Today’s the second and final day of this year’s Mobile Money Summit, and the key words here are data and partnerships:

Data - around the market opportunity for mobile money - by the year 2012 CGAP and GSMA estimate there will be 1.7 billion people with a mobile phone but not a bank account and as many as 364 million unbanked people could be reached by agent-networked banking through mobile phones;

Partnerships - a slew of deals announced yesterday illustrate the momentum around mobile banking services, notably: Visa Launches First Commercial Mobile Payment Service in Latin America.

Does this mean momentum around mobile banking for the unbanked has reached a no-turning-back stage? Not quite. As CGAP’s Technology Program Manager Steve Rasmussen noted in his presentation titled “The Hype Cycle and Mobile Banking:”

• Regulation can be a constraint but is not the only obstacle and is not usually the primary challenge;
• More can be done to reach unbanked and poorer customers;
• Customers want more than payments and try to fit services to meet their needs;
• Being a cash-handling agent is not the same thing as selling airtime top-ups. This is harder to do than most anticipate.

Finally, some snapshots from the podium:

• “I get offended when people talk about the potential of mobile banking. Mobile banking is here.” - Miyanda Mulambo, General Manager, Celpay (DRC);
• “The banking industry has a well regulated financial structure. Carriers have a well regulated and effective channel. If we can combine the power of these two units into one where we leverage infrastructure, its the perfect opportunity.” - Chris Gabriel, CEO, Zain Africa;
• “The value of a network comes from all the people you can reach. Penetration of cash and checks remains our primary opportunity.” Tim Attinger, Global Head of Product Innovation and Development, Visa;
• “Bringing services to [the] doorsteps [of the unbanked] allows them to save tiny amounts more frequently, and more easily, when they receive cash. The four key things poor people do with money is a)spend it down, b)save up for a purpose, c)receive and send money, d)park money for security and inaccessbility.” Bob Christen, Director of Financial Services for the Poor, Bill & Melinda Gates Foundation;
• “Access to finance is not like flipping a light switch. It is a ladder, a ladder of services. I’m not sure who is greedier, the MNOs or the banks. They want their slices of cake but…there’s only so much to slice. There’s a point where the crumbs don’t make it worthwhile.” Brian Richardson, WIZZIT;
• Responding to a question from an official at the Central Bank of Kenya about the stability of mobile banking services vis-a-vis the crisis: “Our EBITDA margins are 65 percent, everything is prepaid. That means the value in our system is all backed peso for peso. Those funds are sitting in a commercial bank.” Rizza Maniego-Eala, President, G-Xchange Inc /Globe Telecom.

What’s the verdict for this year’s event? And where are we on that hype cycle? Reuters has weighed in already: Mobile money seen as chance for world’s poorest.

DCM is Japan’s leading mobile communications operator, with 53 million subscribers as of March 2008, representing over half of Japan’s cellular market. It launched a mobile wallet service, Osaifu-Keitai (meaning: wallet-mobile phone) in July 2004.

Osaifu-Keitai is based on a FeliCa card embedded in mobile phones (the same that was used by Octopus in Hong Kong). Osaifu-Keitai is a device-based mobile payments solution, supporting both proximity payments in shops that have a FeliCa chip reader and remote (online) payments.

Osaifu-Keitai is based on a wallet application on the FeliCa chip, which supports multiple payments instruments including credit cards, operator billing, prepaid e-money, transport ticketing and postpay services.

DCM’s core belief—one that it developed based on the success of the i-mode content platform in Japan— is that use of payment services will be pulled by the presentation of a range of services to the customer. Therefore, DCM has developed a very structured approach to enticing partners onto its content and payment platforms and to promote further service innovation. The service platform now supports a variety of uses beyond e-money, including airplane tickets, membership cards, and house entry keys. Users can download multiple applications over the air onto the FeliCa card to support each of these services. DCM also recognized the challenge of convincing retail chains to accept their mobile money scheme. They were deliberate in stressing to these agents the ways in which Osaifu-Keitai would increase both customer convenience and value for their businesses though (1) process speed, (2) versatility, and (3) security (Jenkins 2008).

