LUẬN văn THẠC sĩ mobile money business development at vietnam mobile service

VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS

TRAN THI THANH NGA

MOBILE MONEY BUSINESS DEVELOPMENT
AT VIETNAM MOBILE SERVICE
(VMS- MobiFone)

MASTER OF BUSINESS ADMINISTRATION THESIS

Hanoi – 2011

LUAN VAN CHAT LUONG download : add


VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS

TRAN THI THANH NGA

MOBILE MONEY BUSINESS DEVELOPMENT
AT VIETNAM MOBILE SERVICE
(VMS- MobiFone)

Major: Business Administration
Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr. Tran Doan Kim

MBA. Ha Nguyen

January, 2011

LUAN VAN CHAT LUONG download : add


TABLE OF CONTENTS
ACKNOWLEDGEMENTS .................................................................................... i 
List of Figures ........................................................................................................ ix 
List of Tables .......................................................................................................... xi 
List of Abbreviations ............................................................................................ xii 
Introduction............................................................................................................. 1 
1.  Research Problems ...................................................................................... 1 
2.  Objective and aim of thesis ......................................................................... 2 
3.  Research questions ...................................................................................... 3 
4.  Scope of work ............................................................................................... 3 
5.  Data resource ............................................................................................... 4 
6.  Methods ........................................................................................................ 4 
7.  Significance of thesis .................................................................................... 4 
8.  Thesis limitation ........................................................................................... 4 
9.  Expected results ........................................................................................... 5 
10. 

Structure of thesis .................................................................................... 5 

Chapter 1: Mobile money theoretical overview ................................................... 6 
1.1. 

Mobile Money (MM)................................................................................ 6 

1.1.1. 

The convergence of Mobile service and financial service ................. 6 

1.1.2. 

What is Mobile money service? .......................................................... 7 

1.1.3. 

Opportunities for Mobile money services .......................................... 9 

1.2. 

Benefit of Mobile money services ......................................................... 13 

1.2.1. 

To Mobile operators ......................................................................... 13 

1.2.1.1. Direct benefits................................................................................. 13 
1.2.1.2. Indirect benefits .............................................................................. 13 
1.2.2.  To Customers .................................................................................... 15 
1.2.3. 

To Banks ........................................................................................... 17 

1.2.4. 

To Others .......................................................................................... 18 

1.3. 

Models for Mobile money business ...................................................... 19 

1.3.1. 

Operator - Centric ............................................................................ 19 

1.3.2. 

Bank – Centric .................................................................................. 21 

1.3.3. 

Payment Company centric ................................................................ 23 

1.4. 

Key success factors for mobile money business .................................. 24 
vi

LUAN VAN CHAT LUONG download : add


1.4.1. 

Regulation......................................................................................... 24 

1.4.2. 

Product ............................................................................................. 25 

1.4.3. 

Promotion ......................................................................................... 27 

1.4.4. 

Distribution channel management ................................................... 28 

Chapter 2: International MNOs .......................................................................... 30 
mobile money business deployment .................................................................... 30 
2.1. 

Entry mobile money strategy for MNOs ............................................. 30 

2.1.1. 

Market strategy ................................................................................. 30 

2.1.1.1. Market analysis (preliminary assessment)...................................... 30 
2.1.1.2. Marketing strategy .......................................................................... 31 
2.1.2.  Partnership model ............................................................................ 43 
2.1.3. 

Technical and IS analysis ................................................................. 46 

2.1.4. 

Distribution agents ........................................................................... 49 

2.1.4.1. The important of agent networks ................................................... 50 
2.1.4.2. How big should an agent network be? ........................................... 50 
2.1.4.3. Characteristics of a good agent network ........................................ 53 
2.1.4.4. Mobile money agent network model ............................................. 56 
2.1.4.5. Main obligations are contractually imposed on agents ................. 58 
2.1.4.6. Incentivizing mobile money agents ............................................... 58 
2.2.  Mobile money case study – M PESA (Kenya) ..................................... 61 
2.2.1. 

Market situation................................................................................ 61 

2.2.2. 

M-PESA Mobile money business ...................................................... 63 

2.2.3. 

