Beyond Branch Banking

1. Beyond Branch Banking

2. Introduction The concept • Provide access to finance • In 75 years of formal banking era, less than 30% of population has access to formal financial services • More than 7.5 mio. mobile phone users within 7-8 years of market penetration with annual growth of 35% • Use mobile phone as an interface to banking activities • Nation-wide supporting agent network • Delivery of financial services in a fast, secure and low cost manner • Local Remittance • Send / receive money to and from anywhere in the country • Microfinance • Support microfinance activities in rural areas • Mobile phones are rapidly growing - Medium to spur entrepreneurial activities • Currently 20% of the population uses mobile phones, with projection of 50% by 2014

3. What is Kumari Mobile Cash (KMC) KMC is an innovative mobile phone based payment system introduced by Kumari Bank. It is a product that enables business transactions via mobile phones. It offers various services such as point-to-point remittance, payment of goods and services, and much more, all across Nepal!

4. Why KMC • It is a result of our continued focus on technology driven service delivery • to leverage technology as our delivery channel to customers • to reduce cost of transaction and save transaction time • It provides convenient and an efficient way to conduct business transactions • It provides much better market penetration compared to other products • Bank Branches (Per 100,000 People) 4.12 • ATMs (Per 100,000 People) 3.40 • Credit/Debit Card (Per 100,000 People) 2000 • Mobile Phones (Per 100,000 People) 25,000

5. Why KMC cont… • We cannot ignore this large customer base 15 million users 7.2 million users Source for 2006-2009: "Nepal - Telecoms, Mobile, Internet & Forecasts" published by BuddeComm; Data for 2010-2013 are authors’ own projection based on YoY population growth rate of 2% and YoY mobile user growth rate of 20%

6. KMC Solution Features • Point to point Remittance • Receive and send money directly from/to mobile phones anywhere in Nepal • Available on Nepal Telecom GSM Network across Nepal • Ncell Network still being Pursued • Top-up cash or withdraw cash from mobile phones • At an agent or at a bank counter • Pay for goods and services at shops and stores anywhere in Nepal • Transfer money to family and friends • Peer to Peer Lending • Air-time top-up at face value • Associate bank account • Allows cash transfer from/to bank account • Pay utility bills • Web Portal

7. Impact on Economy • Kenyan Experience • 10% GDP flows through M-Pesa • 5-30% increase in Income for those who use M-Pesa With 20% of the population using M-Pesa, that translates to roughly 3.5% GDP growth and 1.75% decline in unemployment (Okun’s Law) • Easier access to finance • Increased economic activities • Easier to get microfinance loans and pay monthly installments • Secondary services on top of the platform • Mobile phone based transactions is a rapidly-adopting alternative business tool, especially in developing countries. Examples: • G-Cash, Phillippines • Grameen Phone, Bangladesh • M-Pesa, Kenya • Combined market for all types of mobile phone based transactions is expected to reach more than $600 Billion globally by 2013.

8. Social Benefits • This service is available to all mobile phone users, and customers registering for this service do not have to have a Kumari bank account! • Government distributing money to almost 4000 village development committees (VDCs) • Current: Disbursement to one point requiring villagers to travel • Future: Disbursement directly to end user via a mobile phone • Retired veterans receiving pension • Current: A monthly camp setup in one place requiring the recipients to travel • Future: Pension funds disbursed directly into recipient’s mobile phone • A person living in a remote place no longer has to walk for one day to make microfinance loan payments • Eliminating travel costs that sometimes is more than the amount of the loan installment • Son working in Kathmandu can send money to his parents in a village instantaneously • Eliminate physical travel • Eliminate risk of carrying cash • Daughter studying in Kathmandu can receive money from her parents instantaneously to pay school fees

9. KMC Technology • Built on Java platform – scalability and security • Supports any phone • Structured SMS for lowest common denominator • J2ME application for java enabled phones allows greater usability • Security • All transaction require PIN authentication • ISO 8583 standard communication • Firewall secured network of servers • Secured SMS Gateway using short code 2274 (CASH) • Transaction Amount Monitoring • Cap per transaction, per day, per month • Reduced physical cash handling

10. How it Works

11. Merchant/Agent Enrolment

12. The Approach • Mobile Cash Committee • Inclusion of all relevant departments • Product Development • Phase wise Implementation • Mobile Cash Department formed • Call Center with a country wide Toll Free Number • Meeting with Multilaterals: • World Bank, DFID, ADB, IFC • Meeting with Finance Ministry, NRB and NT • Advertisement and Informatials concept • TVC, Radio, Print Media, Animations, Pocket Guide etc. • Training to prospective agents, merchants and our employee in following locations completed • Eastern Region: Biratnagar, Birtamode, Itahari, Urlabari • Western Region: Argakhanchi, Beni, Baglung, Bhairahawa, Butwal, Damauli, Palpa, Pokhara • Central Region: Kathmandu, Birgunj, Narayanghar • Mid West Region: Nepalgunj, Surkhet, Salyan, Dang • Far West Region: Dhangadi, Mahendranagar

13. Launched on 17th August 2010

14. Roadmap – Short Term • Promotional Campaign • Educational and Awareness Programs through: • TV Interviews • Radio Programs • Local Events • Kiosks at various locations • Branding KMC to various neighborhoods • Advertisements on All major newspapers • Advertisements on All major TV channels • Advertisements on Many radio stations including regional ones

15. Roadmap – Short Term • Enroll All KBL Bank A/C Holders into Mobile Cash • Approximately 70,000 customers will be contacted • All Customers with Mobile Phones have been sent SMS • All Customers with email records have been emailed • Enrollment of Agents/Merchants • 500 Agent Outlets • 200 Merchant Outlets • Ncell Gateway • Testing in Progress • Agreement to be signed in the near future • Dedicated Network at Large Supermarkets • Establish VPN and deploy API • Ability to initiate transactions online • Currently can initiate transactions only with mobile phones • Utility Payment • Various utility providers

16. Roadmap – Medium Term • IVR – Interactive Voice Recognition • Customers able to conduct transactions with the help of voice prompts • USSD – Unstructured Supplementary Service Data • Quicker Response Time compared to that of SMS • Much better customer experience; the transactions are real time rather than “store and forward” concept of SMS • Dependent upon Telecom Provider Service Availability • PoS (Point of Sale) Device • Device that scans phones based on RFID signal, accepts payments, and generates receipt • Localization • Menu interface and SMS messages in Nepali Language • Support for GPRS Application • Internet Enabled • Application Built into the SIM • Dependent upon Telecom Provider Cooperation

17. Roadmap – Long Term • Pension Disbursement to Gov’t Retirees • Microcredit payment Facility • Salary Disbursement • International Remittance • School Fee Payments • Insurance Premium Payments and many more……..

18. Growth Milestones

19. Challenges • Regulatory Framework • Distribution Network • Awareness and Promotion • Illiteracy & Resistance to Change • Trust Factor These challenges can be address with joint effort of Government, Multinationals and other stakeholders…. We can help on Technicalities and Financial solutions..

20. Thank you