Mobile Payment Opportunity in the Middle East and Africa (MEA) Region

Transcription

1 Mobile Payment Opportunity in the Middle East and Africa (MEA) Region February

2 Mobile Payment Opportunity in the MEA Region Executive Summary The Mobile Payment (M-Payment) market in the Middle East and Africa (MEA) region is expected to grow rapidly over the next few years MEA M-Payment transaction value is expected to grow at 66% annually over the next few years, reaching USD 28.1 billion or 11.3% of the global value by 2012 Key segments of the M-Payment market are M-Remittance (84% of the expected transaction value by 2012) and M-Money, which includes retail purchases, airtime top-ups and bill payments via mobile phone Underlying drivers supporting this rapid growth in the market are: The large (and growing) gap between bank penetration and mobile penetration in the region A large number of contractual workers who typically do not have bank accounts A sizeable immigrant population making regular remittances to their home country The relatively low usage of credit cards in the region The resulting economics and ROI for M-Payment service providers are attractive M-PESA, developed with an initial investment USD 3.2 million by Vodafone, generated USD 42.5 million in M-Payment revenue for its affiliate Safaricom in Kenya (in 2009) Attracted by the fundamentals of the market and validation of the business model by players like Safaricom (M-PESA), many of the telecom companies in the region have introduced M-Payment services However, the market is still in the early stages of development and there is plenty of opportunity for new and existing players to create and capture value through a number of different business models 2

3 Table of Contents Market Opportunity Competitive Landscape Business Models Case Studies Challenges 3

4 Market Opportunity Expected Growth in M-Payment Transactions The MEA region represents a significant opportunity for M-Payment services with transaction value expected to grow from USD 3.7 billion in 2008 to USD 28.1 billion in 2012 Gross M-Payment Transaction Value by Region and Segment Gross M-Payment Transaction Value 1 by Region, E M-Payment Transaction Value 2 by Segment, 2012E USD billion The global M-Payment transaction value is expected to reach USD billion by 2012, implying an 11.3% share for the MEA region Middle East Africa +66% CAGR % 2 M-Money Segment 4% 11% 1% Emerging markets such as Asia, MEA, and South America are expected to capture a global M-Payment market share of 65% by E E 2012E 51.6% M-Payment transaction value in the MEA region is expected to grow at a healthy rate (CAGR of ~66% over ) The expected increase in gross M-Payment transaction value will be driven by the rise in M-Payment subscribers and the greater value transacted per M-Payment user Remittance Top up 84% Others 1 M-Remittance Segment Retail The M-Payment market is defined as: M-Remittance, which includes international and domestic money transfers M-Money, which includes retail purchases, top-ups, utility payments, and B2C transfers M-Remittances comprise the majority of the market with USD 23.6 billion in expected transaction value by 2012 Note: 1 The data has been sourced from an image and may not represent the exact values; 2 Estimated Values Grail Research Analysis Source: M-Payments surging ahead: distinct opportunities in developed and emerging markets, Arthur D Little, Aug 2009; Mobile Commerce in MEA, Delta Partners, Jan 2009; Dialed into EMEA telcos, Macquaire, Mar 2009; Grail Research Analysis 4

