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Mobile Financial Services
Mobile Financial Services Grameenphone
SUBMITTED TO: HEAD, PEOPLE AND ORGANIZATION GRAMEENPHONE
Prepared By Zubairia Khan Financial Services, Grameenphone
Letter of Transmittal
2 February, 2012 Head, People and Organization Grameenphone GP House, Baridhara, Dhaka Subject: Submission of the report on “Mobile Financial Services focused on Grameenphone” Dear Sir, It gives me immense pleasure to submit the report on “Mobile Financial Services in Grameenphone” as a requirement of the BBA program of the Department of Finance, University of Dhaka. Apart from the academic knowledge, I have got the golden opportunity to acquaint myself with the mobile financial services provided by GP as well as getting my first-hand work experience. I believe that the experience of corporate world I have acquired from this study will be an invaluable asset throughout my life. It expresses me gratitude to you and my supervisor Mir Rashedul Hossaim, MD Financial Service, for providing me desired chance to learn about the mobile financial services provided by the largest telecommunication company Grameenphone. In spite of my limitation of short duration, I have devoted to find out the core operations and analytical procedures through my works. I hope you will appreciate my endeavor and find the report up to your expectation. It has to be mentioned further that without the expert advice and guidance of the Grameenphone family, it would not have been possible to complete this term paper. I will be pleased to answer any sort of query you may have regarding this report. Thanking you
Zubairia khan BBA 14th Batch
Department of Finance,University of Dhaka
It was the never ending efforts and ever increasing curiosity in preparing a term paper on “Mobile financial services focused on GP “. I strongly believe works like this will surely help me to have a clear concept about mobile financial services existing in our country. I would like to thank Almighty Allah, the all knower & best of the helpers to make my term paper a comprehensive one by providing us the mental & physical toughness in course of its preparation. My next honest & heartiest gratitude goes to Mir Rashedul Hossaim, MD Financial Service and my supervisor as well as all the members of Financial Service for their sincere and utmost guidance to prepare this report & to gather huge practical and realistic knowledge, to make me understand the topics, terms & make me familiar with the mobile financial services provided by Grameenphone.
In Greameenphone. details about these players are mentioned in this paper. and go to scale. payments of utility bills and mobile banking services. A significant development of mobile financial services in Grameenphone is an electronic ticketing service with data support from Bangladesh Railway and CNS. Using the MobiCash service. The Company was successfully listed in November 2009 – which was the largest IPO in the history of the Bangladesh capital market. retailers and so on.Executive Summary Grameenphone Ltd. Bill payment. mobile money ecosystems are networks of organizations and individuals that must be in place for mobile money services to take root. 6|Page . The foundation of Eco-system of Grameenphone lies on three core aspects.insurance etc. Three core mobile financial services of Grameenphone are fund transfers. Purchases of goods and services ranging from prepaid airtime to groceries to bus ticket to micro. both for individuals and the nation. Mobile money services broaden the scope of development in our economy which includes Domestic and international remittances. the authorized ticketing partner of the Bangladesh Railway. different lottery tickets have also been made available through MobiCash service. proliferate. airtime sales agents. The core assets of GP are its strongest points to outperform over its competitors in the mobile financial sectors in Bangladesh. a traveler can purchase electronic railway tickets at anytime and from anywhere from his/her mobile phone and avoid the hassle of travelling to the station during working hours or standing in queue for long. Payroll deposit. where mobile telephony is acknowledged as a significant driver of socio-economic development. Apart from train tickets. Grameenphone’s long term focus of its mobile financial services is on customers and the convenience of other stakeholders including banks. merchants & agents. the largest telecommunications service provider in Bangladesh provides services to rural and urban customers across Bangladesh. Mobile money eco. namely utility.system span a wide range of different players. including itself as mobile network operators. capacity and an enabling environment. Loan receipt and repayment.. banks.
4 13 3. After the detailed report.Grameenphone is constantly trying to improve itself through maximizing utility of its customers. enhancing its capacity through technological innovation and contributing to socio-economic factors which are surrounded by this organization.2 6 Mission.5 17 Long term goals of MFS in GP Eco.1 2.1 1.2 1. Values Recent Development in MFS 5 CHAPTER III: Structural Aspects of MFS 3.system Mobile Money Opportunity MFS in GP CHAPTER IV: MFS Development 7|Page .1 8 3. real world business cases has been supplemented to gain insights on GP’s recent business activities that includes ➢ Train ticketing from retail outlet ➢ GP charge from Bangla Lion Table of Contents CHAPTER I: 1.3 BACKGROUND OF THE STUDY Origin of the Study 2 Methodology of Study Objectives and Limitations of Study 3 2 CHAPTER II: GP At a glance 2.2 9 3.system of MFS Foundation of Eco. Vision.3 11 3.
4.3 35 4.2 28 Lion 4.4 Offering of MFS Business case: Train Ticketing from Retail Outlet Business case: GP Charge from payment of Bangla Bill Tracking: Hypothesized Example 40 Chapter 1 Background of the Study 8|Page .1 26 4.
interpreted and presented in a systematic manner and key points are to be found out. analysis. regarding the academic requirement. interpretation and presentation of Data: To classify. Collection of Data: Primary data were collected through 100% physical inspection. This overall process of methodology is given in the following page in the form of flowchart that has been followed in the study.Origin of the Report In the way of attending the BBA Program in the one of the finest university round the globe we are to get acquainted with the best knowledge and techniques. Recommendations are suggested thereafter to overcome the problems. Identifying the Data Sources: Essential data sources were needed to be identified to prepare the report. D. teacher Dewan Mustafizur Rahman and the Company (Grameenphone) was selected by me. E. we were assigned to prepare a report on two important updated issues of the banking world among which we chose the issue of Basel from the viewpoint of Bangladesh. And interviewing is predominantly required to collect the primary data. I used some analytical tools to understand them clearly. Before assigning this report I have discussed with my instructor about the subject. 9|Page . In such case. analyze. Classification. To perform the study data sources are to be selected and collected. And to meet up the need for the primary data I had taken several appointments with the high officials of GP. Selection of the Study: This topic was assigned by our honorable B. and we had selected one of the high profile banks of the country called Dhaka Bank Ltd. Findings of the study: After scrutinizing the data problems of the study are pointed out and they are shown under concerned heads. they are to be classified. interpret and presentation. We were to select a bank to represent the implementation of Basel on it. A. Methodology of the Study The study requires a systematic procedure from the selection of the topic to final report preparation. After number of discussions with the officials of DBL we have prepared this report titled as “Is the Basel Compatible: Focus on a Bank”. C. (DBL) for our report purpose.
