Mobile Banking technology project

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Finance at your Doorstep. Angkor Mikroheranhvatho Kampuchea Co. Ltd. Mobile Saving. : AMK - Finance at your Doorstep ...
Finance at your Doorstep

Angkor Mikroheranhvatho Kampuchea Co. Ltd

Mobile Saving

:

AMK - Finance at your Doorstep

Savings Market in Cambodia Cambodian Savings Market Potential Assessment Total Cambodian Population (HH survey, 2008)

13,388,910

Households above poverty line (about 30% under poverty line)

1,994,093

Total Existing MFI and Bank Households*

603,992

Potential untapped households

1,390,101

Average Saving Size Per Household

$304 (ADB 2007)**

Current MFI Saving (include ACLEDA bank Saving) as of June, 2011

$1,107.6 million

Total Potential Saving

$422.5 million

* Assumes only households above national poverty line are potential MFI savers. ** Surveyed with 807 households within 8 provinces (Battambang, Pursat, Siem Reap, Kampong Cham, Prey Veng, Kandal, Takeo, Kampot), February 2007

AMK - Confidential

Needs of low income savers • Accessibility of funds – One of the most important factors for low income savers. Based on research, since the first and foremost need for savings is Emergency, there is a natural need for ready access to these funds. • Flexibility – Given the income fluctuations in poor households, there exists a demand to allow flexibility in the size deposits and ability to withdraw easily. • Customer service catered to the poor – Poor households often consider their cash savings as very small and are embarrassed to take these small amounts to financial institutions. • Value added services – Extra services such as affordable money transfers and remittances are considered as value added and attractive. AMK - Confidential

Challenges to offering savings services • Deposit and Withdrawal network – Limited number of bank / MFI locations (branches) – Cost of access very high due to distances from villages to branches

• Average deposit size of customer – Typically small deposits not qualifying for a regular branch based savings account – Customers not confident to take small deposits to branches

• Current offerings not focused on financial inclusion – Existing MFI’s and Banks are competing mostly in Urban and middle/ high income markets for savings customers – Products specifically targeting low income customers do not exist

Mobilizing savings – Options Option 1 - Compete with existing MFI’s and banks in towns • • •

Invest in upgrading branches Target population residing in areas near big towns only Possibility of launching branch based savings products only

Option 2 - Open new branches • • •

High costs of constructing new branches Cost of hiring new staff Coverage remains limited to surrounding villages only

Option 3 - Offer savings services using agents in villages • • •

Use mobile banking technology to offer services to poor households keeping true to AMK mission No need to invest in branch infrastructure Low cost of operations using commission models

AMK - Confidential

AMK Mobile Banking •AMK has designed an innovative mobile savings product specifically designed for low income households in rural Cambodia. •This savings product will supported by a network of AMK Agents. • AMK has purchased software which will be loaded on mobile phones and integrated with AMK’s core banking system. • Every transaction will be recorded into banking system. • Mobile Banking has been used very successfully in Africa especially Kenya.

AMK - Confidential

Mobile Savings Account • Saving account using mobile phone and conduct a host of transactions • Having freedom to deposit cash, make withdrawals and transfer at AMK Agent nearby • Mobile Savings Accounts will come with a Plastic Savings Card • 4 digit PIN code which will be used at the time of conducting any transaction

AMK - Confidential

Mobile Savings Account - Features Generic Attributes

Product Features

Target customers

Rural people – AMK client, and non-client

Deposit or withdrawal location

• •

AMK branches & sub branches AMK Agents

Fee charge for deposit Fee charge for withdrawal Interest rate Interest calculation

• Khmer Riel (KHR) • US Dollar (USD) FREE Detailed in Fees Section Rate to be decided (2.5% to 3.5%) per annum Will be based on daily minimum balance

Interest capitalization

Will be capitalized monthly

Currency of the account

Transactions available at Launch

Transactions planned for future Account opening requirements

• • • • • • • •

Cash In at agents/branches Cash Out at agents/branches Account to account funds transfer Account to non account funds transfer Non-account to account funds transfer Pay AMK Loan installment Acceptable National ID card as per KYC Policy Account opening form

Mobile Banking Agent Network • AMK agents will be individuals or businesses set up by AMK to provide Cash In and Cash Out services to customers. • Agents will be recruited through a qualification and certification process (based on questionnaire & social status survey). -

Occupation Literacy Mobile phone usage Residency Social Status in community

-

Credit history with AMK & others Location (proximity to customers) Liquidity maintaining capacity Business hours to service customers Cash Handling ability

• Agent’s key responsibilities: • Facilitate customer transactions • Refer new customers to AMK. • Receive commission for performed transactions AMK - Confidential

System Overview

 Application resides on Agent’s mobile phone  All customers and agents account reside on core banking system  Access through switch  The switch allows AMK to easily manage transaction, fee, agent commission and report  Security include:  Agent’s PIN & Customer’s PIN  AMK Card & Transaction receipt  Application design  Data Encryption AMK - Confidential