5 Market Opportunity M-Payment Market Segments While remittances dominate M-Payment transactions, M-Money transactions are expected to grow at a faster rate, as value added services like retail purchases via mobile phone will become more popular 1 M-Remittance Transaction Value 1 in the MEA 2 M-Money Transaction Value 1 in the MEA M-Remittance Transaction Value, E M-Money Transaction Value, E 10 24% 8 USD billion % USD billion % % 67% E 2011E 2012E E E 2011E 2012E Top-ups Retail Others In the Middle East, 70% of the recently launched M-Payment initiatives initiatives are related are to money related transfer to money through transfer mobile through phones, mobile, indicating indicating a focus a focus on M-Remittance-related on related services services International transfers are are expected expected to to form form a a major major part part of of M- M- Remittances because of of the the large large immigrant population population In Africa, domestic remittances are expected to form the majority of M-Remittances, In Africa, domestic as remittances a result of the are substantial expected to unbanked form a major population part of M- Remittances, as a result of the substantial unbanked population Currently, mobile top-ups and other value added services form a major portion of the M-Money market in the MEA region Retail purchase via mobile phone is expected to witness the highest growth in M-Money transactions The transaction value of retail purchase is expected to rise from USD 26.3 million in 2009, to USD million in 2012 Several companies are considering transferring employee salaries to their mobile phones. This may further increase the value of M-money transactions in the region Note: 1 Estimated Values Grail Research Analysis Source: Mobile Commerce in MEA, Delta Partners, Jan 2009; Business Intelligence Middle East; Middle East Mobile Money; Grail Research Analysis 5

6 1 Market Opportunity Drivers of the M-Payment Opportunity In MEA, factors such as the large number of migrants, transient workers and a substantial (and rapidly growing) mobile user base are driving the growth of the M-Payment market High Mobile Penetration & Low Bank Penetration 2 Large Number of Transient Workers 3 Large Immigrant Population in Need of Remittance Services M-Payment is a convenient funds transfer option in areas with low bank accessibility The large and growing gap between the number of mobile subscribers and bank account holders make MEA an ideal market for M-Payment service providers Transient workers, form a significant proportion of the workforce in the Middle East, accounting for over 50% of labor force in the GCC These workers have low/irregular incomes and can benefit from M-Payment as no minimum balance or regular installments are required Contractual workers typically make frequent lowvalue transactions that have lower risk, thus making M-Payment a preferred transaction medium The MEA region currently has ~40 million migrant workers, leading to a substantial outflow of funds from the region M-Payment service providers can capture a sizeable share of the international remittance market, given the cost advantage over traditional funds transfer mechanisms Africa Middle East Gap in Mobile and Bank Penetration in MEA, % 22% 30% 52% 0% 35% 70% Mobile Penetration Bank Penetration 4 Population s Reluctance to use Credit Cards Adoption and usage of credit cards is low in the MEA region USD 6.9 billion in electronic payments 2 in the region in 2009 represented only 1.8% of the global e-payment transaction value Low credit card usage may be attributed to behavioral & religious reasons Given the high mobile penetration, M-Payment can be a popular alternative to credit cards Note: 1 Calculated by Grail Research and refers to Workers' remittances, compensation of employees, and migrant transfers, debit; 2 Made primarily through credit cards Source: Business Intelligence Middle East; Gartner; IE Market Research; Arthur D Little; Mobile Commerce in MEA, Delta Partners, Jan 2009; First Arabic Financial Daily; International Trade Administration; International Organization for Migration ; World Migration Report 2008 USD billion Remittances 1 Outflow from MEA,

7 Market Opportunity Economics and ROI in the M-Payment Market Safaricom s M-PESA service illustrates the strong ROI experts believe M-Payment providers can expect. M- Payment service providers are projected to capture 2.5%-4.5% of the transaction value by 2012 Market Potential for M-Payment Service Providers in MEA 1,600 Market Potential (Range) for the M-Payment Services Sector in MEA, E USD million 1, Range , Market potential for M- Payment services may range from USD 702 million to USD 1,280 million in 2012 (2.5%- 4.5% of the total transaction value) E 2010E 2011E 2012E ROI on M-Payment Services The Case of M-PESA Investment for Money Transfer Platform Development In 2003, Vodafone invested USD 3.2 million to develop a cash transfer platform (other costs such as setting up infrastructure, e.g., POS and advertising not included). The M-PESA offering was piloted in 2006 and formally launched in This money transfer platform enabled: Provision of cash balance on mobile phones (M-Wallet services) Transfer of money to third parties such as non-vodafone customers and non M-PESA account holders Airtime purchases for an individual s or a third party s phone Returns M-PESA in Kenya In FY09, Safaricom, an affiliate of Vodafone (40% stake) generated USD 42.5 million in revenue from M-PESA with an estimated USD 4.26 million 1 subscribers This translates to an average incremental ARPU of USD 9.98 M-Payment penetration is ~46% of Safaricom s subscriber base (as of Mar 2009) Note: 1 Estimated Values M-PESA customers for each month have been averaged out Source: Mobile Commerce in MEA, Delta Partners, Jan 2009; Progress of Funded Projects, Vodafone Group, Nov 2006; Grail Research Analysis 7