Limitations of the Study This report is focused on Mobile Financial Services provided by GP. Final Report Preparation: On the basis of the suggestions of our honorable instructor and officials of GP thereafter in a comprehensive manner. This study report is based upon secondary source of information from the documents and databases of the GP. 10 | P a g e . different internet sources. Finding out the performance of GP. The objectives of the study are given bellow: Exploring different mobile services provided by GP Analyzing the current polices taken by GP. Though I tried my level best in preparing this report some limitations were yet present there: i. this report is prepared Objectives of the Report It is important to define the perceived objectives behind preparing this paper to make this a meaningful effort. Information from Annual report regarding mobile financial services is not sufficient for in depth analysis. . Interviewing technique was used in collecting primary data.F. This report is extensively dependent on secondary data such as annual report of GP. Primary information in investigating the report findings is difficult for time constraints. published materials. Status of GP in Bangladesh.
Chapter 2 GP at a Glance 11 | P a g e .
Grameenphone is the largest mobile phone service provider in Bangladesh. both for individuals and the nation. relevant innovations & services. The company always ready to help. 12 | P a g e . where mobile telephony is acknowledged as a significant driver of socio-economic development. received its operating license in November 1996 and started its service from March 26. Mission Grammenphone is the only reliable means of communication that brings the people of Bangladesh close to their loved ones and important things in their lives through unparalleled network. the Independence Day of Bangladesh.Grameenphone: At a Glance Grameenphone Ltd. After 12 years of successful operations. with more than 23 million subscribers as of December 2009. Grameenphone provides services to rural and urban customers across Bangladesh. the largest telecommunications service provider in Bangladesh. The Company was successfully listed in November 2009 – which was the largest IPO in the history of the Bangladesh capital market. Grameenphone has played a leading role in increasing the country’s telepenetration rate in mobile industry from less than one percent in 1997 to over 40 percent as of 2010.. Vision GP exists to help the customers get the full benefit of communications services in their daily lives. 1997.
Everything they produce should look fresh and modern. Axiata (Bangladesh) Ltd. If it doesn’t.(Robi) and Airtel Bangladesh Ltd. Grameenphone signed agreements with different mobile phone operators to share its infrastructures. Moreover. the authorized ticketing partner of the Bangladesh Railway.Values MAKE IT EASY Everything GP produces should be easy to understand and use. BE RESPECTFUL Although being a multinational company. it wants to help customers with their specific needs in a way that suits way of their life best. not overpromising. In another business development. (formerly known as Warid) are among the major signatories. different lottery tickets have also been made available through MobiCash service. The company wants to be a part of local communities wherever it operates. They bring energy and imagination to our work.(Banglalink). not words. GP acknowledges and respects local cultures. a traveller can purchase electronic railway tickets at anytime and from anywhere from his/her mobile phone and avoid the hassle of travelling to the station during working hours or standing in queue for long. BE INSPIRING The valued members are creative. The company should always remember that it tries to make customers’ lives easier. Using the MobiCash service. It cares about actions. Augere and Banglalion also opted for Grameenphone’s infrastructures to expand their services around the country. WiMax operators. Apart from train tickets. 13 | P a g e . the company is there to put things right. The company is concerned about delivery. Recent Development: Mobile Financial Services The electronic ticketing service was launched by Grameenphone with data support from Bangladesh Railway and CNS. KEEP PROMISES Everything GP does should work perfectly. Leading mobile operators Orascom Telecom Bangladesh Ltd.
enabled all parties to optimize their resource utilization and minimize cost of network deployment as well as of operations and maintenance. it would ensure sustainable utilization of national resources and reduce deployment of unnecessary infrastructural facilities in future. done in compliance with the guidelines issued by BTRC. 14 | P a g e . As a result.Infrastructure sharing agreements.
Chapter 3 Structural aspects of MFS 15 | P a g e .
Thus mobile money has significant implications for economic activity across the board. education or training which involves ones job market prospects). it facilitates the flow of money from one party to another using a communications infrastructure that already connects billion of customers throughout the world. illness. poor people are forced to rely on informal financial services. Besides. • 16 | P a g e . In the developing socio. most important thing of mobile money can be said as it reduces cost and risk inherent in dealing with cash. They help reduce vulnerability to unexpected events such as accident. There is no limit in range of transactions and services for which mobile money can be used. thefts. which may be unsafe or fringe formal financial products which may be expensive as well as unsafe. or droughts. Scope Use of mobile money for transactions and services in a developing country like Bangladesh includes • • • • • Domestic and international remittances Bill payment Payroll deposit Loan receipt and repayment Purchases of goods and services ranging from prepaid airtime to groceries to bus ticket to micro.Mobile Money Opportunity in Bangladesh Mobile money is money that can be accessed and used via mobile phone. particularly in case of pre. In addition in many countries.economic scenario.emerging like Bangladesh. housing.insurance Motivation for the poor people GP recognizes that financial services can help poor people who are the majority in Bangladesh forge their own paths out of poverty in 2 ways – • They enable one to obtain through savings or credit sums of money large enough to invest in income generation and asset creation (through enterprise.
8% per day Urban population Per capita Income Annual GDP growth Labor Force 27% $ 580 (nominal) At least 5.4 mn (UN estimated) Population living below $ 2 82. to being able to integrate one’s small business into the value chains of the larger market players.13% of GDP) 17 | P a g e . Thus inclusion in financial sector is a critical prerequisite for effective market participation in its broadest sense – from being able to integrate send a utility bill payment by mobile phone instead of losing half days work in the line of the bank.7 mn >$10 bn (9. Socio economic Agents Population 164.6% since 1996 75 mn Communication & Connectivity Mobile Phone Penetration Mobile Phone Subscribers Mobile Network Coverage PSTN Subscribers No of mobile networks Internet Users 44% 76.Financial inclusion bolsters both the access to resources and he ability to transform resources into opportunities.43 mn 99+% 1 mn 6 <1% Inward Foreign Remittance Number of Workers abroad Remittances 6.
