There are a variety of digital finance business models. This presentation includes examples of many.

1. Business Models in DFS
Claudia McKay, Greg Chen, and Peter Zetterli
9 March 2016

2. Agenda
1. Bank Business Model –
Equity Bank
2. MNO Business Model –
Airtel Money
3. Standalone Model – bKash
4. Diversity of Business Models
2

3. Links in the DFS value chain
Data / VAS Digital Channel
Physical
Channel
What sections of the value chain does the business own or control?
Who is legally
responsible for the
user accounts?
Whose brand(s)
do users see?
Who ’owns’ the
user relationship?
Accounts
Who sees and
controls user /
transaction data?
Are these data
being utilized to
offer Value-Added
Services?
Who controls the
key comms
channel (USSD,
SIM, data) used?
Who controls the
physical touch
points (e.g. agents
or ATMs), who
controls these?
3

4. Differing levels of controls
Data / VAS Digital Channel
Physical
Channel
What sections of the value chain does the business own vs outsource to partners?
Accounts
Shared control
Full control
No control
Completely controls the value chain item. Not dependent on any partner.
Partly controls the value chain item and/or shares it with partners
Controls no part of the value chain item. Value chain item may or may not
be important for the business model
4

5. Bank model: Equity Bank
5

6. In 2011, Equity Bank saw 6% of its cash transactions take place
in the agent channel. What is the share today?
A. 15%
B. 25%
C. 40%
D. 50%
A. B. C. D.
6%
39%
45%
10%
6

7. Majority of cash transactions have been shifted to the agent
channel
Source: Equity Bank Investor Briefing Q3 2015
0
10
20
30
40
3Q 2011 3Q 2012 3Q 2013 3Q 2014 3Q 2015
Number of transactions, in millions
ATM Branch Agency
Agenc
y
51%
ATM
27%
Branch
22%
Percentage of
transactions by channel,
as of Sept. 2015
7

8. Since 2004, Equity Bank has grown its deposit base by 40x and its total
loan portfolio by 60x. How much has its branch footprint grown in the
same period?
A. 0 – In fact, it’s
shrunk by 5%
B. 5x
C. 10x
D. 20x
A. B. C. D.
26%
10%
23%
42%
8

9. Target customer
Mass-market consumers
• Largest retail bank in Kenya
• 8.5m customers (2014)
• Half of all banked Kenyans are
Equity customers
• 94% of accounts have <$100
balance
Small & medium enterprises
• More recent focus of the bank
• Now over 70% of total loan book
• Over $1.8bn in SME lending
10

10. Digital Strategy has evolved in several phases
11

11. Equity 3.0: the next step in the evolution
• Licensed as Mobile Virtual Network Operator (MVNO)
• Rents space on the comms channel from Airtel
• Issues SIM cards and SIM overlay under Equitel brand
• Offers regular voice, SMS and data services alongside
an integrated financial services product
• Free P2P between Equity customers and
Orange Money wallets
• 30 day mobile loans up to $2,000 at 1.5% interest
• Free educational content
13

12. Client Accounts
Ownership of the value chain
Accounts Client Data / VAS Digital Channel Physical Channel
Customer accounts
are fully fledged
bank accounts
Equity Bank is the
only brand visible to
customers
Accounts
15

13. Ownership of the value chain
Accounts Data / VAS Digital Channel Physical Channel
Customer accounts
are fully fledged
bank accounts
Equity Bank is the
only brand visible to
customers
Equity Bank owns
the transactional
data
No other actor has
visibility on the data
Mobile loan is based
on data
16

14. Ownership of the value chain
Accounts Data / VAS Digital Channel Physical Channel
Customer accounts
are fully fledged
bank accounts
Equity Bank is the
only brand visible to
customers
Equity Bank owns
the transactional
data
No other actor has
visibility on the data
Mobile loan is based
on data
Equity Bank initially
relied on MNOs for
the channel
Paid Safaricom
$0.06/USSD session
In 2015 launched
Equitel MVNO
Digital Channel
17

