Mobile Money Market Sizing Toolkit

CONFIDENTIAL
Mobile Money Market Sizing Toolkit
Mobile Money Toolkit
Objectives& Definitions Market analysis

Sizing the market (direct & indirect) Estimating product mix Estimating unbanked access Stress-testing the numbers
Macro tools
Business plan framework Conducting Primary Market Research Best practice research guide Surveys and facilitator guides MMU database Market screening frameworks Appendix Philippines market documents
1
Overview of this document in the context of the toolkit
Objectives of the toolkit
Key contacts:
This toolkit is designed to help a variety

of organisations conduct research and analysis about the market for Mobile Money. The toolkit contains analytical frameworks, research tools as well as data to help inform the analytical work
Mark Pickens
CGAP
Note: This document is confidential and should only be used outside GSMA/CGAP with prior approval Users of the toolkit GSMA/CGAP users looking at particular markets Coffey International in assessing applicants for funding Local market participants may elements useful
Version history
Version 1.0 was developed in March

2009
Key Definitions (1/2)

Key terms Mobile money Emerging markets Unbanked Definition Any financial service delivered over a Mobile Phone. Includes Mobile wallet, p2p,G2p and B2p transfers and remittances, payments (including airtime), savings, credit, insurance, etc
For MMU purposes any market that has a GDP per capita of less than USD 15,000 Analysis; anyone who does not have formal access to financial services as per
World Bank composite measure in Finance for all (see next slide for detailed definitions) Research; anyone who does not have an account of any kind (deposit, cheque, savings, salary, credit, postbank etc)*
Previously Unbanked Otherwise Unbanked
Users of Mobile Money who had no other access to financial services (i.e. no bank
account of any kind) prior to becoming Mobile Money users
Mobile Money users who have no other formal access to financial services (i.e. no
bank account of any kind)
Unbankedmobiled
Sub $2/day
People who have no formal access to financial services (i.e. no bank account of any
kind) but who do have access to a mobile phone
Income segment of people who earn less than USD2/day per person (not ppp
adjusted)
3
* Users of remittance services that do not require an account are considered unbanked. Note: World bank definition may include this category Source:Team definitions
Key Definitions (2/2)

Key terms Underbanked Definition Segment of users who have some access to financial services (eg a bank account ) but who still rely on informal mechanisms for other financial services (eg borrows from loan-sharks, save under the mattress or rely on informal money transfer mechanisms)
Source: Team definitions
World bank definition of Financial Access
World Bank Finance For All extract Financial inclusion, or broad access to financial services, implies an absence of price and non-price barriers in the use of financial services; it is difficult to define and measure because access has many dimensions. Services need to be available when and where desired, and products need to be tailored to specific needs. Services need to be affordable, taking into account the indirect costs incurred by the user, such as having to travel a long distance to a bank branch (p.22) Financial inclusion, or broad access to financial services, is defined here as an absence of price or non-price barriers in the use of financial services. Of course this does not mean that all households and firms should be able to borrow unlimited amounts at prime lending rates or transmit funds across the world instantaneously for a fraction of 1 percent of the amount. Even if service providers are keenly competitive and employ the best financial technology, prices and interest rates charged and the size of loans and insurance coverage on offer in a market economy will necessarily depend on the creditworthiness of the customer (p.27) It is easier to measure the use of financial services since use can be observed, but use is not always the same as access. Access essentially refers to the supply of services, whereas use is determined by demand as well as supply (p.28)
Source: World Bank Finance for all

Macro tools
Business plan framework Conducting Primary Market Research Best practice research guide Surveys and facilitator guides MMU database Market screening frameworks
Appendix
6
There are 4 primary elements in sizing the market

Description A Sizing the overall market Objectives
Sizing the direct market potential

Estimate the number of potential Mobile Money users Bottom-up modelling of overall ARPU Total market revenue potential
This is the primary methodology for sizing the

Mobile Money market in terms of users and revenues
B Sizing the indirect benefits
Sizing of the indirect benefits
This section provides a way to estimate the

indirect benefits of Mobile Money to an MNO these can be a significant driver of a business case
C Estimating the product mix
Estimate size of financial service

flows by product category for each market Estimate MM take-up rates & fees Calculate the overall revenue potential and product mix
This methodology can be used to estimate

relative potential for different mobile money products and services based on revenue pools This approach can also be used as an alternative method to help size the overall market revenues by product category
D Estimating unbanked access
Estimate how many incremental
This approach would primarily be used to
Source: Team analysis
people can be provided with illustrate the potential for extending financial financial access by reducing cost to access to unbanked people serve through Mobile Money The approach can also be used as an alternative method to estimate the size of the mobile Money revenues and subscribers 7
A Sizing the direct market potential
1
Estimate potential mobile money users Steps
2
Derive MM ARPU
3
Estimate total market revenues
Market analysis to
estimate MM take-up rates based on similar markets Develop take-up scenarios based on likely market development Apply take-up rates to the addressable market, as well as to the unbanked share of the market Validate through market research if possible
Top-down: Market
analysis to estimate MM ARPU as % of total ARPU based on similar markets Bottom-up: Estimate actual usage per subscriber of key services at a given set of pricing assumptions Estimate the total ARPU per customer Validate through market research if possible subscriber
Calculate the total market