100 distributors 100 nationwide GP Centers 500 GP Community Information Centers Subscriber Base • • • 35.69 mn active (Oct 2011) 44% market share Customer Usage Data Grameenphone stands on the strong foundation because of these four valuable assets. The industry specific assets GP has are not attainable by the other banking organizations. Brand • • No 1 Telecom brand in Bangladesh Among top 100 most valuable brands in the world Network • • • 99% geographic coverage Over 12000 base stations Nationwide fiber optic network Distribution • • • • 300000 points of sale 12 logistics centers. Mobile Financial Services 18 | P a g e .GP and Mobile Financial Services Core Assets The core assets of GP are its strongest points to outperform over its competitors in the mobile financial sectors in Bangladesh.
ticketing for Bangladesh Railway lottery e. In most cases. Chittagong. Rajshahi. in 2006 first mobile e. MFS opens new opportunities for the Banking sectors. accounting. particularly for the customers. banks think that MFS will harm their business in the long term. BillPay. Sylhet and BillPay service Operations and Back Office • • • Financial operations. 19 | P a g e .Grameenphone has launched such financial services for the favor of the convenience of the people of Bangladesh.ticketing for charitable organization inward foreign remittance services for the 2 banks Technology Platform • • World class MFS technology platform based in international standards (transaction engine and prepaid stored value accounts) Access and use of GP network Distribution and Agent Network • 5000 retailer agents serving Dhaka. Two banks are the associated partners of the Grameenphone. reconciliation Customer service requests Reporting Long term goal: GP MFS Grameenphone is a customer focused company which introduced the mobile financial services with long term goals for different stakeholders. Pioneering Experience & Knowledge • • • • Launched Launched Launched Launched first MFS in Bangladesh. it has been evolving its development cycle of being the provider of top class financial services. but this is completely a wrong concept. By the time.
SMART Communication In Greameen Phone. As this is a new concept in our developing country.” – Nepoleon Nazareno. 20 | P a g e .” Mobile Financial Services has become a highly regulated sector in Bangladesh.GP intend to achieve these goals for its three prime stakeholders. financial inclusion bolsters “both access to resources and the ability to transform resources into opportunities. Moreover its supplementary goals are mentioned here: United Nations Development Programme (UNDP) articulates.system “The three rules of mobile money are partnership. the central bank Bangladesh Bank has published the rules and regulations regarding Mobile Financial Services which are to be in application from now. mobile money ecosystems are thus the networks of organizations and individuals that must be in place for mobile money services to take root. proliferate. We need to create a mesh of partnerships covering various networks of relationships. and go to scale. partnership and partnership. necessary independence is required for the experiment. Recently. Non bank retail agent outlets are used to convert monetary value (cash) into electronic value ile phone used to identify customers. authorize transactions and to enable customers to initiate transactions on Transaction processed against stored prepaid electronic value GP Mobile Financial Services: Eco. president.
retailers. employers. regulators. Players MNO (GP) Assets & Capabilities Mobile infrastructure Extensive Retail Outlet Massive Customer bases Strong branding Customer Service Structure Incentives Acquire customers Manage churn Capture additional opportunities Increase ARPUs revenue Reduce airtime distribution Ability to make good margins cost on low ARPUs Meet service obligations & CSR goals Bank Banking License infrastructure Regulatory Expertise and Appearing in new customer segments and new geographic areas Compliance Capture additional revenue Ability to facilitate foreign Reducing cost of delivering exchange. international financial institutions and donors. airtime sales agents.system span a wide range of different players.Mobile money eco. clearing. financial services settlement Distributor Physical points of presence Earn commissions transactions & on sales Aware of customer habits & usages Increase traffic potentials Retailer Physical points of presence Reduce cost of handing cash Reduce queues at peaks in peak times Manage inventory effectively 21 | P a g e . utility companies. and even civil society organizations. banks. including itself as mobile network operators.
money Agent oversight & quality Strategic focus may not be control mobile money Exercise leadership in Shareholder pressure for quick drawing mobile money eco. low income customers Ensure compliance with financial sector regulation Narrow customer base Handle crosstransaction Hold float name in border Stringent regulatory requirements with significant compliance burdens customer’s 22 | P a g e . such as taking deposits and issuing e.money Limitations & Constrains & Regulatory limitations on providing financial services. monitor & enforce development compliance Enable wider range of payment choices Address AML/CFT concerns by moving cash into more visible channels End user Relevant needs Convenience of remote payment.Regulator (BB) Authority to impose National socioeconomic regulation. remittance & financial services Increased affordability services access & of financial Reduce risk of carrying cash Players MNO (GP) Roles Provide infrastructure communication services Issue e.increased returns system together Bank Offer banking services via Lack of experience with and in mobile some cases interest in.
Distributor Indentify potential new Inefficient practice of business mobile money applications skill Perform cash.in & cash. It spins the threads that knit all the relationships together.system is their reach across customers in all income segments. In Bangladesh.out Liquidity problem transactions Lack of customer trust very Report suspicious often transaction accordance with Limited ability to partner with AML/CFT large corporations Retailer Accept mobile payments Build customer mobile money trust Customer payments in channel demand for through mobile Business partner willingness to Use mobile payments in B2B transact by mobile transactions Regulator (BB) Provide environment money for enabling Lack of financial and technical mobile capacity Lack of experience with Protect stability of financial convergence of financial and system telecommunication regulatory regimes Demonstrate leadership to encourage & protect behavior change End user Going for the use of mobile Limited financial literacy money for convenience Lack of awareness Cultural and resistance psychological Mobile Network Operators As a Mobile Network Operator Grameenphone is playing leadership role in this eco. What gives MNOs the impetus and ability for leadership in developing mobile money eco.system. about 1/10th of the population has bank accounts while nearly 23 | P a g e .
