Archive for: Research

Last week, we began a blog series and released a CGAP report on international remittances through mobile banking channels. The series continues this week with guest blogger Paolo Baltao, President of G-Xchange, Inc. (GXI), a wholly owned subsidiary of Globe Telecom in the Philippines. G-Xchange’s GCASH is one of the first mobile wallet services in the world and has been offering international remittances since 2004. In this post, Paolo shares some of the lessons GXI has learned in the past eight years.

My home country of the Philippines has a very strong culture of migration and nearly 1 in 10 Filipinos lives and works outside the country. As a result, we rely very heavily on international remittances. In fact, the Philippines is one of the top five recipients of remittances globally and receives about $19 billion of remittances a year. When we first started GCASH back in 2004, focusing our offering around international remittances seemed like a no-brainer. We thought this would be the low hanging fruit and the engine that would drive the domestic mobile wallet business and the roll-out of our agent network. We also thought that this product would be a natural one to attract unbanked customers and that it would be easy to get them to receive their remittances through the mobile wallet.

In our first years of operation, we put an enormous amount of time and energy into developing partnerships with almost 100 international remittance partners, enabling people in locations as diverse as Hong Kong, Singapore, United Arab Emirates, Qatar, UK, and the US to send money home via GCASH.

Unfortunately, despite all this potential and the network that we have built around the world, international remittances have not been the engine to drive customer adoption in the Philippines. A few key lessons we have learned are:

1. A strong domestic ecosystem should be in place before launching international remittances – After many trials and error, we have learned that it is essential to first build a critical mass in the user base through the domestic mobile wallet business. According to the new CGAP study, it seems that this is a very common realization around the world. We faced many challenges in developing this product, especially customer education on both receiving and sending ends and building partnerships with money transfer operators around the world. International remittances are just not low-hanging fruit we initially thought and we spent a lot of time and effort trying to build the business that we now feel should have been focused on building a domestic ecosystem. A significant domestic ecosystem will allow users that eventually receive international remittances to conduct many “downstream” activities such as paying bills, domestic transfers and savings. Without this, it was hard to convince customers of the benefits of receiving funds through GCASH. Read the rest of this page »

CGAP and Dalberg Global Development Advisors recently conducted a landscaping study of international remittances through mobile money. Download the report to read details of the industry landscape in 2012, emerging success factors, challenges and innovations as well as seven case studies. This blog post is the first in a five part series examining international remittances and branchless banking. Andria Thomas is Project Manager at Dalberg.

Since remittances to developing countries were estimated at about $351 billion for 2011, capturing even a small share of this market could be a transformational opportunity for mobile money providers – right?

Perhaps, but it’s not as easy as one might think. Building on our landscaping study of international remittances through branchless banking conducted at the end of 2010, we set out to analyze the growing industry of international remittances through mobile money as it continues to evolve today. We paid particular attention to offerings that allow a customer to receive funds from abroad directly into a mobile wallet which can be converted to cash at a large agent network. We wanted to understand whether international remittances are helping build the mobile money business. Can international remittances be a tool to improve the value proposition for agents? Are they a hook for attracting new customers or driving more transactions?  And, fundamentally, do they provide a more efficient path to build the mobile money ecosystem?

In the past 18 months, the total number of deployments with a cash-out option via a mobile wallet increased from 8 to 17. Some innovative approaches are emerging, such as KlickEx’s leveraging of foreign exchange trading to lower transaction costs and BICS HomeSend’s interoperability across players within a corridor.

Still, we found a number of reasons to be skeptical of the short-term value of international remittances to mobile money deployments. Some key lessons which emerged from the study include:

1. It’s not a chicken-and-egg problem; a functioning mobile money ecosystem needs to precede success in international remittances. First movers in international remittances anticipated that this product would drive mobile money usage. However, establishing a functioning agent network and providing complementary “downstream” transactions such as bill payments and domestic transfers are now seen as necessary precursors to success in international remittances.
2. Even success stories such as M-PESA have not made significant traction with international remittances. Safaricom and Vodacom recently rolled out M-PESA-tied international remittances in Kenya and Tanzania respectively, but early usage has been “miniscule.” Attracting users – even those who are already comfortable with a mobile wallet – still requires a heavy marketing and education push on both the sending and receiving ends. In the list of business priorities, the investment in this area is not seen as the best resource allocation.  Read the rest of this page »

David Porteous is Managing Director at Bankable Frontier Associates. This is the third blog in a series on G2P and financial inclusion, based on CGAP’s new Focus Note Social Cash Transfers and Financial Inclusion: Evidence from Four Countries. Read the first two posts here. 

We are also releasing today the four accompanying Country Notes which were distilled into the Focus Note. For much more detail on the link between social cash transfers and financial services in each of these countries, read the full reports on Brazil, Colombia, Mexico and South Africa. 

