Yabx’s Post

Transcript

Hallo Eduard welkom bij de nieuwe episode of the behind. Today I have Jaffet, the Managing Director of Airtel Money Uganda with me. Thank you so much for joining, Jeff. So we want to talk about mobile money markets here and what is what is it about? What is the future of mobile money markets or how does it work? So can you just brief us a little bit about the context of marketplaces, especially on mobile, mobile wallets? Very, very interesting question. And yes, if you look at mobile money, especially in the region and I'll talk about the region because mobile money is starting in this in this region of the East Africa in 2005 as a pilot. Between an MRI and and and Safaricom and that thing, the intention was actually to try and find a solution that could help them advise to correct them to correct the, the, the, the the loans once they have discussed it. But during the pilot it was confirmed that there was more demand, there was more use case, the use case whereby the members who are sending money to each other more than repaying the loan. And in 2007, if I remember very well. Empresa was launched and they they, they, the, the message that was communicated to the public was send money home and beyond our young man working in Nairobi, saving money to the people in the rural areas and this the parent will get the SMS, go to the kiosk and correct the money. It was simple and clear and that actually triggered the innovation and the things that we have seen because there are so many things that have happened since then. I think if you look at it from that perspective. More money and this trajectory has followed has been almost the same in all the market. You can actually replicate exactly what is going to happen in a new market. Mobile money has already started with people depositing money into their wallet, sending to one another and cashing out, which is traditionally the money transfer. And it's because actually the biggest need in our region, even in Uganda then was people being able to move money from one person to another. And and that has helped to build the foundation if I look at you. And at the same thing, our Huskies that has really driven adoption, yeah, is that people being able to cash in, people being being able to send money to one person and then being able to cash out from another occasion. And then in addition to that, this became a very good distribution channel for telecoms when by now airtime distribution. You know, when I was growing up, we used to have a lot of scratch cards, people scratching their heads. And you know, and then decisions were taken like in Uganda and by the government took a decision to say. We have completed where ethnic and, and today Ottoman is, is actually the, the item sales that we are doing for the Airtel Uganda is over 94% of the of the item is going through. And you can see that has helped almost everyone to know what mobile money is and do whatever they are doing. But the future of the business with the time then what you have seen is a lot of innovation coming with open APIs and the like. And today there are so many things that are being driven, but the the, the, the, the. Ecosystem is not being driven by, by the telecom. The ecosystem is now being driven more by partnership, partnerships and and to me what I've, what I've I've come to realize is if you look at the use cases that have been built in Airtel Money Uganda for example, in the last three years, majority of them is in partnership with someone either a financial institution or an insurance company, all an aggregator. So those are the ones that are now. Driving the ecosystem and mobile money has become almost a marketplace, yeah, whereby anybody can come in and, and sometimes they want actually whether what we said is a service or a platform. Because at the end of the day, if you look at our role is to connect the person who is willing to collect the money with the person who need to pay the money. It's actually that kind of business that we are doing today. So the, the business has actually changed and the, and the, the trajectory is changing. There's a lot of focus especially in our market to lead to drive financial inclusion. Yeah. And financial inclusion means going beyond money transfer to offering savings, offering insurance, offering credit. And credit in this market has to be democratized. It's something that it was only an appraiser for a few 1 characters. Now we need to really look at it from that landscape. And the future is too bright in the market if you look at it from those perspectives. And there are some markets at mobile money has done well. I know in Eastern Africa has done done well. Zimbabwe, I think it has done well in in Nigeria. However, in South Africa, however, it did not catch up as much as it had it caught up in the other regions of Africa. Why do you think there was a there was a difference in the way it was taken up? I don't know whether to to, to, to actually apportion some brains or anything, but what I can tell is, you know, this market that we are talking about still there are people who are financially excluded. Maybe the models that have been brought out in those markets are still not addressing the need in that society, but they there are gaps. If for example, look at Nigeria, I'm sure I am not a, I may not have the real statistics, but I'm sure there is over 50 million plus people who maybe don't have access to financial services. There's a time we did a study when I was working in economics and we did a case study in South Africa. And actually there are some areas that we couldn't push on more, not less than 13. Less than 13 million people could not access financial services. These are people working in the same estates, people doing construction jobs. These people have no access to banking and they need also to be included. So there are some opportunities in this market. Maybe the models might not be the same as what has worked in the in the region. I know in Airtel Money, when we got the PSP license, we are we got very excited because obviously PSP license goes beyond traditional mobile money. And, and they, they, this PSP licenses, if you look at them at least they enable you to invest the money that you correct in the, in the, in the wallet, which is which in other jurisdictions and other regions, we are not around to the money. The money is, is supposed to be held in the trust account. And, and that is there's an opportunity there to be able to actually create a model that is less costly to the customer since now you can have alternative revenue which is not applicable in our case or our values. Are coming from transactional revenue, we don't make any money from the investment. But what what I'm what I'm thinking and this is not something to be validated. Maybe we have gone to where everyone is in this market. I have