Thursday, January 9, 2020

Wave Money releases 2019 results

Sunday, July 23, 2017

What does a shampoo sachet have to do with developing market fintech?

It is an intriguing question, however there is far more in common with the humble shampoo sachet and developing market fintech than you would expect. I have recently returned from a few days in the field in Northern Shan State in Myanmar, and as always I am impressed by the business savvy of our mobile money agents, who are selling everything from shampoo sachets, noodles, soft drinks and water to money transfer services. For many of them, it is as natural to sell a money transfer product as it is to sell shampoo, and there is a very good reason for that.

Both products have been designed to meet the need of the specific consumer, whilst they are packaged in a way that makes it easy for the retailer to sell.

For many years major corporates assumed that they could not effectively reach the poor with the products and services, primarily as the cost structures they employed would make them an unprofitable segment. In addition they also assumed that the poor could not afford, nor would they want products and services available in developed markets.

Academics CK Prahalad and Stuart L. Hart challenged these assumptions in their 2002 article “The Fortune at the Bottom of the Pyramid”, which was followed by a book of the same name in 2006. Their hypothesis was that the poor had significant untapped purchasing power and that companies that challenged cost structures and go to market strategies could meet this demand in a profitable way. Many companies took up this challenge, and new segments have developed across multiple industries.

FMCG companies like Proctor & Gamble and Unilever realized that they could make the same sort of products accessible to developed market consumers provided they redesigned the packaging and distribution strategy. For example, a one-liter bottle of shampoo was completely inadequate for the developing market customer, for one very specific reason. In purchasing a liter of shampoo, this customer was purchasing a store of inventory of approximately 950 milliliters. In holding onto the unused shampoo there was a significant opportunity cost for that consumer, as their need was only to wash their hair on that day. The capital employed in purchasing the liter bottle could be better utilized in other activities that added economic value to the customer, rather than being tied up in an investment that lasted perhaps two to three months.

Throughout developing countries today, you will see small grocery shops with hanging rows of shampoo sachets. These sachets allow consumers to purchase 50 milliliters of shampoo at a price that factors in the increased cost of packaging and distribution, but allows the consumer to keep the capital they would otherwise need to employ on the larger bottle. This trend has been repeated with everything from biscuits to toothpaste. Of course, this trend hasn’t been without issue, as there is now a growing sustainability issue with this sort of packaging as there is little economic incentive for collection in these communities (as opposed to other materials which may be recycled for profit). However, it is without doubt that developing market consumers have received the benefit of access to developing market products and services that they otherwise would not of received, and this has largely benefited these communities.

So how does the emergence of the shampoo sachet mirror what is happening in developing market fintech, particularly in Myanmar.

In developing markets access to financial services has generally been limited to the wealthy. The emergence of microfinance and mobile money has led to improvements in financial access, however approximately two billion people globally are still without a bank account. The lack of a bank account increases opportunity cost for these consumers at every step. Whether it is difficulty in getting access to credit, or an inability to safely save money, being unbanked is expensive, and life can be very difficult. Even in the United States, being unbanked can be very expensive, as product based fees and interest costs on payday loans far eclipse standard banking products.

For the unbanked in Myanmar, sending money is not an easy process, however many must send money regularly to support family members in different parts of the country. The unbanked tend to use buses or friends and family to take money home, or they will use bank branches. There is an opportunity cost for the consumer at every step of the transaction. Firstly, there is the time taken to travel to the bus stop or bank branch. Secondly, there is the time at the bank branch to fill out forms, and the wait to be served. Banks are only open from 9am to 3pm Monday to Friday; so many consumers have the opportunity cost of leaving work, and therefore income in order to be able to transfer money. Lastly, there is the time taken for the recipient to either wait for the bus to arrive, or to travel to the bank branch (generally in larger towns and cities only), to receive their money. The opportunity cost to send money in Myanmar is significant, and it is the unbanked customer who pays the cost in time and lost income.

With the development of mobile money in Myanmar, unbanked customers no longer have to pay this opportunity cost. Wave Money, the first provider in the country, now has over 10,000 agents in every part of the country, including remote locations in Kachin, Rakhine and Chin State. Wave Money shops are located next to factories, universities and markets, and they are generally open from very early in the morning to late in the evening, seven days a week. We talk regularly to customers who tell us that previously they would need to miss a day of work, just to be able to send money home to family. The Wave Money service now allows these customers to send money in minutes, and literally have family members receive it instantly. The time and capital previously employed in sending money can now be better utilized in other activities that add economic value to that customer.

