Archive for: Agents

Joep Roest is a Financial Inclusion Specialist with the Pacific Financial Inclusion Programme (PFIP). PFIP is a Pacific-wide programme helping to provide sustainable financial services to low income households. It is a joint project of the UN Capital Development Fund (UNCDF) and the United Nations Development Programme (UNDP) and has received additional funding support from the Australian Agency for International Development (AusAID) and the European Union. The programme is based at the UNDP Pacific Centre in Suva Fiji.

Papua New Guinea (PNG) is a country so complex it defies easy description. A place of such diversity it hosts 850 distinct languages for a population of about 7 million. The population figure, mind you, is only a guess as nobody really knows. The landscape is so rugged that the capital, Port Moresby has no road link to any other city. To get anywhere in PNG, you walk, fly or take a boat. As such, it was only in the 1930’s that the first Western gold miners started to penetrate the interior and “discovered” the densely populated highlands where the bulk of the population lives. The miners were a sign of things to come as PNG rides the crest of a gargantuan resource boom. Over the last few years, PNG has become notorious for its high levels of crime which is a major preoccupation of all who live and work there.

State of play in PNG

Against the backdrop of PNG’s security issues and difficult geography, a means to save, store and send money is desperately needed. Mobile money looks to be the answer and typically for PNG, things have developed in their own unique way. In the last half year three providers have launched very distinct offerings, all on the same Telepin platform. Interestingly, it is not a line-up of the usual suspects as both the postal service and an MFI have entered the fray. PNG now plays host to Post’s Mobile SMK, Nationwide Microbank’s MiCash and Digicel’s (of Haiti fame) Cellmoni, with more rumoured to be waiting in the wings.

Both Post and Digicel have opted for a virtual wallet product while Nationwide has developed a real-time linkage into their core banking system. To make matters even more interesting, both Post PNG and Nationwide Microbank have partnered with Oceanic Communications Limited (OCL) to manage their agent network. Confused yet? It gets better; OCL does most of Digicel’s airtime distribution yet does not provide agency services for Cellmoni. That is, at least, where it all stands now.

Airtime distributor

As we all know, mobile money is hard, especially in places like PNG. A successful mobile money operation has to be excellent at everything, all the time. Building and maintaining an excellent agent network may be hardest part of all. It takes tremendous investment in time, resources and energy for it to work. Unfortunately there is no quick fix or technological silver bullet that ensures success. It is a long, inglorious slog. Who wouldn’t want to farm it out?

That is where OCL comes in. As an airtime distributor they seem ideally placed to play a role. They make money by getting airtime (electronic and scratch) out to the furthest reaches of this challenging country and take cash in return. Airtime distributors are operationally minded businesses where solid processes are the cornerstone of profitability. In OCL’s case, they have established relationships with 12,000 resellers. From their interactions with these resellers, they have years of data that can help predict liquidity needs and identify resellers who are prime candidates for becoming successful agents. Admittedly, airtime distribution is a far cry from mobile money agent management, yet many of the same capabilities come into play.

The opportunity

OCL is now doing much of the hard stuff on behalf of its two partners. They manage agent recruitment and training, agent monitoring and liquidity management. This frees up the mobile money operators to concentrate on their offerings. There is also the compelling possibility that OCL could drive agent interoperability and standardization of the agent experience across partners. It would make their management of the network simpler, drive down their costs and make it easier to recruit agents. This seems especially likely, as all the current products are on the same platform. Both agents and customers stand to benefit. Agents won’t have to maintain separate balances. Customers will benefit from a broader agent network, unified customer experience and an even playing field for all competitors, ensuring competitive offerings.

Will we see OCL shape mobile money in PNG due to their central role? More generally, will third-party providers become a force for standardization and interoperability in other markets?

So far…

It seems to be working. OCL’s two partners have been able to quickly expand far beyond their brick & mortar footprint. Nine months in, customer growth is strong and accelerating. If developments so far are anything to go by, there will be a lot more to write about over the coming months.

- Joep Roest -

Chrissy Martin is a Senior Project Manager at MEDA, a non-profit organization that is partnering with Mobile Transactions on product development and agent network expansion, with a specific focus on reaching rural clients through services designed for the agricultural market.  Azalea Carisch is a Rural Microfinance Intern with MEDA who is currently based in Lusaka supporting Mobile Transactions on agent network monitoring and compliance. 

Mobile Transactions Zambia - courtesy of Chrissy Martin

Until recently, Mobile Transactions could have been considered the best kept secret in Africa.  Operating in Zambia on a shoe-string budget, they have been developing their own unique business model for electronic financial services slowly and with little media attention.  Now, as of February 2012, this small company has secured investments from three big investors, Omidyar Network, ACCION Frontier Investments, and Sarona Asset Management. All three are banking on the fact that Mobile Transactions’ experience and innovative approach to serving a range of consumers situates them to fill crucial gaps in the mobile money transactions and payments market in Africa.