Besides these points are opportunities to bring new members into mobile money eco. Vodafone’s Hughes considers the agents and retailers “absolutely critical.system depends on good information about the flows of money. These people are called as the backbone of any mobile ecosystem. they get the chance to observe the habits and needs of the customers and therefore identify and suggest new ways of use of mobile money.system.” Banks According to the Grameenphone. Mechanism of mobile money has coined the term called “branchless banking”. GP is able to provide not only the infrastructure and a large pool of potential users of mobile money but also advisory services to other companies – banks. They are our touch points to our customers. This facility of branchless banking offered by the Grameenphone has been providing more value to the 24 | P a g e . where customers can sign up for services. As these people do operations being close to the customers. utilities. insurers. thus the argument for the mobile money is stronger than the others like banks.1/3rd has mobile phones.paid airtime accounts. mobile banking is approximately 50% cheaper than traditional financial systems. It is costly for the traditional banks to reach the remote areas of Bangladesh. cross border business) set by the government authority to run business. Distributors & Retailers GPs network of sales agents and retail outlets. Thus these people are placed to follow the flow of mobile money and identify points at which cash is taken out and used instead. Another thing is recognized that expanding the mobile money eco. Moreover banks are supposed to abide by the rules and regulations (in case of deposit taking. purchase phones and accessories and top.up their pre. the agents and retailers play the most significant role. As an MNO. and so on – seeking to develop their own mobile money models. no doubt. Most of the geographical areas in Bangladesh are of rural segment where no bank operates its business. lending money.system expansion. In case of further eco. give them their reach geographically and across income segments. Thus doing business in rural area is not profitable for banks as the people in these areas are unable to pass the requirements to have relationship with banks.
users need to be educated through a proper channel. 25 | P a g e . The role of Bangladesh Bank in Bangladesh cannot be overstated as it is responsible in providing feasible platform that enable ecosystem development to happen. no doubt. GP recognizes that there exists many opportunities for the growth of this industry.income customers who have no other options whereas banks have been content to focus on highest income segments. “No one knows what the ecosystem would look like in five years.banking may only offer marginally more convenience or security compared with options already available. basically cashless – but getting there is the challenge. Regulators In Bangladesh the regulatory role is played by the central bank called Bangladesh Bank.whereas m. Regulators can create space for experimentation and as experience accumulates. The challenge of shaping an enabling environment for mobile money is crucial in case of developing country like Bangladesh. According to Vodafone’s Nick Hughes. Current standing of Eco. build the policy frameworks needed to undergird further growth.system For something to be ubiquitous the foundations need to be concrete. This is a very complicated exercise.system Mobile money is still in the emerging phase. most appropriately it is in “chaos” phase particularly in a developing country like Bangladesh. The foundation of the Eco.” GP MFS: Foundation of Eco. We can imagine the end state – closed loop.system of GP lies on 3 pillars to work properly. with disparate and sometimes competing objectives that need to be reconciled. everyone connected. thus scalable and robust technology will be required.low.
Leaders in the mobile money industry believe that remittances and remote payments will serve as effective catalysts. Within these categories. but that in the longer term. if mobile money is to be ubiquitous. Utility According to the economic context. it’s what the customer can do with that money. the predominant value proposition is being able to send money easily. For mobile money. different applications have experienced different degrees of uptake in different markets. money out. the key to success is simplicity” It is important not to confuse the market with too many services and to take the necessary time to establish consumer trust as well as the interest and collaboration of the parties that would need to be involved in each new service. So far. hospitals. according to DoCoMo Managing Director Hiroshi Tamano. He stressed a number of factors which are also followed by many pioneers round the world like GP. utility is the ability of a good or service to satisfy some human want or need. additionally greater utility requires greater integration into consumer’s economic lives. simple value proposition.” Thus the future of Grameenphone is to be working to bring into the mobile money eco systems the schools. It can initially be an uphill battle to persuade merchants to accept mobile money. cheaply and securely. remittances and remote payments are the most common uses of mobile money. Today. Consumers are using mobile money where there is a very clear. utility is a function of the number of ways and places in which it is possible to use it. The greater the utility. “It’s not just money in.A. and other merchants where its mobile money consumers must currently use cash. the greater the potential uptake. 26 | P a g e . people typically must take three to four hours off work to travel back and forth and queue at designated banks-which are not necessarily the banks closest to their workplaces-in order to pay their utility bills. it must offer even greater utility. In Bangladesh. This is partly because of differences in what mobile money provider’s offer and market. retailers. According to experts in Grameenphone: “In the early stages of mobile money ecosystem development.
want to focus on their core business. even if it is with a different provider. will be needed to expose to a broad range of players so collectively they can get the full package of financial services. Interoperability in the emerging diversification of mobile money service Some degree of interoperability will be required if a critical mass of mobile money services is to develop.Process speed Minimizing the time it takes to process a transaction at the point of sale Versatility Enabling customers to use a single device for multiple services from multiple service providers. Interoperability plays a role in both the remittance and remote payments space and in the emerging diversification of mobile money services. it will be a lot cheaper and more powerful as a value proposition if you can send money to anyone with a bank or mobile money account. Mobile network operators and other companies are conscious of their core competencies and often. in the sense of collaboration or partnership. Offering consumers choice can be a 27 | P a g e . as compared with plastic cards that apply to single service providers only Security: Allowing customers and service providers to view their transaction histories at any time via their mobile handsets. Interoperability in remittances and remote payments For customers. As a result. quite rightly. and reducing the chance of loss as compared with cash Mobile money providers increasingly recognize interoperability as part of the value proposition to consumer. some interoperability. Interoperability in the diversification of mobile money services is also important from the perspective of consumer choice. over time.
