© 2007 GSM Association Notice: This document and its contents are confidential to the GSM...

© 2007 GSM Association

Notice: •This document and its contents are confidential to the GSM Association and/or its subsidiaries, who expressly disclaim any liability for the accuracy or completeness of any information contained herein. •All GSM Association meetings are conducted in full compliance with the GSM Association’s antitrust policy

M Commerce in Emerging Markets

Presented By: Ms. Asma Khan Warid Telecom

Meeting # GSMAP 27Venue : BaliDate : September 6th, 2007

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Introduction

• M Commerce & Emerging Markets

• Products

• Successful Strategies

• Case Studies


1. Tremendous growth in telecom and consumer banking Industry.

2. Efficient transfer of data over 2.5G and 3G networks.

3. The evolution of the handheld devices incorporating WAP and now GPRS.

4. Cost of entry into mobile commerce is low for most entrants.

5. The unique features of the mobile device are user friendly and customers have been attached to mobile interfaces

6. Attracting players from all economic sectors from technology, finance, retail, media; all anticipating significant growth in m-commerce.

Drivers of M Commerce Growth


M Commerce

Banking services are the essence of M Commerce.

Telecom services are more accessible than banking services in emerging markets.


M Commerce

Usage of micro finance is high in emerging markets. Telecom subscription can be and is a convenient way for financial activity.


M Commerce

Transfer of Funds to Emerging Markets has shown a steep positive trend

FDI: Foreign Direct Investment

ODA: Official Development Assistance


Emerging Markets

Key Characteristics of Emerging Markets:

1. Lower Average Income

2. Major segment of people have no interaction with Banks

3. Users prefer anonymity

4. Subscribers more comfortable with the prepayment concept

5. Government policies are geared to support M Commerce

6. Subscribers ease with SMS usage


Products

Mobile Commerce is mostly applied in the following categories:

1. Mobile Ticketing

2. Mobile Banking

3. Mobile Brokerage

4. Mobile Purchase

5. Mobile Marketing

6. Mobile Parking Meters


Products - Mobile Ticketing

1. Ticketing (Events, facilities, transportation e.g. , O2 UK & Ticketmaster

)

2. Coupons/Vouchers (Gift vouchers, discounts, meal plans. e.g. Sainsbury Europe

& Mac Donald in Pakistan)

3. Mass Transit(Buses, airlines, subway e.g. Telia, Tele2, Telenor in Sweden/

Mobile ticketing )

4. Loyalty Cards (Air miles, Usage, Mobilink Pakistan)

Source: http://www.mobilegolive.com/casestudies.htm, http://www.thelightagency.com/what4.html, www.mobilink.com, http://www.plusdial.fi/index.php?tid=59.


Products- Mobile Banking

1. Cash Deposits/ Withdrawals (Consumer Banking e.g.

Warid Pakistan)

2. Remittance (International/ Local transfer of money,

‘smart padala’ / Philippines)

3. Account Balance (Balance Inquiry, Mini statement, Warid Pakistan)

4. Cash management / Credit transfer (P2P transfer of money, Warid/ Pakistan, M Pesa/ Safaricom)

5. Credit Card/ Debit Card (Cash Transactions, Credit card charge notification through SMS, Warid/ Pakistan)

6. Monthly Payments/ Employee Payroll (Subscription/ recurring Payments, Warid Pakistan, M Pesa/ Safaricom)


Products – Mobile Brokerage

1. Trading (Investments, quotes, statements, e.g. Info services)

2. Stock and Shares (Investments, quotes, statements, e.g. Stock market )

3. Portfolio management.


Products - Mobile Purchase

1. Retail of low price products (Groceries, Tickets etc, e.g. McDonalds & Warid - SMS based purchases)

2. Mobile phone applications (Ring tones, Wallpapers etc,.)

3. Delivery Service (Gifts, food and beverages, groceries)

4. Other Goods and Service


Products - Mobile Marketing

1. Advertising Campaigns (New products, Subscription Services)

2. Charity Campaigns (Shaukat Khanum, Zindagi Trust)

3. Politics (Voting Tool)


Products – Mobile Payments

1. Parking meters/ coupons 2. Traffic Tickets 3. Point of Sale


Successful Payment Methods

• Charging mobile subscriber’s bill

• Deducting from subscriber’s calling credit.

