Published on January 6th, 2010 | by Arsalan Mir4
Tameer Microfinance Bank And Telenor Provide Insights On Easypaisa
Cross post from Mobile Money for the Unbanked
The launch of Pakistan’s ‘easypaisa’ by Telenor and Tameer Microfinance Bank was one of the most exciting deployments of 2009. Targeting the massive unbanked segment and initially supported by a network of 2,000 agents, it’s not surprising that easypaisa is seeing early signs of success. Having been live for less than two months, almost 250,000 customers have used the bill payment or money transfer services initially available and there are positive signs that repeat business will be strong.
I recently caught up with Arif Qayyum from Telenor and Abbas Sikander from Tameer Microfinance Bank to learn more about their approach.
Our conversation covered three broad themes:
1. The structure of a mobile operator / bank partnership
2. Approach to agent distribution
3. Their product launch roadmap and plans to drive adoption of an e-wallet
The structure of a mobile operator / bank partnership
According to Arif, the partnership between Telenor and Tameer works ‘because we have an aligned strategic vision. In the past, we’ve seen technology play an important part in whatever Tameer has done. That is very important. When you’re looking at partners, I’d say the most important aspect is the ability to work closely together and share a common vision. Tameer’s active interest in branchless banking years ago set them apart from competitors in Pakistan and made them a logical partner for Telenor.’
With a partnership established, Abbas provided clarity on how the two organizations have come together to launch and manage easypaisa: ‘We are set up as a joint team. There are not two specific entities launching this service – its one large department with distinct responsibilities assigned to each partner based on who’s best positioned to execute. Within our joint product team, there is everything you would expect to see: product management, operations, marketing, legal, technology, etc with staff contributed from both organizations.
From a legal perspective, we have a relationship which entails an agency agreement whereby Telenor is acting as a distribution arm for branchless banking. Anything which relates to demand liabilities rests with the bank: the balance sheet used is the banks, so all customer balances appear there. Beyond the legal architecture, there is also a logical assignment of responsibilities within the project to staff from Telenor and Tameer. The entire channel management and retail set-up work is done by Telenor, given their immense expertise in this core line of work for them. They also host the technology and operate a call centre that provides customer service and complaint handling. Concept development is done in partnership, but Telenor takes the lead on marketing, including working with creative agencies and purchasing media. Tameer is responsible for operating accounts, creating ledgers, reconciliation, fund settlement, fund settlement with external parties, risk and compliance, and fraud investigations. These are all core banking functions that Tameer is best positioned to deliver.’
Agent distribution: providing a good value proposition
In markets around the world, we are seeing just how important it is to provide agents with a strong value proposition. This value proposition typically comes in the form of commissions for performing cash in/out and registering new customers. Arif confirms that ‘on average, about 50% of the value of customer fees are paid to our agent network. The exact amount depends on the value of a transaction, but this is the biggest cost item in our business case.’ The easypaisa agent network has been designed to function using a master agent / sub-agent hierarchy model, so the total commission value is divided between multiple parties.
Agent distribution: leveraging Telenor’s core strengths to manage agent liquidity
Abbas: ‘Telenor has an airtime distribution network that contains over 180,000 points, but we will only select maybe one third of these to become easypaisa agents. Selection is based on a criteria list that was developed jointly between Telenor and Tameer which we call the ‘national agent take-on procedure’. In that procedure, we evaluate how long a retailer has been doing business, their volumes, and whether there would be adequate cash available for them to do this business. Ultimately, we only sign on agents that Telenor’s distribution team and the easypaisa team both agree would be viable agents. So it’s not open for any agent that does airtime sales to start also offering financial services.’
Beyond having clear criteria around agent selection, Telenor and Tameer have also made efforts to position the mobile wallet that agents use as being liquid. Abbas explains that ‘the e-wallet needs to be perceived by the agent as being as liquid as cash. That’s what we are trying to achieve. One of the ways we’re delivering on this is offering agents the ability to transfer value from their e-wallet to get electronic top-up which they can sell.’ This approach has been used to some degree in the Philippines with success – airtime value is often perceived as the closest thing to cash by agents given the rate at which it turns over.
In terms of managing physical cash and e-money liquidity, Telenor’s existing distribution team play a critical role. Arif explains that ‘since we’re using our existing distribution network, there’s somebody visiting these retailers on a regular basis anyways. And since these agents are typically our top-end retailers, the frequency of visits to these outlets is already high. Thus, agents don’t need to go anywhere to manage their liquidity – we can service them using our existing distribution team. For example, if a merchant wants to get rid of cash, he can give it to the sales person and the sales person can transfer him credit, or vice versa.’
It’s worth noting that easypaisa has only recently begun dealing with cash-out. The service is new, and the initial focus has been on bill payments, but Arif is confident that they’ve ‘developed enough tools to assist agents. We have a built in tool for correspondent banks to provide cash, take in cash, and immediately offer top-ups. The average time between a master agent giving the bank cash and seeing the credit on their ledger is very fast – around 15-20 minutes.’
Product launch roadmap and plans to drive adoption of an e-wallet
According to Arif and Abbas, the two main criteria for launching initially with a branchless banking offering were to establish customer trust and present a strong business case to agents. Arif explains that ‘our focus is on making financial services accessible – not necessarily just on mobile money. To do this, you need to start with the basics, and that is to carry out financial services with the customer over the counter.’ Abbas continues: ‘setting up a branchless banking network is transformational in general. The branchless banking agents will eventually be the ones providing cash in and cash out, but it’s important that the channel gets used to dealing with customers first. If you launch immediately with an e-wallet where customers would need to first register and do cash in/out, the channel would not be incentivized enough or used enough for this to be an interesting new line of business for them. These retailers sell airtime and do other types of businesses. It’s important that they see financial services as a viable new type of business to perform. And of course from the customer’s perspective, they first establish trust with an agent doing over the counter transactions, and from there will move to an e-wallet.’
Abbas confirmed that an e-wallet is on the roadmap and that the drivers he’s hoping will encourage customers to move beyond basic over the counter financial services transactions to use of an e-wallet is the underlying convenience. ‘Over a period of time, we’d like to see customers seeing easypaisa as adding value in their lives not just through money transfer and bill payments, but also through savings and paying for other things as well.’The author, Paul Leishman Knowledge Manager for the MMU programme, responsible for leading the development and dissemination of commercial content, including business strategy analyses focused on mobile money business models, and case studies profiling key success factors of deployments.