revenues based on the expected Mobile Money users and the expected ARPU Estimate what share of these revenues each player in the business model will capture (depends on businessmodel & product mix see financial service flow sizing)
End Estimate of a range of products total mobile money subscribers over time
Estimate of MM ARPU per Break-down of total MM

revenues per player in the ecosystem
A1 MMU take-up rate ranges are derived based on existing cases and potential market development
Estimated take-up rates from case-data Average adoption rates, % Best in class** 35
ILLUSTRATIVE
Leaders Others
High end Aggressive scenario (to be developed locally) Adoption rates, % Market share,% Asia Leaders Others
8
26
Top segment
26
Weighted Average
7.8
7
Africa Middle East Americas Eastern Europe
52 48 50 50 54 46 31 69 49 51
Choose an
aggressive take-up scenario which is reasonable E.g., Average adoption rate across markets after weighting for leadership: 16.8%
Middle segment
Low end - Baseline scenario (to be developed locally) Best in class** 35 26
Choose an adoption rate

which best applies to expected local market conditions E.g., The weighted average of all analysed cases (7.8%) is applied to all markets
Lower segment
Top segment Weighted Average
7.8
7 2
Bank models
<1
Middle segment
Lower segment
Bank models
<1
* Not included in calculation for average MM adoption rates; adoption rate for bank-led models based on total mobile subscribers in country ** Actual value for best in class MNO, not an average Source: Press search; company websites; Gartner; Sida; CGAP; Merryll Lynch; McKinsey analysis; Interviews
A1 Adoption rates are applied to banked & unbanked mobile subscribers to estimate the overall market potential
Estimate the total Mobile Money subscriber potential by applying each adoption rate to total mobile subscribers per region Total Mobile subscribers 2012*, m Africa Adoption rates were applied to the total # of mobile subscribers Adoption rates % High end 16.8 Americas Asia Pacific Europe: Eastern Middle East 278 175 519 446 2,155 Mobile Money subscribers 2012*, m High end Low end
41 35
88 75
362 168
49 23 33 15
Estimate the total Unbanked Mobile Money subscriber potential by applying the adoptions rates to total unbanked mobile subscribers per region Unbanked Mobile subscribers 2012*, m Africa Americas Asia Pacific Europe: Eastern Middle East 143 94 332 260 872 25 12 18 8 Unbanked Mobile Money subscribers 2012*, m 56 26 44 20 147 68 High end Low end 135 290 Estd Global MMU subs, m
Low end
7.8
* Extrapolated based on CAGRs Source: Informa World Cellular Information Service, Wireless Intelligence
10
A2 MM APRU is derived from cases and local market experience

1 Top-down Derive MM ARPU from reported market data
ILLUSTRATIVE
Take total value of transactions (USDB/year)

Divide by assumed avg transaction size (USD) Divide by # users (at time of reporting) (m) Output is average # transactions per user per year Divide by assumed avg fee per transaction (USD) Total users ARPU (USD/month)
1.5
20 5 ~15 ~0.5 ~0.5 MMU ARPU, USD/month High end 1.0
2 Bottom-up Build MM ARPU using local market knowledge
Take average users frequency of usage for each MM

service (# uses/month)
2-4 5-50% 0.1-0.8 1.9 ~60% ~1.0 Low end 0.5
Weight each frequency by % of users using the service
Apply average fee per MM service (USD)

Active users ARPU (USD/month) Apply assumed non-active discount (% of total users) Total users ARPU (USD/month)
* Ovum report shows distribution of transactions form 100-35,000 KSH, tightly bunched around 500-2500 with a long tail ** Safaricom website shows User-to-User 30 KSH, Money-to-Non-User 75-400 KSH, Withdraw-cash-from-User 25-170 KSH; average transaction of ~500 KSH so assume lowest of flat fees; assume 80% of usage is user-to-user Source: Ovum Report, Safaricom website, McKinsey Experts, Team Analysis
11
A3 The MMU subscribers and ARPU for each scenario drives a total market revenue estimate for a given market
High end estimate: Apply high-end ARPU to the aggressive take-up rate MMU subscribers Estd Global MMU subs, m High end 290 X MMU ARPU, USD/month High end 1.0
ILLUSTRATIVE
This allows us to estimate the total MMU market value Total MMU market size* USDb/year
(Take-up: 16.8%)
Low end estimate: Apply low-end ARPU to the baseline MMU subscribers Estd Global MMU subs, m High end 135 X MMU ARPU, USD/month High end 0.5
High end
3.5
Low end
0.8
(Take-up: 7.8%)
* NOTE: ARPU numbers are monthly, revenue numbers are annual Source: Team analysis
12






