The introduction of third party payment networks also known as MPSP (Mobile Payment Service Providers) would be of immense advantage since these third party payment handing agents can work with many providers, rather than the closed networks, Dr Muhammad Yaseen, Chairman Pakistan Telecommunication Authority (PTA) said in its authored article on his blog “Mobile Banking – Market Dynamics for Pakistan.”

The primary approach is to encourage multiple mobile banking services to MPSP as opposed to One-to-One payment system or one bank one operator. Therefore, there will be opportunities to design multiple money transfer saving and financing services to customers.

We could foresee opportunities for service providers from banks and mobile sectors alike who move quickly to create new products, especially if they can establish shared networks of third party agents, he wrote.

Dr Yaseen explained that the customers belonging to any bank and mobile operator would have the freedom of managing their finances when and where they want. This means that all banks and mobile operators would be able to connect with each other resulting in a situation where any bank customer can access their accounts, transfer funds, and interact with all other bank customer using mobile connection.

“This also provides an extra freedom to all service providers to start mobile banking offers to their consumers. Under this model, all banks and all operators could join hands to offer services to virtually all bankable customers, he said and added “this model offers the maximum connectivity and hence maximum outreach but requires a central transaction processing system that could be handled by a MPSP. Relying on third party service providers would also “liberate” banks from location constraints, allowing them to compete for customers anywhere based on product design, marketing, and branding.”

Block Diagram of the TPS Model

PTA has join hands with State Bank of Pakistan for drafting banking while offering state-of-the-art security to mobile users and financial. This aim to introduce a unified regulatory regime catering the requirements of operators, financial institutes and the consumer by providing a many-to-many relationship.

The present regulatory framework available under Electronic Transfer Act (2005) and Branchless Banking Regulations (2008) promulgated by State Bank of Pakistan is based on 1-to-1 relationship. This offers a close system between a single bank and a single mobile operator required to develop their own payment

Pakistan has region’s best performing sector, the financial sector assets have risen to over $185 billion, its profitability is exceptional and at an all- time high, non-performing loans (NPLs) are at an all-time low, credit is fairly diversified and bank-wide system risks are well-contained. Almost 81% of banking assets are in private hands. Similarly mobile sector in Pakistan has observed an enormous growth with a subscriber’s base reaching

Source: http://www.dryaseen.pk

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With the economic boom witnessed during the Musharraf era, two sectors reported the strongest growth rates among all: banking and telecom.

The introduction of consumerism within the local community was one way to release the strong grasp of the frugal middle-class from their savings of decades, and invite them to indulge in various offerings of luxury and investment.

Plastic money had not been a successful center-piece of Pakistan’s commercial economy, with the checking system holding a dominant hold and cash considered king. Even though the ATM and credit networks existed in the 90s through international banks in Pakistan, the uptake of such tools was minuscule. The entire banking system was location-centric, with each branch being a completely independent entity due to the lack of a computerized network across the nation.

The emergence of financing solutions and online banking in recent years have pushed the community to see banks as more than just money vaults. Even though there is still some rigidity in the system, privatization of institutions and increased competition has resulted in more options for the average consumer.

The biggest winner in the overall revamp is the ease of money transfers, whether intra-bank, inter-city or international. Using the word ‘ease’ is done relatively, with the knowledge that the red tape still remains in some way or form. However, most would agree that the transfer system is now a step forward than what it was in the 90s and early 00s.

Mobile communication in Pakistan is still growing out of its infancy; analysts often attribute the market as a pre-mature baby that has had to make jumps instead of gradual growth like other countries.

Whether this is due to a strong uptake in telecom-banking or the delay in technology roll-out, the boom in the segment caught many operators unprepared at the start. The companies have been quick to stabilize their service provisions, allowing for innovation to return to the sector and new streams to be investigated. Out of all the options, linkages with financial institutions to grab a share of the mobile banking and money transfer market have become the new playground.

Convenience and accessibility is what mobile banking is all about. A recent article in the ‘The Time’ showcased the banking revolution of Kenya, where Safaricom has transformed from being a communication provider to one of the strongest entities in the financial services segment. The model adopted by the company has been one of simplicity; providing access to functions that were once considered out of reach for the unbanked majority. Other operators across Africa and the world have jumped on the bandwagon and are in the process of rolling out similar services in order to share a piece of this untapped market.