In our last post, Chris Bold discussed the second of three questions that our new paper on G2P tried to tackle, namely:

1. For governments: Is building inclusive financial services into social cash transfer programs affordable for the social programs?
2. For recipients: Will poor recipients use financial services if these are offered to them?
3. For providers: Can financial institutions offer financially inclusive services to G2P payment recipients on a profitable basis?

Today, I will finish off the discussion by focusing on the final question regarding the business case for providers to offer financial services to social cash transfer recipients.

The biggest challenge when it comes to the business case for banks is that the amount per grant payment is small, and as client research has shown, very little of each payment is left behind in the form of savings. However, compared with other small value accounts, G2P recipient accounts have a regular dependable cash inflow ensuring that they stay active. And there is usually a government agency that is willing to pay for the service. But these anecdotal observations alone do not make or break the business case: it all depends on how the financial institution defines a business case.

To introduce greater precision to this discussion, we identify five different levels of the business case, as the figure below shows. The first level is each individual account. Small balance bank accounts are notoriously difficult to make profitable at the individual account level. But a business case may be sustained at this basic level for G2P payments if governments are willing to pay a regular fee to the banks, as they do in the four countries from our research. Without this fee, the account-level business case would be much harder to sustain. This is rather like the case for basic bank accounts which are considered loss leaders at this level by many banks, but which are nonetheless offered for strategic reasons (other profitable government business may be sold as a result of a good record) or to satisfy regulatory requirements (without regulatory support and forbearance, the bank may struggle to obtain approval for what it considers core business).

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In the first two posts in this series, we introduced CGAP’s work on the importance of data analytics to tackle low customer activity and looked at what data tells us about getting customer activity right from the very beginning. In this third and final post, we’re going to take a look at one of the most fundamental types of data analysis: customer segmentation. The deck highlights several types of customer segmentation but in this post we’ll focus on two simple but effective types – customer demographics and super-users.

Customer segmentation is a powerful marketing tool which can be used to understand customers, design products and tailor advertising messages. It’s based on the premise that some customers will find a service extremely valuable while others couldn’t care less about it. Segmentation divides the market into groups of individual customers with similar needs or wants. It allows providers to focus scarce marketing resources and appeal to high-potential customers in ways that are likely to make them active. Using segmentation, providers can tailor product features or marketing messages to speak to the needs and interests of different groups.

We found that one of the most basic ways of segmenting customers – by demographics – is actually highly correlated with differences in activity rates. Many providers don’t capture a lot of customer information and are missing a valuable opportunity to understand and target customer demographic segments. Some demographics which have a significant impact on activity are:

• Gender – Female customers are 41% more likely to be active than males.
• Income – Customers in the lowest income bracket at one provider are 3 times as active as customers in the highest income bracket. Only one provider out of the four actually tracks income levels so we cannot make a generalized claim about income – but it certainly is valuable information for the provider in question.
• Occupation – Activity rates for some occupation segments like students and farmers are 3 times the overall average activity rate of the service.

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Chris Bold spent two years on secondment from DFID to CGAP where he worked on G2P-related issues, among other things. He has since returned to DFID where he is an Adviser on Private Sector Development in Fragile Countries. This is the second blog in a series on G2P and financial inclusion, based on CGAP’s new Focus Note Social Cash Transfers and Financial Inclusion: Evidence from Four Countries. Read the first post here.

Our recently released Focus Note on Social Cash Transfers and Financial Inclusion looks at the evidence from four large and well established programs in Brazil, Colombia, Mexico and South Africa to attempt to answer three broad questions that are relevant to different stakeholder groups:

1. For governments: Is building inclusive financial services into social cash transfer programs affordable for the social programs?
2. For recipients: Will poor recipients use financial services if these are offered to them?
3. For providers: Can financial institutions offer financially inclusive services to G2P payment recipients on a profitable basis?

In the first post, Sarah Rotman looked at the costs to government. Today, I am going to expand on what we found about the recipient experience of receiving payments electronically and into “mainstream financial accounts”. David Porteous will look next at whether there is a business case for providers to offer financial services to social cash transfer recipients.

Last week, Sarah explained our characterization of payment approach into three categories: (i) physical cash, (ii) limited purpose instrument and (iii) mainstream financial accounts. We set the bar quite high for what we deemed to be fully “financially inclusive” – to earn the title of a mainstream financial account it must allow a recipient to store funds indefinitely, access them through the mainstream financial infrastructure (think ATMs and POS devices) and deposit additional funds. Some schemes only enable some of these features and while we recognize the steps that they are taking toward being fully financially inclusive we label these accounts “limited purpose”.

