Category Archives: India

Remittances remain buoyant but cross-border mobile remittance still less than 2%

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World Bank’s recent reports on remittances indicate a welcome continued buoyancy. India remains the largest receiver, as growth in 2014 is led by East Asia and the Pacific, South Asia, Latin America and the Caribbean. However MENA flows are affected due to disturbances in the region, and ECA countries traditionally receiving inflows from Russia are badly affected. While mobile money has been adopted for domestic money transfer, 7 years on it has yet to make the inroads into cross-border remittances that was originally expected.

 

Good news as global cost of remittances falls from 8.9% to 7.9%

The global average cost of sending $200 fell from 8.9% in 2013 to 7.9% in Q3 of 2014, as remittances go online and digital. Account-based money transfer (cash-to-account is the lowest-cost method today). However although mobile money is being used for domestic money transfers, and is making an impact on sending money from urban to rural areas, its use for cross-border transactions remains limited. Less than 2% of remittance value took place through mobile phones. Yet with global remittance flows at $542 bn this even now represents a flow of $10 bn.

However Bill Gates believes that even with all the regulatory compliance it should be possible for pure digital to digital transactions to be moved at less than a percent. We are still far from achieving this goal. Is it a case of further enablers or something else that is needed to make this this possible?

 

Global remittance flows to developing countries are projected to reach US$435 billion in 2014

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At a much welcome 5% increase over last year, the growth is expected to continue into 2015, though at a reduced rate of 4.4%. Total flows are expected to rise from US$582 billion in 2014 to US$608 billion in 2015.

 

Forced migration is at an all time high with 73 million forced to leave home

The main message from the latest World Bank report on migration is that forced migration due to conflict has reached the highest level since World War II. Of the 73 million who had to leave their homes, over 51 million were forced to move due to conflict, and 22 million moved due to natural disasters.

 

India remains largest recipient at estimated $71 billion

Highest receivers are India ($71 b), China ($64 b), the Philippines ($28 b), Mexico ($24 b), Nigeria ($21 b) and Egypt ($18 b). Yet these flows are not as high as they could be. The largest receiver, India, only receiver 3.7% of GDP in 2013.

 

Remittance flows respond to natural disasters

Remittances continue to offer a much-needed lifeline of support in times of natural disasters, rising by 16.6% for Pakistan in 2014, and 8.5%  in the Philippines in 2013 in response to destruction from the super typhoon.

 

Regional trends

Remittances are projected to increase by 7% in the East Asia and Pacific region (EAP) with China and Philippines being the largest receivers. Remittances to South Asia have rebounded strongly in 2014, expected to grow by 5.5% to over $117 bn in 2014, with very strong growth for Pakistan, Nepal and Sri Lanka.

Growth in remittances to Sub-Saharan Africa is picking up in 2014, expected to reach $33 billion in 2014. Nigeria continues to dominate in terms of inward remittances flow, with $21.3 bn forecast for 2014.

 

imageRemittances to Europe and Central Asia (ECA) are slowing as compared to 2013 affected by conflict in Ukraine and sanctions against Russia. The figure shows how receivers of remittances from Russia have been affected as remittances received continue to decelerate.

 

 

 

 

 

 

Another affected region is the Middle East and North Africa, but despite the volatility, remittances represent substantially larger and more stable sources of inflows. Remittances to the region are expected to grow by 2.9% to reach $51 bn. Remittances to Egypt are expected to stabilize in 2014,  after the 2013 decline of 7.3% in remittances to Egypt (biggest receiver in the region, 6th worldwide).

 

For the full World Bank report click here: Migration and Development Brief 23 

 

Charmaine Oak, Practice Lead, Digital Money

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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http://www.linkedin.com/in/charmaineoak

 

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Online payments and ecommerce in India

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India’s ecommerce market is set to soar to USD 20 billion by 2020 (1), with growth generated, mainly, by the use of smartphones.

 

The USD 4 billion ecommerce is being driven by cheap handsets and mobile data plans that allow consumers to buy from their mobile devices. As we say at Shift Thought, India’s payments market is 'Born Digital Money', and this demands convergent payment services of the variety we describe in our Digital Money in India 2014 Viewport, which reflects our recent market studies in India, and from which this analysis is taken.

I had the opportunity to share my opinion on the direction of the e-commerce market with The Paypers, the Netherlands-based leading independent source of news and intelligence for professionals in the global payment community.

Click here to read the whole Expert Opinion published on 19th September 2014.