M-PESA key successful factors ........................................................ 68 

Chapter 3: The case of Vietnam mobile service company ................................ 70 
3.1. 

Introduction of Vietnam Mobile Service Company ........................... 70 

3.1.1. 

Overview about Mobile Market 2010 ............................................... 70 

3.1.2. 

About Vietnam Mobile Service Company (VMS) ............................. 72 

3.1.2.1. Foundation and Development of VMS........................................... 72 
3.1.2.2. Company Structure ......................................................................... 73 
3.1.2.3. Business Activities ......................................................................... 74 
3.2.  Mobile money – Opportunities for VMS? ........................................... 75 
3.2.1. 

Market analysis ................................................................................ 75 

3.2.1.1. Opportunities of mobile money services to bank the unbanked .... 75 
3.2.1.2. How should Mobile money in Vietnam be? ................................... 77 
3.2.1.3. How to pricing the unbanked? ........................................................ 78 
vii

LUAN VAN CHAT LUONG download : add


3.2.2. 

Regulation condition ........................................................................ 82 

3.2.3. 

Technical and IS ............................................................................... 84 

3.2.3.1. VMS current technical and Information system............................. 84 

3.2.3.2. Technical applied for mobile money .............................................. 85 
3.2.4.  Distribution channel ......................................................................... 86 
3.2.4.1. VMS Distribution channel .............................................................. 86 
3.2.4.2. Develop mobile money distribution channel.................................. 89 
3.2.4.3. Incentive policies ............................................................................ 92 
3.3.  Research Findings .................................................................................. 94 
3.3.1.1. Customer’s need ............................................................................. 95 
3.3.1.2. Products’ specifications .................................................................. 98 
3.3.1.3. Pricing ........................................................................................... 100 
3.3.1.4. Distribution channel interest and commission ............................. 101 
3.4.  Discussion.............................................................................................. 103 
3.4.1.1. Customer’s demand ...................................................................... 103 
3.4.1.2. Products offering and pricing ....................................................... 104 
3.4.1.3. Retailers’ interest .......................................................................... 105 
3.4.1.4. Conclusion .................................................................................... 105 
Chapter 4: Mobile money services business development proposal for VMS107 
4.1. 

Mobile money business development proposal for VMS ................. 107 

4.1.1. 

Partnership model .......................................................................... 107 

4.1.2. 

Market strategy ............................................................................... 108 

4.1.2.1. Products ........................................................................................ 109 
4.1.2.2. Marketing...................................................................................... 111 

4.1.2.3. Service pricing and agent commission ......................................... 112 
4.1.3.  Distribution..................................................................................... 117 
4.1.4. 

Business organizational structure .................................................. 121 

4.2. 

Risks & challenges for VMS when deploy mobile money services . 123 

4.3. 

Recommendations for Theory ............................................................ 126 

4.4. 

Recommendations for Further Research .......................................... 126

REFERENCE ...................................................................................................... 127 
APPENDIX 1 ....................................................................................................... 127 
APPENDIX 2 ....................................................................................................... 135 

viii

LUAN VAN CHAT LUONG download : add


LIST OF FIGURES
Figure 1.1.  Mobile Money services ...............................................................................9 
Figure 1.2.  Top recipients of remittances ....................................................................11 

