1Introduction and Context 3 2Global Context on Mobile Money 4



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Terms of Reference

Key Learnings from the Vodacom M-PESA South African Journey



August 2016

Table of Contents


1Introduction and Context 3

2Global Context on Mobile Money 4

3Project Objectives 5

4Project Scope 5

5Methodology 6

5.1Review of relevant literature on Mobile Money and identify what have been the key success factors in other markets and why or why not they are not applicable in South Africa. 6

5.2Focused interviews with authorised MPESA Agents, Customers, and other Retail shops that had partnership with MPESA. 6

5.3Focused interviews with regulators including the South African Reserve Bank and Competition Commission. 6

5.4Mystery shopping exercises at FSP outlets that serve the low end of the market. 6

5.5Any other approaches suggested by the successful bidder. 6

6Deliverables 6

7Research Questions 8

7.1What factors have influenced the growth of mobile money in South Africa, as oppose to other markets such as Kenya, Tanzania, etc.? 8

7.2What was the view of the current external factors, as well as those forecasted, at the time of the M-PESA deployment in South Africa? 8

7.3What were the primary bases for the vision and/or strategic purpose behind launching M-PESA South Africa? 8

7.4How did the distribution and marketing approaches utilised by Vodacom M-PESA impact on the success of the overall brand and product success? 8

7.5What was the key motivation behind keeping the brand name, M-PESA, in South Africa? 8

7.6Which specific target market did Vodacom earmark for M-PESA? 8

7.7What was the role of the sponsoring bank regarding agent ownership? 8

7.8Did Vodacom M-PESA contribute to the creation of certain misconceptions relating to the cost of the service? 8

7.9What were some of the other hindrances to the success of the M-PESA go-to-market strategy? 8

7.10 What were some of the possible misconceptions regarding the profitability of agents? 8

7.11 What led Vodacom/Vodafone to finally take the decision to terminate the product? 8

8Timing 8

9Contents of proposal 8

10Basis of award 10

11Contact 10



1Introduction and Context


With the March 2016 decision to terminate the domestic M-PESA solution in South Africa, both Vodacom and the FinMark Trust (FMT) identified an opportunity for an independent and reflective assessment of the journey taken by Vodacom; taking into account the state of the mobile financial services industry as a whole, including other impactful market conditions in the domestic market. FinMark Trust intends to assist the organisation in formulating a ‘post-mortem’ analysis of the factors that drove certain results in the South African domestic market. The study will articulate valuable findings for not only Vodacom’s internal purposes, but also for the use of the mobile financial services industry as a whole.

FMT would thus like to engage a consulting company to help it engage all the key stakeholders that will help it answer the questions regarding the performance of MPESA South Africa.

With a focus on financial inclusion and the role of mobile money, the 2015 South Africa FinScope Survey indicates the following information:


  • Levels of financial inclusion remain stable at 87%.

  • About 31.2 million (84%) of adults are formally served; that is they have a bank and other formal non-bank product/service(s).

  • While overall inclusion figures have not changed substantially, the make-up of inclusion in terms of product usage has changed:

    • The percentage of the banked population increased from 75% in 2014 to 77% in 2015.

    • The percentage of adults relying exclusively on informal mechanisms to manage their money declined from 6% in 2014 to 3.4% in 2015.

  • A breakdown of the critical area of remittances reveals:

    • Total remittances have declined slightly (from 23 - 21%), as well as the frequency with which people are remitting. This is interesting to note considering that household incomes and cellphone-based remittances have increased from 1.5m to 1.9m. This could potentially be linked to fewer people being financially aided by friends and family.

    • 31% (11.6 million) of the adult population use cellphones to manage their finances, but mainly to buy airtime.

    • Channels used for remitting money underwent the following movements:

      • Through a bank: increased by 36% (from 2.5 million to 3.4 million).

      • Through a supermarket: increased by 50% (from 2.2 million to 3.3 million).

      • Through a cellphone: increased by 27% (from 1.5million to 1.9 million).

However, higher levels of inclusion do not necessarily mean that people are benefiting from the financial products that they have. Users are not making the best use of their transactional products in order to save on transactional cost, time, transport costs and queuing time – quality of life is, therefore, not being improved to full potential.

Furthermore, although smartphone penetration in the adult population is narrowing the digital divide with about 18.9 million adults having smartphones, digital adoption is not necessarily progressing at the same pace – with only 40% of adult population using smartphone applications. The study shows that 37% of the population use digital payment mechanisms on a monthly basis; the other 63% opt to use traditional brick and mortar branches to pay bills, send remittances or transfers.