B Mobile Operators will benefit from significant indirect benefits when deploying Mobile Money
Possible indirect benefits Churn reduction Rationale more sticky since they get more utility out of the SIM and have stored value on the SIM Churn of banking customers tends to be lower than Mobile Lack interpretability can help reduce churn, especially for market leaders (note to be discussed Range of impact (examples) 20% below non MM users
People who use MM services are likely to be MM churn rates can be more than
ARPU Increase
MM allows consumers to buy top-up in

smaller increments driving up ARPU MM users are likely to use the MM SIM as their primary SIM MM is a functionality which may attract higher-end subscribers with more usage
ARPU of mobile money users can be

more than 20% higher than non-users
Market share increase Reduced channel costs*
A compelling MM solution can help attract

subscribers by establishing a stronger value proposition
Some operators have increased

market by up to 8% since launching MM
Cost savings as top-up sales can bypass

traditional channels
Possible savings of 23% of channel

top-up sales margins when people top-up from mobile-wallet instead of channel
14
* Not sized since this lever may not be relevant to all markets Source:Interviews, company websites, Press clippings, Team analysis
B A high level sizing of the indirect benefits gives an indication of what MM is worth to an operator
Example indirect benefit sizing methodology 1 Value of reduced churn - example Reduced customer base churn revenue (of telco)* # Mobile Money users Current churn of telcos customer base (weighted avg) Forecast reduction of churn in MM adopting segment Value of churn reduction in # subs Current telcos customer base ARPU (weighted avg) ARPU * churn reduction = $ value 2 Increased ARPU - example Higher phone usage revenue Current telcos customer base ARPU (weighted avg) Marginal increase in phones usage (voice/data) Marginal ARPU # Mobile Money users $/month % $/month Nr subs Nr subs %/month % Nr subs $/month $
Total benefit to MNO of rolling out Mobile Money $
1
2 3 Indirect
Marginal ARPU*Mobile Money users = $ value

3 Added subscribers - example
ARPU New customers as % of total MM customers Incremental subscribers attracted through MM ARPU*incremental subscribers = total value
$/month % Nr of subs $
15






C Estimating service revenues by product category
1 Estimate the value of all retail financial service flows Top-down Approach
2 Estimate take-up rates & fees for Mobile Money products
3 Calculate total market revenues and product mix
Estimate the value of all
Estimate potential adoption Estimate the overall

market opportunity
retail financial service flows rate for MM from these various service flows Estimate the unbanked proportion of these flows by Estimate fees per service accrued by different scaling up the cash/informal players in the ecosystem sectors to relevant products
Mrkt research Approach
Launch targeted survey in

your market to understand current usage of informal financial services in unbanked mobile segment
Evaluate per service:

usage frequency average value transacted/stored average fees
Estimate the overall

market opportunity
Endproducts
Breakdown of total financial Mobile Money product mix

service flows by product category (including unbanked potential) by service category (in terms of total flow & fees for each service category)
Total Mobile Money

revenue estimate by product category
17
C1 Top-down Approach: Estimate the total banked financial service revenue flows
ILLUSTRATIVE Existing flow Total economy FS flows (illustrative)
Definition
Possible sources
Non-cash Payments
Value transacted on 5 epayment instruments & scaling for cash component
World Bank; Payment Systems

Group; outcomes of the 2008 global survey - appendix
Total value of cash

Cash transactions = M0 * GDP/M1
MGI Global Financial Stock

Database, IMF's International Financial Statistics
Domestic Transfers
Total value of domestic

payments & remittances (p2p, g2p, b2p etc)
National Central banks
International Remittance
Remittance volumes (inflows

and outflows)
World Bank; Outlook for

Remittance Flows 2008-2010
Total value of domestic

Deposits deposits
National Central banks Worldbank Assume xx% of all flows
Total value of outstanding

Loans domestic loans and credit
National Central banks Worldbank
Source: Team analysis, Interviews
18
C1 Top-down Approach: Estimate the Unbanked financial service flows as a proportion of the total
Relevant to unbanked Unbanked share of GDP Existing flow Non-cash Payments Total economy FS flows (illustrative) Unbanked FS flow (top-down indicative) Relative Cash/Transfers % Assumptions
Pre-existing payment flows are all