 

 

Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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http://www.linkedin.com/in/charmaineoak

Join us to explore ideas at The Digital Money Group on LinkedIn

The MMPL Story: Innovating through the Assisted Model for e-commerce in India

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Today I am joined by Shashank Joshi, serial entrepreneur and Managing Director of My Mobile Payments Ltd (MMPL), which he set up in 2010. Today MMPL is one of the companies that are driving the war on cash in India. They make it easier for consumers to keep their cash and cards away and just carry their mobile phones.

 

Through an extensive network of 225,000 small stores and a multi-lingual app that supports 10 languages and a proposed first support for payments through WhatsApp, MMPL today provides 24 X 7 mobile payment services to subscribers and merchants under their ‘MoneyOnMobile’ brand.

It was great to hear of the multiple innovations and the insights that Shashank had that led to his innovations that bring the uniquely Indian ‘Assisted Model’ of service to use in serving the needs of the unbanked, while also creating profitable transactions for merchants.

Shashank, thanks very much for your time today. Could we begin by understanding your main motivation for getting into the mobile money business in India?

I’ve been a serial entrepreneur for 22 years, having started my first company before leaving college. From 2003 to 2010 I was heavily involved in payments in the US, managing the whole merchant acquiring process from card swipe to settlement and underwriting. My first plan was to start a POS solution in India. However when I did my feasibility study in 2009 it was the exponential growth of the use of mobile services that set our direction and this led to my embarking on money on mobile in June 2010.

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How did things evolve from SMS based payments to the mobile wallet app you support today?

At first we started with text messaging. As you know, India is a highly price sensitive market and back then we could expect zero Capex when starting our business. We planned for something that needed no change of handset, was not operator led and worked on all networks and I’m glad to say we got some great numbers in our first 3 years.

Today we provide a mobile app and our customers are the small retail stores. Consumers go to these outlets to recharge mobile phones, pay bills and buy tickets and more.

 

Please give us a bit of context on the Indian payments scene (especially the PPI business) and share some of your key learnings in bringing services to market

The Indian payments market is indeed pretty unique. I’ll share three of our key learnings to put some colour on this.

 

Key Learning 1: To succeed in India, Apps must be multi-lingual

India skipped the desktop generation, going direct to mobile. So mobile apps are important, but English only on an app is a deterrent as every state speaks a different language. We modified the app we’d launched last year and now support top 9 regional languages + English. (Ed: Did you know there are 1,683 mother tongue languages in India, with 780 different languages in use today?)

We support Android as that’s a more realistic $65 price point as compared to Apple/ BlackBerry. The unbanked is our primary segment and they have been taking to cheaper smartphones with data plans, to avail of WhatsApp messaging. In fact, MMPL expects to be the first company in India to launch on WhatsApp in the near future. We are also the first to have launched a multilingual app of this kind.

 

Key Learning 2: Ability to convert cash to digital currency is a game-changer

 

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We have focussed on building our key asset in terms of cash network. We already have the ability to convert cash to digital currency at 225,000 “Mom & Pop” outlets in every state across India barring J&K. Going forward we are aiming to increase this to a million by end 2015 (we estimate approximately 4 million small stores exist in India just now).

 

Key Learning 3: Move from COD to CBD

You know how India has developed this unique Cash on Delivery (COD) model. Well the thing is, as many as 8 of 10 cases may be impulse buys – satisfying wants rather than needs. By the time the delivery is on your doorstep in 4 days, quite often that impulse has faded.

 

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E-Commerce cannot be profitably built on a COD model alone: it needs to be a payment first model. At MMPL we are building a Cash Before Delivery (CBD) model. This is a payment method in which an order is processed when received, but is shipped only upon receipt of full payment. Consumers pay from money on mobile wallet to the e-commerce provider, who gets a settlement as he gets from Visa and MasterCard. His payment is now in the bank before the goods are shipped.

 

That is fascinating, thanks Shashank. But I’m still a bit confused about B2B v/s B2C. As you mention that your customers are the stores, could you tell us how this unique model works in India?

In India the B2C model is protected by RBI who must protect consumers. On the other hand the B2B model, where we are talking to the stores is not directly regulated by RBI. In India the B2C model is not seeing so much traction due to the current RBI restrictions on Cash Out. It is rather the B2B model that is growing fast. If you put  ₹ 10,000 on your phone, you can only use it to pay for services, not extract any of it back if you need it.

 

Please tell us a bit about the unique “Assisted Model” of service unique to Indians, and how you innovate to serve the payment needs of the people with this model

People have the tendency to come into the store and ask someone to do the transaction. At first I thought this may be a language issue, but it goes deeper. The self-serve model that is popular in the Western world simply does not work here, is not in the Indian DNA. Look at hotels – there is no such thing as a self-check in hotel here. There is not a card on file concept.