Mobile Transactions offers services to both individuals and institutional customers.  For individuals, they offer both mobile wallet peer-to-peer transfers and over-the-counter money transfers through their agent network (a mobile wallet with a stored value is available but not compulsory.)  For institutions, they are providing e-voucher services to donors, governments and private corporations (including Dunavant, FAO and WFP).   They are also testing a variety of bulk payments products, including microfinance loan payments and utility payments.    Finally, they are working with Zambian Breweries on supplier payments, often referred to as business-to-business (B2B) payments.   These products are at a variety of different stages, with money transfers and e-vouchers reaching the most customers so far.  This product mix is extensive, but is not in and of itself enough to distinguish Mobile Transactions from the many other mobile payments start-ups.  So the question is what makes Mobile Transactions different?

• Mobile Transactions is an independent operator:  Readers of the CGAP Technology blog know that the market has developed past a simple MNO-led or bank-led model. Increasingly, the market is facilitating new business models which do not partner exclusively with any one mobile network operator or commercial bank.  Mobile Transactions is one of these independent companies, due in part to the regulatory environment, which allowed them to become an independent, certified financial transactions company.  This allows them to think creatively about their technology and go beyond the mobile phone when developing services. For example, the e-voucher service mentioned previously can by delivered to end-users either through a mobile wallet or via paper scratch-cards.  Paper-scratch cards are printed with a unique transaction code that is linked to the recipient’s identity and is redeemable at certain retailers.  The paper-based distribution method works better in rural communities in Zambia, where many people do not have a mobile phone but everyone trusts and understands scratch-cards, which are extensively used for mobile airtime top-up.  A mobile phone company, on the other hand, is interested in promoting their core business, airtime, and would not have an incentive to offer a service that does not require the end-user to make a transaction via a mobile phone.  Of course, there are drawbacks to the independent model, mainly the lack of an existing capital base, brand recognition, or distribution network, all of which are crucial to any branchless banking business.  Yet, Mobile Transactions has managed to find alternative solutions to provide quality service for people and institutions needing to move cash within Zambia.

• Mobile Transactions relies on independently owned and operated agents: Mobile Transactions’ original market-entry strategy looked much like M-Pesa in Kenya, which meant that they recruited and trained existing retail outlets to grow their agent network as quickly as possible.  However, they quickly saw that this strategy was not sufficient to drive customer acquisition.  The retail outlets weren’t motivated to act as sales people for a company with little brand recognition or to push a new product that few Zambians understood.   As a result, Mobile Transactions decided to recruit, train, and set-up their own “Champion Agents”.  Champion agents operate in much the same way as franchises do: each store is independently owned and operated by a trained individual who receives marketing and commercial support from MTZ.  This model has driven brand recognition and has provided Mobile Transactions with a backbone of core agents who are devoted entirely to selling their products and services.  Although this model is much more expensive than the retail agent model and therefore results in slower agent network growth, the benefits are accrued in the quality of the network, the customer-facing entity of any branchless banking operation.

• Mobile Transactions’ products are derived from a service-led approach. Mobile Transactions does not experience the low activity rates of many other mobile money operators.  Most other operators offer one product, the mobile wallet, and then build value-added services on top in order to drive higher customer use of the m-wallet.  Mobile Transactions, on the other hand, provides a variety of services (business to business payments, payments to farmers or microfinance loan payments) that respond to a specific customer need, and these services may leverage the mobile wallet, a paper-voucher, or simply an agent-based transaction (for example, the scratch card voucher mentioned previously.)  The commonality is in the central Mobile Transactions IT platform, where each type of transaction is processed regardless of the delivery channel. The challenge of this approach is scale, which is reliant on the agent network and the agents’ ability to adapt quickly to new services and to serve multiple customers segments.  As they deal with these challenges, Mobile Transactions is continually growing services through a learning-based approach to product development that allows it to develop services based on Zambia’s market realities, rather than success from other markets.

Mobile Transactions’ model is not without its challenges, as any member of the company’s small and dedicated staff will tell you.  However, the experience of this independent operator with a service-led approach challenges many of the commonly held assumptions about mobile money implementation, and their patience is starting to pay off.  Our guess is that it won’t be a secret for much longer.