Interoperability can be part of that better service. And diversification of mobile money services is itself dependent on the capacity of businesses of all kinds to make effective use of the mobile channel. B. In the short run. and innovation. potential players will have to have enough prior knowledge and capacity to be reasonably confident they will succeed. There needs to be a push on the corporate side. The technologies are fairly similar. When the time comes to think about interoperability. and not on the enabling technology. Bilateral agreements Mobile money providers need time to experiment. price. for example to convinces employers to process their payrolls 28 | P a g e . Industry leaders seem to agree that interoperability is the key. such as business planning. Competitive advantage comes from delivering better service to your consumers. deploy and develop their models. But these agents often lack even the most basic business skills. For mobile money ecosystems to begin springing up everywhere. Agents’ Capacity Agent capacity becomes increasingly critical with the diversification of mobile money services on offer. It is particular issue for the large numbers of small-scale players involved. Among these small-scale players are the agents and retail outlets that perform the critical cash deposit and withdrawal functions. and this has the potential to become a bottleneck on overall ecosystem growth. Capacity: Entrepreneurialism involves risk while the risk appetites of firms and their shareholders reflect differently and change time to time. Capacity is an important consideration not only for MNOs like Grameenphone but all across the mobile money ecosystem. Consumers do not care about technological infrastructure-compete on product. the worry becomes whether or not interoperability will compromise their competitive positioning. accounting. and cash management. provider’s primary concerns have to do with consolidating their models. learn.key part of the value proposition.
thus regulators are to offer flexibility & help in flourishing mobile money business for its own sake. for instance. must drum up some interest in customer segments they have previously ignored. But even though MFIs have strong local knowledge. Big banks. There is a big need for capacity-building for MFIs if they are going to participate in any way in mobile banking. cultural receptivity goes beyond mere tech-readiness. But in the mobile money ambit. Cultivating openness and receptivity is a significant part of the work a firm must do to implement a new technology. and certainly most companies have at least some work to do before implementing any new technology-especially one so central to the customer experience. for example. or make a strategic decision to let MNOs and others serve those segments without political interference. 29 | P a g e .Some of the biggest banks in Bangladesh still keep track of deposits and withdrawals in hand-written ledgers. Mobile money is in its emerging stages as an industry. Because this would increase the economic and financial activity to accelerate the Bangladesh Bank to achieve its target of price stability and monetary sustainability Capacity building is not only a technical challenge. Capacity issues are certainly not exclusive to MFIs .using mobile money and to convince retailers and other points of sale to avail them of mobile money payment acceptance mechanism. most lack the stable core banking systems and specialized technical skill to implement branchless banking models or tap into existing systems. Regulator’s Capacity For regulators (Bangladesh Bank). much is made of the potential for microfinance institutions to adopt mobile money mechanism. openness and receptivity are an important part of the capacity that is needed. product development and the ability to manage small transactions. Micro Finance Institutions’ Capacity As indicated above. “best practices “are still evolving. and while there are policy innovations out there.
30 | P a g e . The first concern of the regulator in Bangladesh is to maintain and if necessary restore. The role of IFIs. because they are accountable for social results in addition to or even instead of financial results. development donors. while consultants and other commercial capacity-building groups are still scarce. players such as IFIs. But regulation is essential to creating and maintaining an enabling environment for business. IFIs. airtime is being traded like currency. in addition. collaborative self-help.with significant implications for the economy and for people’s lives. Hers roles are especially important in mobile money’s current. there is an almost instinctive negative reaction to the word “regulation”. development donors. As we have seen. public confidence is a perquisite for the uptake of mobile money. and civil society organizations have strong potential roles to play in capacity-building. Another very interesting leveraging strategy is bottom-up. organizations development donors. and civil society Because of the positive social and economic impacts of mobile money. and mobile money is no exception. An Enabling environment It may sound weird but it is true that for many business people. and civil society organizations may be particularly well-suited to help build the capacity of some of the smaller members of the mobile money ecosystem. such as cash-in/cash-out agents and small-scale retailers. and civil society organizations will be uniquely positioned to take on nonrevenue generating bits of the capacity-building challenge. emerging stage. IFIs.Leveraging strategies Smart communications is using a train-the –trainer strategy to train the smart money agents who sell airtime and perform cash deposit and withdrawal functions for its customers. developments donors. C. both today and in the longer term. mobile money. Public confidence is predicted on the stability of the financial system.
living in entirely cash-based economics –at the expense of their full economic potential and often of their physical security as well.Grammenphones Delwar Hossain Azad agrees: “We are talking about millions and billions from the base of the pyramid. It is surprising that many leaders in the mobile money industry view the regulatory environment as not particularly enabling at present. They cite regulation as a primary challenge to expanding mobile money ecosystems. because multiple regulatory domainsbanking and telecommunications –are involved. it could raise barriers to entry and jeopardize providers and regulators shared goal of reaching ever lower income clients. 31 | P a g e . billions of people are currently left out of the formal banking system.” In addition to financial stability. Grameenphone believes. ”Except regulation. The need for stability on the one hand and innovation for inclusion on the other hand requires regulators to strike a delicate and constantly evolving balance. Their inclusions has implications not only for them individually but also for their countries nationally. As described above. We cannot live with the present banking act. Mobile money providers need some regulatory certainty in order to reduce the risk of investment. all other challenges are within our control.we cannot serve the population within its present parameters.” What is needed. But rigidity in this emerging stage would stifle investment and innovation. the Bangladesh Bank is concerned with financial inclusion. we don’t want to mess with these people’s money. Additionally. if the cost of compliance were too high. Striking the balance between the stability and innovation is particularly difficult in the mobile money space. the worst thing we could do is pretend we know all the answers in advance. then? Instrumentality Leaders are clear that in mobile moneys emerging phase.
through industry associations. For instance: Other companies: Collective company action can take place on an ad hoc basis. and benefits. We have to understand and accept the differences in need and requirement. proportionate. they often have their own channels of 32 | P a g e .Regulators are not futurologists’. for example on consumer usage. Grameenphone interacts regularly at various levels of Central Bank management. Proportionality Regulators need to weigh the potential gain against the potential damage. These institutions do not usually advocate company specific position. and risk-based regulatory framework. Collaborative or multilateral engagement with regulators There are a wide range of organizations mobile money providers can work with to collaboratively engage in dialogue with government.g. Executives of Grameenphone think like this: ”the success of service can be realized only through a rational. mature approach. but they provide credible information on which to base those positions and communicate them to regulators. or more systematically. then add regulation as risks manifest. First. Research institutions: Independent research institutions can objectively assess and present fundamental data. Take a relaxed. Development agencies: Development agents can be effective partners in government engagement for a number of reasons. needs. e.” Individual or bilateral engagement with regulators In Bangladesh. and let the channels emerge. as clusters of companies with complementary interests coalesce.