In Pakistan, Telenor took the first plunge by launching Easypaisa and the results have been encouraging. With competing operators scrambling to get their services alignedand operational at the earliest, analysts are expecting the next phase of battles to be for more than call rates.

The market for transfer services in the country is not confined to the rural locations of the country, as the urban centers also hold potential for many aspects of the financial services. With regulatory requirements coming into play for such services, the microfinance institutions have become the target for the mobile players and others, as each entity pushes to capture some share of the segment.

And there are other non-cellular entities who have analyzed deeper layers of the mobile banking model that can be applied to the national market.

For the cellcos of the country, the normalcy in revenue growth from voice and data services has pushed the need to diversify. It is hoped that the financial services adoption may be better though out, and an understanding of the market needs to be incorporated when jumping into these waters.

Maybe, this time around, the consumer should push for their voice to be heard, rather than just sing along to the jingles of the cellcos.

Telenor Easypaisa promises empowerment and convenience to the masses in carrying out financial transactions whether they live in the urban area or rural communities of Pakistan and whether they are banked or unbanked, said Anjum Rahman, Director Corporate Communications and Responsibility at Telenor Pakistan.

Telenor started its mobile-banking services with 2,500 outlets in October 2009. After an year or so there are now a total of 12,000 mobile-banking points, outnumbering the total number of bank branches and post offices in the country, she said in the exclusive interview with ProPakistani.

As per an estimate, Pakistan has more than 8,000 banks branches and it has 7,000 post offices in large and small cities.

Easypaisa now stands as the largest financial services network in the country with a much stronger rural presence in the country, she asserted.

Telenor’s mobile-banking service has been gaining tremendous popularity as credible and fastest source of money transfer across the country as showed by a significant number of people transacted Rs. 17 billion of amount against 10 million transactions carried in merely one year and three months, revealed Anjum Rahman.

Tracing the success of the service she briefed that Easypaisa’s transacted amount has witnessed 70 percent quantum jump with Rs. 7 billion since October 2010.

On the other hand, the total number of transactions carried recorded 33.3 percent or 4 million increase in just three months, showing a tremendous growth in service utility by the customers, she added.

It is pertinent to mention here, Telenor Pakistan had recorded Rs. 10 billion transacted amount against 6 million transactions carried by the end of 15, October 2010, the day service completed its first year.

The transaction amount includes domestic money transfer, international remittances and utility bill payments.

Anjum said the Telenor’s management has continued to promote the services in the country, particularly for those living in far flung or rural areas in order to ease mobile-banking services in Pakistan.

Read the full story

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The Japanese and Korean vision for mobile communication differs vastly from any other nation in the world. Operators and regulators in both countries adopted the telecommunication change not merely as a means to ease the communication link between entities, but saw it as the replacement for almost all established networks; be it business or personal.

The concept dates back to when plastic money was introduced; remember the Visa advertisement, where the girl wears tight-fitting jeans and has no means to fit her wallet, so all she takes with her is her Visa card. Twist that to the 21st century, and all you need is your mobile phone now.

Of course, it will be hard to replicate the models adopted in Japan and South Korea. Both exhibit natures of highly coordinated market economies, where the industry giants have developed from family control and are conglomerates with interests in several sectors. With such extensive spread, it is easier to link the telecommunication unit with the financial services unit, and deploy mobile applications to ease customer needs.

Telenor, with its 150 years of international experience, took the first step towards ‘mobile money transfers’ by introducing Easypaisa in 2009. Based on the regulations in financial trading, Telenor could not perform the service in its own right, and acquired Tameer Microfinance Bank to ensure all required criteria was fulfilled.

The simple model adopted was a bid to cross the boundary of mobile users, enabling anyone and everyone to utilize the service. The only thing required is a copy of your computerized national identity card (CNIC).

With international remittances coming online earlier this year, Telenor has reduced the burden from our slow banking networks that operate in far-flung areas.

However, the burden has been placed onto small retailers and outlets, which are unlikely to be as trained or skilled in fiscal matters as general bank staff.

Even then, Telenor has to be commended on enhancing the spread within its focus segment of the rural regions. The service demonstrates steps being taken to bridge the innovation gap that exists across Pakistan’s population topology.

One worrying factor, among others, that may need attention from Telenor is the recent study on migration from rural to urban centers. While numbers remained steady in the past few years, the recent natural calamities have resulted in a massive spike in the movement.

Hence, easypaisa will need to be re-modeled to cater to two very different subsets of the population.

