Tuesday, May 29, 2012

Show Me the e-Money! Using Payroll to Support Your Mobile Money Liquidity Strategy

This is the second blog in a series of posts where the contributors, all involved in the creation of WING Cambodia, share their thoughts on the importance and challenges of e-money and liquidity management

A core component to any mobile wallet business is how easy it is for a customer to fund their account to do transactions. A lot of the focus needs to be given on building the capability in the ‘cash-in & cash-out’ network to enables the unbanked to convert physical cash into electronic-money, however an important channel of electronic funds will come through the integration to existing banking infrastructure.  This makes sense as the majority of the money in the economy resides in bank accounts, and more importantly can be transferred electronically. Integrating to the banking infrastructure will allow the flow of money from the banked (corporations and people) to the unbanked.


Payroll as a Source of Liquidity for Mobile Money Accounts
When you think about how most ‘banked’ customers fund their bank accounts, it’s through their wages or salaries being deposited by their employer. Why should it be different for mobile money account holders?

Mobile Money Infrastructure is Valuable to Corporates & Governments  
A mobile money service provides significant reach to disperse electronic money for payroll services or G2P payments. Managing physical cash payments to the unbanked creates a large overhead for Governments, Manufacturing and Agricultural business. Mobile Money payroll solutions that leverage their accounts and cash-out network are able to remove the physical cash payment overhead from corporate and governments, creating the ability charge a fee for payroll services. However more importantly it assists the flow of liquidity into the mobile money system.

The Key to Corporate Payroll Services are Banks’ Transactional Banking Divisions
Banks have strong and deep service relationships with their corporate clients. Many large employee companies have complex needs when it comes to cash management and their bank play an important role. Among other products and services banks will support a company’s payroll, comprising of (a) disperse-to-bank-account & (b) cash-based payroll service. Integrating into a bank’s payroll service can allow a third option: (c) disperse-to-mobile-money-account.     

What is important here is to understand that the corporate client relationship is held by the Transactional Banking division of a bank. Larger banks are divisional organisations. Consumer Banking and Transactional Banking divisions operate as two separate business with separate service models and most likely different technology platforms to run client accounts. If a mobile money business wants to understand the payroll needs of its target customer base, it’s the Transactional Banking divisions who have deep relationships with large employee companies and are looking for solutions to help their clients.

...However Payroll Services Will Take Time to Develop     
Bank-client relationships have been built over many years of trusted service delivery. Banks will not risk their relationships until it can be proven that the service is dependable and meets the needs of both the client and their employees.

Yes it will take time to build the relationships & understand the stakeholder needs, however like the banked population have adopted e-banking through access to their salaries dispersed to their bank accounts, payroll services will increasingly play a large role in the success of mobile money.

Paul Reynolds currently works for a leading mobile banking and payments company in Indonesia. He  has worked in mobile money for 4+ years and banking for 14+ years.