mservice Retail Approach to Top-Up Distribution and Mobile Commerce

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1 Amdocs Presents Mobile Money Hall Of Fame Retail Approach to Top-Up Distribution and Mobile Commerce Image courtesy of Wikipedia We innovated in the space by introducing the concept of a single SIM card for agents which could hold inventory for all MNOs in the country resulting in almost 70% reduction in the working capital for the agents and retailers in the distribution network, and also savings for them due to the fact that only one handset is required. Today, we have over 80,000 agents and work with Utiba (now part of Amdocs) as our technology partner. TUONG NGUYEN, MSERVICE VICE PRESIDENT OF BUSINESS DEVELOPMENT

2 EXECUTIVE SUMMARY In Vietnam,, a Ho Chi Min City based company, has created a mobile based commercial ecosystem based on its retail distribution network. is neither a bank or a mobile network operator nor a financial institution. But by effectively partnering with banks and MNOs, they have created a true commercial net-work that is independent of the operator network. Headquarters: Ho Chi Min City, Vietnam Website: mservice.com.vn Industry: Mobile Money Services vietnam Fact File 80% of the population is unbanked 12 million people live on less than 40 cents per day More than 100% tele-density Amdocs, as the technology provider for the platform, is proud to be associated with this initiative and presents a study of the Technology Platform Amdocs Mobile Money Solutions case and how they have overcome many of the challenges faced in this pioneering endeavour and what are the key learnings that the rest of the world can take away from their experiences. 2

3 Why is the case important? In circles that look towards financial inclusion of the unbanked, where technology is being seen as the single most important enabler of financial services for the poor, the offering offers a lot of learning in terms of how good business and financial inclusion can go hand in hand. The management at have created a business model that fills in the gaps that a conventional financial system could not cover. The focus of their business model was overcoming difficulties using technology. Another important aspect of is the fact they have not tried to create mere agents for their network, but in a single year have created entrepreneurs. They have created a Tool for Living for the millions of people in Vietnam who live below the poverty line. The case study outlines the evolution of the mobile commerce ecosystem from a unified top-up distribution service. The challenges faced by the various stakeholders, and how innovation and technology and good business sense helped in overcoming them. is an operator independent e-top up provider in Vietnam. They manage and operate the country s largest pre-paid talk-time distribution network for seven operators using a common mobile wallet based system. is now moving ahead to creating a full-fledged mobile commerce ecosystem for mobile subscribers across service providers. Traditionally, being in the business of airtime distribution, slowly grew to be the biggest airtime distributor in Vietnam. The vision that had was of an electronic distribution system that could not only create better ROI, thus better profits for their agents and retailers but at the same time enable them to manage the entire distribution channel more efficiently. Presented in this case study is a brief background of how has singlehandedly overcome multiple obstacles, challenged conventions and have redefined mobile top-up distribution in Vietnam. However, that s not where the saga ends, is all set to continue leveraging its retail presence and success in the top-up distribution to come up with successful mobile based financial services. 3

4 background In Vietnam, the subscriber mix for a telecom operator is typical for any developing economy. The pre-paid segment forms 95% of the subscriber base, making the distribution of airtime and revenue collection the priority for any operator. It is in this scenario that, back in year 2008, emerged as the organization with the largest distribution network, with more than 6000 agents servicing four operators at the same time. What this meant was that each agent, in order to set up shop needed to invest in four different mobile handsets, one for carrying each operator SIM and a separate stock inventory for each. This amounted to a capital expenditure of nearly 250 USD, which was a large sum for many Vietnamese people. Multiple Operators One Wallet The only way that would solve the problems being faced by and its distribution network would be to create their own distribution system that would integrate all the operator accounts into one single wallet for the agent. The agent would then have to invest in only one mobile handset and maintain a common stock inventory for all operators. Having achieved this, today, results in almost a 70% reduction in the working capital for the agents and retailers in the distribution hierarchy and also savings on cost more than one handset. 4

