HOW TO SUCCEED IN YOUR DIGITAL JOURNEY: A SERIES OF TOOLKITS FOR FINANCIAL SERVICE PROVIDERS TOOLKIT #6: BECOME A DIGITAL PROVIDER HOW TO SUCCEED IN YOUR DIGITAL JOURNEY: i A SERIES OF TOOLKITS FOR FINANCIAL SERVICE PROVIDERS TOOLKIT #6: BECOME A DIGITAL PROVIDER BECOME A PROVIDER OF DIGITAL CREDIT AND SAVINGS: The case of Commercial Bank of Africa in Kenya, Rwanda, Uganda and the United Republic of Tanzania OTHER INNOVATIVE PATHS AND PARTNERSHIPS: BECOME A MOBILE VIRTUAL NETWORK OPERATOR: THE CASE OF EQUITY BANK IN KENYA LEVERAGE AN E-MONEY ISSUER LICENCE TO DEVELOP A SHARED MOBILE BANKING PLATFORM: THE CASE OF MICROFINANCE INSTITUTIONS IN BENIN By PHB ACADEMY and MICROLEAD MoKash loan limit consultation via mobile phone Courtesy of PHB Development © Cyril Ducottet HOW TO SUCCEED IN YOUR DIGITAL JOURNEY: A SERIES OF TOOLKITS FOR FINANCIAL SERVICE PROVIDERS TOOLKIT #6: BECOME A DIGITAL PROVIDER ii ACKNOWLEDGEMENTS We would like to thank the management and staff of the following institutions for contributing to this toolkit. We thank them for their time and for sharing their information, lessons learned and recommendations, to enable other financial service providers to succeed on their digital path. • Commercial Bank of Africa • Consortium Alafia We would like to thank in particular the following individuals for their time and effort: • Philippa N. Muzahura and Carolyn Njenga from Commercial Bank of Africa • Ignace Dovi and Jean Dah Hounnon from Consortium Alafia AUTHORS Digital credit and savings: Isabelle Mușat and Aurélie Wildt Dagneaux Becoming a mobile virtual network operator: Chris Statham and Aurélie Wildt Dagneaux Sharing a mobile banking platform: Lisa Chassin and Aurélie Wildt Dagneaux REVIEW COMMITTEE United Nations Capital Development Fund – MicroLead: Pamela Eser, Hermann Messan and Ivana Damjanov Mastercard Foundation: Ruth Dueck-Mbeba and Amos Odero EDITOR Chela Cea February 2018. Copyright © UN Capital Development Fund. All rights reserved. The views expressed in this publication are those of the author(s) and do not necessarily represent the views of UNCDF, the United Nations or any of its affiliated organiza- tions or its Member States. The designations employed and the presentation of material on the maps and graphs contained in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations or UNCDF concerning the legal status of any country, territory, city or area or its authorities, or concerning the delimitation of its frontiers or boundaries. HOW TO SUCCEED IN YOUR DIGITAL JOURNEY: A SERIES OF TOOLKITS FOR FINANCIAL SERVICE PROVIDERS TOOLKIT #6: BECOME A DIGITAL PROVIDER TABLE OF CONTENTS iii iv List of figures 34 SECTION 2: TESTING AN 64 ANNEXES INNOVATIVE MODEL— v List of tables 64 Annex 1: Context of Kenya WHEN A BANK BECOMES vi List of boxes A MOBILE VIRTUAL 66 Annex 2: Context of vi List of tools NETWORK OPERATOR Uganda vii List of acronyms 34 Introduction to mobile 68 Annex 3: Context of virtual network operators the United Republic viii Definitions of Tanzania 38 The case of Equity Bank— Digital path to become a 70 Annex 4: Context of Benin mobile virtual network operator 71 Annex 5: Details on Commercial Bank of 01 INTRODUCTION: 40 The case of Equity Bank— Africa—Savings accounts OVERVIEW OF THE Implementation 72 Annex 6: Details on TOOLKIT PROJECT 44 The case of Equity Bank— Commercial Bank Achievements of Africa—Technical integration of 48 The case of Equity Bank— M-Shwari Key success factors, SECTION 1: BECOMING A Lessons learned, Next steps 73 Annex 7: Details on 05 Commercial Bank of DIGITAL PROVIDER Africa—Branding and 05 Introduction to digital marketing strategies used credit and savings in different countries SECTION 3: TESTING 18 The case of Commercial 50 Bank of Africa—Executive AN INNOVATIVE summary PARTNERSHIP MODEL— SHARING A MOBILE 74 About MicroLead 18 The case of Commercial BANKING PLATFORM Bank of Africa—Digital path 74 About PHB Academy and results 50 Introduction to shared mobile banking platforms 75 About UNCDF 23 The case of Commercial Bank of Africa— 55 The case of microfinance 75 About Mastercard Implementation institutions in Benin— Foundation Executive summary 30 The case of Commercial Bank of Africa—Key success 55 The case of microfinance factors, Challenges and institutions in Benin— lessons learned, Next steps Digital path and objectives 57 The case of microfinance institutions in Benin— Approach to implementing digital finance 59 The case of microfinance institutions in Benin— Results, Key influencing factors, Lessons learned, Foreseen challenges, Next steps HOW TO SUCCEED IN YOUR DIGITAL JOURNEY: A SERIES OF TOOLKITS FOR FINANCIAL SERVICE PROVIDERS TOOLKIT #6: BECOME A DIGITAL PROVIDER iv LIST OF FIGURES 05 FIGURE I 27 FIGURE