Building an Open Ecosystem Asian Banker Summit, Hong Kong, 8 th 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-ledBank-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 ? A clear centre of gravity for financial services and expertise Banks offer But there are challenges in Reaching mobile subscribers mobile platform support mobile consumer experience Other devices Merchants Banks F. I. Operators Nokia Consumers

For Everyone, Anytime …on Any Network, Any Mobile 5 © N o ki a V 1 - F il e n a m e. p p t / Y Y Y Y - M M - D D / I ni ti al s 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 systems 6 Local Entity: LPSP Payment Service Operator, License Technology Platform R&D, IT, scheme rules Bank Retail Network Wholesale banking Distribution/ retail partner/ Operator Nokia Markets, MFS Contractual relationships Nokia perimeter of influence Bank perimeter of influence 2 3 Nokia Preloading 4 Bank Partners Post Office, Agents 5 Operator Distribution 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). ab cd Nodes 2, Connections 1 Nodes 5, Connections 10 Interconnecti ng these networks creates one large network with many more connections a, b, c, d interconnected Traffic between nodes is proportional to the square of the users connected 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 now taking 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 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 © 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

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