Figure 1.3.  Mobile money revenues forecast ...............................................................12 
Figure 1.4.  Value drivers of mobile money to MNOs .................................................15 
Figure 1.5.  Example MPESA Cost of non-bank domestic transactions ......................17 
Figure 1.6.  Compelling reasons for key stakeholders to invest in Mobile money ......18 
Figure 1.7.  Operator Centric Model .............................................................................19 
Figure 1.8.  Strength and challenges to MNOs in Mobile money ................................21 
Figure 1.9.  Bank Centric Model ..................................................................................22 
Figure 1.10.  Strength and challenges to banks in Mobile money ..................................23 
Figure 1.11.  Payment network Centric Model ...............................................................23 
Figure 2.1.  Relative value of MNO in mobile money services ...................................32 
Figure 2.2.  Potential Service Roadmap for Mobile Money and Payment Services ....34 
Figure 2.3.  The use of mobile Money in Philippines...................................................36 
Figure 2.4.  The use of mobile Money in Kenya ..........................................................36 
Figure 2.5.  Main mobile money services& fee structure of some current providers ..37 
Figure 2.6.  Branchless banking provider cheaper than the cheapest informal option
for money transfer............................................................................................................38 
Figure 2.7.  Money transfer pricing models..................................................................39 
Figure 2.8.  Money transfer entry level pricing in selected markets ............................40 
Figure 2.9.  M Pesa domestic money transfer pricing vs. transferred amount (USD)..40 
Figure 2.10.  The Operator’s Role in the Value Chain ...................................................43 
Figure 2.11.  Value for MNOs and Banks ......................................................................44 
Figure 2.12.  Agent model for MNOs .............................................................................57 
Figure 2.13.  Kenya economic situation .........................................................................61 
Figure 2.14.  Kenya Financial Access ............................................................................61 
Figure 2.15.  Sanfaricom market share ...........................................................................62 
Figure 2.16.  How people in Kenya sent money before M-PESA ..................................63 
Figure 2.17.  How people in Kenya sent money after the introduction of M-PESA ......63 
Figure 2.18.  Posted customer tariffs for M-PESA .........................................................65 
Figure 2.19.  M-PESA Agents Model .............................................................................68 
Figure 3.1.  Mobile market development ......................................................................70 

Figure 3.2.  Mobile market APRU ................................................................................71 
Figure 3.3.  Mobile market share (2009) ......................................................................71 
Figure 3.4.  VMS Organization Structure .....................................................................74 
Figure 3.5.  Total subscribers ........................................................................................74 
ix

LUAN VAN CHAT LUONG download : add


Figure 3.6.  Revenue .....................................................................................................74 
Figure 3.7.  Price of banking services vs branchless banking ......................................79 
Figure 3.8.  Price of mobile money transfer via informal options vs branchless banking
...................................................................................................................80 
Figure 3.9.  Number of Providers that charge specified method of pricing .................80 
Figure 3.10.  Transaction pricing of main mobile money services.................................80 
Figure 3.11.  Vietnam money transfer pricing ................................................................81 
Figure 3.12.  Vietnam money transfer pricing for unbanked..........................................82 
Figure 3.13.  Technical system connection.....................................................................84 
Figure 3.14.  SIM Menu image .......................................................................................86 
Figure 3.15.  VMS distribution channel..........................................................................86 
Figure 3.16.  MobiFone shops images ............................................................................87 
Figure 3.17.  Authorized agents images..........................................................................87 
Figure 3.18.  Point of sales images .................................................................................88 
Figure 3.19.  Distribution model .....................................................................................92 
Figure 3.20.  Research samples by gender and habits ....................................................94 
Figure 3.21.  Research samples by regions and income .................................................95 
Figure 3.22.  Consumer habit of send/receive money ....................................................96 
Figure 3.23.  Customers behavior and attitude to bank account services .......................97 
Figure 3.24.  Consumers demand on bank account services ..........................................97 
Figure 3.25.  Consumers interests in mobile money services .........................................98 

Figure 3.26.  Consumers interests in M wallet services by MobiFone ...........................98 
Figure 3.27.  Mobile money services interested rate. .....................................................99 
Figure 3.28.  Factors’ importance when deciding to use mobile money ........................99 
Figure 3.29.  Current money transfer services transaction/ fee ....................................100 
Figure 3.30.  Expected mobile money transfer services transaction/ fee .....................101 
Figure 3.31.  Expected mobile money fee break down ................................................101 
Figure 3.32.  Current revenue of retailers and their attitude toward join mobile money
services
.................................................................................................................102 
Figure 3.33.  Expected gross revenue of retailers when provide mobile money services ..
.................................................................................................................103 
Figure 4.1.  Some main VMS mobile money product describe..................................110 
Figure 4.2.  Mobi-cash organizational structure models ............................................121 

x

LUAN VAN CHAT LUONG download : add


LIST OF TABLES
Table 3.1. VMS & MPESA calculation on retailers’ gross revenue .............................105
Table 4.1. VMS mobile money product development progress ....................................110
Table 4.2. VMS mobile money price and commission .................................................113
Table 4.3. VMS price and commission analysis for round trip transaction ..................115
Table 4.4. Mobi-cash retailer revenue analysis .............................................................117