The data show a very clear trend over the past few years away from recipients receiving their payments in physical cash and toward electronic payments. Three of the four countries also showed increases in the number of customers receiving their transfers into a mainstream financial account with South Africa leading the way by paying 59% of transfers paid into mainstream accounts.

Read the rest of this page »

Last week, CGAP released a study focused on using data to understand low customer activity. We worked with four branchless banking providers in three regions to look at data they already had to discover insights about low customer activity. In this post, we’ll see that one of the keys to high levels of customer activity is getting it right from the very beginning – ensuring that the registration agent and first customer transactions are both focused on long-term customer activity.

Can we even call them customers?

One of the first things we noticed as we looked at overall activity levels was that, aside from the high percent of inactive customers (92%), the majority of them – 59% – had never done a single transaction! Providers with high levels of customers who have never transacted need to get customers to actually understand and try the service in the first place. This is different than providers who have high levels of customers who had once been active but are now dormant. These services are not offering customers a value proposition that they are willing to pay for and need to investigate what aspects of the product or pricing customers are dissatisfied with. The providers we worked with were clearly struggling with the initial customer registration and trial process.

Awesome agents register active customers

Next, we saw that a customer’s activity level is often determined by who registered them. We looked at the top 20% of agents by number of registrations – all high-performing agents based on number of registrations and all receiving high registration commissions. However, when we segmented this group based on the activity rates of the customers they were registering, we saw a huge disparity. The activity rate of customers registered by the best agents (top 10%) in this group was over 40 times higher than those registered by the worst! The activity rate of the worst agents was close to 0 and they clearly were failing to help customers understand and try the service. For example, one agent signed up 1052 customers but not a single one did a transaction! These providers need to understand what makes the best agents so successful (great location, good customer education, etc.), re-train or get rid of the worst agents and – most importantly – change the incentive structure so that agents are rewarded for ongoing activity of clients they register rather than just the registration process.

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This is the first blog in a series on G2P and financial inclusion, based on CGAP’s new Focus Note “Social Cash Transfers and Financial Inclusion: Evidence from Four Countries”.

While I was in West Africa a few weeks ago, there was a recurring theme running through all our meetings. Whether we were meeting with MFIs, commercial banks, mobile network operators or third-party e-money issuers, they all came back saying about the same thing: their branchless banking business viability depended on capturing more flows of money to turn into consistent, revenue-generating transactions.

Branchless banking is, fundamentally, a business built on high-volume, low-value transactions. Over two years ago, colleagues and I published a Focus Note on the potential for government-to-person (G2P) payments to bring banking to the poor by leveraging the consistent flow of money that goes from governments to its citizens. In particular, social cash transfer programs were just beginning to make innovative changes to the way payments were made, mostly by transitioning from cash to electronic delivery. We wondered about the extent to which electronic payments could go even further by landing directly into the newly opened bank accounts of the beneficiaries.

But the evidence base at the time was sparse because these transitions were just getting started. Our paper was largely forward-looking by presenting the potential of this space, while posing still unanswered questions around three main topics:

1. For governments: Is building inclusive financial services into social cash transfer programs affordable for the social programs?
2. For recipients: Will poor recipients use financial services if these are offered to them?
3. For providers: Can financial institutions offer financially inclusive services to G2P payment recipients on a profitable basis?

A lot has changed over the past two years. Our new Focus Note “Social Cash Transfers and Financial Inclusion: Evidence from Four Countries” attempts to answer these questions by building off of the evidence base from four large social cash transfer programs: Bolsa Familia in Brazil, Familias en Accion in Colombia, Oportunidades in Mexico, and Child Care Grants and Old Age Pensions in South Africa. We selected these countries because they are the few that have pursued the twin objectives of electronic government payments and financial inclusion at scale. Admittedly, these countries are all large, middle-income countries with relatively well-developed financial infrastructure. But unfortunately, and quite telling I think, the evidence base does not yet allow us to speak to the situation of low-income countries because G2P-linked financial inclusion is only happening at a pilot level in these countries, if at all.

Over the coming weeks on this blog, my two co-authors, Chris Bold (DFID), David Porteous (Bankable Frontier Associates) and I will provide an overview of the answers to the three questions posed above. Today, I tackle the first question regarding the cost to governments. I have found this question in particular to be asked quite often by social protection practitioners, for good reason. But before I get to that, I first need to frame the discussion with an updated categorization of payment approaches that our paper presents.

Read the rest of this page »

For the last year CGAP has conducted quantitative research on the challenge of inactive customers. In culmination of this research, we are releasing a deck that helps providers understand and develop strategies to address low customer activity in their services.