The business model that Telenor has followed is merely the outer layer of payment solutions. Of course, business constraints will always play a role in the planning and implementation of such models. No other operator has managed to match this offering by Telenor, giving it complete control of the market for now. And it is unlikely that any of the 4 competing operators will give Telenor competition on this front.

But a local logistical group may take a follower advantage, having studied Telenor’s model and system, and performed a research study of how to create a deeper connection with the population, urban and rural. The group’s belief is that human interaction is still perceived highly across the country, especially when it comes to money.

The core feature they aim to complete with their model is removal of the requirement for a customer to travel to any market to send/receive funds or make payments.

All services at your doorstep and should get done through a mere keypad!

President Asif Ali Zardari inaugurated a mobile banking service named Benazir Bhutto.

Solution is aimed at providing mobile-banking solutions to far-flung areas of the country with less developed banking infrastructure.

Addressing a ceremony the President said that the value of one card of Benazir Mobile Banking is equivalent to Rs. 3,000.

The President said the facility of Women Protection and Rescue will also be incorporated in this Card which will enable the user to register a complaint against any police personnel or any one committing excess.

This mobile phone will provide every kind of product, he added.

Before I begin, allow me to speak of the success of Telenor Easy Paisa’s Utility Bill payment service. Listing down some quick facts about the bill payment service:

» More than 47000 bills paid across Pakistan
» Total amount of bills paid exceeds Rs. 58.8 million

It can be safely said that the Easy Paisa method of bill payment has been received well by consumers and people have started to rely on it. The usage stats are more than the bills paid at ATMs in Pakistan.

Now like it was expected, Telenor has started expanding the set of transactions offered over its ‘Easy Paisa’ service. After the success of utility bill payments, Telenor has launched its ‘money transfer’ transaction that makes it possible for absolutely ANY customer to send and receive money as the receiving and sending of money does not necessarily require a cell phone.

Telenor’s target market appears to be ‘Domestic Remittance’ users in Pakistan i.e. People residing in urban areas for work and sending money from one city to the other or to their native villages. It also aims to work as a replacement of ‘traveller cheques’.

The process is relatively simple, let me list how sending and receiving money works one by one:

Sending Money:

» Sender visits any one of more than 4000 Telenor Easy Paisa retail outlets, Telenor customer service centers or any branch of Tameer Microfinance bank
» Sender fills in a form/receipt (as shown in the image below) providing name, CNIC and mobile number of receiver and the amount to be transferred
» Easy Paisa retailer hands over phone to customer to enter secret 5 digit PIN (this PIN has to be delivered to the recipient)
» Sender needs to provide a photocopy of CNIC and present his original CNIC for verification

Receiving Money:

» Receiver visits any one of more than 4000 Telenor Easy Paisa retail outlets, Telenor customer service centers or any branch of Tameer Micro-finance bank
» Receiver presents to retailer/branch/service center the ‘Transaction ID’ as received via SMS or directly by the sender
» Easy Paisa retailer hands over phone to customer to enter secret 5 digit PIN (this PIN was delivered/told to the recipient by the Sender)
» Receiver needs to provide a photocopy of CNIC and present his original CNIC for verification
» Receiver receives the amount transferred by Sender
The service, however, is not free and comes at a cost. The cost is divided into slabs depending on the amount transferred:

Fee for the transaction (including taxes) will be charged on top of the Money Transfer amount and it will only be charged to the Sender and not the Receiver.

Example:
A person who wants to transfer Rs. 1000 to another person would end up paying Rs. 1000 + 58 to the Merchant (where Rs. 50 = Money Transfer fee& Rs. 8 = taxes).

Receiver does not need to pay anything and will be able to pick up Rs. 1000 from any easypaisa Merchant.

There is, however, a limit of Rs. 10,000 as the maximum amount that can be transferred imposed by the State Bank of Pakistan. Providing cell phone numbers for both sender and receiver are optional but recommended as they provide automated transaction confirmation in real time.

As an e-Banking enthusiast, I am anxiously waiting for what is next in line in the Easy Paisa service offering! I can make guesses, and very focused ones too, but I’ll leave that for now and may be go out and try a transaction for myself.

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In this post I review the efforts by US banks and financial institutions such as credit card companies to push mobile commerce as another channel for their clients. This post is based on a study and report by Information Week. As you go through this, compare this with the experiment in Japan, especially how applications are loaded on the phone … it will be interesting to revisit this after a few months.

