Workshop on Enhancing Access to Formal Financial Services in Indonesia Shangri-la Hotel in Jakarta 9-10 December 2009 Mobile Banking Market Demand Study (A Study for the IFC by TRPC Ltd., Singapore) John Ure Director, TRPC Pte Ltd (Singapore) Associate Professor and Director Telecommunications Research Project (TRP) University of Hong Kong
Agenda This is an edited version of our findings with a focus on the use of mobile phones for payments and banking Study objective = analyze the demand side for m- banking as a means to include the unbanked Structure FGDs Section 1: Mobile Phones Section 2: Mobile payments Section 3: Bank accounts Section 4: Mobile banking Section 5: Transition issues Conclusions
Some Key Issues 1. Accessibility and affordability of banking and mobile telephony: Percentage of population covered by MNOs & banks Bank charges, interest rates a barrier or not? 2. Attitudes and Behaviour Why people don t use banks Is there demand? What is the demand? What is the demand for? and who would be most likely to use banks among the poor ie, What are the demographics? What are the characteristics? What are the push factors: e.g lack of trust? Lack of collateral? Time and distance? What are the pull factors: e.g. no money, attractive alternatives? Lack of knowledge? What services would be most persuasive to poor families to bank? E.g. higher interest rates? Easier access? Better understanding? Low ceilings on loans? 3
FGD: Structure & Demographics 4
Focus Group Discussions Pre-requisite for participants: ownership of a mobile phone Two groups : Banked group Un-/ underbanked group Group size : 10-12 Exceptions: Malang (U) 9, Bali (U) 10, Malang 13. Dates: Aug trial Sept - FGDs Low, medium and high incomes relative to regional minimum wage Denpasar, Bali Banda Aceh Manado, N.Sulawesi 16 groups in 8 locations Pontianak, W.Kalimantan Sukabumi, W.Java Wonosobo, C.Java Malang, E.Java Lombok Timur, W. Nusa Tenggara Urban Urban (WB survey) Urban (WB survey) Urban Rural (WB survey) Rural (WB survey) Rural (WB survey) Rural (WB survey)
Section 1: Mobiles and SIMs
Mobile usage Average 1.26 SIMs per participant Unbanked: 77% w. 1 phone; 2.6% > 2 phones. Banked: 69.1% w. 1 phone; 5.1 % > 2 phones Multiple SIMs (Bali, Malang) Multiple SIM use per sub falls away out of key cities (Jkt, Dps) Mobile phone a strong potential channel for rapidly broadening access out across Indonesia. Network quality & coverage Initial concerns, then price tends to take over; Higher price sensitivity in unbanked groups; Cost combined with network effects increasingly important over time. >90% mobile number v. important Unbanked Banked Top-up 15x per month Most multiple SIM users Key conclusion: Mobile phones have become a strong potential channel for rapidly broadening access out across Indonesia.
Section 2: Mobile payments
M-wallet: current use Unbanked/ Banked Airtime transfer Games/ Ringtones OTA reselling OTA Denpasar Banda Aceh Manado Pontianak Sukabumi Wonosobo Malang Lombok U X B X X All U X All B X X All U X All B X X All U X X All B X X All U X X All B X X All U X X X All B X X X All U X X All B X X X All U X X All B X All
M-wallet services Some participants claimed to have no knowledge of e- money accounts, but almost all turned out to be using OTA top-ups, reasons being: convenience cost savings choice and ease of use. Broad usage among participants in transferring air-time to friends or family. Comparatively few used m-wallet for games, ringtones Key point: Three-quarters of the groups had at least one OTA top-up reseller.
M-payments: interest Unbanked/ Banked OTA Cash-in Transfers Bill payment Denpasar Banda Aceh Manado Pontianak Sukabumi Wonosobo Malang Lombok U X X X X B X X X U X X B X X U X X X B X X X X U X X X B X X U X X X X B X X X U X X X B X X U X X X X B X X U X X X X B X X X
M-payments services A very strong level of interest, with take-up being constrained: lack of trust in MNOs acceptance of m-payments by merchants uncertainty in use and lack of information Utility bill payment services were particularly desired 2 nd most popular service in 13 groups; convenience the main reason Particularly strong interest from unbanked groups compared to banked groups Convenience is measurably greater for the unbanked participants as it is their only potential form of alternative access
M-payments: issues Some doubts regarding cash-in: some participants would deposit their money with MNOs only if it were secure and if there was a representative to help in case of problems in another instance participants were specifically worried that their money would be lost Other doubts: cost (remittance/transfers and bill payment services) lack of knowledge about how services work.
