Why is mobile banking slow to grow?
Much has been written about how innovations go from being extraordinary and untested to becoming commonplace (Everett Rogers, Diffusion of Innovations, 2003). How can we apply the thinking that “innovation diffusion” research has come up with to mobile banking?
First, let’s identify what the innovations are in mobile banking. For someone who has a mobile phone, but doesn’t have any bank account, I would see three:
- a new concept of value – electronic, not cash or in kind
- a new financial provider – not manual exchange or through hawala or through bus driver or friends/family, but unknown / untrusted organization or some bank
- a new use of device – use existing device for new purpose (idea that phone can be used for finance is a new idea)
We then try to evaluate the characteristics of the innovations – these are what determine its rate of adoption. We would expect an innovation that has a high relative advantage, compatibility with norms, trialability, observability, and possibilities for re-invention – and low complexity – to have a higher rate of adoption.
The table here is my assessment of the characteristics of the three innovations that encompass m-banking. The picture isn’t pretty.
Second, we look at the communications channels through which messages about the innovations are transferred. There are two broad types – mass media channels, which tend to spread awareness, and interpersonal channels, which spread subjective evaluations and thus form and change attitudes and influence decisions. One problem here is that the diffusion of an innovation usually takes place from promoters or innovators to a mass market that has different characteristics (e.g. less tech-savvy, cosmopolitan, etc.). People are more likely to communicate with others like them.
This ties to the third issue – the ways in which innovation is spread over time. In general, people follow a sequence as follows in adopting or rejecting an innovation:
knowledge – become aware
- persuasion – form an attitude
- decision – to adopt or reject
- implementation – use the new idea
- confirmation – confirm the decision
It seems that most people who have knowledge have formed an attitude about the m-banking service and have decided to reject it. If we assume mass media has been successful at raising awareness (which we found not to be the case in South Africa 2 years ago, however), then it’s a lack of favorable interpersonal communication that is preventing an initial adoption decision.
The final task is to look at the social system, because the social and communication structure of the system determine the pace of innovation diffusion. In this situation we are dealing with social systems in which norms may dictate the use of cash, a mistrust of banks and/or technology. Because most decisions to adopt are made by individuals and not by a collective or by an authority, we expect quicker decisions. But this also means a potentially large number of individual decision-makers who must be influenced. Wizzit and GXI have courted opinion leaders in communities but it isn’t clear this has been successful.
Based on this, I think the hardest thing so far is not the marketing of the solution, but the product and innovation itself. There are three innovations here for an unbanked person, not just one. The innovations itself are counter to social norms, complex, not easily trialed and not observable.
I also wonder – if we allowed people to develop their own financial products using an mbanking interface (e.g. open as many accounts as they want for different purposes, create terms, etc.) would that be a way of increasing usage once adopted and improve subjective evaluations communicated through interpersonal ties?
