Making Dollars & Sense By Salman Ansari

E-Commerce, E-Banking, Mobile Banking – it’s really all the same to me now. I think we’ve had enough people talk about this and explain everything to us. The more I listen to lectures and conferences, the more ideas I get about where we need to be going. For example, I recently spoke at a Mobile Banking Conference and had a chance to tweak some ideas which I wanted to share with you.

Each time I tell someone that these are great times for the banking and the mobile industry, they look at me as if I have gone mad. I haven’t and once you read a bit about what I have in mind, you’ll better understand where I am coming from.

The last couple of years have been great. Banks introduced new products into the market, marked new shiny new bank branches, lots of ATM’s, well a very, very awkward number of ATM’s but we’ll have more on that later.

The mobile phone companies have seen phenomenal growth. We only had 230,000 phones in the first 10 years of the mobile industry. After the introduction of the CPP plan (Calling Party Pays) and boom! We jumped to the 6 million mark and today, have close to 94 million SIMs in circulation. Of course, the number of active users differs depending on who you speak with and what the prevalent mood that day might be, but a guesstimation that is usually referred to is that we have approximately 50 million active mobile phone subscribers.

Something interesting happened in the very recent past.

I’d like to use some great analogies but let me just say that with this “interesting shift”, the birds have come back to roost. The banks have lost the huge value. I’m not taking names but seeing the tremendous growth the mobile service providers are experience, the unserved population that banks are unable to reach out to, has become glaringly obvious. But hold that thought for just a moment, while I address the other side of the coin and then get to the eventual point of increasing value to your consumer.

The telecom companies are also going through an interesting paradigm shift of their own. The fact that they are now fighting it out at who has the cheapest SMS rates or the most economical call rates simply voices out their desperate attempt at grappling with the daunting challenge ahead of them – retaining the customer. With so much competition and so much choice, if the company hasn’t injected value into their brand, they can reduce all the paisas they want, it’s not really going to make any difference. The only thing, in fact, which is being reduced to ‘smithereens’ is their image. Customers are price sensitive but they make their decisions on a few things more than just the going rate of a phone call.

If surveys were conducted, they’d be able to have scientifically proven evidence to support their brand IQ. Reducing costs by every few paisas will scare off shareholders, is not bringing value for your money and your ARPU continues to shrink.

Rethinking and new strategies are required to a great extent, which brings me back to stitching this point, with the one I made earlier.

This economic downturn is an excellent because it is now going to get the banks and the mobile companies to see how they can extract value from their existing networks.

This is very good because they are going to be forced to work in collaboration with one another. There will need to be recycling and consolidation on resources. How can it not be a good time?!

Add to this the element of an open ecosystem and the sky is just the starting point for what this can do.
Exclusivity towards a model or company won’t work here. If you really want to make the most out of the E-enabled space, you have to take the internet paradigm into account. If you aren’t addressing the total population in an open model, you cannot launch a service. It has to be universal and accepting that there is a lot of money to be earned through small transaction revenues. Launch a great service and tie it into one service provider, and they will charge 8 bucks per minute for a service nobody wanted to begin with!

Exclusivity has got to go! The same paradigm shift has to occur whether it is a bank or a mobile phone company, and only then will the both be able to create true value in terms of VAS (Value Added Services).

The next piece of the puzzle is the regulator. The State Bank of Pakistan, in all their circular issuing glory, and the Pakistan Telecom Authority. I admit bias towards the PTA but you have to give them credit on the fact that they are moving in very unfamiliar territory.

The Inventory
Pakistan has a great telecommunications infrastructure – perhaps one of the best (and most underutilized) in the world. They continue to expand and it will only be a matter of time by when they resolve their quality issues altogether. They know they will lose a lot of customers if they don’t provide the right quality of service. Large customers will start demanding more intricate Service Level Agreements. So there is a great deal of dynamism and expansion taking place there.

So in addition to the Cellular and GSM space, there is optical fiber access networks, wireless local loop and even the PTCL is getting their act together. Telecoms have a huge inventory. And it’s a huge infrastructure which has the capacity to generate more revenue.