Cash 2% 28% cash for unbanked people (none in electronic payments system) Unbanked segment is not accounted for in formal e-payments flows Unbanked segment does account for a share of total cash flow Unbanked share of income & remittances can be derived by taking the unbanked share of GDP (~2%) and applying this to cash & transfer flows Distribute total amount in relative proportions as per banked (e.g, 28% and 72% in example) Unbanked share of Int remittance flows (based on %GDP, ~2%) Unbanked deposits are based on residual value in MM accounts (calc as 5% of total value transacted) Very small could be sized from Micro finance flows (if known) 19
Domestic transfers
72%
2%
Deposits
Loans
C1 Mrkt research Approach: Build the Unbanked financial service flows through primary analysis of current usage
Relevant to unbanked Total economy FS flows (illustrative) Unbanked FS flow (top down indicative) Unbanked FS flow (mrkt research Country A), USDM/year MM services included from survey results
Existing flow
Cashless transactions in
Non-cash Payments
0
Cash
68

224
restaurants, groceries, supermarkets, malls Payment of bills Airtime purchase Transport access Receive salary/payment
Domestic transfers
Money sent Money received (dom.) Airtime sent/received Money received (int.)
161
Deposits
Storing value
Loans
20
C2 Estimate the Mobile Money fees
Existing flow Non-cash Payments Cash Domestic Transfer
Fees (indicative ranges), %

1
Rationale (note must be adapted to local markets)
Same potential as cash replacement (below) Based on average of reported fees for all
cash-replacing products
2-3
~1.5% cash-in, ~1-1.5% cash out (SMS excl.)
International Remittance Deposits
0.51.5
0.51.5
~0.5% as reported in market research ~1.5% based on MMT work (total is 4-6% of
which MNO capture ~1/3
~0.5% as reported in market research ~1.5% assumed potential interest spread TBD
Loans
n/a
21
C3 Estimate the Mobile Money product mix flows and revenues
ILLUSTRATIVE
Product Non-cash Payments
Total flow USDb
MM take-up %
MM flows by product USDm
MM fee %
Revenues by product USDm
53,534
Cash
8,597 9,105
Domestic Transfer International Remittance
43,740
473 593
Deposits
5,317 5,413
Loans
4,042
22
C3 Check estimate with targeted market research results

EXAMPLE
Product Buy airtime Cash Cashless POS & remote payments Receive salary Send money Domestic Transfer Receive money (dom) Send & receive airtime International Remittance Deposits Receive money (int) Store money
MM flows, USDm/year 132 85 598 1,399 1,157 134 1,932 98
MM fee, % 0.7% 0.8% 2.0% 1.5% 0.9% 1.1% 0.3% 0.3%
MM revenue, USDm/year 1 1 0 20 10 1
5
0
Source: Philippines Unbanked Consumer Insights Survey - Feb-Mar 2009, (n=400); Team analysis
23






D Estimating the incremental financial access provided by Mobile Money

1
Build "affluence curves" Steps
2
Apply "cost-toserve"
3
Estimate addressable group
4
Estimate the incremental access via MM
Build income
distribution curve to identify who can reasonably be served by current banking system (or use proxy curves provided)
Estimate the
incremental population theoretically servable through lower "cost-to-serve" mobile channel (use range of cost-t0-serve reduction scenarios)
Calibrate this
theoretical addressable group to include only those who own a mobile and then apply a take-up assumption to this target population
Calculate
incremental access to financial services through mobile money
Endproducts
Income
distribution curve for target region
Estimate of
theoretical access provided by Mobile Money
Estimate of the
total potential access provided by Mobile Money
Estimate of
expected incremental access provided by MM
25
D1 Affluence curves have been developed to establish the income distribution for a range of markets
Daily income/capita $
40 35 30 25 20 15 10 5 0 0 10 20 30 40 50 60 70 80 90
PRELIMINARY
Asia Pacific Africa (limited sample)* Americas Europe: Eastern Middle East
100
Population percent
* Income distribution data for Africa sample is based on Nigeria data only (South Africa excluded, all other countries not available) Source: Euromonitor, Team analysis
26
D1 Key data for select markets can help determine which market proxy is most relevant for a given market
Population 2012, Million people GDP per capita 2012, USD/person Mobile subscribers* 2012, % Financial Service access 2008, % Unbanked share of GDP 2008, %
Region
Africa
1,004
1,898
52%
23%
25%
Americas
597
6,889
75%
37%
22%
Asia
3,581
3,150
60%
41%
18%
Eastern Europe
357
13,517
78%
43%
21%
Middle East
247
7,730
71%
38%
27%
* Mobile subscribers is based on discounted count of total # SIMs per market. Number of SIMs discounted by Wireless Intelligence formula Source: WMM, Global Insight; Wireless Intelligence; World Bank; Finance For All; Team analysis
27
D2 The income distribution can be linked to the cost to serve based
ILLUSTRATIVE
on assumptions about the share of GDP that goes to Financial Services

Daily income per capita $
12 11 10 9 8 7 6 5 4 3 2 1 0
Financial service revenue and cost to serve $ 0.012 0.011 0.010 0.09 0.08 0.07 0.06 0.05 0.04
B C
MC = MR
0.03 0.02 0.01 0.

