Kevin Chetty, focusing on building a sustainable Mass Retail Bank business model. Creating an ecosystem of interdependencies, helps entrench a sustainable model. The focus is on delivering a low cost business model.

1. Kevin Chetty
Building A Sustainable
Business Model for the
Mass Retail Market

3. “The poor are poor not because they cannot
retain the returns of their labour. They have no
control over their capital that gives them the
power to rise out of poverty”
Dr Muhammed Yunus
Gameen Bank

4. An Overview

5. Retail Banking a Reality Check
1. Traditional
retail bank is at
an inflection
point. Mobile
has made
channels
ubiquitous
3. Can retail
banks sustain
themselves
using existing
channels &
products to
service the
needs of the
Mass Retail
Client?
2. Other
financial
institutions and
non-financial
institutions are
invading this
space through
disruptive
innovation

6. An Evolution – Find your space

7. • People have right to financial and economic freedom
• Old vs. New
• Informal vs. formal
• Integrated, innovative, end to end capability KEY
• Do we really understand the needs and wants of the MRC?
• Singular vs. Blended approach
• Partnerships with VISION and VALUES
• Ecosystem, cycle of cash
• Consumer education
• Usability vs. Uptake
• Thin margins vs. High margins
• Differentiate across segments
Food for thought

8. Long Distances High Bank Costs
Poor Education/Literacy Poor Product Design
Some of the Factors that limit access for Mass Poor

9. Positioning as a
Mass Retail Bank
Business Model

10. Subject of rapid development, due to:
• Global attention in improving access for the poor
• Improvement in the insights and financial behaviour of
the mass-poor
• Enlightened policy makers, legislation and regulators
willing to permit the use of innovative and cost-reducing
delivery channels
• Wider take-up of technology (mobile phones), thereby
reducing costs, increasing accessibility/reach, storage
and analysis
Under Continuous Development

11. • Price sensitivity
• Simple integrated, standardised IT system and processes across the
value chain
• Mass client will only absorb marginal cost base, they do not use the full
suite of services and products
• Cost recovery from:
– Cash-in/cash-out
– Inter-account transfers
– Payments across channels (mobile, POS, ATM, etc)
• Differentiating the price per transaction type will encourage greater use
• Developing a supply-demand „Ecosystem”
• Segmentation model:
– Upper Mass
– Middle Mass
– Lower Mass
General Approach of MRB Model

12. Market Characteristic
(SUPPLY); and
Customer Needs
(DEMAND) as main
drivers
Coordinated and
Integrated Strategy of
Financial Services
Providers and
Business Partners
Business Plans and Change
Programs, Sustainability
Broad Package of
Service Delivery, in
Relation to Customer
Behaviour and Culture
INTEGRATED
APPROACH
DEMAND
SUPPLY
Outside-IN
Inside-OUT
An Integrated Approach – „Ecosystem‟

13. 1. UNDERSTAND and FULFIL LOCAL DEMAND
a) Distance is money Effective and affordable distribution, that is convenient and accessible
b) Pricing Affordability and usage
c) Product development Innovative, market driven and accessible to all
d) Promotion Increase financial literacy and brand equity/trust
e) Culture Customer experience and service irrespective of language, skill,
education, age, etc
2. IMPROVE MASS RETAIL SUPPLY CHAIN CONTINUITY
a) Low cost Integrated approach, efficiency and economy of scale
b) Transfer pricing, cost charged to client Business sustainability and cost recovery for supply chain
3. MATCHDEMAND AND SUPPLY IN CHANGE AND ONGOING BUSINESS
a) Reduce fragmentation/core driven Integrated service, interoperability in channels
b) Improve „change‟ effectiveness Integrated projects and proven sustainable solutions
An Integrated Approach – „Ecosystem‟

14. LOWER MASS
Basic Payments/Limited Savings/Credit
MIDDLE MASS
Active payments/Beginning to Save/Credit
UPPER MASS
Higher Income/Save
20% of Banks Manage for Profits
40% Recover Variable Costs
40% Breakeven on
Variable Costs
A Typical MRB Segmentation Model

15. Making a product or service relevant to the MRC is dependant on USABILITY
Usability in Mass Market

16. Making Banks
relevant to the
Mass Retail Client

17. ELECTRONIC IN
CASH OVER COUNTER
and VIA ATM
ELECTRONICOUT OTHER
Transaction
Type
Internet
Remit
Domestic
P2P
Domestic
G/B2P
Cash
In
Cash
Out
Paying
Out
P/B/G2P
Collecting
P2P/B/G
Payment
P2B/G
Transfer
P2P/ac2
ac
Credit Insure
BurkinaFas
o
SA
Vietnam Limited Limited Limited Coming
Tanzania Externally Funded
Kenya Coming Coming Coming Coming
Lesotho Coming Coming Coming Coming Coming Coming
Uganda Coming Coming
El Salvador Coming Coming
WSBI, May 2012
Current Product and Services rendered