Photo courtesy of SEWA

This is the final post in a four-part series on branchless banking in India. The earlier blogs on MicroSave’s review of e/m-banking and the innovative service providers Beam and Eko demonstrated the power of convenience and simplicity. In keeping with this optimistic view of a still uncertain India venture, we conclude with three more positive items to highlight. Two reflect new changes by the government and one goes back to the fundamentals.

1. The Government of India has established a clearer vision for electronic payments and agents and aims to make a substantial investment to expand these capabilities across India.

The Government of India recently released a task force report on a unified payments infrastructure linked to the biometric Aadhaar number. While many questions remain, this report establishes important policy points. It recognizes the value of electronic payments to both cut costs for the government and bring convenience to the end recipients. It also sees G2P as a major flow of capital which can prime the pump, while recognizing that much more ought to flow over branchless banking channels. The Government of India also proposes to pay a 3.14% fee to banks for delivering G2P payments – a significant shift in the business case for banks. Some of the insights in the task force report built off of international G2P experiences shared by CGAP.

As always, there are potential pitfalls in this system, including the risk of building a single-purpose G2P payments infrastructure that is not widely usable for other payments. A supply push too hard by the government could create disruptions in customer service. There are other questions to contemplate such as whether biometric authentication of every transaction might forestall easier to use payments systems. such as PIN-based mobile phone payments, from emerging.

But these are all solvable challenges and the new momentum for branchless banking will shape the financial inclusion agenda in India in the coming months and years.

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Read our two previous blogs in this series on branchless banking in India here.

An Eko agent offering the tatkal service

Eko was the first company dedicated to a mobile phone-based basic savings account and payment service for the unbanked in India. Launched in 2007, Eko has carefully developed a mobile-based service usable on the most basic of handsets and continually revised and re-fashioned its approach. At first, Eko experimented with a basic deposit and payment service from one Eko account to another. But by the second half of 2011 Eko had struck on a revised formula that appeared to work as a business – providing a highly efficient and simple payment directly into the account of a bank anywhere in India. Having found a popular offering, during the second half of 2011 Eko doubled its revenues, reducing its operating losses to 16% of revenue by February 2012 with the expectation of passing breakeven in the first half of 2012.

Leveraging a strong base of agents in Delhi, Eko offers users a simple way to send money anywhere in India. Users can come to Eko’s agents to make a deposit into any bank account held by the State Bank of India (SBI). SBI is the largest bank in India with over 14,000 branches and more than 250 million accounts. By presenting the mobile number of the sender and receiver to the Eko agent, plus the account number of the receiver, the agent can make a payment into the account securely simply by dialing a short sequence of numbers. Each transaction is then verified by an SMS to both sender and receiver with a time and date stamp, the fees levied and a transaction ID.

The success of this tatkal payment service is predicated on two basic features. The first is that Eko’s service ties into the core banking system of SBI on a real-time basis. Thus, clients send and receive transactions instantly giving them confidence. The power of the service is persuasive to clients as the receivers simply withdraw the funds from any SBI channel across India. This includes a national network of interoperable ATMs which charge no fee on most withdrawals.

The second important feature is simplicity. Clients only need to know the correct account number and the sending and (optionally) the receiving phone numbers. And they only need to go to an authorized agent to complete the transaction. This is more convenient than getting to branches which may be further away and often require longer waits. “The big difference for Eko has been the irrefutable legitimacy that tatkal transactions bring to the SBI-Eko outlets. The fact that the client’s relative thousands of kilometers away can instantly withdraw cash at an ATM just a few seconds after the transaction completes is a definite ‘Wow!’ for the client”, says Abhishek Sinha, co-founder & CEO of Eko.

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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.

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Photo courtesy of MicroSave

India is undergoing a significant expansion in the use of agents (Business Correspondents) to offer a range of financial services. There are many questions about whether this present expansion can be sustained. A new publication from MicroSave highlights reasons for optimism. To understand this perspective, Greg Chen, CGAP’s Regional Representative for South Asia, asked Graham A. N. Wright, the founding Director of MicroSave, a series of questions about branchless banking in India (note: MicroSave uses the term electronic/mobile-banking or “e/m-banking” to describe this field, while we at CGAP tend to use “branchless banking”). MicroSave has a large presence in India with over 80 staff and a large practice focusing on: e/m-banking; microfinance; SME; private sector development and responsible finance.

Question: MicroSave’s latest discussion paper on branchless banking in India portrays a decidedly optimistic picture. How did you arrive at this and what are some of the positive conditions you see?

Graham Wright, MicroSave: India has huge opportunity to leverage the potential of e/m-banking and build a cash-light economy. In addition to its cutting edge information technology industry and relatively dense population, the Government of India is clearly determined to achieve financial inclusion through digital money and is taking aggressive steps to see this happen.