In order to remove the opportunity cost from this service, we have focused on a number of design factors. Firstly, we ensure that our distribution network is as broad as possible. We now have nearly ten times the number of agents as bank branches in Myanmar, making it very easy for a sender and receiver to access the service, at almost any time of the day or week. Secondly, we have made the transaction easy for the consumer and the agent, with all information entered on the mobile phone and transaction records sent electronically by SMS. Lastly, the transaction is instant, which provides confidence to sender and receiver and builds trust in the service. In addition we provide customers with access to a call center that is open 24 hours of every day so that they can query transactions if needed.

As we have designed our mobile money service, we have been inspired by other industries that have developed products that both meet consumer need, whilst at the same time remove opportunity cost from the alternatives in the market. We firmly believe that this enhanced customer experience will change the way people transfer money in Myanmar, and we are already pleased to see that shift occurring.

- Brad Jones

Brad Jones is the CEO of Wave Money in Myanmar. He has worked in mobile money for most of the last decade, in markets such as Cambodia, the Philippines, Indonesia and China. Follow him on Twitter at @bradjoz.

Sunday, October 9, 2016

Smartphones will change everything about mobile money

I am firmly of the belief that we will see a huge shift in the mobile money industry over the next five years as smartphone penetration takes hold. Myanmar is at the forefront of this change as I have written previously, with smartphone penetration at 80%. Comparatively, Pakistan has penetration of 23%, however that will change rapidly, as it will in other successful mobile money markets in East Africa and Bangladesh.

CGAP have just released a great blog post which introduces 21 principles for the development of smartphone interfaces in mobile money. The principles are outlined below and make for great reading.

Saturday, September 24, 2016

Great feature on mobile money in Myanmar

A great video and article released this week on the development of mobile money in Myanmar. It is very exciting to see companies like Wave Money launching and opening up financial services to the unbanked of the country. Myanmar has massive potential for mobile money. An unbanked market of 94% and smartphone penetration of over 80% present unique opportunities for the myriad of companies starting to provide services. This blog has been posting on the Myanmar market since 2012! Check out the blog posts below if you want to read how this market has developed.

1. Digital and design will change mobile money in Myanmar...and Africa.

2. Mobile Money in Myanmar - A Unique Opportunity.

3. Mobile Money in Myanmar: Significant Opportunity Ahead.

Mobile Money Asia is the best source of unfiltered and authentic blogs on the development of mobile money and digital finance in Asia. We are not only observers of the development of this market changing innovation, we are at the core of it. 

Wednesday, September 14, 2016

How mobile telcos could make billions from international money transfer

Workers wait in line
It must be disappointing to find at the end of a month, perhaps spent working under a hot sun in difficult conditions, that you can give away one entire day’s pay in just a few minutes on fees and commissions to send your monthly salary home. If you’re a South Asian expatriate, you could nevertheless count yourself lucky - it can easily cost two days pay to send a month’s wages home to some African countries. The money in your pocket that represents your hard work, handed over to someone in an aircon office who punches a few buttons to send your cash home safely to your parents - does that feel fair? Bill Gates, the G-20, the European Council and the UN don't think so. 

The author's quest for new
routes to market may
involve trying novel paths
Last year I was working in one of the less well-travelled countries of the Middle East. Among other things I was looking for the best return on an investment in some form of mobile financial service. The country in question has some of the world’s most beautiful natural scenery, an exceptionally hospitable population, and much to recommend it.

For anyone interested in international remittance, it also has startlingly attractive demographics, and is a net remitter, mainly to the countries of South Asia; foreign expatriate men outnumber local adult male citizens two to one, and virtually every single one of them sends the bulk of their wages home. Aside from the foreign men, there’s another 10% of foreign women, mostly domestic workers. This is one of those countries of the Middle East that has a wages protection system (WPS), and it pays foreigners better than some other countries in the region; remittance CAGR is 16% over the last 5 years and volumes continue to grow 12.5% a year; outbound payments by expatriates through formal channels is likely to top US$16Bn in 2018.