Citibank has unveiled Citi Mobile, the first downloadable mobile banking application from a major financial services provider. After enrolling online and downloading the app to a cell phone or smartphone, customers can view balances, pay bills, transfer money, locate ATMs, and click to call customer service.

Citi Mobile can be downloaded to 100 cell phone and smartphone models. It’s initially available in California, but Citibank says it will be out in other states by midyear. The app has been more than a year in development, and Citibank execs think U.S. cell phone users are ready to do more than talk and text on their phones. “They can manage their accounts while sitting at a red light in their car,” says Steven Kietz, Citi’s business manager for enhancement services and e-commerce.

Information Week is not so sure. As they say: There will be a growing market for mobile banking when there’s a need for immediacy, like emergency fund transfers and balance checks, predicts James Van Dyke, president of payment consulting firm Javelin Strategy and Research. But his take on a mass market for mobile bill paying: “It’s ridiculous.” The banks beg to differ, though. Wachovia, which has a mobile offering, says mobile bill paying is one of the top customer requests.

Since the Citi Mobile app resides on the phone, it’s faster and offers a graphics-intensive interface that’s closer to online banking than text-heavy Web-based apps. Customers select the Citi icon on their phones to access accounts instead of navigating through multiple Web pages on a tiny screen. They’ll also receive new features automatically whenever Citibank makes an upgrade available.

Bank of America took a different approach, launching its WAP-enabled Web-based mobile banking service in February. Most mobile browsers can access the service, which lets Bank of America customers check account balances, pay bills, and transfer funds. “We chose to go with a WAP application, so that everyone can access it,” says Sanjay Gupta, an e-commerce executive for Bank of America. The downside: WAP displays information mostly in text form without rich graphics.

More from the report:

Wachovia also went with a Web-based app, launching its Wachovia Mobile service in December. It works only with Web browsers that come on smartphones running Microsoft’s Windows Mobile 5.0, Research In Motion’s BlackBerry, and the Palm OS. More than 50,000 people access Wachovia Mobile each week, says Ilieva Ageenko, the bank’s director of emerging applications.
But Wachovia has another option in the works. It has teamed with AT&T, which will offer later this year mobile devices preloaded with a mobile application for accessing Wachovia’s and other bank’s services. Preloading the app makes it easier to use on the phone. By getting together with AT&T, Wachovia has “enough footing to reach out to this huge base of customers,” says Ageenko.

But preloaded apps have their downside since the number of customers a bank can reach is limited to the number of phones its app is loaded on. But even with downloaded and Web-based apps, banks may have to work hard to convince customers to sign on. “Instead of banks giving away toasters, maybe they’ll give away phones,” says Richard Crone, of Crone Consulting. Also, putting an app on a mobile device could increase calls to the support center as people struggle to get an app to work on a particular device, thus increasing a bank’s costs, he says.

Besides usability and access issues, security looms as a potential problem. Mobile applications preloaded on cell phones mean personal information will be stored on phones, posing a huge risk. The good news is that the banks are putting a lot of effort into securing their mobile offerings. With Citibank’s Citi Mobile service, the phones don’t store any personal information and transactions are secured with 128-bit encryption, the same technology that’s used at Citibank.com.

Customers accessing Bank of America’s online banking service from their cell phones are protected by the bank’s SiteKey security technology. Data also remains encrypted when it’s sent between the phone and the bank. Once AT&T rolls out mobile devices with Firethorn’s preloaded banking application, it will have the ability to remotely wipe devices clean of personal data if they’re lost or stolen.

MORE THAN JUST MOBILE BANKING
Credit card companies MasterCard and Visa have their own agenda. They want to convince users to use cell phones as credit cards for quick purchases. The report presents a few updates on this:

MasterCard and Visa have tested cell phones with embedded Near Field Communication technology that enables short-range wireless communications between devices. The next step is to team with wireless carriers and financial services providers on actual products. MasterCard says it’s in discussions with several carriers and financial services companies.

Visa is testing a mobile application that will let consumers use their cell phones for payments and online purchases. Customers will have access to their credit card account information and will receive account alerts and mobile coupons when they use the service. Visa also is partnering with chipmaker Qualcomm and phone maker Kyocera on contactless payment-enabled phones.

With everything that credit card companies, banks, and wireless carriers are doing, people’s cell phones should soon turn into more than communications devices. “It truly is disruptive technology,” says consultant Crone. The question is whether consumers also will be as excited about mobile banking and contactless payment apps.