8 Table of Contents Market Opportunity Competitive Landscape Business Models Case Studies Challenges 8

9 Competitive Landscape Telecom Service Providers in the Middle East While a number of Telcos in the Middle East offer M-Payment services, there is significant opportunity for both new and existing players to capture value from this market Country Potential Opportunity Gap Between Mobile and Bank Penetration, 2007 Zain Batelco Etisalat du Wataniya Telecom Orange MTN STC Players Bank Penetration # of Bank Branches in country Mobile Penetration Jordan 37% 77% UAE # of Bank Branches 1 : % 1 Bahrain # of Bank Branches 2 : 95 64% 2 Kuwait # of Bank Branches 3 : % 3 In Feb 2009, STC announced plans to launch M-Payment services in Kuwait through its subsidiary - Viva? Saudi Arabia 62% 101% Oman 33% 77% Oman has two domestic mobile operators: Oman Mobile and Nawras. However, M-Payment services are not currently offered in Oman Note: 1 Data for 2009; 2 Data for 2003 ; 3 Data for 2007 Source: Mobile Commerce in MEA, Delta Partners, Jan 2009; ITU; World Bank; IMF; Alrroya; Grail Research Analysis Mobile Network M-Payment 9

10 Competitive Landscape Incumbent M-Payment Service Offerings in the Middle East M-Payment services in the Middle East have been growing in the last few years; however Saudi Arabia continues to be an untapped market despite favorable fundamentals (mobile penetration, migrant population) Competitive Landscape in the Middle East Jordan Lebanon Kuwait Zain: Launched in May 2005, Zain-M-Payment service allows users to transfer airtime to other customers. Zain charges USD 0.20 per transaction Syria Iraq Jordan Zain: Launched in 2006, Zain s M-Pay allows users to recharge airtime with funds from their bank account Wataniya Telecom: Launched in Feb 2006, Wataniya Telecom s GoDo! portal allows users to access their bank accounts through mobile phones Saudi Arabia Mobile operators in Saudi Arabia have not yet launched M-Payment services. The market has high mobile penetration (120% in 2008) and a large immigrant population (over 6 million in 2007), thus providing significant opportunity for service providers According to a survey in 2009, 67% of people in Saudi Arabia indicated a high comfort level in conducting financial transactions via mobile phones Israel Saudi Arabia Kuwait Yemen Bahrain Qatar U.A.E. Oman Bahrain Zain: Launched in Nov 2008, Zain Me2U offers remittance, top-ups and utility payment services. It charges USD 0.15 for money transfer in Bahrain. International remittances start at USD 2.64 per transaction. In 2009, the offering had between 3,000 and 4,000 customers Batelco: Launched M-Payment services in Jul 2004, including a mobile bill pay service UAE Du: Launched in Apr 2007, du s M-Payment services allow users to pay bills and recharge airtime Etisalat: Launched in May 2007, Etisalat s M- Payment services allow users to pay their mobile bill via a pre-registered credit card Note: Pricing details are represented in USD using on-date conversion rate from oanda.com Source: Value-Added Service and Applications, GSA, Jan 2009; Etisalat mobile payment, AME Info, May 2007; Visa International and Fastlink debut new mobile payment service in Jordan, AME Info, May 2005; Primary Research Interviews with industry experts/ operators; Consumers not prepared to pay for mobile banking, egovonline, Jul

