1. Mobile money overview Prepared for the Chamber of Commerce By: Joep Roest (PFIP) Date: 7 April 2011

2. What can mobile money look like? m-wallet – Virtual wallet separate from bank account m-banking – Underlying bank account accessed through phone Linked wallet – Ability to move funds between bank account and wallet

3. Why does mobile money matter? Demand is high Scalable – no clear limit Cost effective delivery Reach Fast adoption Geography no problem Reporting Speed Security m-Pesa 8.3 million users after 4 years 40% of adult population 14,000 cash-in / cash-out stores $650m / month in deposits & withdrawals

4. Generally the following services… Send money (ONNET) Bill pay Payroll Self top-up Send money (OFFNET)

5. Micro loans Microsaving Online purchases Supply chain Payroll Micro insurance MFI transactions ATM cards G2P Link to schemes (VISA, Mastercard) MFI loan collection International remittances But later…

6. Players Mobile Money RegulatorBanksMNOAgents

7. Is there space for both mobile operators and banks? Transaction revenue Reduce airtime distribution cost First relationship & up sell Link a wallet to value added services Reduce prepay churn Customers & brand Retail & service reach Deposits Corporate & SME customers Regulatory Trust What mobile operators value What banks value What BOTH value What mobile operators bringWhat banks bring Mobile Money RegulatorBanksMNOAgents

8. Absolutely crucial Commissions & opportunity cost Super agent structure – Recruiting other agents – Liquidity Transactions – Signing up customers – Cash in – Cash out Ecosystem Mobile Money RegulatorBanksMNOAgents

9. Regulatory considerations Addressing systemic risk Managing money supply Addressing AML/CFT Address liability of agents Enabling Consumers Protecting Consumers Mobile Money RegulatorBanksMNOAgents

10. What makes a country right for mobile money? Young population Mobile phone usage is high or growing quickly Cash movement expensive/risky Cash is a large part of how transactions are completed – Bill payments – Payroll – Distribution payments. Geographically dispersed with significant domestic rural to urban migration for work. Need to send money home. Ideally, there are national network chains to partner with (eg Post, banks, distributors) Progressive regulator Enablers (M-Powa, credit transfer)

11. Great…..so how does it work?

12. A mobile money platform is a system that records balances held within mobile wallets. These balances represent bank liabilities and are accounted for within a trust account on a bank CBS Customer Agent Factory Agent Customer Mobile Money systemBank CBS  total Mobile Money trust account Q-money Superagent

13. 100 Customer 2,000 Agent 100,000 Factory 100,000 2,000 Agent 2,000 Agent 2,000 Agent 100 Customer 100 Customer 100 Customer 100 Customer 100 Customer 100 Customer 100 Customer Mobile Money systemBank CBS  total 258,800 50,000 Superagent Mobile Money trust account The total value of the mobile wallets is represented IN TOTAL in the trust account Q-money

14. Customer X Agent Z Customer Y 503002,0001,40010010 Customer X sends 250 Kina to customer Y in Madang - 250 260 +250 50

15. Customer X Agent Z Customer Y 503002,0001,40010010 50 260 Customer Y cashes out 260 Kina from Agent Z in Madang + 260 - 260 0 1,660 - 260 +260 360 1,740

16. Customer X Agent Z Customer Y 50 1,7401,6603600 Customer X cashes in 40 Kina at Agent Z in Madang + 40 - 40 + 40 1,620 10 90 1,780

17. Great…..so why should I care?

18. Other opportunities for business Bill Payments Bulk payments – Worker payments – Supplier payments Supply chain Distributor payments Ideas?

19. Advantages of MM salary payments Large number of workers paid & notified instantly Fewer employees managing payroll services Reduces cost of cash- handling for payroll Reporting Security benefits

20. Questions?