Regular readers of this blog are familiar with the challenge of low customer activity and the negative impact this has on the business case. Last year, CGAP released a framework to map how a potential customer moves from awareness to ongoing activity and all the different dimensions of a business required to make this successful. As we worked with providers to understand this problem, it became clear that one of the first steps was to help providers analyze the gold mine of information they already have about their own customers. Understanding customers is a complex undertaking and will ultimately rely on a variety of tools such as focus groups and surveys. Yet the starting point should be a data-driven understanding of current customer trends and segments which then highlights areas to research further.

We worked with four providers in three regions to analyze customer registration, customer transaction and agent registration datasets. We conducted many different types of analysis – general activity trends, money transfer patterns and regression analyses to determine which factors are most correlated with high customer activity. The analysis revealed the untapped well of customer insights that providers have but most are not using.

This deck summarizes some of the most interesting findings on data analysis and customer activity across the providers. There are no magic bullets in the deck and, in fact, we found that data from providers in different markets was in some cases contradictory, highlighting that insights from one market are not automatically transferable to other markets. The deck does identify which types of data providers should be collecting, what types of analysis we found to be most useful in understanding activity levels and how providers can act on the data analysis with adjustments in service offerings or follow-on qualitative research.

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“Cash is easy.” “Cash is what I know most.” “There are no charges when I use cash.”

Ghana Market Seller (Photo Taken by Adam Jones)

I was sitting in a little room in the outskirts of Accra listening to a group of tomato sellers talk about the financial tools they use to manage their finances. As a part of CGAP’s work in Ghana, we have commissioned Bankable Frontiers Associates (working with Easy Errands, a Ghanaian market research firm) to conduct a market research study on the financial needs of low-income customers in Ghana. One of the first steps was to conduct focus groups throughout the country and listen to diverse groups of Ghanaians, including farmers, taxi drivers, traders and students, talk about their strategies for moving and storing money. They discussed bank transfers and drivers and the use of family and friends but more than anything, they talked about cash.

The trite expression ‘Cash is King’ is over-used in our line of work, but as I sat in that little room listening to these people whom mobile money services have spent millions of dollars trying to woo, I realized yet again that the biggest competition we face in scaling branchless banking is not a rival MNO or bank or even the expensive money transfer operators – it’s cash. (Read some recent posts on our blog about this topic here and here.)

Cash is far and away the preferred method for storing and sending money in Ghana, no matter how inconvenient. One tomato seller, Charity, wraps her cash in no less than six black plastic bags and hides it in the back of her refrigerator, underneath her tomatoes and meats, so that the rest of her family does not suspect it is there.  A timber seller, Emmanuel, told us he keeps his cash under the carpet in his living room. When asked whether the cash does not form a noticeable bulk, he replied with a big grin, ‘That’s why I spread it all around so that people walk all over my cash but have no idea it is beneath their feet!’

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This is a guest post by Peter Goldstein and Caldwell Bishop of InterMedia. Peter is Director of Communications for InterMedia and Project Director of AudienceScapes, an African research program and online knowledge center for the global development field funded by the Bill & Melinda Gates Foundation. Caldwell is a communications intern at InterMedia and is currently pursuing a Masters in International Development at George Washington University. 

We all remember the devastating 7.0 earthquake that struck Haiti in January 2010 reportedly destroying about one-third of the country’s bricks-and-mortar bank branches, limiting Haitians’ ability to send and receive money transfers, cash checks, or simply access much-needed cash resources.

In June 2010, the Financial Services for the Poor initiative at the Bill & Melinda Gates Foundation partnered with USAID on the Haiti Mobile Money Initiative (HMMI), featuring a $10 million fund to provide incentives to mobile service providers to quickly launch and expand m-money services. Notably, Digicel, Haiti’s leading mobile provider, won the first-to-market prize of $2.5 million in January 2011 after launching its Tcho Tcho Mobile service. Soon thereafter, Voila, Haiti’s second largest mobile provider, released its T-Cash m-money service and received a $1.5 million USD second-to-market award. The CGAP Technology Blog has had several posts on this initiative (here, here, here, here, and here).

To help monitor the impact of the HMMI as well as m-money service use and financial access in general, the Gates Foundation commissioned InterMedia to design and conduct a series of household surveys of Haitian adults (aged 18+).  The first  Haiti Mobile Money Tracker (HMMT) survey was conducted in March 2011, in the early days of m-money usage, and sampled all ten Haitian administrative departments based on figures from the latest census in 2003. Follow-up surveys will be conducted to establish usage trends – hopefully based on a more up-to-date 2011 census.

InterMedia’s HMMT Online Data Analysis Tool allows financial access practitioners and stakeholders to dive into the survey data themselves in a user-friendly way. The combinations of financial, mobile and demographic data are easily cross-referenced to support project planning and analysis.

Meanwhile, the first survey yielded some helpful insights and provided rare baseline data for a mobile money deployment. Here are some of the highlights:

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