0 10 20 30 40 50 60 70 80 90 100 Population percent 0
C 10 20 30 40 50 60 70 80 90 100 Population percent
A Assume that Financial services account for X% of income (based on proxy market)
The share of income determines the Financial services revenue for a given income band B Assume that Financial services are offered to the point where Marginal Cost = Marginal Revenue
(ie the revenue curve = the cost curve at each point)
C A reduction in the cost to serve enables offering financial services to lower income bands (based on same income share of GDP). Hence more people are accessible
28
D3 By estimating the local cost to serve reduction it is possible ILLUSTRATIVE to determine the theoretical access made possible by mobile money
Inputs
A Current FS access
(%) B Cost to serve reduction (%) Current cost to serve estimate ($) MM cost to serve ($) C New theoretical financial access (%) D Increase in Financial access
Daily income per capita, $ 0.012 0.011 0.010 0.09 Theoretical access 0.08 possible through reduced cost to serve 0.07 0.06 Traditional 0.05 cost-to-serve A 0.04 MM B 0.03 cost-to-serve C 0.02 D 0.01 0 0 10 20 30 40 50 60 70 80 90 100
Population percent
29
D4 Steps for estimating the increased financial access
Calculation s 0 Choose an income curve 1 Estimate current access to financial services (eg 40%) 2 Use current access to plot line to show where current Cost to serve could lie 3 Estimate the cost to serve reduction opportunity (e.g., 50% reduction) 4 Estimate the number of additional people who can now access financial services (eg 62%) 5 Map the total mobile penetration (eg 52%) 6 Total theoretical access (62%) minus mobile penetration (52%) = MM potential access = 10%
Daily income per capita, $
ILLUSTRATIVE
0.012 0.011 0.010 0.09 0.08 0.07 0.06 Theoretical access possible through reduced cost to serve Traditional cost-to-serve
0.05
0.04 0.03 0.02 0.01 0
0 10 20 30
2
3 6 4 MM cost-to-serve
40
50
60
70
80
90
100
1 5
Population percent
30
Objectives& Definitions
Market analysis
Macro tools
Business plan framework
Conducting Primary Market Research Best practice research guide Surveys and facilitator guides MMU database Market screening frameworks Appendix
31
Reality testing the numbers test the key numbers against other variables to see if they make sense
User input
Variables High end of range x% x% x% x% x% Low end of range x% x% x% x% x% Indicative ranges 5-8% 3-5% 10-15% 5-25% 10-15%
Projected mobile money users as share of total

unbanked population
Implied increase in % banked (ppts)

Subscribers
Share of total unbanked mobile segment Total MM take up rate as % of total subscribers Mobile Money ARPU as share of total ARPU
Revenues
Indirect
MM churn and ARPU vs non-MM users MM cost to serve per user (technical) MM marketing & agent costs as % of technical
costs
x%
x%
~20%
x%
x%
x%
x%
~$2-4 1x-4x
Cost
Source: Company reports, Literature search, Team analysis, World bank data
32

Sizing the market (direct & indirect) Estimating product mix Estimating unbanked access
Stress-testing the numbers
Macro tools
Business plan framework Conducting Primary Market Research Best practice research guide Surveys and facilitator guides MMU database
Market screening frameworks Appendix

33
KEY QUESTIONS FOR A BUSINESS PLAN (1/2)

Key questions (Examples)
ILLUSTRATIVE
What is the basic business idea, target customer segments, and value
Executive summary proposition? To what extent will this service reach the unbanked What does the organizational business look like and who will lead the business?
Market/competitor analysis and own positioning
What is currently happening in the market? What are the key success factors for MM success? Who are current and future competitors? What is positioning compared with key competitors?
What services are offered at what prices? What take-up rates are expected for different services? What partnerships/cooperations are needed? Where does the value to the customer lie, especially to the unbanked? What evidence is there to suggest there is a consumer demand? How can advertising and promotions support the customer value?
Product and customer value proposition
Business-model organization and processes
What business model will be deployed, have partnerships been agreed? What type of technology will be deployed? How will the service be distributed, how will the agent network be built,
what is value proposition for the agents? What organization and resources are needed? What are the core business processes?
34
Source: McKinsey
KEY QUESTIONS FOR A BUSINESS PLAN (2/2)