As of January 2006, there were over 10 million subscribers of Osaifu-Keitai with compatible handsets. As of 2008, there are more than 29 million subscribers (NTT DoCoMo 2008). The mobile wallet application is accepted at more than 640,000 stores (Contactless News 2008).

Though Osaifu-Keitai is by no means a proven success, it does show significant promise. What sets it apart from all the other initiatives we have reviewed is the sheer level of dominance DCM exerts over the mobile market (with an impressive 80 million customers) and the ecosystem around it. The sheer muscle that DCM brings is unparalleled. This approach would not be replicable in Europe, where markets are more fragmented on both the telecom and banking sides.

Read more details about the Osaifu-Keitai experiment here.

That’s the subject of a new CGAP brief authored by Ignacio Mas and me. Read it here.

As part of the study, we conducted a survey of Filipino unbanked mobile money users. We found:

• One-half of mobile money users in the Philippines were previously unbanked;
• Unbanked non-users tend to know telco brands better than bank brands, and already have a view of m-banking as easy or very easy to use (72%);
• However, only 21% feel m-banking is a product for “people like me”, which is significant.

And there’s more:

• 16% of unbanked non mobile money customers have in fact been banked in the past but have abandoned banking as the services were too expensive (36%) or no longer needed (43%);
• 58% of unbanked Filipinos indicate that they do save, but entirely through informal mechanisms;
• Unbanked customers are more likely to purchase in high frequency and low values i.e. in the Philippines mobile money users “top-up” on average fourteen times per month;
• 90% of users surveyed feel that their money is safe with mobile money.

Nick was at an event we did in Washington and you can watch that here.

photo courtesy of Olga Morawczynski

Last month, I described an observation on usage that came from my ethnographic fieldwork. I noted that money flows reversed during the post-election violence in Kenya. That is, urban migrants were receiving money and airtime from their rural relatives. M-PESA has also generated a variety of impacts to the daily lives of its users. One of the most significant will be described in this week’s blog. That is, changing remittance patterns.

Users began to make transfers “in bits”, remitting smaller amounts of money more frequently.
A significant change to remittance patterns was noted during the fieldwork, especially during the latter stages. Money was being remitted “in bits”. That is, smaller amounts of money were being sent with greater frequency. A shoe maker in Kibera explained:

“Before M-PESA, I used Posta [post office] and would transfer money at month-end. Now I send the money in bits. I send every week. Sometimes I send twice in a week. It is cheaper for me to send with M-PESA…so I can send more times.”

Other urban migrants confirmed this finding. They gave two main reasons for such a change. Firstly, M-PESA was more accessible than the other money transfer options. There were no formal financial services within Kibera, but over 40 M-PESA agents. Money could also be sent from anywhere, and at anytime, as long as a balance was maintained in the M-PESA account. As was noted by one migrant, “M-PESA never closes”.  M-PESA was also less expensive than the other money transfer services. For example, sending 1000 Ksh through M-PESA was 27% cheaper than the post office’s PostaPay, and 68% cheaper than sending it via a bus company.

Some urban migrants increased their money transfers significantly since adopting M-PESA. Sylvesta, a security guard in Kibera, sent money home 15 times during the period of one month. He explained that he did so because his family was large. He had two wives, eight children, nine siblings and countless in-laws.  The rural recipients confirmed that they were receiving more frequent transfers of smaller value. Most further noted that such a change had beneficial outcomes. It resulted in an increase in their total income inflows.  The shoemaker’s wife in the village, for example, explained that she was receiving between 400-500 Ksh more per month since she adopted M-PESA. She noted that such an increase was vitally important—remittances constituted a substantial part of her household income.

In my next post, I will provide a lesson for financial service providers and development practitioners who are developing an m-banking application. In particular, it will note the importance of establishing trust with customers before introducing the application.