KYC Methodology • All account holders (agent, customer or staff) must conform to the KYC requirements set forth for these accounts by AMK and in line with the NBC regulations especially National ID card. • KYC / AML verification process: •Check 1 – at the time of account opening request by AMK MBO •Check 2 – at the time of account activation at AMK branch by a branch operations manager •Check 3 – screening of accounts at head office

AMK - Confidential

Pricing and Agent Incentive Transaction

Currency

Amount

Fee

Deposit to own account

All

NA

Free

KHR Withdrawal from own account

USD

THB

≤ 20,000 >20,000 - 100,000 >100,000 - 200,000 ≤5 >5 - 25 >25 - 50 ≤ 2,00 >200 - 1,000 >1,000 - 2,000

Transactions Sharing Ratios Free Withdrawals Charged Withdrawal Cash Out Account to non account Non Account to Account Transfers Account to Account Transfers Account Opening commission

300 600 800 0.075 0.15 0.2 3 6 8

Limit/Exception Maximum balance: 40,000,000 KHR 10,000 USD 400,000 THB Free withdrawal at AMK office for any amount. Free one withdrawal with the maximum amount of 5 USD per transaction per month.

Agent

0.1% of amount 50% 50% 50% 50% $ 1 per a/c

AMK

50% 50% 50% 50%

Liquidity Management – comply with NBC regulation • AMK as whole - Treasury department manage liquidity - 8% of the deposit from customer - Maintain 50% of liquidity ratio all time - AMK will keep another 20% as liquidity reserve internally - AMK also has another liquidity reserve of 1,000,000 USD as well as 2,500,000 USD credit line which can be drawn within one week. • At the branch level - Keep liquidity level between 10,000 USD to 60,000 USD for its operations (approximately 5% to 10% of its performance assets) - Project the cash flow on daily, weekly, monthly and quarterly basis to ensure the expected liquidity is within a manageable range - Cash can be transferred from Head Office less than 3 hours from the time requested • At the Agent level - Open account with minimum balance KHR 200,000 or USD 50 - AMK Client Officer can accept deposit and inject liquidity in case of low liquidity AMK - Confidential

Agent Liquidity

AMK - Confidential

Risk mitigation Risk Description

Possible Impact

Key Controls Summary of Action Plan Pilot testing to streamline processes • Ongoing customer education • Regular checking / monitoring of programs agents and MBO by AMK branch • Pilot testing to streamline and head office staff processes • Zero tolerance against fraud • Strict controls and monitoring by branches and head office •

1

Agent fraud (Fake receipt given by the agent but not electronic receipt).

2

MBO Fraud

Financial loss for customer





3



Error by Agent • •

4

Error by MBO

5

Liquidity risk (agent may not have enough cash or float to process transaction)

6

Mobile Banking System Error

• • •

• • •

Core Banking System Error •

8

Financial loss Negative impact on customer confidence





7

Financial loss for customer, agent and AMK Reputational Risk

Client unable to do transaction Operational risk Negative impact on customer confidence Reputational risk

• •



Mobile phone Internet Connection Error





9

PIN security • •

10

Miss selling by agent

11

Failure to comply with KYC, AML and operation process by internal staff



Financial loss Negative impact on customer confidence



Pilot testing Regular monitoring Ongoing training Complaint registration and handling processes Pilot testing to streamline processes Regular liquidity monitoring using reports Monitoring of system by IT staff. Alerts sent to stakeholders in case of system issues. Monitoring connectivity Backup mobile internet connection Pilot testing to streamline processes Ongoing customer education

Pilot testing to streamline agent processes • Enforce agent qualification criteria • Internal audit • Disciplinary action Non compliance toAMK policy. - Confidential Termination •









Regular check/monitoring of agent by AMK staff Efficient reversal process by call center with strictly monitored turnaround times Dedicated staff to manage liquidity at agents Regular visits to agents



Strictly enforced turnaround times and service level agreements with vendors for resolution



Resolve on a case by case basis with the mobile service providers



Issues to be resolved on a case by case basis Investigation carried out by risk and compliance teams







Ongoing Agent evaluation & monitoring Treated on a case by case resulting in Warning or dismissal

Team Structure for Pilot Test

Roles

Responsibility

Marketing savings services

Agent

Opening account & basic KYC

Mobile Banking Officer (MBO)

Activating account after full KYC

AMK Branch

Front end customer servicing

Agent / AMK Field Staff

Resolving complaints, troubleshooting & exceptional handling

Call center / MMT Team at HO

Agent liquidity management

AMK Branch and MBO

Agent in field support

MBO

Monitoring and research

MMT Team at HO AMK - Confidential

Mobile Banking Pilot • The initial pilot would start in November , 2011 • Approximately 100 agents and run for 6 months to 1 year. • Pilot test area: Province Kandal Takeo Prey Veng

Selected Districts S’ang Kandal Stoeung Koh Thom Bati Prey Kabass Mesang Kampong Trabek

• Mobile Banking could be roll out in November, 2011. • MMT team will conduct training to agent at their place • With support from Marketing and operation team, AMK will promote the service in that area with some small activation campaign. AMK - Confidential

Finance at your Doorstep

Thank You! :

AMK - Finance at your Doorstep