Archive for: Customer adoption

In my last post, I introduced the town of Autazes in the Amazon basin and shared how agents (termed banking correspondents in Brazil) helped transform Autazes from a backwater to a banking hub. I visited Autazes in December 2009 as part of an agent research project conducted with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas) and Planet Finance.  The merchants and leaders of Autazes are thrilled with the new business and higher tax revenues that resulted indirectly from agents, but what about the rest of the community? How has the arrival of agents impacted the lives of average, low-income people living and working in Autazes?

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Amitabh Saxena started the Alternative Channels workstream at ACCION in 2006 after spending several years in developing credit card products for Capital One’s Innovation Center.  He has worked in strategy and implementation of various channels, particularly prepaid cards and mobile, for ACCION’s partner microfinance institutions (MFIs) in Latin America, Africa, and Asia.

Remember MFIs?  Ten years ago they were front and center in delivering financial services to the poor.   These days, it seems that you’re more likely to see the likes of retailers like Wal-Mart (Mexico), mobile operators such as Safaricom (Kenya), or even post offices (Brazil) in the same sentence as “access to financial services”.   Are MFIs, then, still relevant in branchless banking?

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Recently we caught up with Damdinjav Dorjdamba, the Director of the E-banking Department at XacBank. Based in Mongolia’s capital Ulaanbaatar, XacBank is a community development bank and microfinance institution working to extend financial services to poor and underserved people, including nomadic groups, in both remote and urban areas in Mongolia.  It is providing electronic banking and payment services through a combination of cellphones and cash-handling agents. XacBank is also aiming to create the first nationwide payment system using mobile phones in Mongolia.

How is your mobile banking service faring?
In February 2009, we began piloting mobile banking and payment services in three locations and, the following month, we expanded into more places, including Ulaanbaatar. These pilots, along with several stress tests and focus group discussions with the first users of the mobile banking services, have contributed to the development of the m-banking platform. We went fully live with the commercial launch of our m-banking service AMAR (EASY in Mongolian) in July. By the end of September, the Bank had reached 11,200 clients served via around 1,000 agents.

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This post is based on a workshop led by Jan Chipchase of Nokia and me at the recent MMT conference in Dubai.

“Ecosystem” seems to be a big buzzword in the mobile money space. Many mobile network operators (MNOs) are extending their focus beyond what they consider to be the  killer applications – storing and transferring money and cultivating strategies to offer financial services at scale.

The cornerstones of a viable network are trust and ubiquity, but this is no easy task. MNOs not only need to find the appropriate partners, they also need to make the ecosystem relevant to the daily lives of their users. This can be done by capturing the various financial practices that constitute daily life, and by monitoring so-called unintended uses. One of the clearest examples of this – the use of M-PESA for the safe-storage of money suggests a latent demand for particular types of services, such as savings. By capturing and integrating these practices, MNOs increase the likelihood that their ecosystem will sustainable.

There are other ways to ensure sustainability. That is, through education initiatives targeting financial literacy. In the context of the mobile ecosystems this term has several meanings. At a more basic level, it could mean providing users with information regarding the various features of the application and could also mean explaining how these features can be navigated. Such initiatives are beneficial because they take some of the burden for education away from the retail agents handling cash-in and cash-out transactions. But financial education can be taken beyond lessons of simple usability, and involve those of better money management. These projects could teach the poor how to initiate savings plans, make strategic investment decisions, or seek out credit from formal financial institutions. If done properly, they could raise financial awareness and, in some cases, have positive implications for the livelihoods of poor users.

Achieving a sufficient level of financial literacy is not an easy task - what to teach, and how to teach it, takes both time and money and whilst the onus of providing (consumer) education leans towards the service provider the boundaries of this responsibility are not clear. As such MNOs may not always be interested in such an investment, especially at earlier stages of ecosystem development. However our position is, that by raising the level of financial and service literacy such initiatives will have substantial benefits for the MNO in the long run: on a personal level people are more willing to invest time and effort in using a wide range of services because there is a clear benefit; and within the broader society – that people are aware of the kinds of services that are available to them. Remember that banking is often seen as something that is ‘for others’ rather than for themselves.

