migration to cash-less mode of payments 1st East African Finance Conference Addis Ababa migration to cash-less mode of payments Munir Duri, CEO Kifiya December 2016

Learning of what it might take agenda Why Migrate Challenges & Factors Learning of what it might take Context: Ethiopia

why migrate burden of cash usage on economies represent as much as 1.5% of the GDP Convenience Secure for the customer modern economies increasingly use and are dependent on effective large networks: telecom, energy, road, water ….. payment networks Transparency Traceable into the economy aids the journey to financial inclusion for both Urban and Rural segments cost saving for customer and businesses if at scale and if usability addressed improve market linkages and creates an efficient market place

Over the counter transactions Electronic Transactions journey to cashless REPLACE CASH WITH DIGITAL INSTRUMENTS CASH-LESS SCALED USE OF DIGITAL INSTRUMENTS CASHLITE BITS & BITES BECOME STATE UTILITY CASHLESS Optimized Cash Creating ACCESS digital accounts Over the counter transactions Electronic Transactions Utility Usability Regulator issues settles in bits and bites Scale Access Usage Cash Heavy Bulk Payer Transition Government & Large Buyers Differentiating and addressing utility and usability: introducing many to few payments, increasing adoption and usage

framing the challenge to migration to cash-less mode of payment Buyer pays to merchant using payment instruments and merchant and customer bears charges and commissions Card | Mobile carries cost to customer Payment instruments are issued and merchants acquired by enterprises and cost usually transferred Central Banks issue FIAT currency: issued as state utility for free Cash has no cost to customer Buyer pays to merchant in cash and receive face value equivalent worth of good and services

still cash transactions dominates development to date: we have come a long way From ATMs, POSs, Online e-Commerce, Mobile Phones (Wallets), Smart Phones (m-Commerce) to BITCOIN still cash transactions dominates Kenya In spite of having successful mobile money deployments [MPESA]: 85% of the transaction is still over the counter Europe 82% of transaction in Germany are made in cash [only 53% in value terms] showing small value transactions carry volume. India India has been leading the way in payment technologies and services, currently introducing new business models. Still over 80% of transaction is cash There is general consensus that we need to figure out on how to multiple transaction in all verticals, channels and instruments: HOW?

migrating to cash-less: basic factors affecting migration Access to Financial Services Marco Economic, Cultural Factors & Context Merchant | Agent @ Scale Technology & Infrastructure

migrating to cash-less: understanding and differentiating utility and usability Banks, MFIs, Cooperatives, Telcos Incumbents must take the lead USABILITY PSP, MMSP, FINTECH, mCom Disruptors must take the lead Ensure SCALE Drives ADOPTION Customer Support Account Management Business Model to return to C Simplify Experience Innovate on Products + Services Access Local Context & Factors

context: Ethiopia Macro Economic Conditions Demographic Population of 90m + evenly spread over an area of 1.1 m sq. km Telecom network infrastructure covering close to 80% of the country, with over 40 million mobile subscribers [32m active]. Target is by 2017 to reach 50 m active subscriber base Road network of 25,000 km, Rail network of 5,000: linking people and trade Active drive for rural electrification Macro Economic Conditions Demographic Potential: Urban + Rural Does not have simple and affordable means to effect payment for goods and services digital [electronically] close to 32% of the urban population does not have an active bank account MSME drive but need access to finance and linkages to markets Utility Access Usability 82% of the rural population doesn’t have access to formal financial service: a safe place to save, access to credit SHFs do not have access to non-traditional risk coping mechanisms SHFs don’t have easy access to markets MSME drive but need access to face and markets Access to Rural Clean Energy Utility Access Usability

Utility increasingly present Usability largely not present context: digital payment landscape NBE Credit Reference Bureau Very capable system 120 000 referenced data Does not do scoring or rating National Bank of Ethiopia National Payment System [RTGS & ACH] RTGS Function Inter-bank HV-LT Tax Payments ACH Function Check Challenges Banks connected only at HQ Level Banks have yet to interconnect branches No MFIs connected ET Switch Function Interoperability Routing Challenges Confusion on role Dashen CBE Wegagen PSS Abyssinia Banks OMO OCSCO ACSI DECSI MFIs TELCO Retail Payments Bulk Payments Digital Payments e-Commerce Mobile Payments Agent Services Merchant Services Innovative Payments Card Payments m-Commerce Utility increasingly present Usability largely not present

jointly we have to figure out ….. Governments must take lead: creating incentives and drive Regulators must create an enabling environment Banking Industry must play the incumbent provide the utility to scale Innovative Industry must bring in usability for scale adoption Developing the Business Model How to transfer savings on cost to customer Build business model that bring value proposition to customers and providers Create a complimentary ecosystem with many stakeholders that is sustainable and viable Building appropriate technologies and Infrastructure that enables development and distribution of innovative products and service that will create the plumbing for issuance and settlement that can drive the cost of distribution and access to become affordable Governments Lead and Regulators Enable Drive for a Digital Economy Strategy Set of enabling regulations New models within policy frame works: Incentives for drive and adoption

Thank You