The gradual regulatory evolution to support business correspondent network managers (BCNMs) and banks in their outreach efforts continues – and the results are beginning to emerge. While the emphasis continues to be on numbers, the targets are such that large scale outreach infrastructure is being built in a short time frame, with an agent covering every village with a population greater than 2,000. This, coupled with the government’s resolve to move to cash-based subsidy transfer and social security payments systems, will ensure transactions. Institutions such as the Unique Identification Authority of India (UIDAI) could greatly ease customer KYC and authentication, and the National Payments Corporation of India (NCPI) has already built a national switch for inter-bank mobile transactions. This infrastructure could play expanded roles as systemic back-bones that support different players and bring about interoperability.

Question: The services necessary for financial inclusion are much broader and so what are the anchor or lead products for building agent-based branchless banking systems in India?

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I think it is safe to say that the financial inclusion world has started to get used to the idea of thinking about financial service providers more broadly than traditional microfinance institutions, rural banks and financial cooperatives. With the recent growth of mobile network operators, technology providers and agent network managers, it’s evident that financial inclusion encompasses a broad set of providers. But even I am sometimes surprised to learn about some private companies that seem to have a very tangential link to the unbanked financial sector taking advantage of new opportunities in branchless banking.

Take OXXO as an example. OXXO is the largest convenience store in Mexico (comparable to 7-Eleven in the US) opening a new store every 8 hours…yes that’s 8 hours!  7.5 million people come through their stores every day, most of whom are looking for things that a normal convenience store would offer…food, snacks, paper goods, etc. But OXXO is diversifying its products to offer its wide customer base the “convenience for everything you’d need in life any time of day.”

In this video, Aiko Fujimura, Manager of Financial Services for OXXO, explains how this added convenience extends now to financial services offered through the OXXO e-wallet. She admits that there are certain challenges. “It is easy to sell soda and snacks, but not as easy to sell financial services.” Training a huge network of employees and convincing people to trust the store with their money are two issues OXXO is currently facing.

Few companies have the scale of OXXO, but convenience stores and other retail outlets are still being used to build up branchless banking agent networks. In this video, Johannes Kling of the agent network company DD-DEDO talks about the role that convenience stores play in Colombia in expanding the outreach of banks. As he explains, Colombia is still very early on in the growth curve when it comes to branchless banking. But as we all know, a strong agent network is one of the early pieces of the puzzle in building a branchless banking ecosystem.

Next week, we’ll share two more videos from more traditional players – a bank and a mobile network operator – but each with an interesting take on their new business model to reach the unbanked.

- Sarah Rotman

This is the third post in our series on interoperability and related issues in branchless banking and mobile money. Read the first post that presented the overall framework for the discussion and the second post that looked at the interconnection of mobile money platforms. Today, we discuss interoperability at the agent level as it relates to agent exclusivity. We include agent exclusivity in the topic of interoperability because it raises many of the same issues as platform interoperability.

Agent exclusivity revolves around the ability of a customer of one provider to use the agent of another provider for cash-in and cash-out services related to that customer’s account. Non-exclusive agents can expand financial access by providing more access points to a greater  number of customers, while limiting the rise of a dominant actor which could ultimately reduce competition. But as with platform interoperability, regulators are cognizant that prohibiting exclusive agents could deter private actors from entering the market. What service provider would invest in identifying, training, and equipping agents if competitors can piggyback off their investment?

To be clear, when we speak of agent exclusivity, we are only referring to the cash-in and cash-out services performed by agents – not other services (where permitted) such as customer enrollment, related KYC, and processing of loan documents. Agents providing only cash-in and cash-out services are often called “cash merchants”. We distinguish the cash merchant services from other services because cash merchant functions arguably present less risk to the financial service provider since agents typically transact against their own accounts. Think human ATMs.

We identify at least four different ways to share cash merchants:

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One of the exciting and yet challenging aspects of the branchless banking industry is how fast things change. Topics discussed just 3 months ago can seem out of date today. That’s why it’s fun to look back over the topics we blogged about in 2011 starting from last January to see how the discussion has evolved over the last 12 months.  Here are just a few of the blogs you may have missed or you may be interested in reading again:

• January 25: The lurking challenge of branchless banking: Activating the inactive customer
• February 24: Can branchless banking be profitable?
• April 14: Five business case insights on mobile money
• April 20: Commercial investment landscape in mobile financial services and branchless banking
• May 12: Marketing branchless banking
• May 20: Can mobile money be “free”?
• July 28: So where are we in the link between G2P and financial services?
• October 6: An overview of the G2P payments sector in India
• October 14: The case for more product innovation in mobile money and branchless banking
• November 30: Top 10 List: Powerful partnerships in branchless banking