An increase in service use will not without its consequences - the integration of financial practices into the ecosystem makes them both more visible and more traceable, especially in countries where the majority of economic activity is currently informal. For governments, this provides new opportunities for the exploitation of financial information – ranging from  the monitoring and prosecution of criminals to the stricter enforcement of taxation. As such it raises some interesting questions regarding the content of financial education projects. In particular, to what extent should the providers of such projects make clear these potential risks clear, especially given that they may not themselves have a clear idea of how their services will evolve? The actual and perceived mishandling of this issue threatens to marginalize the use of mobile money services, and as such all players in the ecosystem need to clearly communicate where they stand.

-Jan Chipchase and Olga Morawczynski

Since the official launch of GCASH in early 2004, Globe Telecom’s subsidiary GXI set-up a number of initiatives to help them arrive at a strategy for mobile banking in the Philippines. As part of those efforts, CGAP and GXI partnered to roll-out GCASH in three predominantly rural and low-income provinces of Bohol, Palawan and Surigao. Our goal was to understand how to expand the reach of GXI’s agent network into smaller towns and how customers would use the service. I am writing to share briefly what we learned in terms of customer usage and preferences in the low-income provinces that we have been working in.

In 18 months, GXI signed up 120,000 new GCASH customers in three low income provinces (Bohol, Surigao del Norte and Palawan) and set-up 200 agents to service those customers (GXI has 1.1 million GCASH customers nationally with 3,000 agents). GXI reached over half of the registered base in the first three quarters of 2009 – roughly 72,000 new GCASH accounts. About 2,000 of those customers (under 3 percent of total) have been conducting one or more GCASH transactions a month. The average transaction size was very low at USD 30, reflecting GCASH’s appeal to those looking to transact at low values. In addition, a very small number of customers have used the wallet for storage. We found a small subset (6-7 customers) maintain a monthly running balance.

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For the past several months, we’ve been hearing from many of you about the forces and uncertainties that will shape branchless banking, including mobile banking, and how much (or how little) it reaches poor people over the next decade. We had a series of podcasts with leading thinkers in the sphere of financial inclusion, as well as a prediction market and some serious discussion with the nearly 2,000 of you who have joined the Linkedin group on mobile banking and microfinance.

My colleagues, Mark Pickens and Sarah Rotman of CGAP and David Porteous for DFID took in the views of nearly 200 people from 30 countries to try to answer this question:

How can government and private sector most affect the uptake and usage of branchless banking among the unserved majority by 2020?

I won’t tell you that we’ve answered this question *completely.* But we do have, after just a few months, a new CGAP/DFID Focus Note that concludes that the growing use of branchless banking, including mobile phone banking, is inevitable in most countries. But it’s far less certain whether large numbers of the unbanked poor will use these alternative channels for financial services beyond payments, such as savings and credit. Some highlights:

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The launch of BanKO, Globe Telecom’s new bank, raises a number of questions. Why a new bank for Globe when it has a mobile commerce outfit, GXI, and why now? For one, they can do it — regulation permits it. Few other regulators would easily permit such a bank. CGAP is aware of a couple of other similar businesses being set-up in Africa but EasyPaisa in Pakistan and now BanKO are the two notable ones to date. For Globe/GXI, it means the possibility of more revenue if they reach Filipinos with a range of financial services. CGAP is not complaining. If they are able to design products and leverage their distribution, then Globe/GXI will help bring even more reliable formal options to low-income Filipinos than they currently face.

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There’s been a lot of talk recently comparing M-PESA in Kenya with that in neighboring Tanzania. I shared some of my initial impressions a few months ago after visiting both countries. While on the surface the countries appear to be similar, there are some important differences in geography, culture and market structure that have impacted the way M-PESA has fared in each place.

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Because the “Why?” behind adoption of new technologies is so essential for diffusion of initiatives such as m-banking and smartcards, its elusive answer is all the more perplexing. The “I need that” decision is seemingly motivated by anything, from an environment, to a person, or even a need to self-broadcast. Even I, after recently purchasing a new cell phone, have difficulty stating precisely why I decided on the make and model I did.

This particular quality of customer adoption creates compelling ties to my current bus ride read. Similar to John Gottman and relationship emotions or Paul Ekman and facial cues, perhaps dissecting the factors that influence customer decisions will yield stronger insight into that elusive “Why?”

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