a feeling if somebody was to just look at the entire model and say why should I solve the problem for example, because Legos might not have a problem because for the last many couple of years there is a lot of digital solutions, but there's some rural areas where there is no access to financial services I believe. There's a lot more, maybe the model need to look from rural into urban rather than rubbing into the rural. But the challenge that we face in our models, it has always been urban influencing the rural areas because you can see even if you look at our and PESA was launched and then maybe people are trying to copy models that have been done in other markets because you know, human beings say is better you copy what has worked rather than to experiment something. But in these two markets you are talking about, maybe the best option would be to look at them. Completely different and it might need to require a rule or approach rather than urban rural approach. Cool. And last question, I hope you have the time. Yeah. The last question is that what do you have, what is your say on regulation? Who is regulating such markets? I've heard that I was reading that the government had put a tax on mobile money transactions which kind of declined the usage of mobile money in Uganda, Tanzania and do you think that the that the owners of. What happens with this product? Should stay with banks, Should stay with telcos? Or should should it go to the government itself? You know, you know, there is a, it's a very interesting question. And for me is to balance, remember and government has to continue to provide the services, so they need revenue. And what has happened is that with the time there's this assumption that people have access to mobile money or people who are included in using mobile money don't pay taxes because many people look at it from financially excluded. And obviously when you look at it from that perspective, you see that. Is an opportunity to raise some taxes from people who traditionally, yeah, would not have been taxed. And. And I think that is what informs some of the government. And yes, of decisions to tax our this space. But but the the problem is how much to tax. The tax is not a problem, is how much. For example, give you the scenario and the Uganda is a very good case study, not Tanzania. They have relaxed overtime the taxation because immediately they implemented them industry degree. Uganda they, we had, we started those with 1%, the government was able to consider and move it to 0.5% cash out tax. But they, they, they, they businesses are not grown, but we are seeing a shift. We are seeing a very different shift whereby people are now using more. You get mobile banking, banking agency services at the expense of our cash out of business, because when you go, you push money into the bank and go to their agency bank. Yeah, you are exempted from that 0.5 tax. OK. But if you are using the mobile money or wallet, you have to pay the tax. So some people have discovered you cannot use water to bank push money to the bank and access it. So there's already a bypass and our appeal to the government of Uganda. And we did that. We need a presentation. With them to the Finance Committee during this budget making process, we actually appealed to them to consider extending this to all digital channels. That means also agency backing being included and being down from 0.5 to 0. 3. By doing that the tax obviously the the field will be a bit level plus also the government revenues will not come down because what we don't want to advocate is government collecting less because if they collect less then Rd. networks. Would be a disaster, Security will be in disaster. So we appreciate the tax. But sometimes when you make it even and you make the level they feel a bit level, then it helps to drive financial inclusion. So .5 is quite pricey because it's quite 0.5% of the value. And you see the other day was analyzing our challenges. In a transaction where we charge 12,005 foundation things, for example Uganda shillings, that won't be roughly $3. Our company enters are cashing costs. It has a cash out cost of that 12,000 and it has AV. Our next size duty tax of 15% from that 12,500 but then on top of that there's 25,000 zero, which is 0.5 tax for cash out. So if you look at it, it becomes extremely expensive. It's actually becomes more than $10 transaction. And you see that cannot be actually affect the use case. So I'm I'm sure we continue to engage them. We have we have made a lot of we have abandoned several discussions. And then Bank of Uganda with the with the people, with the ministry concern and I'm sure with the time, maybe if somebody would be able to look at the bigger picture and see that actually you can bring that tax down a bit and then that will cause expansion of the. That's very interesting. That's a very that gives a lot of clarity, but thank you so much. I would have wanted to ask you a few more questions, but I think you're running late now so maybe some other times I'm not a problem, but I will not stop without talking about this recent innovation we have done with the Xbox. Yes, sure, sure And you know The thing is we saw an opportunity because when we looked at our. Data and it was actually informed by data and we saw over 4 million transaction on a single day yeah would get would fail because of insufficient funds. Yeah and that is sufficient funds was like 20 shillings you had the shillings which is a 0.1 or 0.2 cents US. And, and, and then you say, how can we make it easier for these customers And that is what we got our engagement. And then I, I can I tell you the speed at which we were able to roll out the check out your own, which is an overdraft for me, for me. Reliable and then I'm I'm seeing it from the bottom of the hat because I've also seen this product is taking years to develop, sometimes even taking more than two years. But we have been able to develop something that is completely transforming the industry. If you listen to the people share their stories and we are very excited. We believe now we have with this time 4.5 million customers who qualify now for the loan. And with this, with this, I would really, really look for a day where over 2 million customers are able to access the loan. Because these are traditionally financially excluded people who are not dignity, they had to borrow money to buy bread. Now they can actually be able to buy bread without having to tell their neighbor that they have some money, they need some money. So for me, these are the innovations that are going to continue to drive our business going into the future. And this is how MU's are going to drive inclusive finance in Africa. Exactly. Thank you so much for your time, Jeff. It was lovely having you. Thank you so much. Thank you too. Thank you very much for your time. Thank you.