5 Challenges For to win over the MNOs and convince them to join this business engagement model, they had to overcome the obvious hurdles of MNOs being apprehensive about IT risks due to third party integrations and business risks of an outsourced distribution chain. In response to these challenges, needed to show the operators that not only were they serious about their business model but also had the technical and business acumen to make it successful. The first step in establishing solid credentials was to create a platform that could manage mobile transactions and distribution hierarchies. The platform would be required to interface with multiple operators and their pre-paid management systems, while creating a unified operational environment for the vendors to work on. chose to go ahead with Amdocs as their technology partner. Amdocs proven track record of numerous installations which highlighted the systems capabilities to interface with multiple systems and businesses within the same environment, and expertise in pre-paid stock distribution were the key deciding factors. The added advantage was that Amdocs was already being used by two operators in Vietnam. This increased the faith of the operators in the technology that was bringing in, to create their independent distribution network. On the business front, offered the MNOs a service offering which compensated the inherent business risks with a cost effective business proposition and a faster growing distribution network. s efforts paid off when Vinaphone and Sfone, the two MNOs in Vietnam entered into a partnership with, in late 2008, and started a movement that would soon change the very nature of pre-paid business in Vietnam. Soon, Viettel and Mobifone, the two largest MNOs of Vietnam, which accounted for almost 65% of the market entered into an agreement with giving them access to a large section of the pre-paid subscriber base. Gtel, EVN and Vietnam Mobile are the latest entrants in the universe, creating a 100% market reach for. 5

6 s Unified E-Top Up Distribution Platform AIRTIME FLOW Distributor REVENUE FLOW Agent Mobile Subscribers A Win-Win Situation The mobile operators soon began to realize the benefits they were receiving as a result of their venture with. had created an ecosystem where managing the distribution network had become an easy and efficient process. could manage commissions, promotions and distribution for their agents from a centralized location and the overheads of managing airtime for multiple operators had been eliminated. Another advantage that came from a unified distribution network was the ease with which the network could grow. Becoming an agent was now being viewed as a profitable business venture by many Vietnamese people. It empowered them to become airtime resellers for multiple operators, while investing in a single handset, and they could sell airtimes of multiple operators from the same inventory. 6

7 As can be seen in the agent growth chart for, they are recruiting new agents at a rate of per month. Since they began operations in January 2009, has increased their network four-fold from 6000 to agents across all 64 provinces of Vietnam Agent Growth Agents 0 Jan Mar May Jul Sep Nov The operators now did not have to waste resources on ensuring growth of their distribution network; was doing that at a speed and scale which they would have never achieved in so short a time on their own. From E-Top Up to Mobile Money Today does more than 100,000 transactions per day. Within their first year of operations they have achieved the required critical mass that enables them to move upward in the mobile commerce value chain. Very recently, in January 2010, has created yet another landmark by partnering with VNPOST. In this first of its kind partnership, post offices have agreed to participate with and become a part of the talk-time distribution channel. By the end of 2010 expects to have a agent network that is more than strong. 7

8 In December 2009, was considered the largest top-up partner for all the seven mobile operators in Vietnam. Once the national distribution network had been established; the common man had been introduced to and made accustomed to the idea of mobile transactions, evolving to more complex financial transactions was only natural for. Currently, with 25,000 agents nation-wide, collections have become a huge operational challenge for. The primary reason being the limited reach of traditional banking services in the country, 80% of the nation s population does not have a bank account or any interface with a financial institution. The only way to make payments and collect on dues is to move cash physically along the distribution channel, making it a time consuming, costly and risky task. Solving this riddle was the beginning of mobile commerce for and for Vietnam. Vietcom Bank, Vietnam s largest commercial bank and launched a bank enabled mobile wallet ewallet service for its agents. Using the ewallet, agents could now sell/purchase airtime for top-up, accept payments for utility bills, provide money transfer services. Services and payments could now be delivered using the mobile handset, anytime anywhere. What had done was that they had essentially taken the bank out of the cities, out of the office buildings and into villages, into farms, to the masses at a fraction of the cost the bank would have incurred. Unprecedented Growth Within one year of operations, has grown to be the largest top-up distributor for all 7 operators it has partnered with. At present, is starting to move forward with the hope of creating a full-fledged mobile commerce ecosystem by extending the functionality of the mobile wallet beyond our agents and onto the end users across our different service providers. The ultimate goal of is to be more than a service, to be a Tool for Living for the poor. Armed with a cell-phone, a SIM card and capability to deliver multiple services, people in rural areas can make a from being a agent. A mobile entrepreneur is capable of generating an extra income of USD 20 per month. For a country where 80% of the population live below the poverty line, that is a 30% increase in income. As a result of s achievements, the State Bank of Vietnam has awarded them an E-Wallet license. Under this license, could now create mobile wallets for all subscribers and enable a host of mobile commerce services. This is how mmoney* Amdocs technology and expertise in creating mobile transaction services has been instrumental in the success of by creating a service delivery environment that has allowed the business to grow and mature as when it required. Amdocs unmatched multi party interfacing capabilities ensure that is never restricted in its search for new partners and opportunities. 8