15. Ownership of the value chain
Accounts Data / VAS Digital Channel Physical Channel
Customer accounts
are fully fledged
bank accounts
Equity Bank is the
only brand visible to
customers
Equity Bank owns
the transactional
data
No other actor has
visibility on the data
Mobile loan is based
on data
Equity Bank initially
relied on MNOs for
the channel
Paid Safaricom
$0.06/USSD session
plus SMS fees
In 2015 launched
Equitel MVNO
Owns a network of
22,000 agents
across Kenya
Compared to 166
branches and less
than 600 ATMs
Only network to rival
Safaricom’s 89,000
M-PESA agents
18

16. Profit model:
Digital lowers CAPEX and marginal costs to expand reach
Reduce infrastructure cost Lower transaction costs
• An agent transaction costs Equity
$0.88 less than a branch tx
• Moving away from Safaricom
USSD to Equitel MVNO saved
Equity $0.06 per mobile tx
• Rapid scale up of agent network
since 2010
150x
3000x
19

17. Profit model:
Digital channels drive deposit mobilization, revenue growth
Mass deposit mobilization New revenue sources
Transaction fees:
• Total transaction fee revenue grew by
29% in 2015 to $166m
• 8 million transactions per month on
Equitel channel (Aug 2015)
• USSD users average 2 txs / month while
Equitel users now average 21
Total deposits now $3.1bn
Agents collected $285m in
deposits in Aug 2015 alone
20

18. Equity has grown larger with ever lower reliance on expensive
branches and branch staff
0
5
10
15
20
2005 2007 2010 2014
Access points to 10k / 100k customers
Staff /10k Branches /100k (G) Agents /10k ATMs /100k
Source: Equity Bank annual reports
21

19. Key takeaways on the bank business model for DFS
1. DFS drives significant reduction in the cost of
physical infrastructure
2. DFS can generate significant cost of funds
reduction
3. These adjacencies enable banks to offer cheaper
transactions
4. Lack of control over the communications channel
can be a major challenge (and cost)
22

20. MNO Model: Airtel Money 23

21. What is the average amount of time it takes for an MNO to break
even on a mobile money service?
A. Less than one year –
these guys are money
making machines!
B. Between one and three
years
C. Between three and five
years
D. More than five years –
it’s a tough business
A. B. C. D.
10%
7%
31%
52%
24

22. What share of total revenue are the top quarter of Mobile Money
deployments making for the network operator?
A. 2%
B. 10%
C. 25%
D. 50%
A. B. C. D.
0%
8%
50%
42%
25

23. 11%
EcoCash
Zimbabwe
26%
Mobile money is growing as share of total revenue for MNOs
MM share of total revenues for respondents to GSMA SOTIR 2015
Source: GSMA State of the Industry 2015
of MNO-led services
earn more than 10%
of total revenue from mobile money
22%
M-Pesa
Tanzania
20%
M-PESA
Kenya
26

24. Airtel Money in Africa
Established in August 2012
– Live in 16 countries
– 12m active customers
– 250,000 active agents
– 7m txns per day
– $70m in txns value per day
27

25. Target customer and value proposition
Mass-market voice customers
• DFS was devised primarily as a
loyalty play aimed at the existing
mobile telephony user base
• Increasing competition has led to
customer churn
• In addition, new voice customer
growth is set to fall from 8% to
4% as markets near saturation
• So customer retention will grow
further in importance
Target customer
0%
1%
2%
3%
4%
5%
Q1
2000
Q1
2002
Q1
2004
Q1
2006
Q1
2008
Q1
2010
Q1
2012
Q1
2014
Customer churn rates 2000-2015
World Developed
0%
2%
4%
6%
8%
Voice customer growth
2010-15 2016-20
Source: GSMA Intelligence 2016
29

26. Target customer and value proposition
Value proposition
Low-barrier formal account
• Lower KYC than bank account
• Remote signup via agents or
directly on the mobile phone
Convenient access to services
• Transact on phone 24/7
• Cash transactions at tens of
thousands of agent locations
Rapidly expanding offering
• Data driven credit and insurance
• Evolving ecosystem of services
30