11 Competitive Landscape Telecom Service Providers in Africa Most African markets have low bank penetration and a rapidly growing mobile subscriber base, making them attractive markets for M-Payment offerings Country Potential Opportunity Gap Between Mobile and Bank Penetration, 2007 Zain Batelco Etisalat Vodafone / Vodacom Orange MTN Glo Mobile Maroc Telecom Millicom Players Bank Penetration Mobile Penetration South Africa 46% 95% Tanzania 5% 22% Egypt 20% 1 48% 1 Kenya 10% 32% Vodafone offers M-PESA service through its affiliate Safaricom Uganda 16% 2 39% 2 Nigeria 15% 30% Mauritius 54% 74% Morocco 28% 59% Note: 1 Data for Bank penetration is the average cited in news articles; 2 Data for 2009 Source: Mobile Commerce in MEA, Delta Partners, Jan 2009; New Vision; Grail Research Analysis Mobile Network M-Payment 11

12 Competitive Landscape Incumbent M-Payment Service Offerings in the Africa Africa has been a test bed for M-Payment services. The early success of M-PESA and Glo has motivated pan- African rollout of these services and also served as case studies for M-Payment deployment globally Competitive Landscape in Africa Morocco Maroc Telecom: Launched in Jan 2010, Maroc Telecom is the first M-Payment service in Morocco. The service allows money transfers and bill payments through mobile phones Nigeria Glo Mobile: Launched in Mar 2005, Glo M- Banking allows users to access bank accounts, transfer money and buy airtime at a flat rate of USD 0.27 per request Uganda, Niger, Malawi and Sierra Leone MTN: Launched in 2009, MTN Mobile Money service in Uganda allows users to transfer money. For money transfers above USD 5, MTN charges USD 0.40 per transaction. MTN had 100,000 customers as of Sep 2009 Zain: Launched its M-Payment services ZAP in Uganda (2009) and in Niger, Malawi and Sierra Leone (2010). Zap enables customers to transfer money and manage bank accounts South Africa MTN: Launched in Aug 2005, MTN-Mobile Banking allows users to check balance, view bank statements and transfer money. MTN charges USD 1.90 per transaction Vodacom: Launched in Aug 2005, Vodacom- PayPoint allows users to accept payments from credit cards. The service costs USD 6.44 per month Sierra Leone Niger Nigeria South Africa Egypt Uganda Kenya Tanzania Malawi Vodafone: Launched in 2007, Vodafone Mobile Banking allows users to access bank accounts and transfer money. Vodafone does not charge fees for transferring money. However, it charges a 2% transaction fee for recharging the M-Wallet account Kenya Safaricom: Launched in Mar 2007, Safaricom s M- PESA allows users to access bank accounts and transfer money. Safaricom charges USD 0.37 for money transfer of up to USD 440 to a registered M-PESA user. It had 8.5 million customers as of Nov 2009 Zain: Launched in Feb 2009, Zap allows users to transfer money and manage bank accounts. Transaction fees of USD 0.13 are charged for the transfer of money between Zap accounts Tanzania Vodacom: Launched in Apr 2008, Vodacom s M-PESA enables customers to transfer money. Vodafone charges transaction fees up to USD 0.14 for transferring funds to a registered customer Zain: Launched in Feb 2009, Zain-Zap allows users to transfer money and manage their bank accounts Mauritius Millicom Mauritius: Launched in 2009, the Emtel Mobile Banking service allows users to conduct bank transactions through their mobile phones Note: Pricing details are represented in USD using on-date conversion rate from oanda.com Source: Value-Added Service and Applications, GSA, Jan 2009; Implementing successful milliont initiatives, Octopus Consulting, Sep 2009; Zain; Primary Interview with customer care executives of telecom operators Egypt 12

