Insights into mobile money agent networks

Mobile Money for the Unbanked Working Group

16 February 2010

The MMU programme is funded by a grant from the Bill & Melinda Gates Foundation

Restricted - Confidential Information

© GSMA 2009
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 When operators offer mobile money, expertise in distribution is
as important an asset as brand and customer trust

There are millions of airtime resellers in emerging

markets, some in extremely remote, rural areas

Operators have perfected processes for securely and
reliably distributing airtime
– Bharti Airtel sells US$6 billion of airtime every year,
with essentially no incidence of fraud

Airtime and mobile
… but the way they
money are different… are distributed is
– Airtime is a very similar
product
– Mobile money
is a service

Operators can leverage the expertise of their commercial

teams responsible for airtime when designing their a
mobile money distribution strategy
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 Renegotiating agent commissions is hard, but
adding/changing/removing bonuses is easy

In the same way, revising tariff cards is hard, but running promotions is popular
“If I could have done just Time-limited Time-limited
one thing differently, I would customer-facing trade-facing
have gone to market with promotions promotions
higher tariffs” • Refer-a-friend bonus • Double cash-out or
• First cash-out is free cash-in commissions
• New wallets get • Commissions for the
Manager, seeded with starting registering agent
Successful value when customers top-
Mobile • Prize drawings that up using mobile
Money pay out into m- money
Service wallets

Operators can build flexibility into the

mobile money business model by making
use of customer- and agent-facing
promotions

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 Agents aren’t incentivized to support customer-initiated transactions—in
fact, on the receive side, they’re incentivized to discourage their use

Imagine a mobile money user is sent US$50.

What might they do next?
Agents will
Scenario Behaviour Agent commission (assuming not promote
a 1% cash-out commission) customer-
1 Recipient cashes out ($50) $0.50 initiated
transactions
2 Recipient buys airtime ($10) $0.00 and educate
Recipient cashes out ($40) $0.40 consumers
$0.40 Total about their
3 Recipient pays a bill ($25) $0.00 use, so ABL
Recipient buys airtime ($10) $0.00 marketing or
Recipient cashes out the balance ($15) $0.15 other
$0.15 Total
mechanisms
must be
4 Recipient pays a bill ($25) $0.00 used
Recipient buys airtime ($10) $0.00
instead
Recipient cashes out ($10) $0.10
Recipient leaves value behind ($5) $0.00
$0.10 Total

Confidential 4
 A multitier distribution strategy can help operators add agents
quickly and manage agents’ float more effectively
The evolution of Safaricom’s M-PESA distribution network
1 2

Agent Agent Master Master

Agent Agent

Aggregators help grow

new agent networks and
manage float in mature
ones—but they can only
Aggregator Aggregator
be leveraged with the
right management tools

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 Airtime margins are better than mobile money commissions, but
for agents, perhaps more relevant is how long it takes to get paid
Cash conversion cycle for an airtime reseller (illustrative)
Agent
buys
airtime
from
dealer
Agent exhausts his supply of airtime The longer
Week agents have to
1 2 3 4 5 6 7
wait for their
Profit commissions,
the longer it
takes to see the
Cash conversion cycle for a mobile money agent when value of mobile
money—
commissions are paid monthly in arrears (illustrative)
especially when
Agent Superdealer the comparison
transfers transfers Operator pays Aggregator is with airtime
money to e-value to aggregator pays agent
superdealer agent commission commission
Agent exhausts his supply of e-value
Week
1 2 3 4 5 6 7

Profit

Agents are more likely to stick with mobile money when

they are paid their commissions sooner

Confidential 6
 Agent networks can be too big as well as too small

Customers need Customers Per Agent

agents, with float, to 1200

1000
adopt and use mobile 800

money 600
Safaricom
400

Agents need customers, 200
Recent launches
who transact, to adopt 0

Dec-07

Dec-08
Aug-07

Oct-07

Aug-08

Oct-08

Aug-09

Oct-09
Apr-07

Apr-08

Apr-09
Feb-08

Feb-09
Jun-07

Jun-08

Jun-09
and offer mobile money

By shifting their focus at launch from adding agents

to activating customers, operators can help solve
the ‘chicken and egg’ problem

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 Not all agents are created the same

Variation Different classes Different classes Different classes

of agents perform of agents charge of agents have
different customers different
functions different tariffs transaction limits

Opportunity Operators can pay Agents with

Speed: direct sales
different classes of differing liquidity
agents can be
agents different levels can
mobilized quickly,
commissions while specialize in
and they are
preserving their appropriate
mobile
margins transactions

Risk
Unsuitable
Customer Customer
customers, and a
confusion or confusion or
longer path to
frustration frustration
activation

Operators have to balance the advantages of

differentiating between classes of agents with the risks

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 Credit is helping agents in many markets
raise the capital they need for float

There is anecdotal evidence

that agents are using
MFIs microcredit for float, but no
tailored products exist

Operators Aggregators

The GSMA and In Afghanistan,

Vodacom aggregators put up
Tanzania is
testing a credit Agents initial float for a larger
percentage of
facility commissions

All credit risk accrues to the lender—

customers and the contents of their
wallets are never at risk

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