and other interested firms to share experience and learn about business and technology innovations in the mobile money space. banks. regulators will. they are generally perceived to have the public interest at heart. in addition to those that private sector companies have. determine how ingrained. it is rapidly moving toward consolidation and growth. which gives them a certain legitimacy in the eyes of regulators.communication into regulatory bodies. Industry leaders are clear what is needed now is sustained action: experimentation and innovation by firms with mobile money business models and by government in the regulatory frameworks to make them possible. And as business and government seek to interact more frequently and effectively in the policy-making process. At the same time. It is important to sustain and even diversify the opportunities for mobile network operators. While MNCs have played and continue to play important catalytic roles. Second. More recognition should be given to regulators for creating enabling environments that allow mobile money ecosystems to take root and to grow. Communication and collaboration will be a key. The public value that mobile company creates-in terms of financial inclusion and all its attendant benefits –opens up the space for development agencies and companies to work together on advocacy. more work should be done to learn from their efforts and spread best practice mechanism around the world. it is important to establish and support similar forums for regulators to exchange policy innovations across countries. The very nature of ecosystem development means that to be successful. in large part. it has to be a collaborative effort. mobile money becomes. 33 | P a g e . how ubiquitous. While mobile money is now in its emerging stages. technology providers.
Chapter 4 MFS Development 34 | P a g e .
train ticketing.Offering of Financial Services by GP Channelization of financial services takes this form: The financial services can be divided in two payments of utility bills and ticketing.directed mobile wallet transactions executed by customers from their own handsets Partner Convenience Instant Information Automated bill posting Operational Efficiency Easy expansion into new territories Customer Convenience Convenient locations. 2. Bill Pay It is available to all GP subscribers and non subscribers. 1. GP subscribers can go for it through their Mobicash wallet while non subscribers can avail it by showing the bill to GP retailers as retailers pay through their Mobicash. There are three types in ticketing. a) Lottery Ticket b) BCB Match Ticket c) BTRB Ticket BillPay Currently focused on utility bill collection in 9 localities of the country via GPauthorized agents and self. But Ticketing for lottery is available for non subscribers. open longer Easy to use 35 | P a g e . Ticketing Only the GP subscribers can go for BCB Match Ticket and BTRB Ticket. lottery ticketing and cricket match ticketing.
authorized agents for cash. both GP users and non users are enabled to pay through this system. BPDB ctg BPDB Syl BPDB Raj TTAS DSCO DPDC BGSL CWSA KGDCL JGSL Flow Chart GP settling the Bill Pay with Partner 5 MobiCash Ticketing 1 2 4 Bangladesh Railway Partner Sends bills to the utility users Utility users make payment through Bill P Any registered GP subscriber can book and purchase a train ticket directly 3 from their mobile phone.ticket from selected GP centers Bangladesh Cricket Board 36 | P a g e . Access to relevant information 24/7 dedicated call centers Wider coverage: over 5000 GP.in and bill payment Utility Partners There are nine utility partners of GP. GP users can pay through their air time wallet while nonusers may pay through the retailers’ air. up to 10 days before travel time Physical ticket collection against purchased e.time wallet.
GP has exclusive agreement with BCB to sell tickets for all international matches in the next three years. The purpose of this business case is examining the feasibility of giving this train ticketing to be operated through the retailers outlet. service launched with 2 banks Currently focused on cash-to-cash disbursement in the last mile of distribution Business Case 1: Train Ticketing from Retail Outlet Grameenphone currently operates the train ticketing directly through its close supervisory procedure. The proposal is the retailers are to be offered a flat commission of BDT 1. Distributors and retailers are to get commission on the total value of the ticket purchased by the customer. Lottery Government approved lotteries authorized for fund raising and philanthropic purposes.5 per ticket. Inward Forward Remittance • • Agreement signed with 6 banks. Endogenous Variables GP earns BDT 20 per ticket regardless of the price of the ticket. BTRC gets a portion from GP after deducting VAT and CNS fees from the revenue. Any GP prepaid subscriber can buy a lottery ticket directly from their mobile phone. Variables (Per Seat) MobiCash Fee Per Seat: 20 37 | P a g e .
02 Variables (Current Market Share) BL Avg. 38 | P a g e .43% 13.Distributor Commission: VAT Rate: BTRC Fee on Revenue: Retailer Commission Per Seat Sold: 0.6% 13.50% 1.224 16.045% 6. This projection has not been made on basis of historical data rather it has been made on reasonable ground. A large portion is still untapped in this market of ticketing through mobile operators. another mobile operator company named as Banglalink executes train ticketing through its mobile network system.3% 70.097 25% 6. Daily Sales: Daily Untapped: 1. Along with GP.000 800 4.1% Projection Projection has been made about the growth of future sales under this service. Daily Sales: GP Avg. Variables (Addressable Market) Total Daily Seats: Mobile Quota (seats): Total Daily Addressable Market (seats): 4 24.50 Current Scenario Mobile companies are allocated 25% of the total seats available by Bangladesh Railway.
Thus the operational coverage of GP will definitely increase. not through retailers. Here the ticket of BDT 235 is chosen for the calculation procedure. Revenue Structure There are tickets of Bangladesh Railway about 100 prices.200 400 Addressable Market Share 13.3% 19.6% According to the target market penetration.9% 6. Variables (Growth) Growth in Avg. Seat Price: MobiCash Fee per seat: Transaction Value: 235 20 255 39 | P a g e . There would be promotional activities to boost the sales revenue by capturing untapped market share. Daily Current GP Sales (seats): Target GP Sales after Launch (seats): Net Increase in Seat Sales: Seats 800 1 . GP is going to achieve additional 6% market share by selling 400 more tickets from now. This close competitor also operates the service of train ticketing by own self.This step of selling though retails outlet is to be initiated as it would increase the market reach of people. Avg. GP Daily Sales: 50% It is to be noted that the market share of Banglalink is higher than GP.