The B2B model really facilitates this assisted model. The outlets are not branded; they are small convenience stores which people visit daily. These retailers have a prepaid arrangement with MMPL – I give them a consolidated balance from which they can then do bill payments, top-up recharge and other functions on behalf of consumers. They hang a small sign outside their shop to let people know the walk-in services they offer, as a footfall driver.

 

Shashank, how do you see regulations evolving in India in the near future?

We are currently involved in a pilot with RBI using Aadhaar card authentication. In another 3 months we should heva the results of the pilot. The pilot has seven participating companies and began two and a half months ago. It’s quite low key for now, on RBI’s stipulation – we can’t do a lot of advertising about it. In fact RBI has been very helpful in evolving these new regulations, and certainly the new government and the highly progressive RBI Governor’s vision greatly helps in evolving services in a way that will help the cashless models of the future.

 

Shashank, it has been fascinating to talk to you and to understand your story. Although I am only just back from our detailed market study for creating our “Digital Money in India 2014”, speaking with you has added more dimensions already, and it just shows how fast the market is evolving and growing. Wish you the very best for the rest of the year, and for your ambitious goals for 2015!

 

POST BLOG UPDATE:

Subsequent to this interview MML won the ‘Best Wallet’ award at The Emerging Payments Awards held in London on October 23, 2014, withstanding stiff competition from major international m-wallet brands such as Starbucks Mobile Wallet UK, EE Cash on Tap and JustYoyo. Congratulations to Ashank Joshi and the MMPL team!

 

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Shashank Joshi is the Managing Director of My Mobile Payments Ltd, a leading mobile payments solutions company based in Mumbai, India, which owns the "Money-on-Mobile" brand. A serial entrepreneur, Shashank has over 22 years of professional experience of leading companies in the areas of IT and ITES, Outsourcing, Transition, Management consulting and Mobile Solutions. He pioneered the successful execution of Merchant Cash Advance and Merchant Processing businesses through the offshore route. Shashank studied Mechanical Engineering from MIT.

 

Charmaine Oak is Practice Lead of Shift Thought

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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http://www.linkedin.com/in/charmaineoak

Join us to explore ideas at The Digital Money Group on LinkedIn

Write to us at contact@shiftthought.com to share about how YOU are innovating ways for people to pay

What is Trade Based Money Laundering (TBML) and how it impacts India

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Can India step up action on TBML? Considering the crying need for India to profitably export to support the needs of her vast population, cleaning up this area could be a huge win but involves a fine balancing act.

The Reserve Bank of India (RBI) has just been notified by the Directorate of Revenue Intelligence (DRI) of a high incidence of Trade-based money laundering (TBML) being used by Indians to get remittances into accounts in Hong Kong.

With the change of government in India, I hope we will hear more about this shortly and so thought it worth reflecting a little on TBML and where it fits within overall Money laundering (ML) scenarios.

TBML is defined by FATF as the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimise their illicit origins. While a lot of attention was on use of the financial system and cash movement, TBML received little attention until in 2006 FATF announced results of their Trade Based Money Laundering study.

They found that global trade in goods and services exceeded US $11 trillion a year. This offers fertile ground for tax evasion. By over or under-invoicing imports and exports, companies and their affiliates in low-tax and high-tax jurisdictions use tailored transfer prices to shift company profits and thus reduce worldwide tax payments. Some of this also represents capital flight, where currency restrictions are circumvented by pricing of imports and exports.

However while these two practices may involve legitimate funds, TBML is even more concerning, as it involves proceeds of crime.

It took 6 years more for the Asia/Pacific Group on Money Laundering (APG) to bring out their report, that investigated why so few cases of TBML were being detected in spite of expectedly serious incidence in the region.

Most customs agencies inspect less than 5% of cargo shipments entering or leaving their jurisdictions. Further, they tend to monitor exports less than imports. Consequently under-invoicing exports is a classic TBML ploy. What DRI would have detected would include cases of Indian exporters shipping a higher value of goods and services, with part payment received in India, and the balance deposited into a bank account, in this case in Hong Kong.

Money-laundering (ML) is typically carried out in three stages. Firstly, in the Placement stage, ‘dirty’ cash is placed into the financial system. Multiple smurfs (individuals or businesses) are used to repay loans, manage gambling scenarios, smuggle currency and blend funds into legitimate business.

Secondly, in the Layering stage, an attempt is made to move funds electronically, often between countries, in an attempt to obscure the source and links to the original misdeeds that are associated with the funds.

