Mobile
2011 Financial Services Summit
Innovative Approaches to Universe Expansion: An International Perspective Terry McCafferty Executive Vice President Global Operations TransUnion © 2011 TransUnion LLC All Rights Reserved
Universe expansion objectives: An international perspective Share alternative approaches to traditional account acquisitions q Examine challenges and opportunities in other markets – MobileCredit™ • Overview of a fast growing channel to increase new account acquisitions • Spotlight: South Africa – Microfinance • Overview of the microfinance market • Spotlight: India
2
© 2011 TransUnion LLC All Rights Reserved
International
Universe Expansion: Unleash the Power of MobileCredit™
© 2011 TransUnion LLC All Rights Reserved
Mobile Technology: The fastest growing delivery channel in the world
Internet versus Mobile Penetration* Market
Population
Internet Users
Internet Penetration
Mobile Users
Mobile Penetration
India
1,189m
81m
6.8%
635m
53%
794m as298m Percent 22.3% of Population
59%
ChinaMobile 1,336m Users Mexico
113.7m
32.8m
28.8%
83m
73%
49m
4.6m
9.4%
42m
86%
Canada
34m
26.2m
77.1%
21m
62%
United States
313.2m
239.9m
76.6%
285m
91%
South Africa
Source Utilities Telecom Council
More than five billion devices in use globally by year-end 2010 y to serve Mobile is a cost-effective way the unbanked population in emerging markets and under-banked consumers in developed markets By 2015, it is estimated India will have 450 million Internet users from mobile and PC/mobile devices
Mobile technology offers customers new delivery channels across more geographies at a lower cost. cost * Source:
4
CIA World Fact Book and Internet World Stats
© 2011 TransUnion LLC All Rights Reserved
Why Mobile Technology makes sense Acquire more customers Build B ild relationships l ti hi with ith existing customers
Placeholder text
Create efficiencies
Increase spend through cross-sell/up-sell
Drive cost down – improve bottom line!
“Don’t think of the mobile phone as just another emerging p j g g market medium: It’s much more than that. The mobile phone is a medium with a wallet and it’s about to totally rewrite the rules of marketing.” Barry McCarthy, Mobile Marketing Solutions, First Data 2008
5
© 2011 TransUnion LLC All Rights Reserved
Where to begin? Know your customers and who you want to target
Research mobile technology and understand where it is going in your market
Identify potential partners
Credit Bureaus
Telecom Providers
Conduct telephone surveys and d focus f groups to assess customer preferences, handset devices/level of technology sophistication in your target market
6
© 2011 TransUnion LLC All Rights Reserved
Advertising Agencies Understand and address legal barriers
Mobile Application Developers
Mobile Technology versus Mobile CreditTM Mobile M bil T Technology h l embraces all functionality and touch points Mobile Technology for the finance industry can include: Account acquisition Customer relationship management Cross-sell/Up-sell Bill presentment Bill payment Collections
7
© 2011 TransUnion LLC All Rights Reserved
Mobile CreditTM Mobile Technology
Mobile CreditTM….a TransUnion solution that integrates a mobile network, credit bureau data, customer underwriting rules to produce an immediate consumer response (approved, declined, further assistance) via the hand-held device
The benefits of Mobile CreditTM Consumers
Banks/Retailers/Telco The ability to open new sales channels Generates new business opportunities Reduces manual processing of applications, applications increases productivity 60% of all applications immediately processed Significant saving in back office g to manually y costs relating processing applications Increases return on investment 8
© 2011 TransUnion LLC All Rights Reserved
Apply from wherever you are – provided that you are located within cellular coverage Within seconds, know if your application is successful Secure Easy to understand Less intimidating 24/7/365, any time, anywhere (subject to system availability)
Customer acquisition via Mobile CreditTM
Call To Action
9
Billboard General mail SMS messaging Radio
© 2011 TransUnion LLC All Rights Reserved
Consumer Response Consumer responds – SMS text message with name – National ID # – Gross income / expense
Credit Bureau Accesses credit bureau for risk/affordability check Uses bureau decisioning application to incorporate underwriting criteria Sends message to consumer with product d t offer ff and d terms t May include a reference # for a call center May include designated retail outlet to proceed with sale May ask consumer if they would like to be contacted
Case study: Mr. Price Mobile Credit offer retail