27. How are customers using mobile money?
Customer Transactions on mobile money
Source: GSMA State of the Industry 2015
2%
43%
5%
5%
3%
1%
31%
20%
27%
15%
1%
1%
32%
15%
0% 25% 50% 75% 100%
Trx Value
Trx Count
Air Time Bill Pay Bulk Disbursement Cash In Cash Out Merchant Pay P2P Transfers
Active customers conduct an average of 11 transactions/month and maintain
median account balance of $4.70

28. Ownership of the value chain
Accounts Client Data / VAS Digital Channel Physical Channel
Hosts all customer
accounts on its own
e-money platform
Airtel Money is the
only brand visible to
customers
All customer funds
are held in pooled
accounts at a bank
Accounts
32

29. Ownership of the value chain
Accounts Data / VAS Digital Channel Physical Channel
Hosts all customer
accounts on its own
e-money platform
Airtel Money is the
only brand visible to
customers
All customer funds
are held in pooled
accounts at a bank
Airtel Money owns
the transactional
data
No other actor has
visibility on most of
the data
Airtel Timiza mobile
loan is based on
transactional data
33

30. Ownership of the value chain
Accounts Data / VAS Digital Channel Physical Channel
Hosts all customer
accounts on its own
e-money platform
Airtel Money is the
only brand visible to
customers
All customer funds
are held in pooled
accounts at a bank
Airtel Money owns
the transactional
data
No other actor has
visibility on most of
the data
Airtel Timiza mobile
loan is based on
transactional data
Airtel owns the
digital channel
Cross promotions
with voice business
are often used (e.g.
free talk time equal
to P2P amount sent)
Digital Channel
34

31. Ownership of the value chain
Accounts Data / VAS Digital Channel Physical Channel
Hosts all customer
accounts on its own
e-money platform
Airtel Money is the
only brand visible to
customers
All customer funds
are held in pooled
accounts at a bank
Airtel Money owns
the transactional
data
No other actor has
visibility on most of
the data
Airtel Timiza mobile
loan is based on
transactional data
Airtel owns the
digital channel
Cross promotions
with voice business
are often used (e.g.
free talk time equal
to P2P amount sent)
Owns a network of
22,000 agents in
Kenya and 20,000 in
Tanzania
35

32. • Most transactions (except
cash-in) come at a fee
• 77% of MNOs derive most
revenue from customer fees
• In LAC and South Asia, get more
fees from businesses
Profit model - Revenues
Indirect Benefits – Reducing customer
churn and cost of airtime distribution
Direct Benefits – Transaction Fees
• High customer churn contributes
to price wars and falling margins
on the voice business
• Selling airtime and data bundles
via MM can be at least 20%
cheaper than through physical
scratch cards
Transaction fee revenue
Source: GSMA (2014) and GSMA Intelligence (2016)
0%
1%
1%
2%
2%
3%
3%
4%
4%
5%
5%
Safaricom Telesom MTN Uganda
Churn before MM vs. today
Before After
36

33. Profit Model - Costs
• Relatively little capex needed to launch, but
significant opex to run
• Upon launch, MNOs invest 6-8 times the revenue
generated to drive scale of agents and users
1. Agent commissions
2. Marketing
3. Personnel
Need time and resources to deploy robust agent network and acquire customers
54%
of top 10 provider
revenue goes to
agent commissions

34. Early investment pushes breakeven out past 36 months
Mobile money profitability over time (months)

35. Key takeaways on the MNO business model for DFS
1. Mobile money can be profitable but getting
there can be painful
2. Heavy losses in early years to build agent
network and acquire customers
3. Indirect benefits can be significant but not
always directly reflected in P&L
4. Increasingly, significant revenue requires an
ecosystem-based approach
43

36. Standalone model:
bKash
44

37. A. B. C.
27%
37%37%
What is the split between transaction fees and interest income for
bKash?
A. 15% transaction fees,
85% interest income
B. 50% transaction fees,
50% interest income
C. 85% transaction fees,
15% interest income
45

38. bKash: A brief history
2009 Two Partners Inspired by East Africa:
1. BRAC: world’s largest NGO – mass market social
service delivery with two large retail financial services
businesses
• BRAC Microfinance
• BRAC Bank
2. Money in Motion: Investment vehicle of Iqbal Qaudir
(MIT), Kamal Qaudir (Cell Bazaar), and Arun Gore (Grey
Ghost).
46