Thirdly, in the Integration stage the criminal receives possession of the funds from apparently legitimate sources. This could be done by buying property, cars, paintings and other high-valued items.

The cases that were highlighted in the FATF and APG surveys illustrate how placement, layering and integration take place through TBML. Case 7, a particularly complex one provided by India involved multiple ways in which trade was misused, with Dubai-based Indian national “A” laundering funds for drug cartels in Asia and South America.

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FIGURE: A Case Study provided by India in the 2012 APG Report illustrates a complex case of TBML

Mr A established companies such as A1, A2 and A3 spread across Europe, Asia, Africa and USA. In Dubai Letters of Credit (LCs) were opened by these companies for importers such as I1, I2 and I3 in Dubai. Beneficiaries of the LCs were exporters such as E1, E2 and E3. By creating LCs for amounts much higher than the value of the goods, drug money lying with A was remitted to India. All that remained then was to integrate  the funds – Exporters E1, E2 and E3 kept the price of the goods and transferred the surplus to R1, R2 and R3, family members of A in different parts of the world.

This case study helps in visualising the kinds of cases DRI must have highlighted to RBI. Considering the crying need for India to profitably export to support the needs of her vast population, cleaning up this area could be a huge win but involves a fine balancing act.  Export has already been a highly controlled area for more years than I can remember. This already dissuades genuine small exporters. So I believe this is likely to be more a case of appropriate action than awareness. I look forward to more on this announcement, sooner rather than later.

FaceBook, FaceTime ..next stop FacePay?

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As fraudsters continue to challenge financial service providers around the world, biometrics is starting to offer an alternative – but when will it become truly viable, and part of mainstream payments systems? We look at some developments in biometrics, as the world’s largest biometric system Aadhaar faces its latest setback.

 

imageLast year this time Uniqul Oy from Finland claimed to become the world’s first provider of face recognition payments systems. They believed they could reduce time spent on transactions from an average from an average of around 30 seconds to less than 5 seconds: cameras monitor shoppers from the time they get into the queue, so as to easily charge their account after scanning their shopping.

Unfortunately it expects shoppers to pay. Customers wanting to use the system needed to pay a subscription depending on proximity to the store.  Scandinavia has many “firsts” in payments, and I’m sure the business model will evolve over time. A big step forward in terms of technology, but I expect adoption will prove to be the next hurdle to cross.

A Deloitte survey found that 72% or respondents would welcome the use of biometric identification. Consumers are concerned about mobile device security, yet 63% of smartphone users have interacted with their bank via a mobile app.

Arguably, it is not shops in developed countries with high card usage where the new systems will first take off. As shopping malls take off in India and China, will people move from cash straight to biometrics, and skip the card payment phase?

Last month when I was in India I had the pleasure of revisiting Shoppers Stop in Andheri, Mumbai, and was witness to an interesting exchange. My friend simply gave her mobile number in order for the loyalty points to be added on – she no longer bothers about carrying her store loyalty card!

This seemed to be a straight-forward solution to the problem of managing multiple loyalty cards, but right now it may only be practical in up-market stores where they have the time to indulge an individual customer, without delaying a whole queue. The potential of delivering benefits to the whole shopping experience from face recognition seems to be something that could further drive a new “Face Pay” experience.

But as fewer people visit stores and more take to shopping online and on smartphones, payment by fingerprint has recently grabbed the headlines – first with the release of PayPal’s Samsung S5 fingerprint payment, and shortly after with news that it may already have been hacked.

From the customer perspective, it is always a quandary to allow new data points about themselves to get captured and possibly become the target for thieves. Personal data is powering a great number of new business models. We are currently investigating how regulations are likely to be built so as to be effective in protecting both our privacy and security.  We’ll take a closer look at this, as well as the potential for biometrics in digital channels in subsequent blogs.

Meanwhile it seems from this report that all is not well with the world’s largest biometric project. It continues to face recognition problems, and in particular the big question of who will pay for the equipment required. Read more  at RBI defers Aadhaar-based payment system?

How is biometrics changing the way people pay at a store near you?

Singapore, a catalyst for lower cash usage in India and Southeast Asia

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We share highlights from our recently published reports on the Indian and Singapore markets. We have planned various events around the Terrapin conference in Singapore from 21-25 April. Join us to help make our very first Road-Show a success.

We believe some of the more interesting bits of our research on Singapore related to the role the country can play in catalysing non-cash payments in South-East Asia, and indeed, within the wider Asia Pacific region. Let me explain why.