Campaign has resulted in a 20% response rate
10
© 2011 TransUnion LLC All Rights Reserved
South Africa: Early success cases Retail and financial industries
Retail Marketing
Card Application
Client uses direct mail campaigns to acquire new business; TransUnion assisted client in qualifying leads and developing p g a response p channel
In addition to the regular application process, the client has implemented an SMS channel Grown book by 50%
40 30 20 10
50 60 70
Response rate: 20%
0
ROI for client: 600%
80 90 100 110 120
40 30 20 10
50 60 70
0
80 90 100 110 120
Half of new applications through mobile channel 80% savings on processing costs
11
© 2011 TransUnion LLC All Rights Reserved
Case Study: ABSA mobile account acquisition Financial services
ABSA is currently running this campaign in four news publications bli ti 12
© 2011 TransUnion LLC All Rights Reserved
Mobile Technology applications: We’ve We ve only scratched the surface Vertical
Application
Benefit
Acquisitions, credit line increase, Acquisitions increase crosssale and up-sale
Response time, time agility and cost
Acquisitions, credit line increase, crosssale and up-sale
Response time, agility and cost
Authentication and loan approvals
Broader coverage in rural areas, gain efficiencies, lower costs
Acquisitions
Response time, agility and cost
Reminders
Intimacy, convenience and cost
Alerts (report changes, inquiries)
Immediacy, fraud prevention
Acquisitions and cross-sale
Response time, agility and cost
Financial Services
Retail
Microfinance
Auto
Collections
Direct to Consumer
Insurance
13
© 2011 TransUnion LLC All Rights Reserved
Winner of the 2010 Mobile Marketing Award © 2011 TransUnion LLC All Rights Reserved
Success stories in South Africa market Cost per approved account dropped from about $16 to $1 10% lift in new account acquisition q No adverse impact on customer spend behavior Converting customers to mobile statements has potential savings of $1,000,000 annually Customers readily accepted opportunity to convert to mobile bill payment…cost was comparable, but faster payment remittance
15
© 2011 TransUnion LLC All Rights Reserved
What is next in Mobile Technology?* Bargain Hunting
Tangible Goods
Using mobile device to shop for bargains g was mobile p purchasing g would Thought lead to impulse buying, however opposite is happening
Mobile Marketing Association: 17% of mobile commerce was used for purchasing applications and d ringtones, i while hil another h 6% off people l used d their phones for discounts and coupons, and another 6% used their phones to buy tangible goods In 2009, eBay saw a 200% increase in goods purchased via mobile applications over 2008
Mobile Ticketing
Marketing
Convenience to order, pay and validate tickets anywhere and any time is the driver Mobile ticket transactions will exceed $100 billion worldwide by 2012
A reported 74% of online retailers either have in place or are developing mobile commerce strategies, while 20% have alread implemented their complete already plans
Banking g Still a small percent compared to online banking Number of people using mobile banking apps was up to 5mm in 2010….but growing fast…April 2011 saw 70% growth th YOY
* Source:
16
Mashable.com
© 2011 TransUnion LLC All Rights Reserved
Retailers R t il are also l iinvesting ti more ti time and d money into creative ways to reach consumers via their mobile phones with campaigns that enhance the brand identity or the shopping pp g experience. p
International
Universe Expansion: Microfinance… A Look at the Landscape, Risk and Opportunities
© 2011 TransUnion LLC All Rights Reserved
What is microfinance? Microfinance offers the poor, unbanked and under-banked population access to basic financial services such as loans, savings money transfer services and micro savings, micro-insurance insurance More than 2.7 billion people still have no access to formal financial services Microfinance is only reaching 150M borrowers worldwide Founded on the Grameen Banking model that won a Nobel prize in 2006 → Group p of micro-debtors share jjoint liability y ((India)) Microfinance is not “pay day lending” Microfinance supports repayment plans that allow for very small amounts over time Micro-lending is a different way to increase reach and provide services to a new segment of population
18
© 2011 TransUnion LLC All Rights Reserved
Microfinance institutions (MFIs) T pes of MFI F Types Funding: nding Non-Governmental Organizations (NGOs): – Non-profit organizations dedicated to financing microloans and communityy development p p programs g through g g grants or soft loans (e.g., FINCA, PlaNet, SKS, Opportunity International, etc.)