39. bKash: A brief history
BRAC
Enterprise
1
Enterprise
2
BRAC
Bank
bKashMinority Investors
(49%)
47

40. BRAC: 3 distinct retail channels
48

41. bKash: A brief history
Regulatory conditions
• 2011 launch – license for Mobile Financial Services held
by BRAC Bank
• bKash cannot lend: value of bKash mobile accounts
deposited in full with commercial banks
Initial Capital and Investors
• BRAC Bank 51%; Money in Motion 49%
• $10m from Gates + TA from ShoreBank/Enclude
• 2013 IFC and Gates Foundation invest
49

42. bKash: A brief history
A standalone independent operation
• Hires its own staff,CEO and CTO (recruited outside BRAC
and outside of Banking)
• BRAC assistance in year 1
Seconded 4 staff
First 5,000 agents from BRAC borrowers
• By year 2 few links to BRAC or BRAC Bank
"build it alone"
"if it relies on BRAC it will not succeed"
50

43. bKash: Scale
As of October 2015
Accounts 21 million
Active Accounts 9 million
Transactions Per Month 90 million
Value of Transactions Per Month $1.4 billion
Average Transaction Size $16
51

44. Ownership of the value chain
Accounts Client Data / VAS Digital Channel Physical Channel
“Mobile accounts“
issued by bKash;
redeemed by bKash.
Value of deposits sit
in pooled accounts
at commercial banks
bKash primary
visible brand; BRAC
Bank subordinate
Accounts
55

45. Ownership of the value chain
Accounts Data / VAS Digital Channel Physical Channel
bKash owns the
transactional data
bKash holds the
customer
identification
Data will be used to
develop new
services with bank,
insurance and MFI
partners
56

46. Ownership of the value chain
Accounts Data / VAS Digital Channel Physical Channel
MNOs provide
USSD access
bKash pays MNOs
7% of fee revenue
for access to their
USSD
bKash manages a
call center
bKash will launch a
smartphone
application
independent of
MNOs
57

47. Ownership of the value chain
Accounts Data / VAS Digital Channel Physical Channel
Commissions 100+
distributors that
oversee 100,000+
agents
bKash accounts can
be serviced at BRAC
Bank ATMs but not
at BRAC Bank
Branches or BRAC
Branches
58

48. bKash: Profit model
Fees
Interest
2014 Audit
Months
30-42
REVENUE
$84 Million
Agent
Comm-
issions
USSD
Corporate
COSTS
$79 Million
PROFIT
$5 Million
800 staff
110,000 agents
60

49. Key takeaways on the standalone business model for DFS
• Startup - neither MNO or Bank - can scale
• Challenging profit model:
• No existing business lines to cut cost
• No adjacencies or cross-sell
• Profitability relies on transaction fees
• Strategy and sequencing key:
• Early scale and profitability come from sharp
focus on basic payments
• Medium term pivot towards broader array of
services; connected services
61

50. Diversity of Business
Models
62

51. • The digital channel is not in itself a business model
• It is a tool that enables innovation and diversity of models:
• New ways to deliver existing services
• New services that weren’t possible in the past
• New partnerships based on specialization and interconnection
• A successful DFS ecosystem allows and even requires a
diverse set of players and business models to succeed
• This session presents three quick cases just to give a flavor of
the range of DFS business models that are possible
There are myriad potential DFS models
64

52. Value chainCustomer value proposition
Profit model
Introducing our analytical framework
Capturing the key aspects of the business models
What cost or operational efficiency benefits does the
service bring to the business?
Who is the target
customer?
Who owns the
customer relationship
and brand?
Data / VAS
Digital
channel
Physical
channel
What is the value proposition for the target
customer?
What sections of the value chain does the business own vs
outsource to partners?
Accounts
What additional revenue or loyalty benefits does
the service bring to the business?
• s
Shared control
Full control
No control
Completely owns the value chain item. Not dependent
on any partner.
Partly owns the value chain item and/or shares it with
partners
Owns no part of the value chain item. Value chain item
may or may not be necessary to the business model
Color coding legend
65

