Page 52 - State-of-the-Industry-2013

State OF the induStry 2013

the business case for mobile money is slightly diferent for non-operators and while they cannot beneft from some of the indirect
benefts associated with mobile money such as savings on airtime distribution, they can usually count on additional sources of revenues
including earning interest from the deposits (see text box 14 for the example of dBBl).

TexT BOx 14
what is the business case for banks to get into mobile moneY?
the examPle of Dbbl in banglaDesh*

When MNOs enter the mobile money business, they see a business case of direct revenues from revenues and indirect benefts of
ARPU lift, churn reduction, and/or savings on airtime distribution. However, a bank’s rationale for entering the mobile money busi-
ness will necessarily be diferent as they don’t have the indirect benefts. In the case of Dutch-Bangla Bank Limited (DBBL), their
aim was to increase their balance sheet, growing the number of deposits taken in over mobile banking and on lending those funds.
On this basis, they estimated that at an interest spread of 5%, a deposit of 5 billion taka (USD 62.5 million) would create an annual
income of 250 million taka (USD 3.125 million). This is equivalent to the maximum annual expense of the project and a target they
were hoping to achieve by the end of 2013.

Following the issuance of the central bank’s “Guidelines on Mobile Financial Services (MFS) for the Banks” (of 22 September 2011,
as amended on 20 December 2011), it was clear to both Bangladeshi banks and MNOs that mobile money would only be through
partnership models led by banks. DBBL launched its mobile money service on May 31, 2011.

After the launch of its mobile money service last year, DBBL opened 400 small ofces in the country’s rural areas. A total of 10,423
agents have been appointed to perform cash-ins and cash-outs for customers. These agents are normally small shop owners or
retailers of various MNOs. Agents perform on average 3.3 transactions (cash-in and cash-out) per day.

DBBL now has partnerships with Citycell, Banglalink, Airtel, and GrameenPhone. As per the partnership agreement, MNOs provide
USSD connectivity between the DBBL server system and agents/customers who are using their mobile phones. They also engage
their retailers to work as DBBL agent points. In return, MNOs get around 25% of the transaction fees paid by customers[1].

Launching the service proved more difcult than expected. In particular, the main challenge faced by DBBL was customer education.
But 14 months after the launch of its mobile money service, DBBL is on the way to reaching its fnancial targets.

When I asked Mr Abul Kashem Md. Shirin, the Deputy Managing Director, what advice he would give to other banks willing to launch
mobile money service for the unbanked, this is what he told me:
• Don’t be afraid to put a lot of money on the table: mobile money requires heavy initial investments.
• Manage expectations: mobile money will be proftable in the long-term, but don’t adopt a short-term view.

* This text box was adapted from a blog post by Claire Pénicaud (MMU) published on the MMU website on August 20, 2012
1. On average, customers pay 1% of the transaction amount as a fee. This fee is tentatively shared among the parties as follows: Agent: 50%, MNO: 25%, Bank: 25%

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