Member-Owned Organizations: – Self Self-help help or credit unions run as small local institutions and unregulated to facilitate group lending
Mainstream Financial Institutions: – Regular state, commercial, agriculture development and savings banks who fund microloans as a product offering – largest source of funding for India MFI
19
© 2011 TransUnion LLC All Rights Reserved
Microfinance evolution
2008 MFI was g growing g at double-digit g rates in most countries New equity and debt funds were being launched private investors was Wider sector of p emerging Perceived as a bottom up approach to help the poor and create financial inclusion
Source: 2009 and 2011 Microfinance Banana Skins Report 20
© 2011 TransUnion LLC All Rights Reserved
2011 MFI under much closer scrutiny; y; MFIs pace of growth has slowed…it is no longer “under the radar” Many of the problems facing MFIs are the result of their growth and success and thus, they are now expected to adhere to standards of other lending institutions Still seen as a lending and acquisition model with great promise
Microfinance lending is progressing at different rates in different markets 2009 Key Statistics
Mexico
Chile
South Africa
India
Philippines
China
# of Borrowers
3.4M
308K
632K
10.2M
1.9M
32K
Portfolio Size
$2.7B
$1.0B
$249M
$1.4B
$375M
$13.5M
Avg g Balance p per Borrower
$353
$1,797 ,
$488
$141
$141
$393
NOTE: Industry average write-off is @ 0.5-1.3%
IIndia: di Credit C dit IInformation f ti Bureau B I di h India has received i d close l tto 30 million illi accounts t from f microfinance i fi llenders. d Data quality issues persist.
South Africa: Currently accepting data from MFIs and have seen a significant lift in scoreable files. Currently 60% of all new accounts opened are coming from micro-lenders. Latin America: Microfinance data is added to the existing consumer database as an alternative data source in Costa Rica, Honduras, Guatemala, Nicaragua and El Salvador. Mexico offers a separate report specific to the microfinance industry.
Growth rate continues at 20% YOY with top p 1,000 , MFIs showing total assets at $60 billion.
21
© 2011 TransUnion LLC All Rights Reserved
Spotlight
Microfinance in India
© 2011 TransUnion LLC All Rights Reserved
Why India is fertile ground for MFI India income distribution USD
$1100 - $2300
$2300 - $4600
$4600 - $7000
90 0% 90.0% 80.0%
7.3%
7.5%
13.9%
11.9%
10.6%
70.0% 60 0% 60.0%
31.0%
50.0%
30.0%
35.2%
36.5%
39.7%
33.2%
30.6% %
37.5%
40.0% 30.0%
39.4% 20.0%
27.0%
10.0% 0.0%
2000
2005
2010
2012
2015
Source: IDFC India Research
The population is moving into the middle tier income brackets, with growth in the $2300 - $7000 range. 23
© 2011 TransUnion LLC All Rights Reserved
India age and rural demographics drive demand for easy and affordable credit Under 15 36%
2000 2005 2010 2015
65+
60%
4%
34%
62%
5%
31%
64%
5%
30%
65%
5%
28%
66%
6%
2020 0%
15–64
20%
40%
60%
80%
1.0B 1.0B 1.1B 1.2B 1.3B
100%
120%
India Population by Age Distribution
India I di has h a growing i credit-active dit ti population Based on P.N. Mari Bhat, "Indian Demographic Scenario 2025", Institute of Economic Growth, New Delhi, Discussion Paper No. 27/2001
24
© 2011 TransUnion LLC All Rights Reserved
Urban 28%
Rural 72% Geographic Distribution
Access A to t credit dit is i difficult diffi lt for f the majority of the population Government of India, Census 2001 ,
Microfinance landscape Indian Microfinance L d Landscape
Microfinance Institutions 3,000 Credit Demand $ 45B
Market size 200 million households… and d growing i
Reference: McKinsey Report
25
© 2011 TransUnion LLC All Rights Reserved
Micro-credit Micro credit process flow – Grameen Model Village meets on general awareness and recruitment
Survey need and target groups
Probable credit score check point (centralized)
26
Sanction/ disbursement & collection (Weekly)
© 2011 TransUnion LLC All Rights Reserved
Compulsory Group Training (CGT)
Group Recognition Training (GRT)
Probable credit score check point (de-centralized)
Credit Information Bureau India (CIBIL) and TransUnion partnership CIBIL and TransUnion partner to deliver – Analytics – Products – Technology
CIBIL has been present in the market since 2003 with: – A consumer database of 177+ million trade lines and about 90 million consumers – A commercial database of more than 6.8 million trade lines – More than 500 members representing all major public, private, multi-national and non-banking finance institutions – 30 million accounts from micro-lenders in quality review and testing