18. ELECTRONIC IN
CASH OVER COUNTER
and VIA ATM
ELECTRONIC
OUT
Transaction
Type
Internet
Remit
Domestic
P2P
Domestic
G/B2P
Cas
h In
Cash
Out
Paying
Out
P/B/G2
P
Collecting
P2P/B/G
Payment
P2B/G
Transfer
P2P/ac2
ac
Surplus Cash
Send/Receive
Accumulate
lump Sum
Lump Sum to
Cash
Interface with
Formal
Access Credit
No or Low initial fee for
account opening
Low level or No min
balance
Withdrawal flexibility
Convert small amounts
into Lump sum
amounts
Flexible fees, based on
amounts
Fees per transaction
type
KYC for the MRC
Product/Services required for MRC
WSBI, May 2012

19. Making the MRB
Model affordable
to the MRC

20. The primary drive is understanding:
– What is potential cash? (wallet size)
– What is cash used for? (spend for basic goods/services, disposal)
– Where does the cash flow? (movements of cash in the region/country)
• The 2nd drive of the MRB business model:
– how to get the cash into an account/s for basic transactions, savings, etc
• The 3rd drive is sustainability through the creation of a potential income stream for the bank
• A study undertaken by CGAP in 2010 into the fees paid pm when using mobile and agents for 2 deposit/ 2
withdrawal package:
– $3.9 per month
– $2.9 pm for MPESA
– An MPESA transaction of $10 will cost $0.75 end to end
– Fee structure was an average of 10% of $40 monthly cash flow
– Suggested fee rate of 5% of total monthly cash flow
• A study undertaken by BCG into the Indian financial services using mobile and POS:
– Fee structure was an average of 5-6% of $20 of median cash flow based on potential cash
Scoping the Potential Cash Flow

21. Making the MRB
Model work for
the End User

22. High
High
Low
LowBank Cost (US$)
Quality
Customer
Experience and
Service Offered
Branch
ATM
CCC
Mobile/
Internet
$1-
$1.50
$0.30-
$0.40
$0.17-
$0.22
<$1
Technology can Lower Bank costs
Using Technology to your Advantage

23. • Strategic partnerships are KEY
• Increase deep distribution capability
• Leverage of strengths
• Shared costs, capabilities, resources
• Increase your access to new customers
• Brand Equity becomes Identifiable
• Symbiotic relationship, economic
interdependence
• Deliver a true LOW-COST model for the MRC
• Dependant on regulatory frameworks
• Partnerships must preserve their identity
• MAP out the risks associated with partnerships
Mass Retail Bank
Creating a Standardised Partnership Framework
PARTNERS must share similar VISION and VALUES
Partnerships a Key to Retail Delivery
RETMNO MFI OB

24. Case Studies
X 2

25. • Launched in Kenya, 2007 by Safaricom
• Currently Used by 17 million Kenyans
• 25% of the countries GNP flows through
this channel
• 24/7
• Initially designed for micro-finance loan
repayments
• Kenyan‟s embrace M-Pesa as safer
option to store money over banks
• Branchless Banking
• Dec 2011, KS116 billion
Mobile Money – Success Story

26. • Strong research, understanding needs and wants
• Favourable regulatory environment
• Safaricom dominated MNO market
• Strong experiential branding
• Word of mouth
• Usability
• Accessibility, convenience, reach
• Low-cost base
• Created an ecosystem of cash
Critical Success Factors

27. Alternative Banking – A Blended Approach

28. Conclusion

29. Building Blocks for MRB Model
Packaging & Pricing Low Cost Solution
Comm & Branding
End to End Value
Chain

30. MASS RETAIL
BANK and
PRODUCT
PROPOSITION
MASS CLIENT
ecosystem
Mass Retail Bank Model

31. MASS RETAIL
BANK and
PRODUCT
PROPOSITION
SUPPLY
CHAIN
Partner Network
Costs
Capabilities
DISTRIBUTION
CHANNELS
MASS CLIENT
Communication/
Brand
Revenues
SUCCESS
OR
FAILURE
ecosystem
Mass Retail Bank Model

32. VIDEO

33. Thank you
Q&A