It ain't half hot mum
From official statistics it's possible to work out how much these workers are sending home; for historical reasons highly educated Egyptians in the education sector and civil service are each sending over $10,000 home a year, while Indian workers, who represent the largest group of expatriates send home about $6k a year each. And these are just the formal remittance figures quoted by the Central Bank and backed up by World Bank’s datasets. While it is not possible to say how much informal remittance occurs, some reliable commentators suggest that you might in general double the formal remittance volume to get the true volume of remittance; if that's the case in this country, workers may send home over 25 billion dollars this year.

In my line of work we commonly deal with people whose income may fall to $1 a day, so it's rare to be dealing with both very large aggregate transaction volumes and individually large transactions. Looking at a business opportunity represented by a transaction share of 25 billion dollars attracted my interest considerably. The most robust data is that for Pakistani expats, whose average monthly remittance is $285 - so the market potential for an international remittance service can be simplistically viewed as a transaction share of $285, repeated 25 billion divided by 285 times. Imagine you could design a service that expat workers would use and trust - could you make Bill Gates et al happy by cutting fees and still make a profit?

The way people send money home has not changed very much in 50 years. In some research I carried out elsewhere, I asked someone why he still used MoneyGram. He replied “Because my father used MoneyGram when he worked here”. Given that remittance has been going on for so long and the numbers are so big, you would think that it's a very competitive business, and indeed it may well be. There are quite a few licensed remittance houses and they offer pretty attractive exchange rates.

But all is not well with remittance from the Middle East - fixed sending fees and the spread on foreign exchange can bump up the cost to send money home, especially if you’re sending a small amount. Complicating this is the effect of the working week. It is common for expat workers to have no choice about when they can send money home. If you’re based at a work site you may have to travel to town on your day off, queue at the remittance house, and accept whatever rate is on offer that day. I wondered if this weekly pattern could be discerned in the FX rates on offer - a rational remittance house might choose to give workers a slightly worse rate on their day off, sit on the risk for a couple of days, then bulk send when the rates moved in their favour. I don’t know if it happens, but the data is very strange; have a look at the chart below, which shows a pronounced weekly move in the FX rates.

One way to look at this data is to say that, if there really is a 3% weekly deviation in the Sri Lankan Rupee (LKR) exchange rate from its mean, then giving Sri Lankans the ability to send money when the exchange rate moves in their favour could allow them to send 3% more money home. Even if I built a service that gave half of this windfall to the Sri Lankan workforce and I kept the rest, it’s still a meaningful amount. But what would such a service look like?

Clearly, it would be a mobile-based service that alerts you when the exchange rate is in your favour. It might be an app that interrupted your game of Candy Crush to say that if you send money now from your linked WPS bank card, your family back home would receive $8.57 more than if you sent money last Saturday.

Traditional bricks-and-mortar exchange house
may be on a long lease
How would the existing bricks-and-mortar remittance houses respond to such a service? An obvious response would be to appeal to the regulator while building a competing service, and hope that the inertia of your customer base meant that there was not too much damage done in the interim. But can the traditional exchange houses actually cope with a big shift in their economics? Their offices in the shopping malls and market places have firm fixed costs and perhaps long leases; the economics of traditional remittance houses are a bit opaque in any case. Then there’s the problem of distribution - how would traditional remittance services roll out such a mobile product to their user base, and how could they drive usage? It seems to me that the best entities to promote mobile international remittance are the mobile phone operators, but to get full coverage of the expat population would require some form of cross-network collaboration in order to launch an assault on the incumbents and their fixed costs - and mobile operators aren’t very good at such collaboration.

How much money are we talking? Well, if my figures above are correct, the transaction share from handling all this remittance would be about a billion dollars a year, a figure which comes from applying the current average cost of remittance from the UAE (which is about the cheapest in the world) to my $25 billion figure. And this is just one relatively small country in the Middle East which has less than 1% of the world’s expat workers.

With such a large transaction share from such an immense volume of money being sent, competing with an industry whose working practices don’t look much different from those of half a century ago, it might be time to consider a collaborative approach - perhaps an independent service provider creating a simple path for multiple mobile operators in a territory to jointly launch a cheap, trustworthy, robust, and regulated international remittance service. Who would risk not investing in the potential?