xi

LUAN VAN CHAT LUONG download : add

LIST OF ABBREVIATIONS
2G: Second Generation
3G: Third Generation
AML: Anti-money laundering
ARPU: Average Revenue per User
CFT: combating the financing of terrorism
GPRS: General Packet Radio Service
GSM: Global System for Mobile communications
GSMA: The GSM Association
KYC: Know your customer
ICT: Information and Communication Technology
IP: Internet Protocol
MNO: Mobile Network Operator
MVNO: Mobile Virtual Network Operator
NFC: Near Field Communication
PC: Personal Computer
SBV: State bank of Vietnam
SMS: Short Message Service
VoIP: Voice over Internet Protocol

xii

LUAN VAN CHAT LUONG download : add


INTRODUCTION

1.

Research Problems
Mobile phones have transformed telephony far exceed its needs

during the past fifteen years. The mobile phone device have for a long
time been equipped with many functionalities which have inspired the
development of value added mobile services, the use of mobile phones as
access devices, and mobile commerce in general. These developments
lead to a great numbers of lucrative opportunities to mobile phone device
merchants and service providers. In fact, there are more mobile phones
than any other device that can be used to market, sell and provide
products and services now.
The growth and penetration of mobile services across the world has
been a phenomenon. In 2006 the ITU estimated 79% of the world’s
population had the potential to access mobile services and by the end of
2009 figures indicate over 4.6 billion cellular subscriptions are in use
giving the mobile phone penetration rate of the world to 68,2%.
Penetration in developed markets is about 100% of the population and is
rapidly increasing in the developing markets. Penetration in the
developing economies can reach the bottom of the economic pyramid. In
Vietnam now, according to General Statistics, by the end of Aug 2010, all
operators own 142,2 billions subscribers which equal to about 165% the
population. Vietnam is a really rapidly increasing mobile market.
Because of the commonplace of such phones now, a new opportunity
appears: mobile money, which allows cash to travel as rapidly as a text
message. All over the developing world, people always purchase vouchers
to top up their calling credit at corner shops. The small retailers act rather
1

LUAN VAN CHAT LUONG download : add

like bank branches after the starting of mobile money services allows.
They can take your cash, and (by sending a special kind of text message)
credit it to your mobile-money account. Then money (again, via text
message) can be transferred to not only other registered users, who can
withdraw it by visiting their own local corner shops but also to people
who are not registered users; they receive a text message with a code that
can be redeemed for cash.
The Mobile money issues then become an interesting topic recently.
Juniper Research predicts that consumer demand for mobile money
transfer services will see users exceed 500 million globally by 2014. The
world has recently experienced a number of mobile money transfer
services launches in multiple markets with a variety of new payment
solutions. These implements bring many new benefits to consumers and
operators and banks who involve.
For this reason, In Vietnam market, mobile money is a new business
opportunity for all parties includes operators, financial institutions, and
payment companies. And MobiFone can take this opportunity as well.
With this study, I want to get a well understanding and analyst the
opportunity of Mobile money business on VMS-MobiFone.

2.

Objective and aim of thesis
This research is implemented to obtain the two purposes:
• Study about the Mobile money - the opportunities and benefits of it
in Vietnam mobile market in general and for VMS-MobiFone in
particular. Learn from successful cases and have a small initial
research on these services.

2

LUAN VAN CHAT LUONG download : add


• Develop business proposal for VMS-MobiFone: find the suitable
models with current situation of VMS and develop a business
proposal recommendation.
With these above objectives, this thesis aims at giving a basic
theoretical foundation of Mobile money implementation in general and
how to apply to VMS-MobiFone in particular.

3.

Research questions
The researcher will go to find the answer for questions below:
• What is Mobile Money? Is it a good opportunity?
• What are the models of Mobile money implementation?
• What are the key success factors?
• Is Mobile money an opportunity in Vietnam for the mobile
operator.
• How to implement to VMS- MobiFone?

4.