53. Commercial Bank of Africa
Powering digital credit on the back-end
M-Shwari is a mobile-only deposit and credit account offered as a partnership between an
MNO mobile money provider (Safaricom in Kenya) and a bank (Commercial Bank of
Africa)
66

54. Value chainCustomer value proposition
Profit model
Value proposition:
Commercial Bank of Africa
Powering digital credit on the back-end
Target customer: Mass-
market consumers
Issues full bank
accounts
Holds regulatory
compliance
Only accessed
via M-PESA and
this is the brand
most customers
know
Customer ownership:
Safaricom M-PESA
• Brings mass market Kenyans (about 50% of which were
previously unbanked) the full benefits of a banking product
(interest, deposit insurance, access to credit) – using mobile
money as a gateway.
Credit scoring on
MNO data
Underwrites the
loans on own
books
Owns repayment
history data, but
MNO partner
also has visibility
Owns and runs
the credit scoring
algorithm in-
house
The M-Shwari
account is only
accessible via M-
PESA wallet
Available to
15.7m active
Safaricom users
Cash-in and
cash-out services
only accessible
via 91k M-PESA
agents (not via
CBA branches)
Increase revenue through profitable digital credit
Exact nature of Safaricom-CBA profit sharing is not public
• Total value of loans disbursed since launch (as of Feb 2016): $782 million
• Average loan size: $30
• Loan facilitation fee or 7.5%
• Deposit balance (Feb 2016): $73 million
• Average account balance (90 day active accounts): $5
• Interest rate on M-Shwari deposits 2 – 5%, above the 1.5% weighted
average reported by CBK
• CBA has minimal retail presence/infrastructure as its traditional
target market has been the corporate sector
• M-Shwari partnership allows access to a mass market retail
customer base by outsourcing channels
Reduce costs through low cost deposits
Accounts Data/VAS
Digital
channel
Physical
channel
Customer-facing digital and physical
channels are owned by Safaricom
67

55. Value chainCustomer value proposition
Profit model
Value proposition:
Instaloan
E-money wallets
belong to Globe
(GCash)
Lending license
also with Globe
(Fuse)
Credit scoring on
Globe (MNO and
Gcash) data
Completely owns
the repayment
history data
Disbursement
and repayment
via Globe
(GCash) wallets
Uses only Globe
communications
channels
Cash in/out takes
place via Globe
(GCash) agents
Accounts Data/VAS
Digital
channel
Physical
channel
Similar model, except:
• Controls entire value chain
• Subsidiaries playing all the key
roles required by the model
• MM (accounts + CICO)
• MNO (comms)
• Lender (scoring + credit)
68

56. Value chainCustomer value proposition
Profit model
Value proposition:
All accounts
belong to MNO
partner – just e-
wallets, not bank
accounts
Credit scoring on
MNO data
Owns and runs
the credit scoring
algorithm
Underwrites the
credit on own
books
Owns repayment
history data, but
MNO partner
also has visibility
Disbursement
and repayment
via MNO partner
wallets
Relies on MNO
partner comms
channel for
transactions
Reliant on MNO
partner agents
for cash in/out
Accounts Data/VAS
Digital
channel
Physical
channel
Similar model, except:
• Controls almost none of the
value chain
• Highly specialized on only
• Analytics
• Lending
• Reliant on MNO partner for
accounts, CICO, comms and
access to customer data
69

57. Oxxo
Leveraging retail infrastructure for financial services
Oxxo is Mexico’s largest retailer by number of outlets with high traffic, long opening hours,
and many unbanked customers. They are now leveraging their retail infrastructure to offer
Saldazo, a debit card linked to bank account, in partnership with Banamex bank.
1,506
1,623
1,801
12,597
7-Eleven
Banamex
Bancomer
Oxxo
# of retail outlets
Banking sector
total: 11,000
70