Key questions (Examples)
ILLUSTRATIVE
Management team
Which people will manage the future business? How can the right people be attracted and retained? (Banking and mobile
experience is important)
Opportunities and risks
What is the position of the regulator with regards to this opportunity? What risks are involved with the market entry and how can they be
controlled?
Financial planning and ROI analysis
What are the expected financial results over the next five years? What are the costs of deploying MM? (technical, marketing, channel
costs etc)
Implementation road map
What are the key milestones in building the new business?
Source:
McKinsey
35

Macro tools
Business plan framework Conducting Primary Market Research Best practice research guide Surveys and facilitator guides MMU database Market screening frameworks Appendix
36
Consumer insight research will develop a better understanding of current and potential users and inform market sizing-estimates
Research Objectives
Provide insights regarding current and potential MM users for business planning Attitudes towards traditional banks Usage of alternative informal channels & services Adoption barriers/funnel Inform market sizing estimates Unbanked share of MM users, adoption rate, churn and reload effect Provide understanding of MM service-flows and latent demand
Research approach
Focus groups
Use a structured facilitator guide to manage flow of focus groups while assisting agency in targeting answers on specific areas of interest (see appendix) Can use a survey-lite of 30-40 close-ended questions for respondents to complete pre-group (see appendix) Launch pre-design of quantitative survey to assist with customer segmentation, language/local knowledge input and hypothesis/options development
Survey
Use targeted sampling to address specific segments, but assess incidence through random sampling to size population/opportunity Target ~200 respondents for each relevant customer segment to ensure a 6-7% margin of error on each answer (n=100 is ~10%) Pre-draft core analysis/insights to help with planning option set per question and ensure each questions relevance/impact Ensure flow of question leads with easy/non-intrusive questions (e.g. daily mobile usage) pry into personal financial questions once respondent is warm
Source: GSMA RFP, Interviews
37
There are 6 key steps in conducting the primary market research

Synthesize insights
Design and run focus groups
Develop hypothesis
Refine close-ended ~30-40 minute survey
Launch fieldwork
Analyse data
Debrief with TNS team & McKinsey Manila team in attendance Attain observations of group experiences Bolster understanding of linguistic, emotive nuances related to FS and MM Develop storyline hypothesis using indicative findings from Focus Group moderator guide Close-ended 30-40 min survey group 2 x focus groups with Build well-phrased Define target segments questions with context unbanked MM users MM users, no other of language and and non-MM users formal banking emotive reactions Moderator notes to access, urban/rural focus 2 hours on Non-MM users, no Telco usage formal banking FS usage access, mobile Mobile money <$2/day, mobile usage & perception Ensure key q.s are directly comparable w. existing surveys if * Dialects for fieldwork: Tagalog, Ilocano, Ilonggo, Cebuano, and Bicolano relevant
Validation of market sizing assumptions Testing and validation of key hypothesis

Field-team briefing, Manila, 27 Feb
Target ~1000 responses Consumer with proportionate urbaninsights to help to-rural representation: inform the go to MM users = 400 market strategy Non-MM users = 400 <$2 day = ~200 Process involves door-todoor screening followed by 30-40 minute interview ~30 interviewers (4 teams) trained to use prompt cards, record answers & drive flow of conversation 38
The research should be designed to test a specific set of hypothesis about the market
Segment sizing
Latent Demand
Examples of MMU Consumer narrative The Unbanked mobiled are a significant group: As many as X % of lowincome groups are unbanked but do own a mobile phone. The sub$2/day makes up approximately X% of this group Unbanked consumers have a strong underlying demand for financial services, but most currently rely on informal alternatives
Survey section Screening section
Sect C
Unbanked consumers are generally aware of MM services and tend to

Awareness & understanding
Sect E
Many unbanked consumers do not fully understand the MM service People need to have access to the agent network if they are going to
sign up for the service, agents are much more ubiquitous than banks, but they are still far from the levels of air-time vendors
know the MNO brands better than the banks
Sect E
Access
People are often reluctant to try MM because they find it difficult or they
dont see the services as something for people like me Trial
Sect C,D,E,F
Those who do use MM start with simple services at first but do have
Usage needs for more advances services if they can be made relevant to them
Sect D
People who have good experience with MM tend to become loyal users,
but the slightest service disruption can lead to abandonment of the service. Loyalty Implications for accelerating MM to the unbanked
Sect D,E
See consumer Survey in appendix
39
Primary market research tools
Focus group facilitators guide Description Facilitators guide for focus groups with unbanked MM users and nonMM users Moderator notes to focus 2 hours on Telco usage FS usage Mobile money usage & perception
Consumer adoption survey Description Defines target segments MM users, no other formal banking access, urban/rural Non-MM users, no formal banking access, mobile <$2/day, mobile Standard questions to ensure consistency
Focus Group moderator guide
Close-ended 3040 min survey
These documents are provided separately

40

Macro tools
Business plan framework Conducting Primary Market Research Best practice research guide Surveys and facilitator guides MMU database Market screening frameworks Appendix
41
The MMU database contains key data for 147 markets
Key data for 147 markets e.g.;