9 The Way Ahead, in the future, plans to launch mobile wallets for the entire mobile subscriber population of Vietnam, enabling a host of features like safe storage, domestic and international peer-to-peer fund transfers, retail payments, bill payments, microfinance payment and many more. The management at has realized that to create a commercially sustainable m-commerce service they need to identify specific market segments that would not only readily take up the services but also ensure high number of transactions. In an m-commerce business environment the service provider needs to maintain focus on increasing transactions, as that is the main source of revenue. To kick start the services has identified the huge online gaming community of Vietnam. Online gaming is big in Vietnam, from MMORPG (Massively Multiplayer Online Role Playing Games) platforms to gambling houses; the Vietnamese are catching on in a big way to the interactive entertainment world provided by the internet. Currently 12.8% of all players on a gambling site come from Vietnam, the third highest contribution from a country. Pearl Research states that there will be more than 10 million Vietnamese participating in gaming activities by These online gamers have a huge requirement of non conventional money transfer services. To be able to pay game sites and especially fellow players for special add-ons, packs or for bets the player needs access to some form of electronic money. The problem lies in the fact that most of the players do not have access to a bank account or credit card. But the mobile penetration in this segment is almost 100%. has identified this group of young, tech savvy subscribers as the perfect launch pad for mmoney services. A product that will be able to provide the gaming community with mobile wallets that can support micro payments at a fraction of the cost of a credit card, has all the potential of being the killer app that will give m-commerce services a jumpstart in Vietnam. In the future envisions each and every mobile subscriber as a mmoney Entrepreneur. Anybody with a mobile phone will be able to sell talktime, accept bill payments, set up a remote POS, and many more services. By investing in a basic mobile handset the average Vietnamese can set-up a micro enterprise that could earn him up to $30 every month. 9

10 Key Learnings The success of the business model presents the rest of the world with a unique learning opportunity. has created a wonderful business model by ensuring benefits to all the stake holders, right from the MNO to the pre-paid subscriber. In its short existence has managed to breakthrough many conventions, establish new partnerships and used technological advances and have created a business model that can be replicated with great success in markets across the world. The most important take away from a study of the s experience, is their focus on the retail operation. is neither a telecom operator nor a banking/financial entity, but they are on the way to create a successful mcommerce ecosystem. Their core strength was that they possessed a strong retail network, which they enabled with the required technology and leveraged it to establish its reach to the customers, which will assist them in picking up financial services on mobile. This was the advantage that they sold to the operators and also used to recruit new agents. The retail network has its special place in mobile commerce applications. Firstly it provides the reach, necessary for services to be deployed and secondly they provide an assisted m-commerce environment, where the subscriber base can access the mobile wallet functions via the agent. The other important success factors in s approach to the business was their clear understanding of the parallel and complementing roles that technical capability and business requirements have in the evolution of a mobile commerce environment. Robust transaction engine Easy 3rd party interfacing Adaptability to market/business requirements Global standards compliance Modular design Clear road map Exhaustive reporting Transaction control feature technical capability business requirements Readily identifiable revenue sources Clear value proposition for services launched Crisp market segmentation Segment specific products and services Strategic partnerships Customer requirements Market intelligence Regulatory compliance 10