58. Value chainCustomer value proposition
Profit model
Value proposition:
Oxxo
Leveraging retail infrastructure for financial services
Target customer: Mass-
market retail consumers
Low KYC
account at
partner bank
Banamex
Cards & ads co-
branded Oxxo
and Banamex
Customers think
of it as an Oxxo
card product
Customer ownership:
Oxxo
• Low-barrier Saldazo “savings card” to store money safely
• Special discount offers and loyalty bonuses for Oxxo stores
• Better control of money with SMS alerts, digital statements
• Use at any VISA enabled merchant
Banamex owns
customer data,
shares reports
with Oxxo
Oxxo utilizes
user data for
loyalty rewards
and improved
marketing
Transactions
happen at regular
POS devices
Account may be
linked to Telcel
phone for mobile
P2P, airtime and
bill pay
CICO at 12,597
Oxxo stores
Oxxo has long
opening hours
(minimum 12h/7
days, some 24/7)
Retail payments
at any VISA POS
Direct revenue from transaction fees
• Agency banking: 3.8m txs/mth
• 41% of the national market share
• Remittances: 200,000 txs/mth after 6 months
• Expecting to reach at least 1.5m
• Projected to generate 17% of total operating profit in 2-3 years
• Convenience stores are fairly commoditized, so Oxxo uses this as a
competitive advantage
• Gives people a reason to choose Oxxo
• Oxxo previously didn’t have much data on cash customers, but can now
• Incentivize customers via loyalty rewards
• Use data analytics to design better promos and marketing campaigns
• Aimed at mass market retail consumer base
• Oxxo has 12m purchases daily (~1 per minute per store)
• Mostly FMCGs with average ticket size ~$3 USD
• Leverages existing business for cost efficiencies
• Large retail footprint already in place, staffed and equipped
• Extensive cash handling processes
Generate traffic and data for core business
Accounts Data/VAS
Digital
channel
Physical
channel
71

59. Zoona
Third party agent network with over-the-counter transfers
Zoona enables MSE businesses to offer over-the counter payments and remittance
services, access working capital and purchase inventory through digital channels.
72

60. Value chainCustomer value proposition
Profit model
Value proposition:
Zoona
Third party agent network with over-the-counter transfers
Target customer: Micro and
small enterprises
Hosts internal
agent wallets
Float is held by a
banking partner
Does NOT offer
consumer wallets
(yet)
Customer ownership:
Zoona
• Consumers:
• Instant money transfer, bill pay and MM deposit or withdrawal
over-the-counter (OTC) with no need to register an account
• Agents:
• New transaction revenue and increased footfall
• Access to working capital
• Digital payment of inventory
Agent credit
based on tx data
to accelerate the
growth of its
physical channel
Credit scoring on
basis of Zoona
transaction data
Kiva.org provides
lending capital
Relies on SMS
and data services
by MNOs for
transactions
End customers
do not interact
directly with any
digital channel,
since service is
over-the-counter
Zoona acquires,
manages and
owns all its
agents
650 agents and
1,100 outlets in
Zambia
Revenue is driven by transaction fees
• Consumer services
• $9m in transactions per month
• Domestic money transfer (5-10% of tx value, capped at $9)
• Bill payments, airtime sales
• Agent services
• Working capital loans to agents (21% APR)
• Supply chain distributor payments (e.g. SABMiller)
• Fixed costs:
• Agents finance the costs for rent and operating expenses
• Loan capital for agents is provided by Kiva.org and it’s crowdsourcing
network
• Zoona pays for staff, agent training, and marketing
• Marginal costs:
• Most costs are marginal, reducing risk for Zoona
• Agents receive between 20% - 60% of transaction fees
• As a startup with no existing infrastructure, Zoona has built its
agent network through entrepreneurs and existing retailers
• Pure agents (Zoona franchise)
• Retail outlets with agency as a side business
• Distributors who use Zoona for B2B (FCMG and airtime)
CAPEX is kept low by “outsourcing” to agents
Accounts Data/VAS
Digital
channel
Physical
channel
73