Macro data Population Economy Income Demographics Mobile Penetration Financial access Access to financial services Unbanked population MMU Population Data Financial flows This spreadsheet is provided separately
Source:
Ranges of sources detailed in database appendix
42

Sizing the market (direct & indirect) Estimating product mix Estimating unbanked access
Stress-testing the numbers
Macro tools
Business plan framework Conducting Primary Market Research Best practice research guide Surveys and facilitator guides MMU database
Market screening frameworks Appendix

43
Markets with high mobile penetration relative to financial access penetration may by ripe for Mobile Money
Mobile penetration* %
130 120 110 100 90 80 70 60 50 40 30 20 10 0 0 10 20 30 40 50 60 70 80 90 100
Ukraine Argentina
United Kingdom Spain Saudi Arabia Germany Poland France
Size = population <0.1 bn 0.1 bn 1 bn >1 bn
Colombia
Malaysia
Mobile
United States Thailand
Mexico
Brazil
Peru
Philippines Indonesia Pakistan Vietnam India China Turkey
penetration exceeds the access to financial services in most markets
Access to financial services % * Mobile penetration can include double counting due to multiple SIM-cards, this is not adjusted Source: Wireless Intelligence, World Bank, WMM
44
Mobile / banking penetration and size appear to be important criteria in PRELIMINARY determining readiness for Mobile Money
Mobile vs. Banking Reach*
6.0
Tanzania***
5.5
A
A
5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0
Kenya Pakistan B Ukraine Iraq Algeria Argentina Nigeria C
Major Potential Large unbanked populations High mobile vs. banking reach
Quick Risers High to very high mobile vs.. banking reach Giants Relatively low mobile vs.. banking reach Very large unbanked population in absolute terms Unclear potential Low mobile & banking penetration
Philippines Mexico Morocco Vietnam South Colombia Sudan Africa Uganda Turkey Thailand Poland Nepal Ethiopia
Brazil
Indonesia
Bangladesh India China
Myanmar
10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160
600 610 620 630 760 770 780 Unbanked Population** mn
* ** *** Source:
Mobile Penetration (net of multi-sim proxy) vs.. % banked, average ratio of mobile penetration to banked share across markets shown is ~2 Average of unbanked population across markets shown is ~90 mn Tanzania potential does not seem to be observed in the market. Wireless Intelligence, World Bank, WMM, Global Insight
45
There are a lot of markets in the B & D segments
Mobile vs. Banking Reach*

9.5 9.0 8.5 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0
Nicaragua
Armenia
Tanzania
Belarus Georgia Romania Iraq
Kenya
Question marks: Sudan Thailand Colombia South Africa Uganda Iraq Algeria Morocco Uzbekistan Nepal Peru Poland Malaysia Guatemala Pakistan
Niger Senegal Zimbabwe Sri Lanka Rwanda Bolivia Chile Cuba Tunisia Honduras Sierra Leone El Salvador Paraguay Jordan Bulgaria
Ukraine Argentina Philippines
Nigeria
Mexico
Algeria
Vietnam
C
South Africa Myanmar 0 Ethiopia
Brazil Bangladesh
Indonesia China India
10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160
600 610 620 630 760 770 780 Unbanked Population** mn
* Mobile Penetration (net of multi-sim proxy) vs. % banked, average ratio of mobile penetration to banked share across markets shown is ~2 ** Average of unbanked population across markets shown is ~30 mn Source: Wireless Intelligence, World Bank, WMM, Global Insight
46
Macro factors per archetype/segment are fairly inconclusive

PRELIMINARY Access to Financial Services, % Total Average Urban Population, Population Mobile Penetration, mn Share, % % Gini Coefficient Direct Credits Total cash % of total payments as Non-Cash % of GDP* Payments*
A Major potential 2 countries
Pakistan, Nigeria
14
47
308
43
37
39
22
B Quick Risers including 14 countries

Philippines, Kenya, Tanzania, Argentina 18 61 543 60 39 55 45
Giants 5 countries China, India, Indonesia, Brazil, Bangladesh Unclear potential 85 countries (see page 2)
41
46
3,105
45
42
55
43
32
48
987
48
45
57
35
* Initial team estimates Source:World Bank, Wireless Intelligence, WMM, Global Insight, CIA World Fact Book
47
Data on select markets

