Banking U2

Banking the Unbanked and Unentertained

Business Case
Financial Inclusivity Platforms through Telecommunications
Industry Collaboration

ROMEN SAMUEL WABINA

Student number 340-76992
Banking U2
CONTENT PAGES

I. Executive Summary

II. Project Overview and Needs

III. Project Background and Scope

IV. Key Project Stakeholders

V. Alternatives

VI. Preferred Solution

VII. Assumptions, Risks, and Initial Issues

VIII. Next Steps

IX. References

X. Annexes

BUSINESS CASE
Project Name: Banking U2 (Banking the Unbanked and Unentertained): Financial
Inclusivity Platforms through Telecommunication Industry Collaboration

Project Manager: Romen Samuel Wabina

1. Executive Summary
Novotelecoms, a telecommunications company in the Philippines, started a paid-
up capital of 250 million Philippine pesos to carry out telecommunication expansion.
Novotelecoms wanted to expand their franchise by providing a unified internet protocol
television (IPTV) networks and over-the-top streaming service with more than 500
channels and almost same-day broadcasts. They want to deploy these services to
Filipinos, especially to the communities from far-flung areas. However, to deploy this
expansion, Novotelecoms needs to partner up with Infoserve Inc. for their digital
payment service gateways. These streaming services can only be offered as long as
the payment can be secured using a digital payment system which can transfer money
through cooperatives and rural banks to the customer’s payment cards.
The network connection, data computing techniques, and regulatory compliance
will be the challenge in the project. However, a financial cloud computing service for the
storage data of the Novotelecoms and Infoserve is the most suitable alternative. These
services can provide a payback period for 1.88 years and ROI of 123% per year. This
manifests a 514% profit sales increase forecast. These services also provide 50% less
expenses compared to data center establishment and provides global security against
financial fraud and attacks. Other requirements stipulated in the Bangko Sentral ng
Pilipinas (BSP) shall be strictly complied under this project.

2. Project
1.1. Business Overview and Needs
Infoserve, a Non-Bank Financial Institution (NBFI) company in the Philippines,
envisions to deliver modern financial services to the country’s unserved and undeserved
population through their network, payment cards, and banking services. They operate in
digital payment solutions and e-money cards which can be transacted through Affiliated
Switch Network (ASN)-connected subscribers (e.g. rural banks and cooperatives). The
ASN is a financial network that allows banks to operate fund transfers and e-money to
different banking networks. But despite of the growing digitization in the industry,
Filipinos are still given with limited financial opportunities since main financial networks
are largely concentrated in urban areas (Bangko Sentral ng Pilipinas, 2019). This
project aims to deliver this concern.
Novotelecoms can help Infoserve deliver financial inclusion in the country. The
main premise of Novotelecoms’ expansion is the recent shut down of Philippine’s
largest TV network, ABSCBN, last 5th of May (Ramos, 2020). The recent shut down will
generate millions of Filipinos, especially from far-flung areas, left with no news and
entertainment. This will be Novotelecoms’ opportunity to increase their sales. However,
Filipinos in these provinces only have cooperatives with no full banking capabilities.
Infoserve can connect to these cooperatives (subscribers) to provide full digital banking
solutions. This creates a bigger network of revenue for Infoserve against other FinTech
companies as the Novotelecoms’ digital payment service provider. With this strategy,
Infoserve can generate profit using:
1. ASN subscription of rural banks and cooperative worth PHP 3,000,000.00 per
subscription contract; and
2. Transaction fees of payment cards (PHP 20.00/card transaction)
Infoserve will integrate their platform innovation and customer acquisition into one.
In this way, financial returns to the company are greater with near-zero product
innovation costs. In summary, the project will address the following question:
a. How can the Infoserve, together with Novotelecoms’ expansion, deliver
modern financial services to the unbanked and unentertained communities
across the Philippines while increasing their profit margin without spending
Infoserve’s production costs?

1.2. Project Background and Scope

Financial inclusivity is the primary mission of the project. The Novotelecoms’
business expansion is a great avenue to expand financial access to the Filipinos as
well. However, the biggest challenge of this project is the banking connection of
Infoserve, subscribers, and the Novotelecoms. A unique data network must be created
from these companies in order to transfer customers’ payment to the subscribers,
Infoserve, and Novotelecoms.
The scope of the project includes network connection, payment card production,
and compliance regulation. It also includes mentoring and developing people who can
ensure financial security by managing thousands of transactions per seconds. The
general scopes of the project are the following:
 ASN Data Connection from Infoserve to the Subscribers (See Alternatives)
a. Transfer e-money (Customers-Subscribers-Infoserve-Novotelecoms)
b. Choosing a unique data computing open-loop payment solution
 Europay-Mastercard-Visa (EMV) card production
 Data Computing Training of Qualified Security Assessors (QSA)
 Payment Card Industry Data Security Standard (PCI-DSS) Attestation of
Compliance (AOC)
a. Security information standard to avoid financial fraud