Scope of work
For the theoretical foundation, this thesis will study the mobile

money theory in the world of Mobile operators since 2007 when mobile
money was first soundly successfully implemented in Kenya and became

a worldwide phenomenon.
For the case study, this thesis will focus on some main factors of
mobile money implement strategy to study like: market strategy (product
and pricing), partnership model and distribution channel settlement
because they are the most key challenges factors and also the vital success
factors of the strategy. All of VMS-MobiFone current situations of Mobile
money initial from 2005 until now are put into study.

3

LUAN VAN CHAT LUONG download : add


5.

Data resource
For the theoretical part, data sources are textbooks, researches,

articles from internet since 2007. As for the case study, data is obtained
from questionnaire, interview customers and internal data.

6.

Methods
The thesis uses the empirical method, desk researches, questionnaire,

interview and case study in the study process.

7.

Significance of thesis
The thesis may contribute an important part to the development of

mobile service industry – especially the launching of Mobile money in
Vietnam for Mobile operators which has now starting in many developing
countries. Since Vietnam is a rapidly increasing mobile penetration and
low access to finance system, the deployment of Mobile money have lot
of opportunities to success.

8.

Thesis limitation
The biggest limitation of this thesis is due to the freshness of Mobile

money all over the world in general, and in Vietnam in particular,
therefore few academic reviews have been applied and proved. And there
has been no trial implementation of these by Vietnam operators so far.
Another limit is from wide of the issue. This thesis cannot cover all
the theoretical issues of Mobile money. Thus, later this study, this thesis
only focus on the distribution channel settlement analysis and focus on
this when design action plan to implement Mobile money in VMSMobiFone.

4

LUAN VAN CHAT LUONG download : add


The last but not least, this research collects data by experimental
research, which content questionnaire survey and statistical analysis.
Therefore, it contents some common limitation of this methodology

such as:
- Sample limitation
- Time pressure

9.

Expected results
The thesis expects to give the systematical theory in Mobile money,

analyst the opportunity in Vietnam market and aim to figure out Mobile
money business development for VMS from those findings.

10. Structure of thesis
Apart from the executive summary, introduction, references and
appendix, this thesis concludes four parts as follow:
Part 1: Mobile money theoretical overview.
Part 2: International MNOs mobile money deployment.
Part 3: The case of Vietnam mobile service company.
Part 4: Mobile money services business development proposal for VMS.

5

LUAN VAN CHAT LUONG download : add


Chapter 1: Mobile money theoretical overview
1.1. Mobile Money (MM)
1.1.1.

The convergence of Mobile service and financial service

Penetration of mobile services across the world is increasing rapidly.
In 1990 there were just over 11 millions mobile phone users worldwide.
Today, over 4.8 billion mobile subscribers over the world (ABI, Q1 2010).
At the same time, the possibility to integrate mobile and financial services is
becoming more apparent. According to a recent survey conducted by Edgar
Dunn & Company and the GSM Association (GSMA), with current status of
regulatory environment improvement, in 2012, 7% of the subscriber in
developed countries and 4% in developing countries will make at least one
cross-border remittance. This means over 248 million subscribers using
mobile money transfer services.
Today, financial access for the poor is still an issue in many
developing countries. It’s by far fewer than global mobile penetration rate of
approximately 70%. There are currently only around 0.5 million bank
branches globally with about 1.4 million ATM's compared to more than 4.8
billion mobile subscribers worldwide.
Moreover, bank transfer and money remittance institutions fee is
expensive for small denomination transfers, limiting the ability of workers to
distribute funds to their relatives, especially when sending small amounts.
As World Bank reports, because of retail premises and staff costs increase
overheads, commissions for remittances are so expensive. It is estimate at an
average 15% per transaction and increasing to over 25% for remittances
below $100.
With above numbers, mobile money services are expected to make it
easy for the current average size of a remittance transaction by migrant

6

LUAN VAN CHAT LUONG download : add

workers - approximately $US200 (with 12-14 transactions per year) – the
number conducted by World Bank. They are such simple, low value services
including the provision of cash-in and cash-out of the transferred value.
Conclusion: Mobile-financial merging creates opportunities for MNOs and
financial institution and consumer as well. It also consists of the need to fit
financial regulation to new services, service providers, customers and
especially the risky initiate with mobile money.
1.1.2.