13 Table of Contents Market Opportunity Competitive Landscape Business Models Case Studies Challenges 13

14 Business Models Introduction to the Value Chain Three business models for M-Payment services have emerged; each differs based on the type of organization that plays the role of Issuer, Acquirer and Payment Network Key Parties and Their Role in an M-Payment Transaction Issuer (Bank/ Mobile Operator) Issuers provide credit (M-Wallet) to customers on their mobile phones and manage their accounts Customers receive funds on their mobile phones. They buy credits through the purchase of a pre-paid balance or receive a charge in their mobile bill Customers initiate the purchase or transaction through the mobile application/solution/sms Customer Payment Network (Bank, mobile operator or financial institution such as Visa/ MasterCard) Payment networks connect and switch transactions between the acquirer and the issuer Transaction / Purchase Merchant Acquirer (Bank/ Mobile Operator) Acquirers provide Point of Sale equipment to the merchant and charge the issuer for the transaction Upon receipt of payment, acquirers credit merchants accounts Merchants accept payments from customers and record them through Point of Sale equipment (reader or a mobile phone) New technologies such as Near Field Communication enable customers to use their mobile phone as a smart card Key Business Models M-Payment Services Business Model Role of Acquirer Payment Network Role of Issuer A B C Operator-Centric Mobile Operator Mobile Operator Mobile Operator Financial Institution-Centric Financial Institution Financial Institution Financial Institution Collaboration Mobile Operator or Financial Institution Financial Institution Mobile Operator or Financial Institution 14

15 Business Models Operator-Centric Model The Operator-Centric Model is particularly attractive in countries with weak a financial services infrastructure, because the telecom operator manages the entire M-Payment value chain A Operator-Centric Model M-Wallet Provision by Mobile Operator 1 Customers go to the mobile operator s agent to receive a mobile balance in exchange for cash 2 or Operators charge customers for transactions via their mobile bill Customer has the required credit on his/her mobile phone Customer Customer conducts a transaction using a mobile phone Operator adjusts customer s mobile balance or charges the customer on his/her bill Merchant transfers transaction information Merchant Operator credits merchant s account Mobile Operator (Acquirer + Payment Network + Issuer) In the Operator-Centric Model, the telecom operator manages the entire M-Payment value chain The operator plays the role of acquirer, payment network and issuer. The operator is also responsible for providing the Point of Sale (POS) equipment to merchants Examples: NTT DoCoMo FeliCa (Japan); G-Cash (Philippines), Mobipay (Spain), M-PESA (Kenya) Key Features: The operator leverages its existing infrastructure, customer base and experience in managing a wide distribution network» Operators can adopt this model in developing markets such as the MEA where there are large volumes of micro-payments (low-risk associated with such payments) Since operators are managing the entire value chain, they need to make significant investments in POS equipment and customer service for merchants Source: Proximity Mobile Payments Business Scenarios: Research Report on Stakeholder Perspectives, Smart Card Alliance, Jul 2008; The M-commerce reality in the MEA, Comm.ae, Feb

16 Business Models Financial Institution-Centric Model The Financial Institution-Centric Model works well in markets with an established and trusted financial infrastructure B Financial Institution-Centric Model M-Wallet Provision Customers banks provide the M-Payment application on mobile phones or enable the customer to conduct transactions via their mobile phone Customer has the required credit on his/her mobile Customer Issuer charges the customer for the purchase Issuer Bank Customer conducts transaction using the mobile Information is transferred through payment network Issuer transfers payment Merchant Payment Network (Bank/ Financial Institution) Acquirer credits the merchant s account Merchant transfers the transaction information using the POS equipment provided by the acquirer Acquirer transfers transaction information to the network Acquirer (Bank / Financial Institution) Payment is transferred through payment network In this model, banks and financial institutions are the only parties involved in processing the transaction and transferring funds The acquirer and issuer bank may or may not be the same Banks are responsible for providing customers with the M-Payment application/solution on their mobile phones and deploying Point of Sale equipment with the merchant Examples: MasterCard s Pay-Pass Key Features: Mobile operators are not involved in the process, except for the use of the mobile network (SMS/WAP) The model reduces cash and check handling and improves customer loyalty for banks; customers benefit from improved transaction security since banks are involved This model does not work in markets with poor banking penetration or for customers that do not have a bank account Banks need to incur an additional cost for installation and maintenance of the mobile application, sometimes on multiple networks Source: Proximity Mobile Payments Business Scenarios: Research Report on Stakeholder Perspectives, Smart Card Alliance, Jul 2008; Mobile Commerce in MEA: A Current Reality, Delta Partners, Jan 2009; DOCOMO to Launch Mobile Remittance Service, NTT DOCOMO, Jul