Overall, the study shows that there has not been a dramatic change in financial inclusion in South Africa. FinMark Trust aims to continue with its forward-thinking through its investigation into the drivers and inhibitors of mobile money services in South Africa and other developed markets with particular emphasis on the journey of MPESA in South Africa.

2Global Context on Mobile Money


One need not look past the immediate statistics to prove that M-PESA has fundamentally altered the landscape of financial services, especially in some developing African markets.

According to the 2015 GSMA Report on the state Mobile Money, the service was available in 93 countries, however:



  • Only 51 of those were considered to be under an enabling regulatory environment. More regulators are recognising the importance of creating an open and level playing-field
for mobile money services, although policy improvements are still required to ensure mobile financial services reach the full addressable market and achieve financial inclusion. These objectives need to address the balance of not only managing the cost of ‘owning’ the customer, but also the associated industry risks of doing so.

  • Only 19 of these markets had more registered mobile money account-holders than bank account-holders.

  • Lastly, only one-third of these markets had 10x more registered agents than bank branches.

The graphic below depicts the relationship between the prevalence of mobile money in developing markets and the income-level in those markets.



Figure 1 - (Source: GSMA 2015 State of the Industry Report – Mobile Money)

3Project Objectives

The study should achieve the following:



  1. Develop an assessment of Mobile Money in South Africa through with a particular emphasis on the deployment and performance of Vodacom MPESA in South Africa. The study should look at the macro overview of the South African environment and its conduciveness to mobile money and why the unbanked do not react positively to mobile money in South Africa.

  2. Overviews of the factors that affect banking and mobile money in South Africa as opposed to other markets in Africa. What data do the Financial services providers use in South Africa to offer banking services to the underserved? This should involve:

    1. Assessment of the conduciveness of the regulatory environment to Mobile Money in South Africa as opposed to other markets in Africa.

    2. Assessment of the distribution network for Vodacom MPESA and marketing approaches used by Vodacom affected the performance of Vodacom M-PESA.

Assessment of the performance of active and inactive customers towards M-PESA.

    1. What was Vodacom MPESA’s unique value proposition and Brand appeal to the Vodacom customers?

    2. Include an explanation of how other relevant information/processes, such as data, price, banking infrastructure and branding of the product affected the performance.

  1. Identify and explain opportunities to launch a Mobile Money solution that can serve the underserved in South Africa. The study should help to answer the question, is there an opportunity for Mobile Money in South Africa and how should it be harnessed?

4Project Scope


The study will focus on the factors that drove the termination of MPESA in South Africa and do a “post-mortem” analysis of the factors that drove certain results in the South African domestic market. The project will articulate valuable findings for not only Vodacom’s internal purposes, but also for the use of the mobile financial services industry as a whole.

The following institutions will be within the scope:



  • MPESA Agents across the country

  • MPESA Customers

  • Central Bank of South Africa

  • MPESA Billers

  • MPESA Business partners in South Africa and these could include Banks or Big Retailer shops



5Methodology


The project methodology will entail:

5.1Review of relevant literature on Mobile Money and identify what have been the key success factors in other markets and why or why not they are not applicable in South Africa.

5.2Focused interviews with authorised MPESA Agents, Customers, and other Retail shops that had partnership with MPESA.

5.3Focused interviews with regulators including the South African Reserve Bank and Competition Commission.

5.4Mystery shopping exercises at FSP outlets that serve the low end of the market.

5.5Any other approaches suggested by the successful bidder.

6Deliverables

The deliverables for this project will be:

6.1 Inception report - Outlining the methodology that will be used to conduct the research, project timelines including deliverables and key milestones (in MS Word).

6.2 Detailed report - Which must include an executive summary, assessment of key objectives as articulated above, as well as a set of recommendations to be taken. The detailed report should include the analysis based on:



  • Research: A body of evidence is required upon which to argue that there is r no scope for Mobile Money in South Africa and spell out the key success factors.

  • Accompanying PowerPoint presentation.

  • Presentations to two relevant stakeholder groupings.

6.3 The report should further include:

    • Transcripts – Written transcripts of interviews conducted, with a schedule of interview conducted.

    • A stakeholder list containing contact details of all stakeholders interviewed for the study, or who have provided input into the study.

    • Written feedback - Copies of any written feedback from stakeholders.