70 1. In the extreme case.54% of transaction value is offered like retailers commission for other GP financial services.34% • It is to be considered that if % of transaction value is offered as retailers’ commission. Share CNS: BTRC Fee on GP Rev: Retailer Com per Seat: GP Revenue on Avg.63 1. Moreover. there is increase in their revenues too. • • Measuring Profitability There is net increase in revenue if proposal of commission BDT 1. Share to CNS: Rev.5 is accepted.47 32.61 8.70 0. The ultimate bottom line is increase in net margin. This would irritate customers and become a threat of losing market share.10 2. On the retailers’ point of view.Gross Revenue: Distributor Com: VAT on Fee: Rev. it is found that revenue becomes negative if for an example 0. Share to GP: Net Rev.50 6.00 7. the revenue in case of higher priced ticket would be less for GP. in case of crucial situation retailers would tend to sell only the higher priced tickets in order to gain higher commission as % of transaction value. 40 | P a g e . Seat Price: Margin: 20 1.
it would be demand from retailers to increase the commission.Net CNS Rev Share .46 in commissions on sale of seats worth BDT 250. Under existing commission structure. a commission greater than this would provide negative net margin in case of higher priced tickets. Cost of purchasing printers will be borne by GPCFs. retailer earns BDT 1.81% NOTES The maximum retailer commission per seat is BDT 2. In future.45.Daily Net Increase in Revenue: Total Increase in Ret Com: Net Revenue: Margin: BDT 2. GP can go for maximum BDT 2.45 to maintain non-zero income for GP on all seat prices.VAT) * BTRC Fee Rate 41 | P a g e . 588 600 1. according to November 2011 P&L statement Correct Equation for BTRC Fee (Service Fee . Average revenue per transaction was BDT 10. 988 76.
50 Average net margin is the average of net margin of around 100 tickets which are priced differently.90 % 7.6% Low 4.in Avg Revenue per ticket 20. Future GP Cash –In means total customers coming to get the facility.02 High 34.05 Low 0.5% Low 7. Future GP Cash –In means total customers coming to get the facility. If flat commission is offered 1. If commission is offered as % of Transaction Value 0. Total Avg Revenue 7457. Average Net Margin Future GP Cash.Flat Commission VS Commission as % of Transaction Value 1.78 42 | P a g e . Average Net Margin Future GP Cash.54% Average net margin is the average of net margin of around 100 tickets which are priced differently.99 Total Average Revenue is found by multiplying Future GP Cash.9 Low 28.06 High 39.02288 2.in Avg Revenue 5.31% High 1856 1.88 % -5.09 % High 1856 4.In by Avg revenue per ticket.
Total Avg Revenue 1972.54288 43 | P a g e .In by Avg revenue per ticket.Total Average Revenue is found by multiplying Future GP Cash.
54288 5484.09% 5. three scenarios are in consideration.34 % 20.50 0. Two variables under this analysis are retailers’ commission and capturing addressable opportunity.54 % Net Margin 20.31% 14.84% 44 | P a g e . Changing cells for each scenario are highlighted in gray. Scenario Summary: Flat Commission Current Values: Likely Worst Best Changing Cells: Retailer Commission GP capturing addressable opportunity Result Cells: Net Margin 1.09% 19.5 25% 1.59 % 1. it is quite clear that it would be possible for GP to earn higher profit margin as well as higher revenue if flat commission is provided to agents. these are likely.02288 1972.48 After comparing two possible options.55 30% 1.6 20% 19. Scenario Analysis Under scenario analysis.Comparing two possible options 1. No structured logic is used while choosing values for variables.78% Total Avg Revenue 7457.45 35% 20. If flat commission is offered 2. Notes: Current Values column represents values of changing cells at time Scenario Summary Report was created. All the values of the variables are taken on the ground of reasonability and reality. worst and best scenarios. If commission is offered as % of Transaction Value Gain if Flat Commission is offered 1.
13% 1973 4. Growth of subscribers. 2.55% 30% 0. % that GP will earn from BL.54% 25% 0.96% 5484 14. Business Case 2: GP charge from Bangla Lion Banglalion has proposed to use the infrastructure of Grameenphone in case of collecting this payment for providing internet facility. 45 | P a g e . Variables under 3 Scenarios 1. it is still profitable for GP to go for the flat commission to the retailers.03 % 6847 From the perspective of scenario analysis.Total Avg Revenue 7457 8202 6444 9268 Scenario Summary: Commission as % of Tnx Value Current Values: Likely Worst Best Changing Cells: Retailer Commission GP capturing addressable opportunity Result Cells: Net Margin Total Avg Revenue 5.31 % 2421 0.84 % 934 5.94 % 6176 16.60 % 20% 0.54 % 35% Gain if Proposal of flat commission is accepted Current Values: Likely Worst Best Net Margin Total Avg Revenue 14.90% 2026 2. Now it is to decide how much GP is to ask for being in such an agreement.75 % 5510 15.
most likely and optimistic.00% No of Active Subscriber 46 | P a g e . No logical structure has been used in this case. These are in consideration on the ground of reasonability and reality. Growth over 3 years Year Pessimistic Most Likely Optimistic 2012 40% 50% 80% 2013 30% 40% 50% 2014 20% 30% 40% No of Subscriber of BL Year Pessimistic Most Likely Optimistic 2012 322949 346017 415220 2013 419834 484424 622831 2014 503801 629751 871963 At present the fraction of active subscriber is about 65%. It has been assumed that active subscriber will be around 68%. But it can be assumed that the increase in population and the appearance of technological change would bring more people in this arena. Present Scenario Active Inactive Total Number Fraction Future Fraction 149770 64.93% 68% 80908 35.As the historical growth of the Banglalion subscribers is not available. Thus the fraction of active subscriber is supposed to increase.07% 230678 100. pessimistic. the growth rates have been assumed under three scenarios.