As I write this blog, our team is currently chatting with the Aam Admi in India ( the common man, not the political party, though they too have a way of creeping into most conversations now that elections are on).

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As I made my way, still wide-eyed from the experience of our wonderful new Mumbai airport, and the speed with which I was bundled out of customs,  I saw a huge glass building with StarHub emblazoned on it. I fell to wondering what exactly StarHub was doing in India. imageAs their stated aim (quoting from their website today)  “will always be focused on providing every home and every business in Singapore with world-class services”, why such a big presence in India? I learnt that not only is StarHub the No. 2 mobile operator in Singapore, but it also has a variety of other interests (TV, Roaming services and more), in a number of other countries, including India. For that matter, so does the SingTel Group , that includes the No. 1 operator in Singapore, and a great many other Singaporean companies.

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Understanding what Singapore based groups are currently achieving in the 4.2 billion+ Asia-Pacific market is, to my mind, even more important than what they are doing in their home market of 5 million. That is why we do touch on this, in addition to covering the Singapore payments scene. Big changes are underway, from core system changes such as FAST (immediate funds transfer platform), to the very latest interoperable mobile payment services that are trying to tempt Singaporeans to throw away their much used travel cards, and also serve the millions of tourists who annually visit the country.

We are especially eager to share our insights, as the research we carried out this year in Indonesia, India, China, Pakistan, Bangladesh, Nepal, Myanmar and other countries, turned up a wide range of opportunities for providers that are based in Singapore.

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From the 21st to the 25th of April (next week), our team will camp in Singapore for our very first road-show including various events at which we will share highlights of our research. The Asia Pacific (APAC) region has leap-frogged the West in terms of rate of growth of mobile-enabled services. The tech-savvy markets are ready and waiting for services that will help them to achieve their ambitious goals.

Our team in India politely inform me that some of the services I use in the UK may be slightly older versions of what they use here. Yesterday, a 78 year old Indian gentleman proved to have greater affinity and prowess regarding the latest technology for communications than many I’ve met in Europe. Housewives I chatted with categorically and in no uncertain terms, welcome the time-saving new services and I can see massive changes on the cards for India this year - And earlier this year I saw similar signs when we chatted with people in Indonesia.

My quick summary on what I see from our work this week in India, one of the fastest growing markets in the world: To get the services right, providers must understand the Indian context and tailor their service accordingly. ARPU of mobile services is very low, costs are expected to be brought down to match this. People will not pay for what they don’t want – so the package of services must be carefully planned, with easy opt-in, opt-out.

Missed call – A part of the Indian service cycle

One of our interviewees gave us a great example of a company that detected and used a market practice, to exactly appeal to the Indian user. A common practice is for cab drivers to call back to the office when they need to talk, and immediately hang up (missed call). The supervisor is the one with the unlimited talk plan and she will be alerted and call back the cabbie to issue instructions.

This has now become part of many business processes, and is widely known as a missed call. One smart Indian marketing company, Tata Sky TV actually offers their Missed Call Service (MCS) as a way to request their sales team to call back prospective customers or existing subscribers who want to add on a package.

My point is that one can’t expect to bring a service and plant it intact into these growing markets. What is the equivalent of the missed call, that can make the difference between success and failure for your new mobile payment services?

A role for Singapore?

Providers in Singapore are geographically, technologically and culturally well placed to understand and create services to cater to the trends in some of these rapidly growing markets such as India, China, Indonesia, Malaysia and the Philippines. However choice of the market, type of service and customisation of offer for each of these markets becomes all-important. Financial and payment services are at very different maturity levels – expect some of the services you use at home to get “leap-frogged”, and get ready to observe and learn, before planning major projects.

Let’s talk!

If you are part of the great APAC mobile money revolution, come and chat with us so we can learn more about you, what you plan to do and what is holding you back.

We’ll have special promotions on, in case you like what you see and want to pick up some of our reports, subscribe to our premium portal and/or obtain targeted analysis that directly answers your questions. We are keen for you to enjoy what our customers say they liked most – Targeted answers to your most pressing questions, through our unique “Ecosystem Tour - Show and Tell” service ….

So much so that we’ll give you a FREE 15 minute slot to take your question and provide you a response from our continually updated portal  that covers close to 3,500 player profiles, and 1,900 initiatives, 78 different products and services , across 283 markets world-wide. We’d also like to hear your story – what you achieved, what your ambitions are, and how we may be of help.

Just drop me a line at coak@shiftthought.com and we can discuss what event may suit you best. Please be quick though, as we have limited slots and they’re filling fast!