Malcolm Vernon - 13 Sept 2016

Malcolm runs Social Mobile Ventures Ltd which seeks to identify the next big trends in frontier markets, and design profitable services that can positively impact the communities they serve. You can contact him at

Friday, September 9, 2016

Can financial inclusion beat the odds by combining micro-credit and micro-insurance?

Blackjack is one of the few casino games where sufficient knowledge about the order of the cards allows you to systematically beat the odds. The problem is that its hard both to keep track of the cards and to calculate whether to stick, twist or fold. In 1982 some adventurous geeks figured out that several pairs of eyes and some basic wearable computing might allow them to collaborate and win big; after a couple of practice runs they headed to Las Vegas, and, amazingly, filmed their heist under the noses of the casino bosses. They called the subsequent documentary ’The Wedding Party’ because that’s what they posed as to avoid attracting suspicion about one group all being at the same table at once. At the end they get surrounded by a mob of burly security goons desperate to figure out how these guys’ luck was lasting so long.

Wouldn’t it be good if we could similarly guarantee the outcome from tech bets on financial inclusion and poverty alleviation? Well, perhaps we can, using a similar analytical approach.

In 2014-15 I was asked to design the digitalisation of a paper-based agricultural micro-credit scheme in Ethiopia. This Gates-funded initiative has ambitious goals: provide farmers with credit to increase the take-up of fertiliser and other costly agricultural inputs (like irrigation pumps) in the hope of higher crop yields. The theory runs that so long as the bigger harvest can pay for the cost of credit, smallholder farmer incomes will rise. In 2015 this scheme aimed to reach 1.8 million farmers, a volume that’s hard to manage without some form of automation. Using the impressive Addis Ababa-based software supplier Apposit, in the pilot areas for digitalisation we deployed smartphones at agricultural co-operatives, issued NFC stickers to farmers, and used the community and local MFIs to assess creditworthiness and issue microcredit. Despite the scheme launching in the lead up to one of the worst droughts in living memory it still transacted nearly US$10 million [ETB 160M] in the last couple of months alone. Because we designed massive scalability into the solution, we expect very significant growth in the years ahead.

There are obvious pitfalls, not least being what happens if the rains fail again - last year’s drought may have been related to el Nino and we hope it’s a decade until the next big one. When it next happens, wont farmers who have taken out microcredit find themselves applying expensive chemicals to seeds that will never grow? Who will be liable for these bad debts, and what will be the impact on the digital ecosystem? How to mitigate this?

At this point we need to look at the development of micro-insurance. This is the incredibly fast-growing service that helps excluded communities to protect themselves from catastrophic downside risks; there have been some amazing recent successes, such as Telenor India's Suraksha micro-insurance product (by MicroEnsure) which acquired 22 million opted-in customers in just 148 days from launch. Today, micro-insurance focuses on life (and credit-life) products (see table below), though cover for healthcare (e.g. emergency hospitalisation) is growing fast. Micro-insurance is very much a work-in-progress, and the reasons for the current product mix is owing to the complexity of property or agriculture insurance products; life and credit-life use cases are just easier to set up, opt-into, under-write and manage. Agricultural micro-insurance, for reasons that would make a great case study, makes up just 0.5%-1.75% of the market in LatAm and Africa, with just US$1.1m in gross written premiums reported in the whole of Africa in 2014. Successful agricultural micro-insurance use cases are very hard to find.

But what if we layer catastrophic agricultural micro-insurance on to the micro-credit service discussed above? We know the micro-credit service is profitable so long as the revenue from the increased crop yield exceeds the cost of servicing the micro-credit; using round numbers, fertiliser use typically doubles or triples the harvest, so with loan interest between, say 15-50%, it’s clearly very advantageous for farmers to borrow this money and get a higher yield - unless there’s a catastrophic failure of the harvest. At this point, agricultural catastrophic micro-insurance can pick up the economic cost. What’s inventive about this step is the following: we know the expected outcome from the micro-credit, because applying the recommended fertiliser gives a quantifiable expected yield increase for the fertilised crops; we also have the predicted frequency at which there’s a catastrophic failure in the harvest from historical data. Combining these two gives us both the likelihood of the micro-credit upside and the probability of a catastrophe triggering a micro-insurance claim. Since the insured farmers all have the micro-credit, we know there's a good chance their crop yields are going to be significantly up, which then lowers the risk on the corresponding micro-insurance product, if applied to the same community over time. The combined return for this hybrid product can therefore be estimated and so developed as a single product with known costs and benefits. It would be interesting to see if this might catalyse the deployment of agricultural micro-insurance as a more attractive service to providers, and help the micro-insurance industry continue its impressive growth trajectory.