TransUnion is a strategic partner with 19.9% ownership 27
© 2011 TransUnion LLC All Rights Reserved
MFIs in the future: The creation of standards As MFIs continue to evolve, recommendations are being made for standard practices and seals of excellence to ensure continuity across the industry Central Bank of India has made recommendations for a separate category of non-banking non banking financial institutions with guidelines for lending – – – – –
Limits family income to USD $1,086/per year Puts ceiling on loans at USD $543 At least 75% of loans should be for income generation purposes Not more than two MFIs can lend to a single borrower A credit bureau must be established
“Seal of Excellence” launched in U.S., March 2011 – Recognition g for outstanding gp performance by y MFI – Increased transparency on non-financial benefits – Rating social benefit along with financial performance will help increased interest and comfort from investors
28
© 2011 TransUnion LLC All Rights Reserved
Micro-lending Micro lending in the United States A non-profit p entity y in the U.S. offers microloans that average g $5,100 – They range in size from $700 to $50,000, with terms from six to sixty months
Group vs. individual lending – Domestically, y ACCION USA has found the individual-lending g model better suited to U.S. borrowers, who often resist peer collateralization – The individual model also better prepares borrowers to enter the mainstream U.S. credit system
Target g market – 9 million U.S. households untouched by mainstream banks – 21 million using payday loans and pawnshops for financing peer lending g model used in developing p g countries Embrace the p Since 2008 – collected 1,700 borrowers in New York City June 2010 – opened a second branch in Omaha, NE Other cities in its sights include San Francisco, Boston and Charlotte
29
© 2011 TransUnion LLC All Rights Reserved
Universe expansion: Microfinance industry
Financial inclusion is a global issue The unbanked, under-banked and new to credit exist in all developed and emerging economies What have we learned from the microfinance industry? – Strong corporate governance and transparency is critical – Objective/third-party data sources – credit repositories are a must – Sound lending practices required – Cultural differences cannot be overlooked – Effective data management and technology driven processes can make this a win-win proposition for lenders, investors and the poor
30
© 2011 TransUnion LLC All Rights Reserved
Innovative Approaches to Universe Expansion: An International Perspective Terry McCafferty Executive Vice President Global Operations TransUnion © 2011 TransUnion LLC All Rights Reserved
Universe expansion objectives: An international perspective Share alternative approaches to traditional account acquisitions q Examine challenges and opportunities in other markets – MobileCredit™ • Overview of a fast growing channel to increase new account acquisitions • Spotlight: South Africa – Microfinance • Overview of the microfinance market • Spotlight: India
2
© 2011 TransUnion LLC All Rights Reserved
International
Universe Expansion: Unleash the Power of MobileCredit™
© 2011 TransUnion LLC All Rights Reserved
Mobile Technology: The fastest growing delivery channel in the world
Internet versus Mobile Penetration* Market
Population
Internet Users
Internet Penetration
Mobile Users
Mobile Penetration
India
1,189m
81m
6.8%
635m
53%
794m as298m Percent 22.3% of Population
59%
ChinaMobile 1,336m Users Mexico
113.7m
32.8m
28.8%
83m
73%
49m
4.6m
9.4%
42m
86%
Canada
34m
26.2m
77.1%
21m
62%
United States
313.2m
239.9m
76.6%
285m
91%
South Africa
Source Utilities Telecom Council
More than five billion devices in use globally by year-end 2010 y to serve Mobile is a cost-effective way the unbanked population in emerging markets and under-banked consumers in developed markets By 2015, it is estimated India will have 450 million Internet users from mobile and PC/mobile devices
Mobile technology offers customers new delivery channels across more geographies at a lower cost. cost * Source:
4
CIA World Fact Book and Internet World Stats
© 2011 TransUnion LLC All Rights Reserved
Why Mobile Technology makes sense Acquire more customers Build B ild relationships l ti hi with ith existing customers
Placeholder text
Create efficiencies
Increase spend through cross-sell/up-sell
Drive cost down – improve bottom line!