61. Value chainCustomer value proposition
Profit model
Value proposition:
Kopo Kopo
Value added services for retail SMEs
Target customer:
MSE retail merchants
Hosts internal
merchant
accounts
Float is held by a
bank partner
Controls
settlement of
merchant funds,
allowing for
automated
repayments of
cash advance
loans
Customer ownership:
Kopo Kopo
• Merchants:
• Reduce costs of cash handling (eg: leakage)
• Electronic record of all transactions
• Access to loans and other value added services
Partners (Mobile money providers)
• Increase transaction revenue while outsourcing investment in
merchant focused ops and tech
Utilizes tx data to
offer various VAS
directly to
merchants
Merchant credit
based on KK tx
data is a major
revenue source
Owns and runs
the credit scoring
algorithm in-
house
Kopo Kopo owns
the merchant
web platform for
completing
transactions,
managing
account, and
accessing VAS
Safaricom
controls the
customer
payments
instrument
(M-PESA)
Kopo Kopo
acquires, runs
and owns the
relationship with
all merchants on
their platform
Total 10,000+
merchants
Consumer transaction fees
• Merchants in Kenya charged 1% of transactions received via M-PESA
• Fee split evenly between Kopo Kopo and M-PESA
• Primary costs are:
• acquisition and servicing of merchants
• development and maintenance of technology platform
• Extends working capital loan to merchants based on transaction history
• Loan has no maturity, but it repaid as an additional merchant fee on
transaction volume
• This incentivizes merchants to push txs onto the channel so as to repay
quickly
• Direct revenue from credit product has already surpassed transaction fee
revenue
• Kopo Kopo offers digital payment acceptance to a wide variety of
merchants, from micro-enterprises up to large retailers
• Kopo Kopo aggregates merchants for mobile money systems like
M-PESA, but the consumer relationship and experience remains
with the MNO
Merchant credit product
Accounts Data/VAS
Digital
channel
Physical
channel
Similar model, except:
• Focused on merchants (not
agents) as immediate users
• Stronger focus on credit product
in the core profit model
74

62. Accounts Data/VAS Digital channel Physical channel
Legend
Shared control
Full control
No control
Completely controls the value chain item. Not dependent on any partner.
Partly controls the value chain item and/or shares it with partners
Owns no part of the value chain item. Value chain item may or may not be
necessary to the business model
Is moving partially into controlling the value chain item
Is moving significantly into controlling the value chain item

63. Accounts Data/VAS Digital channel Physical channel
Business models focused on company strengths and assets
Range of models that specialize in a narrow part of the DFS value chain
OXXO
Vast retailer offers agency
banking and transactional
account
M-Shwari (CBA)
MNO (Safaricom) brings
channel, retail presence,
and marketing expertise
Bank brings credit
license, expertise
and capital
Zoona
OTC agent aggregator that offers
agents credit based on tx data
Globe InstaloanComprehensive play by
MNO with subsidiaries
Digital channel from Globe,
agents from MM arm GCash
Jumo
Specialised lender that
brings credit license and
scoring model
Relies on MM/MNO partners for
everything else
Kopo Kopo
First outsourced, but now
controls its credit business
Merchant aggregator that offers
merchants credit b. on tx data
Equity Bank
Bank that established its own
agent network

64. Accounts Data/VAS Digital channel Physical channel
In a digital business, the physical channel is still important
OXXO
Vast retailer offers agency
banking and transactional
account
M-Shwari (CBA)
MNO (Safaricom) brings
channel, retail presence,
and marketing expertise
Bank brings credit
license, expertise
and capital
Zoona
OTC agent aggregator that offers
agents credit based on tx data
Globe InstaloanComprehensive play by
MNO with subsidiaries
Digital channel from Globe,
agents from MM arm GCash
Jumo
Specialised lender that
brings credit license and
scoring model
Relies on MM/MNO partners for
everything else
Kopo Kopo
First outsourced, but now
controls its credit business
Merchant aggregator that offers
merchants credit b. on tx data
Equity Bank
Bank that established its own
agent network

65. Accounts Data/VAS Digital channel Physical channel
DFS business models are not static but evolve (rapidly)
Time
Equity 2.0
OXXO 1.0
Equity 3.0
OXXO 2.0
Offered retail network as
agency provider for banks
Issuing card based accounts
under joint brand, mining tx
data for loyalty, analytics
Est. own agent network for
cash in/out to accounts
Secured own MVNO
license, mining transaction
data for advanced products

66. Advancing financial inclusion to improve the lives of the poor
www.cgap.org