• Registration of a credit card that is linked to a SIM card.

• Additional innovative methods can be introduced depending on the market


Pre-launch Planning

• Adequate system testing• Risk related to banks should be clearly identified (operations, strategic, reputation and

compliance)• Joint project management groups should be set up before launching• Types of services (e.g. informational or transactional) should be standardized and

comprehensively defined.

Security & Integrity

• Data integrity should be maintained with the use of encryption for all transactions• Every transaction should have a PIN; Account debit and credit occurs on receipt of PIN.• Customer receives text confirmation with every transaction, even ATM, POS and Credit

cards.• All accounts operate as debit accounts

M Commerce – Successful Initiatives


Marketing Strategies:

• Aggressive marketing campaigns and customer education initiatives are critical. M-commerce requires that customer are comfortable and well versed with all key dynamics of the service. The following activities are strongly recommend:

1. Comprehensive training of front end staff2. Customer education guides 3. Aggressive media coverage4. ‘Word of mouth’5. Know your customer initiatives



Marketing Strategies:

• Mechanisms to develop consumer confidence.

1. Branding the service2. Customer Loyalty Programs3. Customer Complaint resolution4. Clarity & Visibility

• Customer acquisition should be simple and convenient. This will make backend system more robust and will attract more customers.

• Expiration dates and limits should be strategically aligned with customer interest and revenue gains (e.g. lower top up has lower timeline)

• Low value transactions are recommended (< $10).

• Low charges are recommended to encourage high volume usage


Operational requirements

• Robust infrastructure and sufficient capacity for network to handle high volume SMS

• Process should be compliant to telecom and financial regulatory organizations• Simple process for depositing and withdrawing cash has been identified by

many experts as one of the key requirements for success of mobile commerce• Efficient communication of operators with banks and retailers will enhance

operational efficiency• Place effective triggers and controls to review system performance and

customer complaints• Accurate and comprehensive reporting options should be available• Establish business rules, competitive policies, standards and establish

surveillance.



Cont’d:

Policies & Procedures

• Fraud and money laundering issues should be acknowledged

• Maximum daily and monthly transaction values along with the balance thresholds should be standardized. These limits should be reviewed and analyzed periodically.

• Liability ownership should be transparent amongst Bank, Customer, Operator, Retailer and third party solution provider

• To establish stability in the banking and telecom sectors limits on entry and risk taking should be enforced.


M Commerce – Two Alternatives

Model Advantages Disadvantages

Bank Led 1. Banks already have banking license

2. Have access to financial records

3. Specialize in banking operations

1. Limited knowledge of target market

2. Limited knowledge of telecom related issues

3. Network has limited interest in promoting service

4. Banks will have trouble launching core telecom services for mobile commerce (P2P)

Telecom Led 1. Network has knowledge of target market

2. No conflict of interest

1. Requires banking license2. Network must acquire

banking skills


Philippines – Case Study

The key success factors in the Philippines model include

1. The ability for users to load prepaid airtime credits

2. Transfer both cash and airtime credits between customers

3. Low values set by the operator for prepaid top-ups or credit transfers

Users:An opportunity to become engaged in the formal banking sector, to facilitate and reduce the costs of

remittances, and to enable financial transactions without the costs and risks associated with the use of

cash, including theft and travel to pay in person;

Operators:A significant increase in text messaging revenues and a large drop in customer churn

Consumers: M-commerce is more secure and flexible than cash, allowing consumers to make payments remotely

Banks:An increase in their customer reach and the added cash flows available to the bank

Retailers:Added business opportunities through the sale of prepaid account credits

(An infoDev report Jan 2006– Micro-Payment systems)


South Africa – Case Study

MTN Banking is a mobile banking joint venture between MTN (Africa’s largestmobile telecommunications company) and Standard Bank (Africa’s largest bankinggroup).