What is Mobile money service?

Numerous terms are being used to describe the ways mobile phones
facilitate financial services like: mobile banking, mobile payments, mobile
transfers, etc. So, what is mobile money?
The concept of “mobile money” alters across the industry as well as it
covers a large scope of overlapping applications. In general, people consider
mobile money as the services that allow electronic money transactions over
a mobile phone – describe services that connect customers financially
through mobile. And we can refer it to as mobile financial services, mobile
wallet and mobile payment.
In this paper, I want to introduce mobile money as a broader term that
includes all types of monetary transactions executed via mobile phones. A
list of mobile money applications have developed majorly including:
ƒ Mobile banking - use of a mobile phone to remotely access a bank
account, primarily for account balance checkup and bill payment
services; most mobile banking applications are considered as a new
delivery channel to existing bank customers. Transformative models
integrate unbanked populations into the formal financial sector;
ƒ Mobile Money Transfer (MMT) - Remittance - person-to-person

application whereby consumers are able to send and receive monetary

7

LUAN VAN CHAT LUONG download : add


value by using that mobile device - or more simply put, to transfer
money electronically from one person to another using a mobile
phone. Both domestic transfers as well as international, or crossborder, remittances are money transfer services;
ƒ Mobile Commerce (Mobile Payments): Mobile payments refer to
person-to-business payments that are made with a mobile phone
instead of focusing person-to-person money transfers like MMT.
Mobile proximity payments involve a mobile phone being used to
make payments at a point-of-sale (POS) terminal. In these cases, the
communication between the mobile phone and the POS may set up
through contactless technologies, such as Near Field Communication
(NFC). Using the phone as an alternate payment channel for goods
sold online or pay bill via banking/mobile account is involved by
Mobile remote payments/ bill payments.
So, mobile money allows for any mobile subscriber – whether banked
or unbanked – to deposit value into their mobile account, send value via a
simple handset to another mobile subscriber, and allow the recipient to turn
that value back into cash easily and cheaply. It’s believed that successful
mobile money services originate as simple transfer products, but will
become more sophisticated by the time and will enable lower cost savings,
credit and insurance than traditional branch or ATM banking.
There are some other terms that are often used in association with, or
interchangeably with, e-money, mobile financial services include:
ƒ Electronic Wallet (eWallet): Refers to the cash value that is stored on

a card, phone, or other electronic device.
ƒ Electronic Vouchers: Refer to definition for electronic wallet.

8

LUAN VAN CHAT LUONG download : add


ƒ Mobile Wallet (mWallet): An electronic wallet that is stored on a
phone. GSMA provides the following more specific definition:
“mWallet is a data repository that houses consumer data sufficient to
facilitate a financial transaction from a mobile handset, and the
applicable intelligence to translate an instruction from a consumer
through a mobile handset/bearer/application into a message that a
financial institution can use to debit or credit bank accounts or
payment instruments.”
ƒ Stored Value: Refer to definition for electronic wallet.

Figure 1.1. Mobile Money services

1.1.3.

Opportunities for Mobile money services

Mobile network operators started exploring the concept of mobile
payments in 2000 with little success, so mobile money is not a new concept
in the telecom industry. However, the environment for mobile money
solutions, bringing together different industry groups, such as banks and
operators have been dramatically improved by the recent advances in

9

LUAN VAN CHAT LUONG download : add


handset functionality, chip and mobile network technologies, and the
upgrades to point-of-sale infrastructure.
Then, the industry globally acknowledges the social and economic
benefits that mobile money brings, especially to developing countries where
have many physical limitations of financial services infrastructure. Billions
of people in remote, rural areas touch a less expensive, more convenient
alternative financial service. It means that the wide reach of mobile phones
enables more people to access financial services quickly and easily.
Firstly, in emerging countries traditional financial services usually
haven’t been reached or accessed by a large proportion of the population.
It’s often that in developing countries the banks are unable to provide such a
service to the whole population (not more than 30% of the populations in
visible markets are banked and the branch’s physical footprint is not dense
enough). Therefore, cash is king, and sending money to relatives is a
significant need and of course very complex there. Moreover, the population
in these countries has gotten the lack of convenience and a large of time
consumption when other alternative informal solutions (such as sending via
a bus driver) have used. For this reason, Mobile money is a new solution that
can keep low-income and rural consumers’ money safe while giving them an
affordable and flexible solution. The mobile operator has a great opportunity
to “bank the unbanked”, including customers at the “Bottom of the
Pyramid”. These customers often earn less than USD 2 per day and cannot
be reached by banks whose acquisition costs are much higher.
Secondly, the mobile subscribers outnumber the banking account
holders. In 2009, there is an estimation of 1 billion people in developing