“Don’t think of the mobile phone as just another emerging p j g g market medium: It’s much more than that. The mobile phone is a medium with a wallet and it’s about to totally rewrite the rules of marketing.” Barry McCarthy, Mobile Marketing Solutions, First Data 2008
5
© 2011 TransUnion LLC All Rights Reserved
Where to begin? Know your customers and who you want to target
Research mobile technology and understand where it is going in your market
Identify potential partners
Credit Bureaus
Telecom Providers
Conduct telephone surveys and d focus f groups to assess customer preferences, handset devices/level of technology sophistication in your target market
6
© 2011 TransUnion LLC All Rights Reserved
Advertising Agencies Understand and address legal barriers
Mobile Application Developers
Mobile Technology versus Mobile CreditTM Mobile M bil T Technology h l embraces all functionality and touch points Mobile Technology for the finance industry can include: Account acquisition Customer relationship management Cross-sell/Up-sell Bill presentment Bill payment Collections
7
© 2011 TransUnion LLC All Rights Reserved
Mobile CreditTM Mobile Technology
Mobile CreditTM….a TransUnion solution that integrates a mobile network, credit bureau data, customer underwriting rules to produce an immediate consumer response (approved, declined, further assistance) via the hand-held device
The benefits of Mobile CreditTM Consumers
Banks/Retailers/Telco The ability to open new sales channels Generates new business opportunities Reduces manual processing of applications, applications increases productivity 60% of all applications immediately processed Significant saving in back office g to manually y costs relating processing applications Increases return on investment 8
© 2011 TransUnion LLC All Rights Reserved
Apply from wherever you are – provided that you are located within cellular coverage Within seconds, know if your application is successful Secure Easy to understand Less intimidating 24/7/365, any time, anywhere (subject to system availability)
Customer acquisition via Mobile CreditTM
Call To Action
9
Billboard General mail SMS messaging Radio
© 2011 TransUnion LLC All Rights Reserved
Consumer Response Consumer responds – SMS text message with name – National ID # – Gross income / expense
Credit Bureau Accesses credit bureau for risk/affordability check Uses bureau decisioning application to incorporate underwriting criteria Sends message to consumer with product d t offer ff and d terms t May include a reference # for a call center May include designated retail outlet to proceed with sale May ask consumer if they would like to be contacted
Case study: Mr. Price Mobile Credit offer retail
Campaign has resulted in a 20% response rate
10
© 2011 TransUnion LLC All Rights Reserved
South Africa: Early success cases Retail and financial industries
Retail Marketing
Card Application
Client uses direct mail campaigns to acquire new business; TransUnion assisted client in qualifying leads and developing p g a response p channel
In addition to the regular application process, the client has implemented an SMS channel Grown book by 50%
40 30 20 10
50 60 70
Response rate: 20%
0
ROI for client: 600%
80 90 100 110 120
40 30 20 10
50 60 70
0
80 90 100 110 120
Half of new applications through mobile channel 80% savings on processing costs
11
© 2011 TransUnion LLC All Rights Reserved
Case Study: ABSA mobile account acquisition Financial services
ABSA is currently running this campaign in four news publications bli ti 12
© 2011 TransUnion LLC All Rights Reserved
Mobile Technology applications: We’ve We ve only scratched the surface Vertical
Application
Benefit
Acquisitions, credit line increase, Acquisitions increase crosssale and up-sale
Response time, time agility and cost
Acquisitions, credit line increase, crosssale and up-sale
Response time, agility and cost
Authentication and loan approvals
Broader coverage in rural areas, gain efficiencies, lower costs
Acquisitions
Response time, agility and cost
Reminders
Intimacy, convenience and cost
Alerts (report changes, inquiries)
Immediacy, fraud prevention
Acquisitions and cross-sale
Response time, agility and cost
Financial Services
Retail
Microfinance
Auto
Collections
Direct to Consumer
Insurance
13
© 2011 TransUnion LLC All Rights Reserved
Winner of the 2010 Mobile Marketing Award © 2011 TransUnion LLC All Rights Reserved
Success stories in South Africa market Cost per approved account dropped from about $16 to $1 10% lift in new account acquisition q No adverse impact on customer spend behavior Converting customers to mobile statements has potential savings of $1,000,000 annually Customers readily accepted opportunity to convert to mobile bill payment…cost was comparable, but faster payment remittance
