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Mobile Payment Successes and Challenges of the Industry and the Consumer’s Perspective
23 April 201347th APEC Telecommunication and Information Working Grou p
Rudyanto Herlambang ST., M.Sc.Head of Mobile Payment and Digital Money Business Management Division
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Banks Telcos operators
Penetration • ~40% from addressable population
• 118% from total population
Geographic coverage
• 7,71 Branches per 1000km2, ATM 12,39 ATM per 1000km2
• 30,000 branches & 47,000 ATMs
• ~61,000 terminals per 1000km2 (~95% coverage)
• ~400,000 reseller points
Cost per transaction
• Branch: 8000 Rp/trx
• ATM: 3000 Rp/trx
• Mobile banking: 1,100 Rp/trx
Customer Segment Income
• Middle High • All Low – Middle - High
Indonesia – Facts on Banking and Telcos services
Total population • 245 Million
Bank Addressable population
• 165 Million (unbanked 86M and bankable 79M)*
Telco Addressable Population
• 190 Million
Source: AT Kearney Analysis, WorldBank 2011, KKSK BI Mar 2012, Mobile Banking, IFC 2010,* Unbanked avg annual income Rp 8 – 12 Million, Bankable Avg annual income above than Rp 12M
3
1.406
19.235
11.184
7.908 5.576 4.883
1.955 1.794 562
283 174 225 200 150
Source : Brand Health Tracking Project for Telkomsel – Q3 2012* Prediction only
In ‘000
User
Non User
Payment Shopping Buy Shopping Utilities F&B Legal Movies Modern Paying KRL Taxi*user in Gas in in Payment in Parking 21 / Book- Toll Jabo-
Jakarta*Usership Mini SPBU SPM/HPM Modern Blitz store tabek*
Market Merchant
Routine Payment Activities
Given low bank penetration and high mobile penetration, Indonesia has high m-payment potential across multiple services
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Train Bus Taxi Toll ParkingModernGrocery
ModernRetail
157 stations all over Indonesia63 KCJ stations
TransJakarta : 11 corridors, 217 stops, 700 busesTotal: 49,000 buses
46,990 vehicles all over Indonesia
31 toll ways, 1,300 toll booths
250 hypermarkets, 2,157 supermarkets, 18,000 convenience stores
156,000 stores
Smartcard: Batik Solo Trans
E-Toll, Indomaret and Gaz cards: 12toll ways, 520 toll booths in Jabotabek
E-Toll: parking managed by ISS
E-Toll and Indomaret cards: Indomaret, E-Toll and Gaz cards:125 gas stations
Flazz, in partnership with PT. KAI
Flazz: Trans Jogja, Trans Pakuan Bogor: 30 EDC in 30 buses
BCA Flazz card accepted in Express taxis
BCA Flazz in Secure parking
>23k merchant outlets
Jakcard: TransJakarta : Corridor 6, aim to cover all corridors by end of 2012
Jakcard: 156Indomaret stores in Jakarta
Railcard: 9 train stations in Java, and 1 mallIntermode card:Prambanan Ekspress
Intermode card: Batik Solo Trans, Trans Jogja
Brizzi card accepted in TransJakarta
Brizzi: 100 merchants (restaurants, gas stations, dept stores)
Sources: Jakarta Post, Jakarta Globe, Bisnis Indonesia, Detik, Kompas, Solo Pos, Company Websites
Higherpenetration
Lowerpenetration
No. of payment points (vehicles, stations, shops etc)
However current e-money offerings in the market remain highly fragmented with no integrated solutions, leading to low take-up
Prepaid offerings
5
CashlessSociety
Cashless Society - Objective
Deputy Director of BI – Puji Atmoko
"it will improve efficiency in transactions and it is relatively inexpensive to maintain. Moreover, electronic transactions are easier to trace, thus helping in the prevention and eradication of corruption and money laundering crimes“
“Printing new currency costs a lot of money and main tenance costs are also quite high ,”
“a Cashless society can be established only if there is cooperation between the Ministry of Communication and Information Technology (Ministry) and BI”
We need a solution that is effective, efficient and fast in achieving a cashless society
Going forward, there is a clear objective of moving Indonesia to a cashless society
6
Access to e-money and moving towards a cashless economy will deliver variety of macroeconomic benefits
Source: “The Shadow Economy in Europe, 2011”, A.T Kearney-JKU-Visa, “What does it cost to make payment” Humphrey, Willesson, Lindbolm, Berdendahl , 2003, “The Impact of Electronic Payments on Economic Growth”, Moody’s analytics, 2010, A.T. Kearney analysis
Total 522
Induce consumption
and production
9
Cost savings from
reduced cash86
Transparency –reduce
“Shadow Economy“
428
• “Shadow Economy” is commercial activities hidden from public authority
• Shadow economy can account for 30% of GDP
• Reduction of cash usage can contribute up to 1% of GDP
• An increment of 1% penetration in e-payment will contribute 0.01% of GDP
Macroeconomic benefits
0
20
40
60
80
100
650500 300
France
Singapore
Thailand
Netherlands
Italy
Canada
U.S.