countries who have mobile phones, but do not have access to formal
financial services. By 2012, this number is projected to rise to 1.7 billion,

10

LUAN VAN CHAT LUONG download : add


in which, it’s projected that up to 290 million unbanked people in
developing markets could become potential users of mobile money
services by 2012. According to the GSMA - the trade association for
mobile operators, the number of mobile phone users has exceeded credit
card users by 2 to 1, and has outnumbered the use of automated teller
machines (ATMs) by 2,000 to 1. With the above figure, we can see that
the number of mobile penetration rate is by far more than the financial
penetration rate in the developing countries.
Thirdly, the immense amount of remittance in developing countries is
a driven factor of Mobile money services. According to the World Bank,
recorded remittances to developing countries were estimated at US$315.7
billion in 2009 — 2.6 times the value in 2002 and forecast to reach US$360
in 2011,making an attractive opportunity for Mobile money services. Mobile
money transfer therefore extends remittance services to billions of the under
banked population. As provided in Figure 1.2 below, it is also a good
opportunities for mobile money business that Vietnam is one the countries in
the top 20 remittance received ones.

(Source: World Bank remittance report 2010)

Figure 1.2. Top recipients of remittances

Last but not least, in developing markets in general and Vietnam in
particular the younger generations is also a high potential segment, given
their willingness to accept to new technologies. Financial services always

11

LUAN VAN CHAT LUONG download : add


cannot be accessed as they are not old enough but are actively involved in
virtual gaming transactions. Convenience will provide a main motivation for
them to try new services. Lower income workers are also likely to take up
mobile money services, as they are not well served by the large banks.
Across the world, it is estimated that 176 mobile money
deployments will have been launched by the end of 2010 (94 live
deployments, 82 planned deployments) driven largely by the desire to
capture high value customers.
Forecast by GSMA, the potential of delivering mobile money services
to unbanked customers generates both US$5 billion in direct revenues and
US$2.5 billion in indirect revenues per year to mobile operators by 2012.
Direct revenues are based on transaction fees for delivering services (in line
with current market rates), and indirect revenues conservatively account for
reductions in churn, increases in ARPU and acquisition of new subscribers.
Conclusion:

With

the

above reasons, we can see that

emerging

economies

are

an

especially important growth area
for mobile money service. And
Vietnam is not an exception.
Mobile

money

services

are

especially attractive because of

Source: GSMA mobile money report 2010

the population’s limited access Figure 1.3. Mobile money revenues forecast
to traditional banking services,
owing to a number of common
reasons.

12

LUAN VAN CHAT LUONG download : add


Without an adequate infrastructure to enable online banking,
institutions and providers are enabling more sophisticated services directly
through the mobile handsets.

1.2. Benefit of Mobile money services
By merging the banking and mobile technologies, mobile money are
ready to offer to consumers and make it easy for those who have little
access to financial services. It also creates many benefits to the operators,
banks and payment companies.
1.2.1.

To Mobile operators

To Mobile operators, Mobile money brings many benefits in both
direct and indirect like: increased ARPU, increased data traffic, increased
customer acquisition, increased customer retention, new revenue channel
(e.g., share of fees), reduced operation costs, up-sell mobile content and
postpaid service and enhanced brand image etc..
1.2.1.1. Direct benefits
The direct benefits of mobile operators come from many sources of
revenue include commission on transactions, potential subscription fees and
the monetization of the float which are paid by end users. That revenue
increases with the increase of customer using services and transaction
volumes. And the monetize float conducts revenue for operators via short
and long term investments with the rates are around 12%-15%. So, the
operators should increase float deposits by incentive usage and enrolment
rather than cash out.

