Insights into mobile money agent networks

Mobile Money for the Unbanked Working Group 16 February 2010

The MMU programme is funded by a grant from the Bill & Melinda Gates Foundation

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some in extremely remote. rural areas Operators have perfected processes for securely and reliably distributing airtime – Bharti Airtel sells US$6 billion of airtime every year.When operators offer mobile money. with essentially no incidence of fraud Airtime and mobile money are different… – – Airtime is a product Mobile money is a service … but the way they are distributed is very similar Operators can leverage the expertise of their commercial teams responsible for airtime when designing their a mobile money distribution strategy Confidential 2 . expertise in distribution is as important an asset as brand and customer trust There are millions of airtime resellers in emerging markets.

and agent-facing promotions Confidential 3 .Renegotiating agent commissions is hard. I would have gone to market with higher tariffs” Time-limited customer-facing promotions • Refer-a-friend bonus • First cash-out is free • New wallets get seeded with starting value • Prize drawings that pay out into mwallets Time-limited trade-facing promotions • Double cash-out or cash-in commissions • Commissions for the registering agent when customers topup using mobile money Manager. revising tariff cards is hard. but adding/changing/removing bonuses is easy In the same way. Successful Mobile Money Service Operators can build flexibility into the mobile money business model by making use of customer. but running promotions is popular “If I could have done just one thing differently.

00 $0.Agents aren’t incentivized to support customer-initiated transactions—in fact.10 Total 3 4 Recipient pays a bill ($25) Recipient buys airtime ($10) Recipient cashes out ($10) Recipient leaves value behind ($5) Agents will not promote customerinitiated transactions and educate consumers about their use.40 $0.15 $0.00 $0. so ABL marketing or other mechanisms must be used instead Confidential 4 .00 $0.15 Total $0.00 $0.00 $0. on the receive side.00 $0.10 $0. What might they do next? Scenario 1 2 Behaviour Recipient cashes out ($50) Recipient buys airtime ($10) Recipient cashes out ($40) Recipient pays a bill ($25) Recipient buys airtime ($10) Recipient cashes out the balance ($15) Agent commission (assuming a 1% cash-out commission) $0.50 $0. they’re incentivized to discourage their use Imagine a mobile money user is sent US$50.40 Total $0.

A multitier distribution strategy can help operators add agents quickly and manage agents’ float more effectively The evolution of Safaricom’s M-PESA distribution network 1 2 Agent Agent Master Agent Master Agent 3 Aggregators help grow new agent networks and manage float in mature ones—but they can only be leveraged with the right management tools 5 Aggregator Aggregator Confidential .

but for agents. perhaps more relevant is how long it takes to get paid Cash conversion cycle for an airtime reseller (illustrative) Agent buys airtime from dealer Agent exhausts his supply of airtime Week 1 2 3 4 5 6 7 Profit Cash conversion cycle for a mobile money agent when commissions are paid monthly in arrears (illustrative) Agent transfers money to superdealer Week 1 Superdealer transfers e-value to agent Agent exhausts his supply of e-value 2 3 4 5 Operator pays aggregator commission Aggregator pays agent commission The longer agents have to wait for their commissions.Airtime margins are better than mobile money commissions. the longer it takes to see the value of mobile money— especially when the comparison is with airtime 6 7 Profit Agents are more likely to stick with mobile money when they are paid their commissions sooner Confidential 6 .

who transact.Agent networks can be too big as well as too small Customers need agents. operators can help solve the ‘chicken and egg’ problem Confidential 7 Oct-09 Jun-07 Jun-08 Jun-09 . to adopt and use mobile money Agents need customers. to adopt and offer mobile money Customers Per Agent 1200 1000 800 600 Safaricom 400 200 0 Recent launches Dec-07 Aug-07 Aug-08 Dec-08 Oct-07 Oct-08 Aug-09 Apr-07 Apr-08 Feb-08 Feb-09 Apr-09 By shifting their focus at launch from adding agents to activating customers. with float.

and a longer path to activation Customer confusion or frustration Customer confusion or frustration Operators have to balance the advantages of differentiating between classes of agents with the risks Confidential 8 .Not all agents are created the same Variation Different classes of agents perform different functions Speed: direct sales agents can be mobilized quickly. and they are mobile Different classes of agents charge customers different tariffs Operators can pay different classes of agents different commissions while preserving their margins Different classes of agents have different transaction limits Agents with differing liquidity levels can specialize in appropriate transactions Opportunity Risk Unsuitable customers.

Credit is helping agents in many markets raise the capital they need for float There is anecdotal evidence that agents are using microcredit for float. aggregators put up initial float for a larger percentage of commissions All credit risk accrues to the lender— customers and the contents of their wallets are never at risk Confidential 9 . but no tailored products exist MFIs Operators Aggregators The GSMA and Vodacom Tanzania is testing a credit facility Agents In Afghanistan.