17 Business Models Collaboration Model C The Collaboration M-Payment Model adapts to suit the requirements of different geographies. Telecom operators and financial institutions distribute the transaction-enabling roles (acquirer, issuer, etc.) as appropriate for the market Collaboration Model M-Wallet Provision Banks or mobile operators provide the M-Payment applications on customers mobile phones or enable customers to conduct transactions via their mobile phones Customer has the required credit on his/her mobile Customer Issuer charges the customer for the purchase Issuer (Mobile Operator/Bank) Customer conducts transaction using their mobile Transfer of information through payment network Issuer transfers payment Merchant Payment Network (Bank/ Financial Institution) Acquirer credits merchant s account Merchant transfers the transaction information using the POS equipment provided by the acquirer Acquirer transfers transaction information to issuer Acquirer (Mobile Operator/ Bank Transfer of payment through payment network In the Collaboration Model, services across the value chain are distributed between telecom operators, banks and other financial institutions such as MasterCard and Visa Examples: South Korean SK Telecom s Moneta service launched in association with financial services companies such as Visa Key Features: Leverages the core competencies of financial institutions (credit and risk management) and telecom operators (mobile application and transaction) Telecom operators do not need to take on the financial risk Investment and revenue are shared among stakeholders This model is effective in areas with low bank penetration, as the mobile operator plays the role of the issuer Source: Proximity Mobile Payments Business Scenarios: Research Report on Stakeholder Perspectives, Smart Card Alliance, July 2008; Mobile Commerce in MEA: A Current Reality, Delta Partners, Jan 2009; DOCOMO to Launch Mobile Remittance Service, NTT DOCOMO, Jul 2009; FINsights 17

18 Table of Contents Market Opportunity Competitive Landscape Business Models Case Studies Challenges 18

19 Case Studies Safaricom s M-PESA in Kenya A Success Story M-PESA, which follows the Operator-Centric Model, has been a huge success in Kenya. With over 8 million subscribers, it accounted for more than USD 300 million in monthly M-Payment transfers in Nov 2009 Launched in Mar 2007, M- PESA is the M-Payment solution offered by Kenya s major telecom operator, Safaricom, in association with Vodafone It was a initially a pilot project funded by Vodafone and UK s Department for International Development Conducive Market Conditions ~23% of the population had bank accounts; while the mobile penetration was ~40% M-PESA Customers (million) Apr- 07 Overview Monthly M-Payment Transfers (USD million) Services Offered: M-Wallet services, money transfer, withdrawal of money received through M-PESA, mobile top-up and bill payment for Safaricom customers M-PESA customers can also receive money from senders in the UK Low Cost Accessibility Security M-PESA is cost effective, compared to other alternatives 27% less expensive than the post office s PostaPay Key Performance Indicators No. of M-PESA Customers (million) Value of M-Payment Transfers (USD million) 1 Jan- 08 Success Factors Jan Nov- 09 Wide network of over 14,000 agent outlets Strong security features including PIN protection and value recovery in case of phone loss M-PESA revenue grew 750% from USD 5.61 million (KSH 0.37 billion) in FY08 3 to USD million (KSH2.93 billion) in FY09 3 Note: 1 The data is represented in USD using on-date conversion rate from oanda.com; 2 As of Nov 2009; 3 Financial year ending Mar 31 Source: Safaricom Website ; M-Payment surging ahead Arthur D. Little ; ITU 19