V 43 FIGURE X Key digital credit and savings Steps to access M-Shwari via Equity Bank architecture products M-Pesa SIM application toolkit menu 46 FIGURE XI 06 FIGURE II 28 FIGURE VI Equity Bank transaction number Main partnerships observed and volumes (May 2015 versus involving a financial institution Steps to access MoKash Uganda May 2016) for a digital credit and savings via MTN Mobile Money USSD product code 48 FIGURE XII 21 FIGURE III 38 FIGURE VII Equity Bank transaction number trends (2011–2016) M-Pawa user demographics Digital journey taken by Equity (percentage of M-Pawa users, Bank n=80), 2014 56 FIGURE XIII 41 FIGURE VIII Role of the different partners in 23 FIGURE IV the shared platform project in Equity Bank product and service Benin M-Shwari registration steps offering 43 FIGURE IX Equity Bank channel offering HOW TO SUCCEED IN YOUR DIGITAL JOURNEY: A SERIES OF TOOLKITS FOR FINANCIAL SERVICE PROVIDERS TOOLKIT #6: BECOME A DIGITAL PROVIDER LIST OF TABLES v 07 TABLE 1 16 TABLE 6 45 TABLE 11 Examples of partnerships Potential non-financial risks Equity Bank strategic objectives involving a financial institution identified from digital credit and and achievements in becoming for a digital credit and savings savings implementation a mobile virtual network product operator 19 TABLE 7 09 TABLE 2 53 TABLE 12 M-Pesa revenue and customer Digital credit and savings numbers in Kenya Examples of interoperable projects in the pipeline in Africa (FY2014–FY2017) third-party platforms worldwide, 2017 13 TABLE 3 24 TABLE 8 Types of financial risks Interest rates paid on savings identified in digital credit and for different Commercial Bank of savings Africa digital products 14 TABLE 4 25 TABLE 9 Potential financial risk areas Detailed comparison of identified from digital credit and Commercial Bank of Africa digital savings implementation credit and savings products 15 TABLE 5 32 TABLE 10 Types of non-financial risks Key figures on the digital credit identified in digital credit and and savings products launched savings by Commercial Bank of Africa HOW TO SUCCEED IN YOUR DIGITAL JOURNEY: A SERIES OF TOOLKITS FOR FINANCIAL SERVICE PROVIDERS TOOLKIT #6: BECOME A DIGITAL PROVIDER vi LIST OF BOXES 38 BOX 1 61 BOX 4 61 BOX 6 Key figures on Equity Bank Bim in Peru and the challenge of Bim in Peru and the challenge of Limited agent network development technical integration 59 BOX 2 61 BOX 5 62 BOX 7 Example of Bim, a shared Bim in Peru and the challenge of Bim in Peru and the challenge mobile platform in Peru service offering of effective use of services by clients 60 BOX 3 Lessons learned from Bim, a shared mobile platform in Peru LIST OF TOOLS 10 TOOL 1 17 TOOL 4 54 TOOL 7 Key adoption barriers and Checklist for the launch of Key success factors for shared mitigation strategies for digital a digital credit and savings platforms credit and savings product 54 TOOL 8 12 TOOL 2 37 TOOL 5 Main challenges to anticipate Key success factors for the Key success factors or pre- for shared platforms launch of a digital credit and requisites to become a mobile savings product virtual network operator 13 TOOL 3 37 TOOL 6 Risk management for digital Checklist for establishing a credit and savings mobile virtual network operator HOW TO SUCCEED IN YOUR DIGITAL JOURNEY: A SERIES OF TOOLKITS FOR FINANCIAL SERVICE PROVIDERS TOOLKIT #6: BECOME A DIGITAL PROVIDER LIST OF ACRONYMS vii Association de Lutte pour la promotion des KSh Kenya shilling* ALIDé Initiatives de Développement KYC know your customer API application programming interface MDI microfinance deposit-taking institution ATM automated teller machine MFI microfinance institution Banque Centrale des Etats de l’Afrique de MIS management information system BCEAO l’Ouest MM mobile money BOT Bank of Tanzania MNO mobile network operator BOU Bank of Uganda MTN Mobile Telephone Networks CapEx capital expenditures MVNO mobile virtual network operator CARMES Carte Magnétique d’Epargne Sécurisée OpEx operational expenditures CBA Commercial Bank of Africa PIN personal identification number CBS core banking system RF Rwanda franc* CFAF CFA franc* SMS short message service DC&S digital credit and savings SOA service oriented architecture DFS digital finance service(s) STK SIM application toolkit e-money electronic money Tanzania shilling* Faîtière des Caisses d’Epargne et de Crédit TSh FECECAM Agricole Mutuel du Bénin U Sh Uganda shilling* FI financial institution UNCDF United Nations Capital Development Fund FSP financial service provider US$ United States dollar* GSM Global System (or Standard) for Mobile USSD unstructured supplementary service data ID identification document *Currency symbols: UNCDF uses ‘CFAF’ for the CFA franc, ‘KSh’ for the Kenya shilling,