00% 5336.44% 498.53 0.09 1. Pessimis tic GP Charge to Bangla Lion: Cost Per payment BDT Most Likely 3. Bill Per Frequency Channel 9.17 1.00% 3.01 POS Plaza Office Bank Scratch Card SMS TOTAL Cost Structure GP Dist Commissions Distributor: 0. So.045% 6.96% 1260.90 Optimis tic 4.42% 1337.43% Retailer: VAT Rate: BTRC: 0.06 100. per bill payment the amount would be BDT 0.9.50% 0.00% 47 | P a g e .02% 913.15% 1327.Year Pessimist ic Most Likely Optimisti c 2012 219605 235292 282350 2013 285487 329408 423525 2014 342585 428231 592935 Bill collection through different channels Channel Avg.54% 13.17 87.45. Cost per SMS is BDT 0.5% 1 SMS is to be sent as an alert and another SMS is as a notification to the customers of Bangla Lion.
06 48 | P a g e .17 1337.06 1260.17 498.7 3. % Conversion to GP Channel Channel Plaza Office Bank Scratch SMS Final Outlay 2012 30% 20% 20% 20% 40% 2013 35% 25% 25% 25% 50% 2014 40% 30% 30% 30% 60% BUSINESS CASE (OPEX) 2012 Pessimistic Most Likely 346.17 498.53 913.1 24 10 51 23.01 7 219.94 9 21.09 1327.75 0 68 9 52 21 28.03 3 53 0 57 2.4 2.17 498.3 205.35 Optimistic 415.10 3.90 Average Bill Amnt Per Channel Per Month: BDT Plaza 1260.53 913.17 1337.5 3.17 1337.2 4.22 Registered Bangla Lion Subscribers: Active Bangla Lion Subscribers: Active Subscribers Per Channel: Plaza Office Bank Scratch Card SMS 322.29 0 0 282.86 2 29 28 192.60 5 2 235.09 1327.06 1260.53 913.0 246.Conversion to channels This is the projection on the ground of reasonability and reality.09 Office Bank Scratch Card SMS 1327.
247 736031.871.7 7 13022324.612 64.71 7729290.361 1.615.331 43.316 347261992.682.845 1.791.138.56 1599885.53209215 9 59291.48526931 6929076.440.033.188 1.35 446479704.622 578.019.769.376 Office Bank Scratch Card SMS TOTAL Amount Collected by GP Service 40.673 1.085 743.Annual Total Bill Collection Amount by Channel: BDT Plaza 330.5 3 0.1 8 46115.56720929 5 Net Gain / Loss: BDT Margin on Revenue: 49 | P a g e .477.159.1 6093247.09 8 1009414.62 2 0.7508 5 4 1493226.6 42 10129897.194.67 1359009.737 619.148.912 354.263 425.559 6 5 5362392.282.813.046.814 1.42 Amount collected by GP service has been found by multiplying annual total bill collection per channel with % Conversion to GP Channel.32 372066420.84 48 6 5055467.25 7 9 588825.86 6 0.72 9 2410990.230.677 53.570.365 50.607 2.198 51.7674 49409.581.40 4 2329731.7010 1 1919862.7 1 17859188. Revenue Model Pessimistic Most Likely Optimistic GP Income: % of bill collected Operating Expenditure SMS Sending Cost & OHC: Distributor Commission: Retailer Commission: VAT: BTRC Revenue Share: Total Direct Deductions: 10417859.185.80 1698762.523.60 7 7 1875214.75 9 2009158.
At any cost GP should not accept less than 1.80% 3. if GP targets to gain not less than 30%. 50 | P a g e . otherwise there would be negative net margin.215%. GP Charge to BL 4% 3.68% 19.61% 32.43% 53.2% of bill payment. Moreover. Here. the least possible options are examined.38% 50.72% 55.40% 2.20% Net Margin 56.40% 3.53% 46.14% 26.60% 1. If GP intends to gain net margin not less than 50%. it should not accept less than 2%.58% 48.64% BillPay Tracking: Hypothesized Example One of the most popular financial services of GP is BillPay.20% 2% 1.20% 3% 2.215% 1.80% 1. All the values are hypothesized. analyzes and monitors the scenarios of this service day to day. it has been shown how GP records.Identifying the Floor of the charge on bill payment Initially.40% 1.19% 43.37% -0.33% 36.60% 3. it should not accept less than 3.60% 2. nothing is real in this format. GP is optimistic to get the best possible option as 4%.85% 11.80% 2.48% 40.99% 52. Here through a format.07% 0.
of Bills Paid today No. of Due dates till this day 6 8 10 24 0 11 4 0 0 0 0 No.January Day 29 Name BPDB ctg BPDB Syl BPDB Raj BPDB Total TTAS DSCO DPDC BGSL CWSA KGDCL JGSL No. of due dates till this day(last month) 7 10 10 27 0 13 4 0 0 0 0 Bills uploaded last month till this date 303893 116721 260843 681457 January Day 29 Difference -1 -2 0 -3 0 -2 0 0 0 0 0 Name BPDB ctg BPDB Syl BPDB Raj BPDB Total TTAS DSCO DPDC BGSL CWSA KGDCL JGSL Day 18 Name BPDB ctg BPDB Syl BPDB Raj BPDB Bills Uploaded till today 195275 71733 223617 490625 Difference -108618 -44988 -37226 -190832 51 | P a g e . of Bills paid on the previous day Differenc e 20646 1645 1855 35 462 21 1025 219 3980 992 1288 6 163 25 501 95 653 567 29 299 -4 524 124 There are few due dates in each month. the number of payments increases as people usually makes payment just before due dates No. As the day is close to due dates.
more banners and bill boards are posted to bring people under this service. of Bills paid this month till today 45282 50914 50914 147110 9940 18065 87 1767 225 3243 876 Last month as of this day 63791 25208 61311 150310 12891 16838 16252 2125 747 4925 1068 Difference -18509 25706 -10397 -3200 -2951 1227 -16165 -358 -522 -1682 -192 Monitoring When there is significant decrease in bill payment in case of a specific utility partner for several months. In this case SMS is sent to each GP subscribers with a message of paying bill through BillPay. Moreover.Total TTAS DSCO DPDC BGSL CWSA KGDCL JGSL January Day 29 Name BPDB ctg BPDB Syl BPDB Raj BPDB Total TTAS DSCO DPDC BGSL CWSA KGDCL JGSL No. 52 | P a g e . the team of operations recognizes that there might be a need of promotional activities to encourage people to adopt this service.
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