1.3. Key Project Stakeholders

The key stakeholders who can influence the success or failure of the project to take-
off are:
A. Potential investors from Bangko Sentral ng Pilipinas (BSP) who can help to
approve all compliance concerns stipulated in the BSP’s Manual of Regulations
(MOR) for NBFI.
B. Potential investors from Bancnet, the BSP interbank agency, who can help the
ASN adoption from Infoserve to subscribers
C. Stakeholders from Payment Card Industry-Security Standards Council (PCI-
SSC) who are experts in Data Computing for financial transactions by developing
standards and supporting services
D. Financial analysts, with knowledge and experience on closed-loop systems, who
are committed in providing financial inclusion to all Filipinos.
E. Subscribers (rural banks and cooperatives) of Infoserve who want to be part of
the project
 F. Any potential stakeholders from the National Telecommunications Commission
(NTC) who is responsible for the control of telecommunications throughout the
country.

2. Analysis
2.1. Alternatives
There are three alternatives being considered:
1. Alternative A: Establish an independent data center that will provide high volume
of e-payment transactions and build storage systems using on-premise
hardware. An independent data center can provide delivery of shared data
applications within the network. The establishment of this data center would likely
cost around PHP 200,000,000.00.
2. Alternative B: Provide a powerful cloud computing service that can access high-
volume e-payment transactions and build storage systems using off-premise
computing. It provides higher security to strengthen the customers’ financial
security by protecting the data from potential threats. The purchase of cloud
computing services costs PHP 100,000,000.00.
3. Alternative C: Gather at least 5 potential stakeholders from PCI Security
Standards Council who are willing to invest 25% of the total project cost. They
can handle all of the data transaction systems.

2.2. Preferred Solution

The preferred solution is Alternative B. Having a cloud computing service in
payment service platforms provide a big shift in digital payment resources. This
eliminates the expense of hardware and software. Data centers (Alternative A) require
time-consuming IT management chores. This provides huge management tasks for the
project which can be alternatively managed by cloud computing alone. Alternative C
also provides a risky move since data privacy in third party user are strictly observed in
NBFI. In addition, payment service gateways also require vast amounts of computing
resources that can be provisioned in seconds, with just clicks. This gives the project a
lot of flexibility and taking the pressure off in capacity planning. In summary, cloud
computing services are cost-effective and innovative. It does not require time nor money
to set it up.

3. Assumptions, Issues and Risks

Assumptions and other constraints are taken into account and summarized into the
table listed below:
Design Summary
Customer-Cooperative-
Infoserve-Novotelecoms
(CCIN) interbank payment
system and real-time gross
settlement
Full-service payment system
established that is efficient
and affordable by the poor
 EMV Payment Cards
produced for
Novotelecoms garnered
compliance of the PCI-
DSS standards
 Data Computing
Assumption Risks
Subscribers can  The CCIN do no
smoothly adapt to the coordinate sufficiently in
new system project implementation
and monitoring.
 Delays in real-time gross
settlement among CCIN
network
BSP and Bancnet Market targets lack the
support the development capacity to operate and
of the payment system maintain the new system
as part of the financial
inclusion campaign of
BSP
Increased Reliability of  Network intrusion/Fraud
the PCI DSS  Compromise of user
Compliance credentials
 System compromise
Introduction of malicious
code System downtime
Compromise of sensitive
data

4. Next Steps
In conclusion, the integration of Novotelecoms’ mission in providing television
services and Infoserve’s financial inclusion is feasible with this project. Filipinos’ banking
network can increase the company’s profit margin through transaction fees from
Novotelecoms’ digital payment service gateways. The usage of cloud computing
services also minimizes the security risks in financial storage between the two
companies. This fully complies the strict regulations of BSP’s Manual of Regulations for
NBFI.
All of the stakeholders need to be involved in the project. Two-way communication
between the project team and the stakeholders are in the highest importance.
Particularly, the project should satisfy the BSP, as the chief financial regulatory board,
for all requirements stipulated in the MOR-NBFI and inform all partner subscribers as
much as possible.

References

Bangko Sentral ng Pilipinas. (2019). The State of Digital Payments in the Philippines.
Metro Manila: Better Than Cash Alliance.
Diokno, B. (2019, June 27). China's fintechs see rural bank gateway to Philippine e-
payments. (M. Flores, Interviewer)
Garcia, A., & Schellhase, J. (2019). FinTech in the Philippines: Assessing the State of
Play. Milken Institute.
Ramos, D.-R. (2020, May 6). Philippines Government Orders Shutdown Of Country’s
Leading Broadcast Network ABS-CBN. Retrieved from Deadline:
https://deadline.com/2020/05/philippines-abs-cbn-shutdown-rodrigo-duterte-
1202927654/

ANNEX