Section 3: Bank Accounts 14
M-banking: Wanted, but Location / Group Yes/No Issues Denpasar Unbanked Yes all Security concerns Banked No all Lack of familiarity/ information. (Bank already offers.) Banda Aceh Unbanked Yes some Convenience and curiosity. Concerns about charges Banked Yes all Convenience. Reputation of bank still important. Manado Unbanked Yes some Provides access. Limited need and concerns about charges Banked No most Existing bank services fine. Trader keen on m-transfers. Pontianak Unbanked Yes all Convenience. Banked Yes most Need to align with existing account. Sukabumi Unbanked Maybe Limited income Banked Yes all Very enthusiastic to try Wonosobo Unbanked Yes most Convenience. Particularly bill payment. Some information concerns Banked Yes all Very enthusiastic; convenience Malang Unbanked Yes most Convenience Banked Yes most Convenience, although not urgent. Two already using Lombok Timur Unbanked Yes all Convenience Banked Yes all Convenience. Minimizes risks
Section 4: Mobile banking
M-banking: services used Low: 6.1% of participants, from just 3 locations: Bali, Malang and Pontianak Limited use: Used for limited amount of balance checking and money transfers. Most unaware of current m-banking services In the case of Bali and Pontianak, generally aware but not clear about benefits, and how m-banking works. 1 respondent from Banda Aceh had heard from a friend claiming to have had bad experiences with unexpectedly high service charges remained uninterested. Significant interest in trying the services after explanation unbanked groups welcomed almost all services discussed, particularly utility bill payments
M-banking: services wanted Unbanked / Banked Account checking Cash-in Transactions/ Transfers Pay utility bills Apply for loan Denpasar Banda Aceh Manado Pontianak Sukabumi Wonosobo Malang Lombok U X X B X X U X X X B X X X U X X X X X B X X X X U X X X B X X X U X X X X B X X X U X X X B X X X X U X X X B X X X X X U X X X B X X X
Wanted: Unbanked welcomed almost all services Utility bills of particular interest They foresee greater convenience for bill payments Unwanted? Cash-in/cash-out: No majority support from participants: A lack of trust of the MNOs and cost concerns Instinctive belief that new bank services will have charges. Barriers: General lack of information of m-banking services Failed transactions Cost M-banking: Conclusions Anything that inhibits ease of use (mobiles pre-loaded with m- banking seen to be an inducement)
Section 5: Transition Issues
Trust Mobile operators: not preferred choice for handling money Banks: large commercial banks, particularly state-backed banks (e.g. BRI) are especially trusted. Rural banks did not figure highly in the experience or perceptions of participants. Where they did, they tended to a reasonable degree of trust Not so for co-operatives. Post office: trusted, but not highly Related to participants perception or experiences Where participants collected remittances from post offices, or paid bills, they appeared to be satisfied with the results
Motivations & Deterrents Motivations Cost and time savings Unbanked participants from Banda Aceh spent > IDR10,000 to get to a bank or ATM. Queuing time as important as travel time Those with experience emphasize ease-of-use Malang participant: SMS transaction require just 2 SMS, considered easy Notification of transactions needed to build trust Deterrents Wary of unknown, such as: How service will work If cheaper mobiles will work What the costs will be Procedural concerns entering wrong PIN, transaction failures? Security issues Lack of trust in MNOs (made worse by bad SMS experiences) Account information exposed? Complications from multiple parties Account misuse in case of losing a phone? Key point: Ease of use and familiarity very important.
Strong preference for m-banking? Location / Group Trust (Top 2) M-payment or M-banking Denpasar Unbanked Commercial Bank, POS [MNO] M-banking Banked Commercial Bank, POS [MNO] M-banking Banda Aceh Unbanked MNO, Commercial Bank M-payments Banked Commercial Bank, POS M-banking Manado Unbanked Commercial Bank, MNO [Coop] M-banking Banked Commercial Bank, POS [Coop, MNO] M-banking Pontianak Unbanked Commercial Bank, POS [MNO] Both Banked Commercial Bank, MNO M-banking. Sukabumi Unbanked Commercial Bank, POS [MNO] M-banking Banked Commercial Bank, BPR [MNO] M-banking Wonosobo Unbanked Commercial Bank, Micro-finance [MNO] M-banking Banked Commercial Bank, BPR [MNO] M-banking Malang Unbanked Commercial Bank, MNO M-banking Banked Commercial Bank, BPR M-banking Lombok Timur Unbanked Commercial Bank, MNO M-payments Banked Commercial Bank, POS M-payments
Draft Conclusions : Institutional 1. Multiple m-banking models: Bank-centric vs. telco-centric vs. 3 rd party providers What are the role of 3 rd party providers? Do they offer Indonesia a way forward? 2. The importance of agent networks For m-banking to provide transformational banking, the development or exploitation of agent networks seems crucial. There appear to be 3 key issues that need addressing: (i) Registration and compliance with KYC; (ii) Enabling some form of cash-in/ cash-out, preferably kept simple; (iii) Focusing on merchant acceptance the development of 2- sided models. 3. Despite existing behaviour and indications that suggest the m- banking needs to be iterative, FGD respondents categorically prefer: To move straight to m-banking (everything else being equal) Prefer to do their banking with large state banks 4. BPRs (and other local institutions) obviously have a role to play but it appears to be rather focused one key example/ opportunity is the desire to use m-banking to pay utility bills.
Draft Conclusions: Guiding Principles 1. Simplicity e.g. SMS vs menu; registration (KYC); cash-in/cash-out 2. Convenience e.g. time/ distance/ anytime-anywhere 3. Information e.g. charges structure for m-payments/ m-banking 4. Price e.g. bank admin charges; on-net 5. Network effects e.g. on-net calls; merchant acceptance 6. Experience e.g. ATM receipts 7. Trust banks > MNOs; reliability of payments networks
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