The Mobile applications include– prepaid airtime – electricity purchases– bill payments– person-to-person– mobile card management.

Revenue model:MTN Mobile Money earns revenue through traditional banking and payment transactionfees. Commissions are also earned from prepaid airtime purchases, bill payments andPrepaid electricity.

(Source: MTN Website)


Kenya – Case Study

Safaricom and Vodafone launched M-PESA

Commercial Launch : March 2007

Kenya has a total population of 36 million (2007

estimate) of which 42% are estimated to be

under the age of 15. GDP per capita (PPP basis)

is approximately $1,200 (2006).

Key Usage:

1. Salary and Monthly rent payments2. Transfer of funds while traveling 3. Taxi Service charging methodology4. Delivery Services 5. Buying Airtime6. Medical Care and other payments

Source: The transformational potential of m commerce


Pakistan – Case Study

Pakistanis government prefers to launch M Commerce with bank-led modelsrather than telecom-led model

Orion (UBL)

Orion is one of the pioneering M Commerce initiatives in Pakistan.

1. Orion is smart, convenient and easy to use. 2. You can buy your prepaid talk time minutes over SMS instead of purchasing scratch

cards from the stores. 3. You can view your utility bills and can even pay them over SMS.4. 24x7 on any GSM network anywhere in Pakistan. 5. Customers can open Orion account via their mobile phone. 6. Anyone with NIC can use Orion Account


Pakistan – Case Study

Orion (UBL) Details:Service Silver

Account Activation Free

Subscription fee Rs. 390 for 6 months

Prepaid card Free

Pay 1% - Rs. 3 minimum

ViewBill Free

Bill payment Rs. 5 per transaction

Cash Deposit Rs. 10 per transaction

Cash Debit Rs. 10 per transaction

Load - At Branch Rs. 25 per transaction

Unload - At Branch Rs. 25 per transaction

Balance Inquiry Free

Balance 30,000

Debit (Daily/Monthly) 10,000/30,000

Credit (Daily/Monthly) 10,000/30,000


South Africa – Case Study

Wizzit is a virtual bank launched in South Africa in 2005. It has support from all the major

operators in South Africa.

Wizzit customers: • Are charged US$5.26 to sign up • Receive Maestro-branded debit card that enables them to make purchases• Get cash-back at retail outlets • Withdraw money at any South-African or Maestro-labelled ATM anywhere in the world. • Customers do not have a minimum balance requirement and are not charge fixed

monthly fees. • Use a pay-as-you-go pricing model, with charges ranging from US$0.13 to US$ 0.66 per

transaction depending on the type. • Have the ability to transact with any mobile user regardless of the identity of their network operator

To open an account, a Wizzit agent is sent to the applicant's home or workplace. The account can be used to send money to any other Wizzit account holder in South Africa, and

overnight to any other bank account holder. One of the main advantages of the service is that the mobile banking technology works on any

handset, and SIM card and across all the networks.

(Source: www.nextbillion.net)


M Commerce – Key Benefits

1. Lower costs 2. Quicker and easier delivery 3. Targeted marketing 4. Monitoring of consumer behavior 5. Lower environmental impact 6. Drives economic system towards cashless environment7. Low value transactions (example < $ 10)8. High transaction volumes9. Decreases Customer Churn


Thank You!

Telecom service has penetrated Emerging Markets so rapidly due to which Mobile Commerce has the potential to spread just as fast provided that various challenges are met.

Beyond the need to Security and Convenience, it is important to highlight that different customers in the diverse emerging markets will have distinct needs.

© 2007 GSM Association Notice: This document and its contents are confidential to the GSM...

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