20 Case Studies Me2U Zain Wallet in Bahrain An Emerging Story Me2U Wallet, Zain s M-Payment service in collaboration with MODE Bahrain, had between 3,000 and 4,000 subscribers in Low-cost and strong security features are expected to drive continued growth In Nov 2008, Zain launched a mobile financial transaction service, Me2U Zain Wallet, in Bahrain Zain Wallet, operates in collaboration with MODE Bahrain 1 (financial institution partner) and enables users to transfer money domestically and internationally» The payment interface of Zain Wallet uses SMS, sent from the SIM Menu The product is available at Zain outlets, under the Zain brand Immigrants account for ~30% of the Bahraini population, so the potential for international remittances using mobile phones is high Current Me2U Service Distribution, 2009 a Payments Remittance Overview (Total Me2U subscribers: 3,000-4,000) 30% 20% 50% Airtime Purchase Services Offered: Domestic and international remittances; top-up prepaid account; balance inquiry; money withdrawal or deposit at selected Zain or Nonoo exchange branches Geographic Scope: Bahrain International money transfers can be made to 32 countries Challenges: Low education and awareness among customers may prove to be a constraint Low Cost Accessibility Security Free monthly subscription; domestic funds transfer/payment costs USD 0.13; international remittances start at USD 2.66 No charge to open a Wallet account Factors that may contribute to the greater adoption of Me2U Services 19 Zain and Nonoo branches throughout Bahrain Looking to expand the number of outlets in the future to reach untapped areas High security features such as PIN protection and account blocking on phone loss Zain had ~686,000 active mobile phone subscribers in 2008; This indicates significant untapped potential for the operator in the mobile payment services segment Note: 1 MODE Bahrain is a money transfer company, owned by BMI Bank and Nonoo Exchange Source: Zain Bahrain ; a Primary Research with industry experts/personnel; Grail Research Analysis 20

21 Table of Contents Market Opportunity Competitive Landscape Business Models Case Studies Challenges 21

22 Challenges Barriers to Growth of M-Payment in the MEA Region While the MEA M-Payment market opportunity is significant, telecom operators face adoption, distribution and regulatory challenges Challenges in the MEA M-Payment Market Lack of Technological Sophistication Among Customers Distribution Regulatory Barriers A large segment of the population in the MEA is not comfortable with the use of technology Service providers will need to invest in simplifying the technology and interface, and in educating customers A wide distribution network of agents is critical to success in this market, but setting up and maintaining such a network can be difficult and costly in a number of MEA countries Low start-up costs and an attractive commission structure for their network of agents will be critical for service providers as they look to develop and maintain distribution networks The regulatory framework for financial transactions via mobile phones is currently not well developed As regulations evolve, M-Payment service providers may have to comply with stricter controls such as Know Your Customer requirements (to prevent money laundering, terrorism funding, etc.), which may add costs and slow adoption Mandatory Requirement of Bank Accounts (by Some M-Payment Networks) Some M-Payment service providers require customers to have a bank account, which limits the potential for services within the unbanked population, an important customer segment for growth In addition, some service providers concentrate on existing bank customers rather than going after the unbanked population,who are most in need of services like M-Remittance and M-Money for retail purchases Note: Know Your Customer refers to a regulation that requires banks and financial institutions to verify the identities of their customers Source: Mobile Banks face Challenges in Africa, Wireless Federation; Mobile Banking: Knowledge Map and Possible Donor Support Strategies, InfoDev; Consumer Protection a Key Issue for Branchless Banking, CGAP, Mar 09 22

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