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.

Monday, August 22, 2016

Into Mobile Money & Fintech in Asia? You Need to Know About Next Money!

There are a few true visionaries in the Fintech and innovation space in Asia currently, and I wanted to take the opportunity to recognise one of the best. Rob Findlay is an Australian banker living in Singapore who in my opinion, has been one of the major catalysts of change in the Fintech sector. Findlay, through his organization Next Money has become a true connector for like-minded people, not just in Asia, but throughout the world. 

After being founded four years ago (I was lucky enough to attend the first conference in Singapore in 2012, which rocked!), Next Money now has 45 chapters around the world and over 10,000 members. What I really love about Next Money is that it far more than an events or media company, it has indeed become a movement. Through focusing on cutting edge areas such as design, innovation and entrepreneurship, Next Money is challenging bankers on traditional thinking and connecting start-ups with investors and buyers. 

The timing of their growth could not have been better with the explosion of interest in Fintech over the last five years, and Next Money has been at the centre of it. In the words of Findlay "our community now includes influencers and change makers in insurance, wealth management, venture capital and financial technology, which has been a huge force for change in the past few years."

What really makes Next Money work is the quality of the speakers, and the 'Ted Talks' style that most incorporate. Respected Fintech veterans such as Brett King, Neal Cross and JP Nicols have become crowd favourites at Next Money events around the world, and the focus on quality has resulted in industry giant Visa sponsoring the annual Fintech Finals in Hong Kong. 

In September 2016 Next Money will hold conferences in New York and London, both supported by BBVA. If you haven't attended a Next Money conference before, and you want to be inspired, challenged and entertained, I highly recommend you find yourself a ticket. Well done to Rob Findlay and the rest of the Next Money team. What they have created is truly inspirational and industry-changing. 

- Brad Jones

Sunday, August 21, 2016

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

IN LESS than a decade, mobile money has proven an effective means of increasing financial access in frontier markets. In the process, it has brought significant economic benefits to the countries that have fostered its development.

There are now 265 implementations of mobile money in operation across 89 countries. As a result, 299 million people have used mobile money in these markets. Across these countries there are now 2.3 million retailers providing mobile money services – a bigger footprint than traditional finance and remittance service providers in those markets.

In countries where mobile money has been highly successful, such as Kenya, Bangladesh and Pakistan, customers now have the ability to send and receive payments, store money safely, and pay bills. Before the advent of mobile money, many of these transactions would have taken hours to complete. Lives have been changed through better access to finance, something traditional bricks and mortar banks have struggled to deliver. The remarkable aspect of this phenomenal growth, however, is that it has been achieved almost exclusively through feature phones and analogue channels such as SMS and USSD.

Why is this so remarkable? Compared to smartphones, the user experience of feature phones is generally poor, with multiple technology challenges. Many lack the Unicode needed to display local languages correctly and their limited character availability makes it harder for people to easily complete financial transactions. For mobile money providers, their ability to offer complex financial services products is curtailed, particularly when consumers need education on product features before purchase.

Smartphone penetration in Myanmar, and the rapid proliferation of data usage, dramatically alters this equation by removing the limitations implicit in widespread feature phone use. Based on current estimates, between 70 and 80 percent of mobile devices in Myanmar are smartphones, and of these the majority are accessing data regularly. No other frontier market has experienced growth of this kind. Coupled with very low banking penetration, it considerably enhances the opportunities for serving the unbanked – estimated at 90 percent of Myanmar’s population.

At Wave Money, we are exploring this opportunity in different ways. Given the innate flexibility that smartphones and apps provide, we have been using the principle of human-centred design to build solutions for customers. Human-centred design starts with the people we are designing for and ends with solutions that are tailored to their needs. Building digital products through this process requires a deep empathy for the people we are designing for – forcing us to go deep into their communities, workplaces and even homes to understand what they feel, what they think, what they like and what they desire. Through the power of digital solutions, we can build interfaces for our customers that are relevant to them, and over time will fit seamlessly into their lives.

In addition to building products, digital allows us to build communities who interact with us and our products. Facebook use has accelerated in Myanmar at an incredible rate, and in a short period of time Wave Money has developed a community of followers who guide us in our distribution, products and operational processes. Never before has the voice of the customer been so available to companies. In a short period of time we have seen Facebook emerge as the deepest engagement point we have with customers, with an average of 20 interactions per customer contact. This instant and localised interaction allows us to have a one-to-one conversation where we can communicate product benefits and address customer problems in a far more intimate environment than that offered through a call centre. Over time we expect this engagement will create a tribe of educated followers, with enhanced customer loyalty, primarily through the digital channel.

But why does the rapid growth of digital in Myanmar make such a difference to mobile money consumers around the world? By 2020 there will be 5.8 billion smartphones globally, growing from 2.6 billion today. Data use is expected to grow at an astounding rate of 45 percent a year between 2015 and 2020. In essence, almost all people globally will have a smartphone by 2020 with the majority using data.