Our local banking infrastructure is still better off than the larger economies which have  been hit by the financial crisis, but we’ve been relatively unharmed there. There will be a struggle and we’ll eventually survive. But let’s give credit where it’s due – our survival in most verticals takes place because of one specific reason: the telco operators, banks and the regulator have very smart people working with them who can come up with solutions.

So that’s all the inventory we have. Now what do we do with all this?

Integrate it all with platforms such as MNP (Mobile Number Portability), which brings together the databases of all the cellular operators. This provides access to demographic information, traffic and everything you need to know about your customer. Analytics and that is what makes the platform so powerful for launching any e-enabled services, whether it is for health, education, finance, banking, commerce. All because you have a common backend which provides access to information across networks.

The Plan
How you enable payments to take place through your cell phone so that you can have virtual monetary transaction becomes much more achievable if you have the pieces of this puzzle talking to one another.

Should this be a bank-led initiative or a telco-led model? Well, let’s look at the facts to answer that. Banks, after almost 60 years, have created 25 million customers. In less than a decade of operations, the mobile phones companies have covered 90%of Pakistan and have empowered about 60 million people with a multi-functional communication device. With a clearing house or a central insurance agent to ensure accountability of transactions, who do you think should be leading the e-Payment initiatives?

If you’d like to watch Salman Ansari talk about these issues, please visit his weekly show, The Blindspot at webstudio.ciopakistan.com

About the Author
Exclusivity towards a model or company won’t work here. If you really want to make the most out of the E-enabled space, you have to take the internet paradigm into account. If you aren’t addressing the total population in an open model, you cannot launch a service. It has to be universal and accepting that there is a lot of money to be earned through small transaction revenues. Launch a great service and tie it into one service provider, and they will charge 8 bucks per minute for a service nobody wanted to begin with!

Exclusivity has got to go! The same paradigm shift has to occur whether it is a bank or a mobile phone company, and only then will the both be able to create true value in terms of VAS (Value Added Services).

The next piece of the puzzle is the regulator. The State Bank of Pakistan, in all their circular issuing glory, and the Pakistan Telecom Authority. I admit bias towards the PTA but you have to give them credit on the fact that they are moving in very unfamiliar territory.

The Inventory
Pakistan has a great telecommunications infrastructure – perhaps one of the best (and most underutilized) in the world. They continue to expand and it will only be a matter of time by when they resolve their quality issues altogether. They know they will lose a lot of customers if they don’t provide the right quality of service. Large customers will start demanding more intricate Service Level Agreements. So there is a great deal of dynamism and expansion taking place there.

So in addition to the Cellular and GSM space, there is optical fiber access networks, wireless local loop and even the PTCL is getting their act together. Telecoms have a huge inventory. And it’s a huge infrastructure which has the capacity to generate more revenue.

Our local banking infrastructure is still better off than the larger economies which have  been hit by the financial crisis, but we’ve been relatively unharmed there. There will be a struggle and we’ll eventually survive. But let’s give credit where it’s due – our survival in most verticals takes place because of one specific reason: the telco operators, banks and the regulator have very smart people working with them who can come up with solutions.

So that’s all the inventory we have. Now what do we do with all this?

Integrate it all with platforms such as MNP (Mobile Number Portability), which brings together the databases of all the cellular operators. This provides access to demographic information, traffic and everything you need to know about your customer. Analytics and that is what makes the platform so powerful for launching any e-enabled services, whether it is for health, education, finance, banking, commerce. All because you have a common backend which provides access to information across networks.

The Plan
How you enable payments to take place through your cell phone so that you can have virtual monetary transaction becomes much more achievable if you have the pieces of this puzzle talking to one another.

Should this be a bank-led initiative or a telco-led model? Well, let’s look at the facts to answer that. Banks, after almost 60 years, have created 25 million customers. In less than a decade of operations, the mobile phones companies have covered 90%of Pakistan and have empowered about 60 million people with a multi-functional communication device. With a clearing house or a central insurance agent to ensure accountability of transactions, who do you think should be leading the e-Payment initiatives?

If you’d like to watch Salman Ansari talk about these issues, please visit his weekly show, The Blindspot at webstudio.ciopakistan.com