Mobilization of Payments and Remittances Richard Fraser March 2011
Table of Contents Digicel Introduction Financial Service Requirements Business Models Challenges 2
Digicel Introduction Insert name of presenter Insert job title
Largest Caribbean wireless operator, growing in new markets Fastest growing mobile operator in the Caribbean since initial launch in Jamaica in 2001 and new entrant in Central America and South Pacific 11 million subscribers at June 30 2010 Revenues of $2.2bn for FY 2010, growing at compound annual rate of 24% since 2007 Operational footprint covers 32 markets covering a population of over 40 million people Market share leadership in a number of diverse economies, ranging from Jamaica to Bermuda to Papua New Guinea. 5,000 employees across our footprint. Digicel has had a significant impact in all economies it operates in from increasing mobile penetration and reducing mobile tariffs and handset prices. Digicel has invested in excess of $3.5bn in telecoms infrastructure since 2001
Digicel s footprint CAYMAN ISLANDS BAHAMAS JAMAICA GUATEMALA EL SALVADOR BELIZE HAITI TURKS & CAICOS ISLANDS CENTRAL AMERICA HONDURAS NICARAGUA DOMINICAN REPUBLIC ARUBA CURACAO PUERTO RICO BONAIRE US VIRGIN ISLANDS BRITISH VIRGIN ISLANDS ST. MARTIN ANGUILLA ST. KITTS & NEVIS MONSTERRAT CARIBBEAN SEA BARBUDA DOMINICA ANTIGUA ST. LUCIA ST. VINCENT & THE GRENADINES GUADELOUPE BERMUDA MARTINIQUE BARBADOS COSTA RICA PANAMA GUYANA FRENCH GUIANA GRENADA TRINIDAD & TOBAGO SURINAME Digicel Digicel operates in 26 markets in the Caribbean and Central America 5
Digicel Pacific Footprint and Timeline INDONESIA PAPUA NEW GUINEA NAURU DPL TIMOR-LESTE SOLOMON ISLANDS VANUATU SAMOA FIJI AUSTRALIA NEW CALEDONIA TONGA FRENCH POLYNESIA SOUTH PACIFIC Samoa PNG Tonga Vanuatu Fiji Nauru November 2006 (acquisition) July 2007 (greenfield) May 2008 (acquisition) June 2008 (greenfield) October 2008 (greenfield) September 2009 (greenfield) The DPL acquisition adds 6 markets in the South Pacific, and DPL has recently won a license to operate in French Polynesia. 6
FINANCIAL SERVICE REQUIREMENTS 7
Mobilizing Financial Services Is all about financial inclusion for the segment of the population underserved by the traditional banking system, by allow real money transactions through the mobile phone. Enables basic services: Cash in/out of account Purchases and Bill Payments Top Ups Transfers (P2P/Remittances) While preparing us for more advanced services: Micro loans Payroll Government benefits All accessed through the end user mobile Wallet 8
Key Service drivers Significant unbanked / underserved population Large informal economy High mobile phone penetration Low internet penetration High international remittances Security Inadequate country infrastructure 9
Target users Unbanked / Near banked Are already mobile customers Are accustomed to perform transactions through their mobile device (i.e. Credit U, Electronic Top Up Distribution) Service will offer them financial inclusion Provides security of not carrying cash Banked Practical alternative to cash Payment and cash disbursement convenience All population segments benefit from service, however big winner is underserved segment of the population
Key Partnerships Customer registration Regulatory compliance Cash In Cash Out Send Funds Pay for goods Distribution / Merchant Network Financial Institution Cash Fraud Management Back office Mobile Customers Mobile Network Systems Customer Care Marketing Mobile Network Operator 11
Service comparison by Target groups Activity Unbanked Banked Digicel Receive Remittances Go to Western Union and queue up Go to Bank and queue up On the phone Store Value Below the mattress Bank Account M-Walllet/Bank Account Balance Enquiry Count cash Go to ATM or Bank On the phone Get Cash N/A Go to ATM or Bank Visit ATM or Digicel Pay Bills Go to Paymaster and queue up Go to Bank and queue up On the phone Pay Merchants Cash Cash or Card On the phone Transfer Money Travel to recipient Go to Bank and queue up On the phone Top Up Phone Go and buy voucher Go and buy voucher On the phone Convenience Low Low High Security Low High High 12
BUSINESS MODELS
Model Alternatives Operator led Bank led Independent provider The country regulation will be a key factor in deciding the model in a country 14
Operator Led Model Customer acquisition and ownership with operator Definite reduction of churn Can leverage strong operator brand Will push for lower regulatory requirements to drive adoption and inclusion Will require partnerships for distribution and banking licenses. Although owning all elements is an option if regulation permits it. Bulk of revenues generated from service will remain with operator 15
Bank Led Model Customer acquisition and ownership by Bank No guarantees on churn reduction Strong regulatory compliance Poor market reaction / bureaucratic Will seriously depend on MNO for all product needs Will push for more traditional banking regulations Will have to share bulk of the revenues with partners 16
Independent Provider Model Can amalgamate all operators and banks under one umbrella No retention for operator or bank Customer owned by Independent institution New brand to develop Will require strong partnerships with all players Lowest margin model due to high share of revenue with partners 17
CHALLENGES & OPPORTUNITIES 18
Global Remittances Key Stats Through use of technology Mobile Operators can reduce cost of delivery and increase informal sector participation 19
Key challenges Regulatory Distribution No clear regulatory framework across the region KYC / Fit for purpose requirements need to be flexible to serve the underserved Slow moving industry meets high paced Telecoms world Eco system needed for cash in/out Utilities, shops, AOB engagement in eco system Need the right partners with established network to improve rollout speed Technology Find the right technology partner. Partner with proven experience and willing to grow with you Technology should remain with the operator Access security (STK/USSD/SMS) Financial Institution Back office management, reconciliation, insurance, compliance, fraud management Required licenses (banking, remittance) The right partnerships will make or break the m-finance business for all involved
Additional Opportunities There are additional benefits and opportunities from M-Financial Services: Subscriber Churn Reduction Increased loyalty Reduced Agent Commission Levels Further subscriber acquisition Other Financial services Additional partner products 21
THANK YOU 22