits, informality still predominates in most countries and the cost of remits remain relatively high (the cost of remits from South Africa to Mozambique, Botswana, Malawi or Zambia rank among the 5 most costly corridors in the world).

The mobile industry is in turn a highly dynamic sector, with a 40% CAGR and a global penetration of almost 40% across the continent. Along with the benefits of voice and SMS communication, mobile operators have given birth to a whole ecosystem of small businesses involved in customer facing activities. In terms of popularity and customer adoption, mobile phones have achieved an unprecedented status in Africa.

Is not there an opportunity at the convergence of mobile and remits?

The good news is that some pioneers have started challenging the prevailing models by harnessing mobile technology to enable lower cost domestic remittances. East Africa has been clearly leading the way thanks to the formidable success of M-Pesa in Kenya (now 6.5 million customers and over 7,000 accredited agents). In Kenya, the mobile channel is expected to enable remits at half the cost of a branch transaction, which is estimated at $0.91. What great news if a share of the savings was passed on to end customers.

As far as the other large African markets are concerned, most remain highly fragmented and often present regulatory uncertainties that do not allow the formation of a mobile-based disruptive approach yet. For the mobile opportunity to take shape, clear and certain regulatory environments will be needed.

On the international remit front, value chains are even more complex and require a sophisticated set of players and a clear set of regulations that go well beyond domestic markets. Setting up international mobile remittance requires complying with regulatory frameworks and addressing distribution issues in both the originating and receiving countries, which can prove to be inextricable judging by the unsuccessful attempt of Safaricom to enable the UK-Kenya corridor over their mobile wallet.

In the space of international remittance, the traditional mobile operator’s supremacy gets significantly eroded, opening up the place for new players and traditional remittance giants (Western Union, Moneygram and the likes) have a comparative advantage.

So what is the direction forward?

Several models are likely to emerge in the course of 2009/2010, among which a mobile-enabled MTO-type model, possibly led by Western Union and an MNO-centric remittance hub, potentially led by Belgacom ICS. The former will enable mobile based remits and leverage its unparalleled network of agents and its ability to comply with both domestic and international regulations while the latter will empower MNOs in both originating and receiving countries to fulfill international mobile-to-mobile remits via a centrally operated remittance hub.

With the current crisis affecting remittance flows into Africa, the average value of remit may drop from the current $400 average closer to the $50 mark. New players may be attracted by that opportunity but their ability to run at aggressively low cost structures will be fundamental.

All in all, mobile remittance is slowly becoming a reality for Africans, and Africa may well find itself to be leading the way on the world stage. But this market is still at very early stages of development and to fulfill its promises of lower cost remits for all Africans, several ingredients will be required:

1. Sound regulation: Central Banks will need to create an enabling environment for mobile financial services to develop and ensure that critical items such as e-money, AML/CFT, KYC and outsourcing are properly covered and that mobile remittance businesses are adequately licensed.

2. Interoperability, cost efficiency and scalability: for the market to scale up and deliver its full potential, some form of cost efficiency will be required at some stage. Aggregators and third-parties will have an increasing role to play in ensuring interoperability and bringing down cost structures by sharing the costs between multiple players and rewarding them based on risk and responsibilities. Existing infrastructure will also need to be leveraged wherever possible.

3. Customer focus: no product in history has succeeded without providing value to the end customers, and mobile enabled remittance products are no exception. Industry players will have to cater for the specific needs of each market, provide the right combination of comfort, security, ease of use, affordability and make African peoples’ lives easier. Then, they will need to figure out the next services beyond remittance if they are to be truly transformational.

Aiaze MITHA
Partner
AMARANTE CONSULTING
Aiaze Mitha is a recognized international expert in the field mobile financial services, with hands-on involvement in over 10 projects across Africa, Asia, Middle East & Central America. Aiaze has spent the last 3 years supporting Mobile Operators, Microfinance Institutions and Regulators in every aspect of their mobile money projects, providing strategic guidance, regulatory advice, technology expertise and implementation support.
Previously Aiaze directed M-Paisa for Roshan, the leading mobile operator in Afghanistan. The services rolled-out in the initial stage focused on payroll deposit, microfinance services and P2P transfers.

Prior to Roshan, Aiaze was Consulting Director with Devoteam Middle East, with a focus on the Telecom Industry and Financial Sector.