Why cash is still king? - Arnab Ghosh

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