Mobile penetration
Russia Ukraine Poland Argentina Thailand South Africa Algeria Turkey Colombia Brazil Philippines Morocco Mexico Vietnam Iran Indonesia Egypt Iraq Pakistan Kenya China Nigeria Bangladesh Tanzania India Sudan Uganda Congo, DRC Nepal Ethiopia Myanmar Source: 132 123 115 112 98 93 92 89 83 78 76 75 71 66 65 58 54 54 53 48 46 46 30 30 30 28 28 14 7 1 0
PRELIMINARY
GDP/capita $
12,258 4,199 13,943 7,914 4,355 5,828 4,843 9,933 4,351 7,958 1,787 2,656 9,605 934 5,340 2,192 2,058 4,022 953 868 3,166 1,689 475 427 1,050 1,463 437 179 340 187 423
"Median Household Income ($)" 11,530 n/a
% With Access to financial services n/a

24 66 28 59 46 31 49 41 43 26 28 25 29
Prepaid share Q3 2008, %

91 93 56 73 90 86 97 83 85 80 97 97 85 98 48 97 96 99 98 99 70 99 97 99 83 99 99 99 94 99 88
ARPU, USD
12 7 19 12 7 17 8 14 10 15 5 11 17
17,210 7,790 5,410 8,720 n/a 11,350 5,470 7,560 2,690 n/a 17,010 1,070 n/a 2,200 n/a n/a 2,280 n/a 4,350 n/a n/a n/a 3,590 n/a n/a n/a n/a n/a n/a
n/a
40
5 10 14 3 10 13 3 7
n/a
17 12 10 42 15 32 5 48 15 20 n/a 20 14 19
Wireless Intelligence, World Bank, WMM, Global Insights, EIU, Euromonitor
48
Additional ideas for data to explore (1/2)

Additional ideas Market gaps: (eg market share of independent privately owned banks or telcos)
PRELIMINARY
Rational Will the private sector fill the gap (if there is one)?
Saving propensity: savings rates,

consumer consumption as % of income
Are there indicators of propensity to save vs the

consumption patterns?
Access to credit: Prepaid as % of total

mobile market
What share of population lacks access to credit?

(Prepaid can be an indicator)
Telco & Banking competitiveness:

Herfindahl-Hirschman Index
How competitive are the banking and telco industries? Are there environmental factors which may indicate
people need safe savings options?
Environmental risks: Crime statistics,

inflation rates
Size: Unbanked population Demographics: Age distribution, family

size
How many unbanked people are there? What is share of young vs old people? Does size of
family indicate the need for saving?
Banking reach: Geographic bank/ATM

penetration, Rural population %
Does the banking system reach people who need it?

49
Additional ideas for data to explore

Additional ideas Domestic remittances
PRELIMINARY
Rational What is value of domestic remittance flows?
Domestic migration flows ATM infrastructure
Are there large domestic migration flows? What is ATM penetration? Does regulatory environment allow Mobile
Money?
Regulatory environment
Alternative channels
What are alternative channels?
50

Mobile Money Market Sizing Toolkit

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Mobile Money Market Sizing Toolkit

Mobile Money Toolkit

Objectives& Definitions Market analysis

Overview of this document in the context of the toolkit

Objectives of the toolkit

This toolkit is designed to help a variety

Version 1.0 was developed in March

Key Definitions (1/2)

Previously Unbanked Otherwise Unbanked

Key Definitions (2/2)

Source: Team definitions

World bank definition of Financial Access

Mobile Money Toolkit

Objectives& Definitions Market analysis

There are 4 primary elements in sizing the market

Sizing the direct market potential

This is the primary methodology for sizing the

B Sizing the indirect benefits

Sizing of the indirect benefits

This section provides a way to estimate the

C Estimating the product mix

Estimate size of financial service

This methodology can be used to estimate

D Estimating unbanked access

Estimate how many incremental

This approach would primarily be used to

Source: Team analysis

A Sizing the direct market potential

Calculate the total market

Estimate of MM ARPU per Break-down of total MM

Source: Team analysis

Africa Middle East Americas Eastern Europe

Low end - Baseline scenario (to be developed locally) Best in class** 35 26

Choose an adoption rate

Top segment Weighted Average

A2 MM APRU is derived from cases and local market experience

Take total value of transactions (USDB/year)

2 Bottom-up Build MM ARPU using local market knowledge

Take average users frequency of usage for each MM

2-4 5-50% 0.1-0.8 1.9 ~60% ~1.0 Low end 0.5

Weight each frequency by % of users using the service

Apply average fee per MM service (USD)

There are 4 primary elements in sizing the market

Sizing the direct market potential

This is the primary methodology for sizing the

B Sizing the indirect benefits

Sizing of the indirect benefits

This section provides a way to estimate the

C Estimating the product mix

Estimate size of financial service

This methodology can be used to estimate

D Estimating unbanked access

Estimate how many incremental

This approach would primarily be used to

Source: Team analysis

MM allows consumers to buy top-up in

ARPU of mobile money users can be

Market share increase Reduced channel costs*

A compelling MM solution can help attract

Some operators have increased

Cost savings as top-up sales can bypass

Possible savings of 23% of channel