South Korea
India
China
Japan
Australia
Indonesia
Malaysia
250
Cash displacement will create macroeconomic benefits
Indonesia has a long way to go e-payment penetration
Proportion of electronicto total tx. (%)
# of electronic tx. per capita
Bubble size: GDP per capita
To move to cashless society
Benefits of increasing e-payment penetration by 10% (IDR Tn)
7
Telkomsel’s payments strategy is a long-term play that will modernize and bring benefits to the country
Telkomsel vision
Modernize public transportation
Change people’s payment habit
Modernize the country
Reduce cost from cash handling
Convenience to users
Better monetary control
Indonesia as a cashless societyIndonesia as a cashless society
Modern societyElectronic transport payment
Electronic retail payment
Government voucher
NFC platform
Mobile payment
5 - 10 years
8
Telkomsel aims to create an end goal m-payment ecosystem
Payment and Banking roadmap
Current products Future development End-goal
The end goal is to create an ultimate payment mode for Indonesia with Telkomsel e-money
Telkomsel currently offers a range of payment and banking services to customers
Telkomsel is expanding its services to improve service and capture larger market
Proximity payment
Remote payment
Single mobile money platform with NFC capability
Proximity payment : contactless payment with NFC
Low-cost banking
Transportation payment (train, bus, toll)
Retail payment
• Branchless banking• Mobile EDC
Remote e-money payment
Mobile banking
USSD and SMS based m-banking service
• Cash-in/out• P2P transfer• Airtime purchase• Bill payment• Online payment• Retail payment
Mobile financial svcs.• Loan - Deposit• Remittance• Insurance
• Transport and retail NFC payment
• Server based e-money
Advertising and loyalty program
9
• Retail stores• Restaurants• Gas stations• Public facilities• Government vouchers
An open payment system will promote usage of e-payments
Cashless payments
“One payment media for All”“One payment media for All”
Payment service provider (mobile payment NFC / Card )
KRL Trans Jakarta Taxis Monorail MRT
Public transportation Other usage
One single platform of payment :
• Interoperable between different issuers and transport operators
• Standardized technology
• National Principal capability
Future
Source: A.T. Kearney, Telkomsel, Telkom
Multi-issuers (banks and telcos) :
• Sales and marketing, product development, customer data management, float management
Multi-purpose :
• Multiple payment applications
• Cash substitutes for micro-payments
10
An open integrated payment system will create benefits to all stakeholdersBenefits to stakeholders
Payment providers (banks, non-banks) Customer
GovernmentTransport operators
• Economies of scale from greater acceptance and penetration
• Minimize duplicate investments
• Improve business model –potential monetization for future business expansion
• Provide greater convenience in transport experience – less queue, less cash handling
• Value added benefits – loyalty programs, promotions
• Quick win in improving public transportation service
• Better efficiency in a cashless society
• Better monetary control and monitoring for regulators
• Future G2C applications of e-money –government vouchers, subsidies, etc
• Improved operations – reduce congestions with faster transactions
• Better accountability of revenue – fully automated
• Reduce cost from less cash handling –minimize manpower, logistics, cash loss
• Better monitoring and control of passenger traffic
Source: A.T. Kearney, Telkomsel, Telkom
11
Banks Telcos
Strengths
• High Experienced in financials transactions
• Trusted brand name in cash mgmt.