15
© 2011 TransUnion LLC All Rights Reserved
What is next in Mobile Technology?* Bargain Hunting
Tangible Goods
Using mobile device to shop for bargains g was mobile p purchasing g would Thought lead to impulse buying, however opposite is happening
Mobile Marketing Association: 17% of mobile commerce was used for purchasing applications and d ringtones, i while hil another h 6% off people l used d their phones for discounts and coupons, and another 6% used their phones to buy tangible goods In 2009, eBay saw a 200% increase in goods purchased via mobile applications over 2008
Mobile Ticketing
Marketing
Convenience to order, pay and validate tickets anywhere and any time is the driver Mobile ticket transactions will exceed $100 billion worldwide by 2012
A reported 74% of online retailers either have in place or are developing mobile commerce strategies, while 20% have alread implemented their complete already plans
Banking g Still a small percent compared to online banking Number of people using mobile banking apps was up to 5mm in 2010….but growing fast…April 2011 saw 70% growth th YOY
* Source:
16
Mashable.com
© 2011 TransUnion LLC All Rights Reserved
Retailers R t il are also l iinvesting ti more ti time and d money into creative ways to reach consumers via their mobile phones with campaigns that enhance the brand identity or the shopping pp g experience. p
International
Universe Expansion: Microfinance… A Look at the Landscape, Risk and Opportunities
© 2011 TransUnion LLC All Rights Reserved
What is microfinance? Microfinance offers the poor, unbanked and under-banked population access to basic financial services such as loans, savings money transfer services and micro savings, micro-insurance insurance More than 2.7 billion people still have no access to formal financial services Microfinance is only reaching 150M borrowers worldwide Founded on the Grameen Banking model that won a Nobel prize in 2006 → Group p of micro-debtors share jjoint liability y ((India)) Microfinance is not “pay day lending” Microfinance supports repayment plans that allow for very small amounts over time Micro-lending is a different way to increase reach and provide services to a new segment of population
18
© 2011 TransUnion LLC All Rights Reserved
Microfinance institutions (MFIs) T pes of MFI F Types Funding: nding Non-Governmental Organizations (NGOs): – Non-profit organizations dedicated to financing microloans and communityy development p p programs g through g g grants or soft loans (e.g., FINCA, PlaNet, SKS, Opportunity International, etc.)
Member-Owned Organizations: – Self Self-help help or credit unions run as small local institutions and unregulated to facilitate group lending
Mainstream Financial Institutions: – Regular state, commercial, agriculture development and savings banks who fund microloans as a product offering – largest source of funding for India MFI
19
© 2011 TransUnion LLC All Rights Reserved
Microfinance evolution
2008 MFI was g growing g at double-digit g rates in most countries New equity and debt funds were being launched private investors was Wider sector of p emerging Perceived as a bottom up approach to help the poor and create financial inclusion
Source: 2009 and 2011 Microfinance Banana Skins Report 20
© 2011 TransUnion LLC All Rights Reserved
2011 MFI under much closer scrutiny; y; MFIs pace of growth has slowed…it is no longer “under the radar” Many of the problems facing MFIs are the result of their growth and success and thus, they are now expected to adhere to standards of other lending institutions Still seen as a lending and acquisition model with great promise
Microfinance lending is progressing at different rates in different markets 2009 Key Statistics
Mexico
Chile
South Africa
India
Philippines
China
# of Borrowers
3.4M
308K
632K
10.2M
1.9M
32K
Portfolio Size
$2.7B
$1.0B
$249M
$1.4B
$375M
$13.5M
Avg g Balance p per Borrower
$353
$1,797 ,
$488
$141
$141
$393
NOTE: Industry average write-off is @ 0.5-1.3%
IIndia: di Credit C dit IInformation f ti Bureau B I di h India has received i d close l tto 30 million illi accounts t from f microfinance i fi llenders. d Data quality issues persist.
South Africa: Currently accepting data from MFIs and have seen a significant lift in scoreable files. Currently 60% of all new accounts opened are coming from micro-lenders. Latin America: Microfinance data is added to the existing consumer database as an alternative data source in Costa Rica, Honduras, Guatemala, Nicaragua and El Salvador. Mexico offers a separate report specific to the microfinance industry.
Growth rate continues at 20% YOY with top p 1,000 , MFIs showing total assets at $60 billion.