6.4 Regular progress reports – Provide regular written progress reports to FinMark Trust and attend progress meetings.

7Research Questions




7.1What factors have influenced the growth of mobile money in South Africa, as oppose to other markets such as Kenya, Tanzania, etc.?

7.2What was the view of the current external factors, as well as those forecasted, at the time of the M-PESA deployment in South Africa?

7.3What were the primary bases for the vision and/or strategic purpose behind launching M-PESA South Africa?

7.4How did the distribution and marketing approaches utilised by Vodacom M-PESA impact on the success of the overall brand and product success?

7.5What was the key motivation behind keeping the brand name, M-PESA, in South Africa?

7.6Which specific target market did Vodacom earmark for M-PESA?

7.7What was the role of the sponsoring bank regarding agent ownership?

7.8Did Vodacom M-PESA contribute to the creation of certain misconceptions relating to the cost of the service?

7.9What were some of the other hindrances to the success of the M-PESA go-to-market strategy?

7.10 What were some of the possible misconceptions regarding the profitability of agents?

7.11 What led Vodacom/Vodafone to finally take the decision to terminate the product?

8Timing

8.1 Proposals: Proposals for the project should be submitted by 12 noon on the 2nd September 2016. Electronic proposals are required with one hard copy to be delivered to the Digital Finance Specialist, Block J, Central Park, 400 16th Road, Randjies Park, 1685.

8.2 Work: It is envisaged that the successful bidder will be notified by 16 September 2016. The timelines for the project will be discussed with the successful bidder at the contract phase. It is envisaged that this project will be concluded within six (6) months.

9Contents of proposal


Proposals to undertake this project must include:

9.1 Statement of qualifications of firm(s) (if no previous work record for FMT).

9.2 Name and CV of staff members responsible (i) for overseeing the work; (ii) for undertaking the work.

9.3 Proposed methodology and approach to the work.

9.4 Fee proposal and costs estimate, indicating the basis of calculation of fees.

9.5 Capacity empowerment is a key objective of FMT. In rendering the service the consultant must endeavour to achieve this goal. The proposal must comment on the manner in which the consultant intends to give effect to the capacity empowerment objective.


10Basis of award


FMT will award the contract based on:

10.1 Relevant, demonstrated competence of firm(s) in this area (15%)

10.2 Demonstrated expertise of key individuals to be involved in this project (25%)

10.3 Content, quality and originality of proposal (25%)

10.4 Affirmative action scorecard (if South African firm) or use of local professional

10.5 Capacity if non-South African firm (consulting, analysis, coordination etc.) (15%)

10.6 Fee basis (20%)


Guidance notes to bidders

FMT reserves the absolute right to use its discretion in the interpretation of these award criteria. The following notes are intended to provide broad guidance only on how proposals will be evaluated. Bidders may be required to clarify their proposals by way of a telephone call or presentation.

Relevant, demonstrated competence of firm(s) in this area” - you should aim to demonstrate how the firm’s collective past experience can be applied (or adapted) to address the specific brief set out in the terms of reference. You are welcome to describe the firm’s general experience of financial sector development issues (e.g. in other geographies or topical areas) but the evaluation will focus particularly on the application of that experience for the specific task at hand.

Demonstrated expertise of key individuals to be involved in this project” – the evaluation places considerable emphasis on the role and demonstrated expertise (i.e. track record) of the key individuals to be involved on the project rather than on the expertise of the firm itself.

Content, quality and originality of proposal” – proposals should address the brief set out in the terms of reference in a comprehensive manner. Bidders should aim for innovation as well as professional presentation. Whilst similar, relevant experience in other markets will be an advantage for a bidder, each market is different and so proposals need to reflect the particular characteristics of that market, as well as the challenge set by the terms of reference.

Affirmative action scorecard”- ownership, management, staff development and “Use of local professional capacity (consulting, analysis, coordination etc.)” – FMT wishes to ensure that local capacity is used and developed. International firms are therefore encouraged to partner with local organisations.

Fee basis” – value for money, as well as absolute cost, will be taken into account.


11Contact


Questions or comments in respect of these terms of reference should be directed to:

Contact person

:

Matthew Emanuel

E-mail address

:

matthewe@finmark.org.za

Cellular number

:

+27 83 440 1002

Office number

:

011 315 9197

In line with FMT’s policy of transparency, answers to queries from one candidate will be circulated to all who indicated their intention to submit a proposal. For this purpose, please send an email to Matthew Emanuel by 24th August 2016 to indicate whether you intend to submit a proposal.




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