We believe that when it comes to mobile money Myanmar will provide the template for frontier markets globally. Digital mobile money solutions with the customer at the core, and the creation of communities using digital networks, will demonstrate how mobile money can move beyond feature phones to give customers an experience never before seen in these markets.

Brad Jones is the Chief Executive Officer of Wave Money, a joint venture of Telenor, First Myanmar Investments and Yoma Bank. 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. This post was originally published at

Sunday, May 1, 2016

What have I learnt from building two mobile money businesses?

I have had the privilege in my career to be accountable to build two mobile money businesses in South East Asia. The first, Wing Cambodia is now doing billions of dollars worth of payments on a monthly basis, and is globally seen as a success story. The second, Wave Money in Myanmar is shortly to commercially launch, however we are very excited about its prospects. I recently had the opportunity to meet some of my old team members in Phnom Penh, and I was reflecting on what I have learnt from these two similar, but also very different experiences. I hope it is interesting for those who follow the mobile money field.

Hire the best people. In both of these experiences we hired the very best local and international talent we could find. In Cambodia, we had a policy of hiring young and smart as we were building a business where distinctive skills were difficult to come by. This strategy proved to be successful, as the majority of our local managers in Cambodia from 2008 have now gone on to be the nucleus of an industry talent pool that has extended into microfinance, insurance and other financial services. In Wave Money, we have similarly hired the best in Myanmar and beyond. The team we have created is motivated, passionate and extremely diverse. With 11 nationalities and 45% of our employees who are female, we have formed a diverse team that is persistent and fanatical about making Wave Money a local and international success story.

Create a vision that becomes a cause. When we started Wing in Cambodia, we had the simple vision of ‘Making Money Fair’. We knew that for the majority of Cambodians, money was not fair. It was not easy or cheap to send money to loved ones, it was not safe to store money in group accommodation at factory sites, and it was not secure to carry large amounts of money around. We hired people who were committed to this vision and who worked hard to make it a reality. Those who were more self-centered or had doubts fell by the wayside as the true believers fought for the cause. I feel the same way about my current team in Myanmar. Our team understands the difficulty that comes from being excluded from the formal financial sector and they are passionate about making a positive change for their country. By the way, if you want to join our great team, please take a look at our open vacancies!

Distribution matters over all. Wing Cambodia was originally owned by a bank, and the strategy for distribution was built with a similar mindset to how a bank rolls out a point of sale network. The original strategy of individually signing up agents and then helping to manage their liquidity was fundamentally flawed. After about six months the strategy was scrapped, and a master agent model was established in its place. By contrast, Wave Money leverages the distribution strength of one of our owners, Telenor, which allows us to leverage the extensive network that they have built in Myanmar. We are building distribution expertise into our corporate DNA and my leadership team and myself spend as much time as we possibly can in the field meeting our partners. It is only through this hands-on approach that we can effectively build and maintain a network that will be successful.

Thinking Agile. When we first started Wing in late 2007 the mobile money industry was in its infancy. A learning we had taken from the banking industry was the importance of ‘test and learn’. This philosophy allowed the credit card industry to successfully test new products in smaller groups, and then adopt the insights to successfully scale products. In using the test and learn principle we tested marketing events and products with smaller groups of customers, and then created concepts such as a ‘Customer Board’ to enable us to truly understand whether we were addressing her needs.  In Myanmar we have taken these principles further and have adopted a number of agile philosophies where feedback is built into multiple daily interactions in the team. Visual management is a core part of the way we work and management and staff regularly interact to discuss what is working and what is not. Transparency of our successes and our failures is building a culture of trust and ‘no surprises’.

The Importance of Fun! I was prompted to write the blog after a dinner with some old Wing colleagues in Phnom Penh over the weekend. The stories and experience that we had building Wing during my time from 2007-2010 were recalled in the laughter and enjoyment in each other’s company. This experience has been replicated around the world when I have been lucky to spend time with other colleagues who have moved onto bigger and better opportunities in places as diverse as Jakarta, New York and Melbourne. Whilst it was tough building a new business those shared experiences created a bond between team members that we still have today. I hope we are creating the same level of enjoyment with my current team in Myanmar, and that in years to come we will all remember the formative years of building out another great business in South East Asia.

When I look back at my career, having had the opportunity to build two businesses that will make a positive difference to the lives of people in Cambodia and Myanmar are significant highlights. Whilst very different countries, I believe that many of the philosophies for success remain the same. Hire people who believe in the same cause that you do. Get distribution right and spend time with your partners. Create a culture that encourages trialing new ideas and failure and lastly, make sure people have fun while they are doing it!

-       Brad Jones

Brad Jones (@bradjoz) is the Chief Executive Officer of Wave Money, a joint venture for mobile financial services in Myanmar owned by Telenor and Yoma Bank. He was previously Managing Director of Wing Cambodia from 2007 to 2010, and has also worked for Visa and the World Bank Group.