21
© 2011 TransUnion LLC All Rights Reserved
Spotlight
Microfinance in India
© 2011 TransUnion LLC All Rights Reserved
Why India is fertile ground for MFI India income distribution USD
$1100 - $2300
$2300 - $4600
$4600 - $7000
90 0% 90.0% 80.0%
7.3%
7.5%
13.9%
11.9%
10.6%
70.0% 60 0% 60.0%
31.0%
50.0%
30.0%
35.2%
36.5%
39.7%
33.2%
30.6% %
37.5%
40.0% 30.0%
39.4% 20.0%
27.0%
10.0% 0.0%
2000
2005
2010
2012
2015
Source: IDFC India Research
The population is moving into the middle tier income brackets, with growth in the $2300 - $7000 range. 23
© 2011 TransUnion LLC All Rights Reserved
India age and rural demographics drive demand for easy and affordable credit Under 15 36%
2000 2005 2010 2015
65+
60%
4%
34%
62%
5%
31%
64%
5%
30%
65%
5%
28%
66%
6%
2020 0%
15–64
20%
40%
60%
80%
1.0B 1.0B 1.1B 1.2B 1.3B
100%
120%
India Population by Age Distribution
India I di has h a growing i credit-active dit ti population Based on P.N. Mari Bhat, "Indian Demographic Scenario 2025", Institute of Economic Growth, New Delhi, Discussion Paper No. 27/2001
24
© 2011 TransUnion LLC All Rights Reserved
Urban 28%
Rural 72% Geographic Distribution
Access A to t credit dit is i difficult diffi lt for f the majority of the population Government of India, Census 2001 ,
Microfinance landscape Indian Microfinance L d Landscape
Microfinance Institutions 3,000 Credit Demand $ 45B
Market size 200 million households… and d growing i
Reference: McKinsey Report
25
© 2011 TransUnion LLC All Rights Reserved
Micro-credit Micro credit process flow – Grameen Model Village meets on general awareness and recruitment
Survey need and target groups
Probable credit score check point (centralized)
26
Sanction/ disbursement & collection (Weekly)
© 2011 TransUnion LLC All Rights Reserved
Compulsory Group Training (CGT)
Group Recognition Training (GRT)
Probable credit score check point (de-centralized)
Credit Information Bureau India (CIBIL) and TransUnion partnership CIBIL and TransUnion partner to deliver – Analytics – Products – Technology
CIBIL has been present in the market since 2003 with: – A consumer database of 177+ million trade lines and about 90 million consumers – A commercial database of more than 6.8 million trade lines – More than 500 members representing all major public, private, multi-national and non-banking finance institutions – 30 million accounts from micro-lenders in quality review and testing
TransUnion is a strategic partner with 19.9% ownership 27
© 2011 TransUnion LLC All Rights Reserved
MFIs in the future: The creation of standards As MFIs continue to evolve, recommendations are being made for standard practices and seals of excellence to ensure continuity across the industry Central Bank of India has made recommendations for a separate category of non-banking non banking financial institutions with guidelines for lending – – – – –
Limits family income to USD $1,086/per year Puts ceiling on loans at USD $543 At least 75% of loans should be for income generation purposes Not more than two MFIs can lend to a single borrower A credit bureau must be established
“Seal of Excellence” launched in U.S., March 2011 – Recognition g for outstanding gp performance by y MFI – Increased transparency on non-financial benefits – Rating social benefit along with financial performance will help increased interest and comfort from investors
28
© 2011 TransUnion LLC All Rights Reserved
Micro-lending Micro lending in the United States A non-profit p entity y in the U.S. offers microloans that average g $5,100 – They range in size from $700 to $50,000, with terms from six to sixty months
Group vs. individual lending – Domestically, y ACCION USA has found the individual-lending g model better suited to U.S. borrowers, who often resist peer collateralization – The individual model also better prepares borrowers to enter the mainstream U.S. credit system
Target g market – 9 million U.S. households untouched by mainstream banks – 21 million using payday loans and pawnshops for financing peer lending g model used in developing p g countries Embrace the p Since 2008 – collected 1,700 borrowers in New York City June 2010 – opened a second branch in Omaha, NE Other cities in its sights include San Francisco, Boston and Charlotte
29
© 2011 TransUnion LLC All Rights Reserved
Universe expansion: Microfinance industry
Financial inclusion is a global issue The unbanked, under-banked and new to credit exist in all developed and emerging economies What have we learned from the microfinance industry? – Strong corporate governance and transparency is critical – Objective/third-party data sources – credit repositories are a must – Sound lending practices required – Cultural differences cannot be overlooked – Effective data management and technology driven processes can make this a win-win proposition for lenders, investors and the poor
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© 2011 TransUnion LLC All Rights Reserved
