Beyond Cash ON Delivery: Magic of Mobile Payments
Mr. Mohsin Termezy
Director Commercial, Monet
Discovering the 10 SKUs that Touch our Lives Daily
Anybody who works or manages a retail business would have SKUs as the corner stone of their life. Stock Keeping Units (SKUs) that touch our daily lives and can embed in the lifestyle of the target customers determines their success. Depending on the nature of the business, every retailer has an assortment of articles specific to a particular business. While creating newer SKUs to serve new market segment, sometimes a lot of us never realize that their SKUs are the food chain of another 10 SKUs that are accepted by all the Pakistanis irrespective of their education, age or income group.
If you have not been able to figure them out yet, let me share some more clues. Unlike other branded SKUs that adorn our daily lives and are flaunted, these are kept under maximum security. The excess of them are not stored or stacked in closets but kept in safe vaults. Yes, these are the 10 SKUs of our national currency; Pakistan Rupee.
Over the years, the financial services industry has been able to introduce multiple payment products to position them to fill the need of security and convenience. Introduction of plastic debit and credit cards has been positioned to be able to transfer monetary value of payments instead of utilizing paper currency notes. Globally it has been seen that the value transfer instead of currency transfer generates better economic impact.
In Pakistan, cash continues to be the king. While it remains the widely accepted mode of payments, the cash based economy is creating its own set of challenges to create a parallel cash based economy without any trails. Just to put some numbers behind the facts, according to State Bank of Pakistan, the cash in circulation amounts to 1.8 trillion, whereas the total bank deposits with all commercial banks is 6.5 trillion. This ratio of about 30% remains as one of the highest in our region.
“Financial Innovation in Pakistan over past 5 years and the Road Ahead”
Pakistan has been recognized globally in the past 5 years for its success in two key financial services areas i.e. increase in the overseas worker remittances (home remittances) through banking channels and big stride in mobile financial services. The home remittances have doubled from $6 Bln to $12 Bln and the
“Many more financial institutions are on-course to play their part in the new wave of Mobile financial services”
Revolutionary offerings in the Mobile financial services space by Easy Paisa and UBL Omni. Now that new players like Mobilink and Zong have joined the club, many more financial institutions are on-course to play their part in the new wave of Mobile financial services.
Traditionally financial institutions have been using the brick and mortar approach of distributing their financial products through the branches. The high infrastructure and operating costs involved in putting up branches have kept the banks from increasing a nationwide footprint of bank branches. Thus a mere 10,000bank branch network has been created over the 65 years Pakistan’s history.
Leveraging from the Franchise Model in the Retail Space
Franchising has been a popular strategy in the retail sector to increase the distribution reach through partner networks, however banks has not been able to unleash the power of extending beyond their own branch network. This had resulted into a financial exclusion of 80% of the Pakistanis with no access to formal financial services. State Bank of Pakistan in consultation with the industry players, introduced Branchless Banking Regulation in 2008 which spurred the growth of a workable model of distribution of financial products and services through a distribution network commonly known as Agent network.
Hyper growth in the Mobile Financial Services Arena
In a market which has more than 100 million mobile phone subscribers and 10-15 million banked customers, the opportunity to equip every SIM with a bank account was an opportunity that was targeted by the cellular operators.
After the introduction of the Branchless Banking Regulations in 2008, telecom operators who had access to a robust Sales and distribution network of franchisees and airtime reselling agents capitalized to convert such agents quickly for delivering mobile financial services. Over the past 3 years the branchless banking agents have crossed past 30,000 serving more than 200,000 customers daily.
Mobile Financial Services and Retail Purchase
The typical products right now in the market are domestic money transfer and utility bill payments, and this new wave of embedding mobile payments in the retail can already be felt.
The mobile payments would also touch the customers which can go to a nearby banking agent/retail shop
Unfortunately there is not a lot of published behavioral research globally on the payment mode choices of the customers. What motivates the customer to pay via plastic versus cash? Is it really the security and convenience feature that financial institution globally position as the key advantages? If this is the case, would the plastic have the same adoption rate in Pakistan as in the west? We foresee tremendous opportunity to gradually enable Pakistan as Cash-Lite economy. The ever so pervasive mobile phones with Pakistani customers can definitely play a role in there.
The value proposition of mobile Payments can be unleashed if the current Unbanked customers and banked customers can reap the benefits of innovation. There should be minimal on a perceived notion of person sitting in a couch and paying conveniently. The mobile payments would also touch the customers which can go to a nearby banking agent/retail shop and get the payment transaction completed with the agent’s assistance while the still pays cash. The current success of Bill payments using Kiryana stores in Pakistan follows a similar process.
Opportunities for Retail Merchants
Let me present to you readily available three key opportunities for Retail Merchants like yourselves
- 1. Remote Purchase using Branchless Banking Agents.
While merchants like yourselves, continuously strive to expanding the customer touch points by opening new stores, you are overlooking the opportunity of leveraging the branchless banking agent network to originate new sale orders for yourselves.
With a selection of the retail agents (now available to initiate orders against a commission) and equipping them with a shopping catalogue , these retailers can originate new remote orders for your products. They will collect the cash from the customer and utilize their mobile accounts to pay yourselves electronically in your
The consumer can utilize the branchless banking agent network to pay for the products against the invoice number
- 2. Monetize the Social media and internet.
Market stats indicate that customers are 71% more likely to base their purchases on social media referrals. Unfortunately 99% of the internet purchases have been constricted by cash on Delivery model. The internet risks of customer refusing the merchandize or security concerns have been faced by the merchants regularly limiting their appetite for Internet sales.
While merchants invest heavily on capturing Facebook likes, monetizing their investments to generate actual sales is now possible.
After booking an inventory online on Internet or a Facebook store, the consumer can utilize the branchless banking agent network to pay for the products against the invoice number. Upon electronic receipt of funds the goods are shipped to the customer.
- 3. Enabling an In-store Digital Payments Experience.
With the cash receipt from the sales proceed you are challenged with disposing the cash with your banks. Enabling the customers to pay yourselves directly into your bank account can reduce the risks associated with cash in till and save you the bank interest cost that bear for an overnight cash to value conversion cycle. Based on your interest in converting yourselves into a banking agent, you can participate in the distribution of the financial services by vending cash and also generating commission revenues.
For all of you who want to branch out into the world of online retail and the consideration about payment-collection-mode is keeping you back, then this is the way to go about it. The idea is that customers buy online, pay via their mobile wallets through retail agents, and have the products delivered to their place. And this is what Monet does.
What is Monet? Monet is a mobile payment services provider (PSP) connecting Financial Institutions, Telecom service providers, merchants and retailers in an open, connected and shared mobile commerce Eco-system.
With a passion for financial inclusion, we believe that convenient and cheaper access to financial services will provide much needed impetus to entrepreneurship in the country spurring a distribution of wealth. We aspire to be an entrepreneurial role model enabling new and exciting business models for our customers, partner and economy at large.
Monet’s promise of an open and shared Mobile Money Network for the mass market has been endorsed by BankAlfalah and Warid Telecom in Pakistan.
With 70% of 180MM Pakistani population without access to financial services, we are excited about more banks, merchants, telecom operators and distribution networks joining the cause soon.
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Question. What will it take somebody like Easy paisa to become Monet? Answer: Unfortunately, sharing of experience and developing synergies haven’t been the general trends in our country. However, here we are envisioning about a much bigger opportunity space, and we are talking to Easy paisa as well as other players in the market. We have to interoperate, that’s the name of the game.
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