Malcolm Vernon 9th Sept 2016

Malcolm heads Social Mobile Ventures Ltd, a consultancy firm working to use mobile and internet technologies to create positive social outcomes in frontier markets.

Monday, September 5, 2016

5 Observations about Mobile Payments in Asia

Hardly a week goes by without mobile payments news, whether it be the launch of, YES, yet another “Pay” or a new consumer report mentioning the potential for mega billions of future mobile transactions. I am sharing 5 key perspective that I believe are key to understanding prospects for mobile payments in Asia Pacific;

1. The battle of “Pays’ fought first in the developed Asian markets: The battle of the Pays (Apple, Samsung, etc.) has begun in matured payments markets of Australia, Singapore, Korea and Hong Kong (Japan soon to follow). On the surface it appears that this is where P2B mobile face to face payments have maximum opportunity for success. For e.g. consumers in Australia and Singapore make 30% - 50% of their card payments using contactless. These markets are mobile savvy with heavy smart phone penetration. To me, these markets are a litmus test for the scaling of contactless standards based mobile payments.

2. Its about digital e-commerce wallets in emerging Asia Pacific: It is no secret that e-commerce, especially m-commerce will continue to dominate the payments growth story across emerging markets in Southeast Asia and South Asia. This is amplified by the blurring of lines between digital and brick and mortars commerce. Almost all of these markets have several domestic players raising capital and marketing heavily to build scale. Significant examples include Paytm in India, Paysbuy in Thailand, Momo in Vietnam, G-Cash and SMART in Philippines and Doku in Indonesia, among others. While some have built bigger numbers, none have built major scale and stickiness yet. While some are starting to foray into face to face payments, that category is even more nascent given significant headroom for growth in ecommerce.

3. China is way ahead and social app based payments is the big X factor: There is no dispute that Tencent in China has by far led the most successful mobile payments expansion in the world. They have leveraged their social app for virtually all kinds of mobile remote and face to face payments. The lack of a universally accepted QR code standards however and the low WeChat penetration outside China is their big challenge to expand beyond China’s borders. Other apps such as LINE dominant in Japan and penetrated in Taiwan, Thailand and Kakao dominant in Korea have launched their payments functionality. It is early days, but if Facebook through it’s Messenger or WhatsApp service jumps into the fray in the future, the possibilities are interesting.

4. No single bank has presented a compelling consumer mobile app for payments: Almost all major banks across AP have launched mobile banking apps and are seeing significant usage, primarily for account balance checks and to a lesser extent for funds transfers and bill payments. However, banks are still feeling their way to building a compelling payments app for the POS driving consumer adoption. While Android freed up the banks from relying on the Telcos for provisioning card network payments credentials, they cannot access Apple phones. Moreover, why should consumers use a bank app when they can use a third party app that provisions payments credentials for multiple banks and brands? I am not bullish on bank’s scaling their mobile payments apps significantly, and certainly not regionally, their cards likely relegated inside a third party wallet.

5: Its all about standards:  While it is tempting to speak about shiny things like app design and consumer experience, a key element that will define scaled success is standards ubiquity. This is where global card networks have an established advantage. Admittedly, the NFC standard adoption (PayWave / MasterPass etc.) is nascent in AP and only now growing in the U.S. However, the strongest alternative to NFC payments is the QR code and that is even further behind, though Visa's mVisa standard holds promise in emerging markets where it is being piloted such as India. Whether it is QR codes or a crypto currency scenario, the basic challenge for merchant adoption at millions of locations of a new standard has to be overcome for ultimate success!

I welcome comments about what you agree and disagree with, and look forward to carrying on the conversation.

Shilpak Mahadkar heads Payments for Netflix in Asia Pacific. He has worked on emerging payments and led digital payments initiatives targeting markets across Asia working with Banks, Telcos and Third Parties. All views expressed are the author's in private capacity.