Pocket Payments Inc.

Investment Strategy

Sumit Kumar
Vibhor Dhote
Mihir Upasani

Index

Sr. no.

Section

Page number

Executive summary

Segment

Technolgy

Region

Risk

Executive Summary
Investment strategy for Pocket Payments Inc.
Case analysis was done for Deloitte to help the client Pocket Payments Inc. which wants to expand geographically. It looks at the best possible
segment and technology chosen to enter the African market and identifies 2 countries chosen for venturing first. Also, the risks associated with the
market entry strategy are identified and solutions to mitigate them.

Segment chosen

It is recommended that the

company first ventures into the
C2B segment

This decision was taken after

taking into consideration the
attractiveness of the C2B
segment in the African context

Technology chosen

USSD was chosen due to its

low capital expenditure, higher
degree of user friendliness

Regions selected

The two Sub-Saharan

countries Uganda and
Tanzania were selected due to
the largely untapped unbanked
population , that has high
degree of cellphone
penetration

Risks identified

Theft of service, message

modification, denial of service

Theft of content, digital piracy,

risk to provider for digital rights
infringement, loss of revenue
to content provider or
merchant

Use of service for money

laundering and terrorist
financing

Segment

Technology

Region

Risk

P2P versus C2B C2B is a large and growing market

African money transfer market (USD billion)
Segment
selection

20

G
CA

19

1
.7

2012

C2B is chosen as the

segment to focus as:

2017E

Attractiveness
of Market
4.64

Why C2B

Technology and
Competition

-Remote technology exists

-Its adoption is accelerating

11.41

African C2B market (USD billion)

80
60
40
20
0

GR
CA

.4
28

16.44

2012

2017E

P2P

C2B

P2P

C2B

African Money
transfer market
growing at 19.1%
between 2012-2017

African C2B market

growing at 28.41%
between 2012-2017

High competition
in remote P2P

Remote C2B
technology exists,
adoption
accelerating and
competition low

Size is in the range

of 4-11 USD billion
57.39

Size is much larger

compared to P2P

Proximity
technology has
had limited
success in the
past

-Will benefit in the long term

since competition is low

Segment

Technology

Region

Risk

Technology selection
Factor

Description

Advantages

Disadvantage
s

Why
USSD
5

NFC

Mobile Web

SMS

USSD

Near Field Communication (NFC) is a Mobile Web allows consumers to

short range wireless RFID that allows access and purchase goods and
smartphones and other devices to
services through mobile browsers.
establish radio communication by
bringing them into proximity

SMS allows transactions through the

mobile data network and mobile
devise.

Unstructured Supplementary Service

Data (USSD) uses a communication
between the
telecom provider and bank for mobile
payment transactions.

Extremely convenient for consumers

Can be used with bank cards, transit
passes, movie passes, reward
systems etc.

Mobile banking accounts can be

linked through payment solutions to
expedite the online payment process
Very interactive and user friendly

Users only need basic mobile device

with SMS capability.
Easy to use for basic non - financial
transactions

Connection remains open (often

more responsive and faster for
services than SMS)
Relatively more secure than SMS
Works on all GSM handsets
More interactive than SMS
based services

Low penetration of NFC enabled

devices in sub-Saharan Africa.
Expensive technology for
consumers.

Need data services to operate

Limited to the merchants that build
and maintain application
Applications vary from merchant to
merchant

Dependent on cell service and

connectivity that can create delays
Syntax to transact is complex
No end to- end encrypted hence
transaction limits are lower
Risk of theft of phone

Takes slightly longer than SMS to

complete the transaction
SMS is more capable to
accommodate additional security
features
Till now limited enrollment from
telecom operators

Easier to use, connection always remains open, works on all GSM mobile phones, suits African market

Segment

Technology

Region

Risk

Regions for initial focus

Uganda

66

Tanzania

Uganda
73

Tanzania

Ghana

83

Ghana

Kenya

82

Kenya

81
65

% of population with mobile phones

% of unbanked population

(Figures in millions)

Uganda
Tanzania

Source: World Bank, Pew Global

Tanzania

50.76

Ghana

88 Senegal

Countries
selected

38.84

26.44

Kenya

45

83 Senegal

Senegal

Uganda

72

Unbanked
population

Uganda

28

Tanzania

41

45.55
14.55
Total Population (in millions)

Rationale
Both Uganda and Tanzania have a high
unbanked population, but a high
proportion of mobile phone users.

Segment

Technology

Region

Risk

Risk factors
Vulnerability

Point of Sale (POS) system

installed at merchant
premises accepts Over The
Air (OTA) transmissions

Threat

Malicious party floods POS

system with meaningless
requests

Masquerade attacks;
tampering with POS

Risk

Theft of service, message

modification, Denial of service
(DoS)

Counter measures

Request filtering at reader

based on mobile devicereader relative geometry

POS vendor vetting, message

authenticators, vetted
authorization and accounting

Lack of digital rights

management (DRM) on
mobile device

Mobile device user illegally

distributes content; e.g.,
ringtone, video, games

Theft of content, digital piracy,

risk to provider for digital
rights infringement, loss of
revenue to content provider or
merchant

BDRM incorporated in
smartphone TPM design,
cryptographically supported
DRM

Ease of registering and

subsequent transfer of mobile
device

Anonymity at time of
registration, pooling and
delegation of mobile phones,
falling outside regulations for
financial institutions

Use of service for money

laundering and terrorist
financing

Strong Know Your Customer

(KYC) protocols, USSD
encryption

Source: Integrity in Mobile Phone Financial Services, World Bank Paper No. 146
Mobile Payments: Risk, Security and Assurance Issues, ISACA Emerging Technology
7