Last week at the Mobile Money Summit I had the pleasure of moderating a discussion with Daryl Collins (co-author or Portfolios of the Poor) and Olga Morawczynski (now with Grameen Foundation’s AppLab in Uganda  — Olga and I also co-authored a brief on M-PESA customers last year, based on Olga’s PhD research).

I worry some mobile money providers won’t see the volume of transactions they want to justify the investment, unless they go beyond offering a simple liquid wallet and mobile remittances. If they can get traction with a value proposition like Safaricom did, with 45% of the population signing up — then great. But Kenya was a market where everything aligned just right, not least of all the very poor competition M-PESA faced from banks, bus companies and the post office. We’re seeing that few countries offer such dramatic opportunities.

My guess is mobile money providers in many markets will need a more sophisticated suite of products to attract (a) an attractively large number of customers who (b) will be active and do a number of transactions per month. To do this, providers need fresh thinking about mobile money products that will work with the mass market.

So I was thrilled to have a chance to talk to Olga and Daryl. Here are the four main highlights:

1.    The poor are active money managers. That comes through loud and clear in the financial diaries work Daryl and her colleagues did tracking every penny spent by 300 poor families in Bangladesh, India, and South Africa. The average family used eight financial instruments and passed more than US$1,000 through the over the course of the year. The poor do want, need and use many financial instruments.

2. The poor will also pay for financial instruments, often in ways better off customers would not. In a 2008 survey of M-PESA customers, 21% said their mobile wallet was “the most important way” they save. In more recent research CGAP is doing, we are seeing low income clients paying on average 15% of their saving value to use M-PESA because of the confidentiality it gives them from prying eyes of family members and others, and security compared to the mattress at home. In other words, here are poor people paying for savings (without it ever being marketed to them as a way to save).

3.    There is some exciting product innovation already happening. At CGAP, we are particularly excited about the Safaricom-Equity Bank product partnership around M-Kesho, an interest-bearing saving account at Equity Bank with no fee to deposit money electronically from the M-PESA wallet. In effect, all of M-PESA’s agents just became places to make a deposit into a real bank account. Equity also wants to offer a personal accident insurance policy and instant loans over the phone to M-Kesho customers.

4. Designing new mobile money products need not be expensive, but it will take a different approach than many providers are accustomed to. Daryl, Olga and I agree that standard market research surveys probably won’t reveal the insights needed, and focus groups aren’t granular enough. Financial diaries and other deeper ethnographic work can reveal deep insights about how low-income people manage their money, and where their pain points are (i.e. where they may be willing to pay for something better). The good news is there is an increasing number of people who know how to do this kind of product design.

We’ve uploaded Daryl and Olga’s presentations:

Collins – Portfolios of the Poor – Mobile Money Summit 2010 (pdf)

Morawczynski – Savings via Mobile – Mobile Money Summit 2010 (pdf)

-Mark Pickens