1.2.1.2. Indirect benefits
Apart from the above direct benefits, Mobile money has some
indirect benefits. Mobile Money services offer sizable value generation

13

LUAN VAN CHAT LUONG download : add


opportunities to mobile operators in emerging countries, including the rise
of APRU, reduction of churn rates and opportunity to up-selling and new
customer acquisition:
- A new market sizing study by CGAP and GSMA found that the
average revenue per user (ARPU) of mobile money customers is 74%
higher than that of non-mobile money customers. And some statistic from
implemented countries show that direct revenue generation expected with a
potential 5% to 10% ARPU increase after several years. This is particularly
important as operators are expanding into developing markets where ARPU
is traditionally low.
- Mobile money services were also shown to help reduce customer
churn which is one of MNOs’ most significant challenges. Customer
retention can improve when MNOs offer mobile financial services;
especially among customer segments expect more sophisticated services.
- Current customers and bank customers can be also provided the
opportunity to up-selling and new customer acquisition by Mobile Money.
Offering new mobile financial services may help Telecom companies may
enlarges their reach to a new segment of customers. Increased market share
from the new customer group would also open up opportunities to cross sell
telecom services, thereby spurring revenue growth.
Besides, Mobile operators may also save billing costs associated with

prepaid and postpaid subscribers when customers can pay via their mobile,
MNOs don’t have to pay commission to the retail distributors of mobile
top-up vouchers. That top up and/or payment process of customers is also
more convenient. They can do themselves from their mobile like a 24/7
open shop. Based on some research projections, potential savings can be a
reduction of 4% in the cost of sales.

14

LUAN VAN CHAT LUONG download : add


Source: GreenWich White paper 2009

Figure 1.4. Value drivers of mobile money to MNOs

1.2.2.

To Customers

The extending mobile money to other emerging countries, especially
in Africa and Asia, would have a huge impact to customers.
Firstly, it’s clear that mobile money provides a starting point to
formal financial services for the billions of people lacking access to savings
accounts, credit and insurance.
Secondly, mobile money provides a faster, cheaper and safer way to
transfer money than other alternatives like slow, costly transfers via banks
and post offices, or bus driver.
Mobile money can reduce costs of transferring money because it
utilizes a network of local agents rather than more expensive bank branches.

The cost of remittances can be lower as Mobile technology removes the
need for physical points of presence and ensures a timely and secure
method of transaction. This concept of 'mobile money' is extremely
attractive to low income users in emerging economy.
One international example is the number World Bank estimates that

15

LUAN VAN CHAT LUONG download : add


the flow of formal remittances surges by 50-70% in the case of remittance
commission charges diminish by 2-5%, boosting local economies. And this
reducing the cost of each individual remittance would enable the delivery of
lower value remittances than today’s average transfer value of US$200.
Vietnam is one of top 20 remittance receiving money with the fee of
average transfer value of US$200 remittance is around 10% (by the figure
of WB). The development of Mobile money is promising to reduce it in the
near future.
Besides, about domestic remittances, there are considerable numbers
of instances show that rather than spend a day travelling by bus to the
nearest bank, recipients in rural areas can spend their time doing more
productive things. One of them is the result in Kenyan Mobile money
implementation shows that as soon as the Kenyan households started
mobile money the incomes of using M-PESA have increased by 5-30% and
the mobile money opportunity is also increasingly understood and
appreciated by consumers. In Kenya, for instance, FSD Kenya found that
four out of five M-PESA users believe that not having access to M-PESA’s
services would have a “large negative impact” on their lives. In detail, users
view M-PESA to be faster (98%), more convenient (97%), and more secure

(98%) than the informal methods that are often used to send or receive
money. One other example is in the Philippines where CGAP found
approximately 90% of mobile money users view their money to be safe and
would recommend the services to family and friends. Because mobile
money services become more sophisticated consumers will continue to
benefit such as extending speed, convenience, and security to a broader
range of products such as savings and credit.

16

LUAN VAN CHAT LUONG download : add