Why cash is still king? Examining the effectiveness of alternate delivery channels - Arnab Ghosh • This equates to 60% of retail transaction value • Though cash takes time to get at and is riskier to carry • The burden of cash usage on society is substantial, as much as 1.5% of GDP Source: MasterCard Advisors analysis, BIS CPSS, McKinsey Global Payments Map, World Bank Statistics Is Cash Still King? The Different Stages of Cashless • Growth has come as a result of government enhancements to the payments ecosystem • Consumers that gained interest in cashless payments with M-Pesa are now also beginning to take up more traditional payment tools • he last two years have seen a proliferation in locally issued debit cards • Government epayment initiatives have also begun to direct benefits programs onto card based platforms Inception Stage Case Study - Kenya Source: MasterCard Advisors analysis, BIS CPSS, McKinsey Global Payments Map, World Bank Statistics • The macro-economic prerequisites for going cashless are absent • Indonesia may benefit from non-traditional routes to expanded cashless payments such as those seen in Kenya • Payment providers in market are working with telecommunications providers to develop electronic wallets • Initiatives in Indonesia include prepaid programs to support the Hajj • Acceptance expansion initiatives into heavy cash categories like petrol, groceries and taxis Inception Stage Case Study - Indonesia Source: MasterCard Advisors analysis, BIS CPSS, McKinsey Global Payments Map, World Bank Statistics Share of Non-Cash Payments across major countries Source: MasterCard Advisors analysis, BIS CPSS, McKinsey Global Payments Map, World Bank Statistics So, How Ready Are We To Go Cashless? Source: MasterCard Advisors analysis, BIS CPSS, McKinsey Global Payments Map, World Bank Statistics • Two of the best examples would be Niger and Haiti • Recent pilots in these two countries, among the poorest in the world, demonstrate how such countries can benefit from electronic payments • Less than half of adults are literate, 20% banked in Haiti while only 2% in Niger, vanishingly small proportion of debit card holders • Haiti – Migrating workfare payments from cash to electronic transfers via mobile phone resulted in 75% perceiving electronic as safer and better for financial management • Niger – Pilot conducted on 10,000 households in 96 communities revealed they follow better financial practices compared to cash and were able to save a day’s gain for a family of five • Such pilots prove the benefit of electronic for even the poorest and remotest countries Think the demographics of your country is no match for cashless.. Think Again! • The first shift happens when bulk payers in an economy, such as government, large employers or development aid distributors decide to pay electronically • The second shift takes place as opportunities grow for recipients to spend or transfer money electronically • Finally, the third shift comes when even the majority of small payments, which are usually between people and merchants (i.e., P2B) for everyday items like groceries, also become electronic. How does the shift happen? Benefits of Shifting to Cashless Barriers to the Shift • Transparency • Transparency • Security • Security – Target USA, South Korea • Privacy • Privacy & Accountability - SEA • Timeliness & Speed • Timeliness & Speed – McDonalds • Financial Management • Financial Management - Temptation • Cost Savings • Cost of Cashless – Mark-up, Fees • Financial Inclusion • Economic Growth & Development • New Market Access The Benefits of Shifting are often the strongest Barriers as well Compelling use case Widely Accepted Greater user experience Trust Key Success Factors – “Must be better than Cash” • Founded in 2009, WING is a mobile payment service provider that allows customers (individuals and businesses) to transfer, deposit and withdraw money between each other and with anyone in Cambodia, via any mobile phone or WING POS terminal, at a low cost • WING has 420, 000 registered customers with 100,000 active customers • WING operates the largest POS terminal network in Cambodia with 7,500+ POS terminals nationwide (plans to expand to 17,000 by end of 2014) • POS terminals display and prints receipts in Khmer language; all development is performed by in-house developers located in Cambodia • New services include online and retail payments Cambodia – FTB’s partnership with Wing Mobile Money Service Thailand – True Money Vietnam – The most popular medium of low-ticket online payment Barriers and Challenges for Government • Not just a Legal Mandate • Shift across agencies • Communicating objectives • Mixed Messages to business • Change • Lack of skills Trust is an outcome of many variables, most importantly, individuals’ experiences of a system over time. Trust is easy to lose; if it is not sustained by an enabling legal environment throughout the stages, it can be difficult. and slow to rebuild. This highlights the need to consider future shifts when undertaking the first. Barriers and Challenges for Private Sector • Cost of transition • Lack of inexpensive standardization • Vague legal certainty • Co-ordination with stakeholders across value chain Barriers and Challenges for the Individual • Trust • … and a whole lot of more Gradual Drift or Strategic Shift? Simplify the Access to Financial Services Define strategies in line with such factors Process Re-engineering if required Educate customers to overcome cultural barriers Acceptance is the key to replacing cash Leverage new technology platforms to create alternate delivery channels Educating merchants on the Cost of Cash And… What can Financial Institution do to move away from cash? Internet Banking • Integrated services • Straight Through Processing International Debit Cards • Seamless bundling with CASA • “The new face of Cash” Mobile Banking • Leveraging the latest technology to create a product that can do everything • Location based services for offers and discounts Credit Cards • Best Rewards structure motivating higher spends Merchant Relationship & Presence • Rapidly grow network to offer customers discount across 1500 points of sale Digital Marketing • Largest number of followers on LinkedIn company profile – used to promote prod.  Best Internet Banking Service in Vietnam  Best Mobile Banking Experience in Vietnam  Excellence in Retail Product & Service  Runner Up in Best Product Launch in SEA – MasterCard for Debit  Top 3 Debit Issuer Volume in Vietnam – MasterCard  Asian Banking & Finance – Credit Card Initiative of the Year What did we do right at Maritime Bank, Vietnam? THANK YOU Contact Info: Arnab Ghosh Business Head – Cards & ATM Maritime Bank, Vietnam [email protected] +84 168 884 3838 http://www.linkedin.com/in/arnabg1