• Ability to facilitate foreign exchange, clearing, and settlement
• Regulatory compliance expertise• Financial Product and Service
competencies
• Nation wide network coverage (95%)
• Large customer base (~229 Mn simcard)*• Capability to handle enormous transactions
• Significant distribution/ dealer network (~400K points) with capabilities of day to day cash management for 17 years
• Low transaction cost
• Regulatory compliance expertise• Advanced technology for huge data base,
storage capacity and customer tracking• Significant customer service infrastructure
• Fully interconnect among operators
Weaknesses
• Limited coverage penetration in term of geographic and customer segmentation by income
• Low penetration overall (40% of addressable population)
• Lack of brand awareness for financial products and services
• Less experienced in financial services
Leverage strengths of each stakeholder
We need to leverage strengths of both banks and Telcos to drive consumer awareness/ confidence and uptake of services
* Big three telcos (Telkomsel, XL, Indosat)
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Banks and Telcos need to rely on each other’s licenses to implement comprehensive mobile low-cost financial services
Banks Telcos Required regulatory framework
Service scope/
licenses
• Full financial services covering deposits, loans, insurance and payments (credit, debit, e-money)
• Full network services license including ISP, Jartup, ITKP, SLI
• Payment/eMoney and KUPU/ remittance
• Regulation to integrate banks and telcos services for low-cost mobile financial servicesInfra-
structure
• Branches, ATM network and EDC with limited coverage
• Full Operational Licensed. :
Frequency ( 2G, 3G, 4G) with nation wide coverage and 95% population
Fund mgmt• Manage float for interest
and investments• Manage float by a custodian
bank
Compliance
• Transactions at branches and ATMs
• KYC required at branches
• New regulation on Cash-out through agent now without KUPU license
• KYC required at Telcospremises
• Cash-in/Cash-out for eMoney from/to Bank/ATM network
• Optimize prudent vs. efficiency required on KYC regulation and AML/CFT
13
Benchmark : Collaborative approach to building mobile money solution has seen greatest success
Case 1: Different objective, but successful only after collaborating
Case 2: Same objective, and successful via collaboration
Case 3: same objective, but failed due to no collaboration
Name of service
Oi Paggo, Brazil(Telco centric model)
G-Cash, Philippines (Collaborative/Hybrid model)
Mobile money, Liberia (Bank centric model)
Background • Large unbanked population, highly skewed income levels (42% income held by 10% population)
• Large prepaid customer base
• Low banking penetration (~50%), ATM penetration at 0.1 ATMs/1000 people
• Large prepaid customer base
• One of the lowest GDP/capita in the world (USD 370)
• Nascent banking sector• Large prepaid customer base
Objective • Target unbanked population without access to credit/debit cards
• Objective to promote m-payments and move to Cashless society
• Providing basic banking facility especially to overseas workers requiring low cost remittance solution
• Basic banking especially access to secure remittance services for unbanked population
Business model
• Remote payments using SMS based mobile interface – initial model non-bank based
• Modified model to have a profit sharing model with partner bank operating as co-issuer and a 50-50 JV with acquiring partner
• Hybrid business model, collaboration with rural banks as cash-in, cash-out agents
• Low cost of remittance ~1% of transactions compared to 2.5%-10% via traditional
• Mobile money services provided by banks and its agents and MNO operating as transmission channel only
• However, MTN has offered its mobile money platform to Lonestar bank for services
Key outputs • Building a closed loop network by MNO alone did not yield traction
• Collaboration with banks for co-issuing and acquisition of large merchant acquirer led to success
• Collaborative model proved highly successful and saw high take up
• Lack of innovation expected in this model as operators are offered a dormant role in the model
����
Source : AT Kearney, Telkomselis
14
Benchmark : Collaborative approach has been seen ideal to build NFC payments over the years, worldwide
Collaboration over the years
Case 1: 1 MNO, 1 bank and 1 transit player, 1 handset
Case 2: 1 MNO, 1 bank, 1 payment player, multiple
handsets
Case 3: 3 MNOs, 1 bank, 1 transit operator, multiple
handsets
Name of service
Maxis (Malaysia) (2009)
Telenor (Norway)(2011-12)
Singtel, Starhub and M1 (Singapore)
(2013)
Objective • To create a technology leader positioning by launching world’s first NFC payment solution
• To deliver superior customer experience by enabling major transit and retail payment solutions over NFC phones
• To bring greater value to high end postpaid subscribers using NFC handsets
Business model
• Launched Maxis Fast tap over Nokia 6216 in 2009 and for use at Visa Paywave and touch n go terminals
• Fast tap can be used to pay at retail stores, transit and toll points
• Partnered with DNB bank (Norway’s largest bank) for launch of NFC payments in Norway for Android users
• Also partnered with Mastercardto allow use over Paypassterminals
• Collaboration between 3 largest operators – Singtel, Starhuband M1 along with DBS bank and Ez link transit payment service for Android users
• Common TSM established by all entities and each MNO has its own wallet
Key outputs • Initial launch did not see a very high take up on account of only one handset being compatible
• Maxis now launching the service over iPhone with external NFC jacket
• Early pilot results have has witnessed high interest levels amongst customers and is expected to see high acceptance on commercial launch
• Initial launch has seen healthy take up, with more number of NFC handsets arriving in the market, penetration expected to be high.
Collaboration has increased between entities over t he years
Source : AT Kearney, Telkomselis
15
Conclusion
■ Large potential for mobile payment services in Indonesia
■ However low penetration of e-money services due to fragmented offerings and low customer awareness to drive behavior change
■ Telkomsel’s vision is to drive mobile payments usage across multiple usage areas from transit to retail to remote payments to drive Indonesia’s growth to a cashless society
■ By having the end goal m-Payment ecosystem, it is generating direct revenue plus defensive & synergy value
– Revenue stream from mobile payment and financial service
– Revenue from new marketing platform on mobile wallet
– Create customer stickiness and reduce churn
– Reduce distribution cost of airtime (direct sales)
■ An open payment system will promote usage of e-payments
■ A collaborative approach between Banks and Telcos is critical for success
■ Benchmarks show that collaboration model has highest probability of success – needs to be applied in Indonesia as well, but customized to local situation
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