Archive for: Financial Education

MTN Mobile Money ad in Cote d'Ivoire

Many branchless banking implementations have struggled with low customer uptake and high levels of inactivity. Inadequate investment in marketing, especially advertising, has come under the spotlight as a key culprit. However, several high-profile deployments that made huge initial investments in marketing have re-tooled their strategy after disappointing results. Marketing a new product like mobile money – especially to an unbanked, mostly rural population – requires more than flashy ads and blanketing every agent shop with the right shade of green or red. Beyond brand awareness, customers need to understand what the product is, why they should use it and how they can get started.

We’ve collected examples of branchless banking advertisements from around the world and interviewed providers about the lessons they’ve learned and how they’ve adapted their marketing strategies. The results – including case studies and examples of marketing collateral – are in this compilation deck. Some of the things we’ve learned are:

• Mass media marketing is important to build the brand, but not enough – While a heavy investment in above the line marketing (TV, radio and other mass media) is important to raise awareness and establish the brand and product as legitimate, it is not sufficient. Increasingly, branchless banking providers are shifting resources into below the line marketing.
• Education-based marketing, preferably done face-to-face, is increasingly seen as critical to customer adoption – Below the line marketing (especially face-to-face interaction) has been critical in many markets, especially those with low literacy rates. Some providers believe it takes 15-30 minutes of personal interaction before a customer understands a branchless banking or mobile money offering. Until a critical mass of customers is reached (when they start teaching one another), providers need to find a way to do education-based marketing.
• Keep the messages simple and use scenarios that are relevant to the average customer – M-PESA’s simple yet effective ‘Send Money Home’ advertisement is well known and conveyed a simple solution to a problem faced by many Kenyans. However, many implementations since then have tried to market multiple messages or more complex functionalities. These ads were not only confusing to unbanked people but seemed to advertise a premium service for high-end users. Successful ads have used simple messages and are relevant to the average (often unbanked and rural) potential customer.

Check out our deck to see many marketing examples ranging from M-PESA’s classic ‘Send Money Home’ (and the strikingly similar ads it inspired) to Haiti’s TchoTcho Mobile ad featuring a grandmother using TchoTcho Mobile to keep her money away from the prying hands of her family.

- Claudia McKay & Paul Breloff

To promote effective regulation of branchless banking, especially mobile banking, CGAP, DFID, and the Alliance for Financial Inclusion (AFI) have organized the third Global Leadership Seminar for high-level policymakers and regulators who set policy for branchless banking, including mobile banking. CGAP’s Technology Program and AFI are supported by the Bill & Melinda Gates Foundation. This week we’re blogging from the seminar. One session on branchless banking from the consumer’s point of view (download the presentation here)  was chaired by Daryl Collins, a Senior Associate at Bankable Frontiers and co – author of the influential Portfolios of the Poor: How the World’s Poor Live on $2 a Day. The book draws on year-long surveys of financial diaries from families in Bangladesh, India and South Africa. The surprise conclusion: many of the people they tracked were not living hand-to-mouth. Rather, the poor often rely on a variety of complex tactics and tools to manage money.

How are people who live on $2 a day different from, say, the people who are reading this blog? How would you sum up the financial needs of poor consumers?
When it comes to major cash flow, like incomes, most of us have got a predictable pattern and we can plan our financial lives. Poor people have low, unpredictable incomes,  where it’s hard to have mechanisms to siphon off income to save money, service a loan, etc. We’re used to having a monthly or biweekly pattern to our financial lives as we get paid a regular salary on a regular basis. Having a predictable pattern means being able to plan your financial life. If you’re talking about people who don’t have a salaried job, their income is irregular. Many of the people who live on $2 a day don’t have that predictability and so their financial lives revolve around mitigating uncertainty.

Talk a bit more about the issue of unreliability and informal financial services.
It is crucial to be able to leave your money in a safe place. Formal services generally offer more safety than informal services, but the problem is that formal services are less convenient. This isn’t just about transaction costs – the time and money spent on a bus or taxi ride as you get to the bank. It’s not even about waiting in line for a long time at a bank branch. It’s also about the mental accounting behind making transactions. If people think they can get at their money more easily, when they want it, then they will feel comfortable about shifting away from informal devices and towards a formal service.

What can we learn from “Portfolios of the Poor” that applies to branchless/mobile banking?
You need to make a service convenient and flexible. So if someone can walk up to a banking agent in their neighborhood and make a transaction, they’ll use it. Formal financial instruments, such as a bank account, are not always flexible enough to meet the demands and challenges created by the irregular cash flows that many poor people live with day in and day out. So making services more affordable and geographically closer to the poor – something that mobile banking does – can help expand the reach of the formal financial system.

The real story here is about expanding the reach and reducing the cost of formal financial services to  better meet the needs of poor consumers.
Yes. We have seen that poor people manage their money in a variety of ways, not all of which work well. The services they have available to them are not lined up with their cash flows. Informal financial instruments, such as savings clubs, do a better job at matching cash flows to savings points and being more convenient. But informal services tend to have their own costs, which really center on unreliability. Branchless banking may help people begin to tilt their portfolios towards more formal uses.  But we need to be realistic about how quickly this might happen.  People are not about to leave informal instruments and go completely into the formal. it’s a subtle shift that will grow over time.

-Daryl Collins, as told to Jim Rosenberg

Next: The consumer experience in Brazil and Kenya, and implications for policymakers.

Today we welcome Chris Bold as a new blogger for CGAP. Recently, Chris joined CGAP’s Technology Team on leave from the UK Department for International Development where he worked in their Financial Sector Team and, for the last year and a half, was based in Kabul managing DFID’s private sector development programs in Afghanistan. Chris will be providing additional support to CGAP’s portfolio of projects and exploring how large flows of money such as government payments and remittances can be harnessed to bring financial services to the unbanked.

It’s hard to think of a tougher environment in which to test the potential of mobile banking than Afghanistan. With a population of 30 million people, 36% of whom live below the government defined poverty line and 74% of whom are illiterate; Afghanistan is the poorest country in the world outside Africa. But bringing banking services to Afghanistan is exactly the challenge that Roshan, an MNO majority owned by the Aga Khan Fund for Economic Development, is taking on. We met with Zahir Khoja, Roshan’s Executive Director for M-Paisa, on a recent visit to Afghanistan to discuss the roll-out.

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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

As you review the businesses I briefly described in yesterday’s post, you may want to keep the following in mind.

First, in every case, there is always a bank in the picture – holding funds, issuing e-money, issuing an account – and the bank’s role itself and what the bank charges for its services is an interesting aspect of the business model.

Second, because we are talking about businesses that serve people who live largely in a cash economy, distribution networks are extremely critical. Charging customers to convert cash to electronic and vice-versa is part of the revenue pie.

Third, mobile network operators are uniquely positioned in this business. For example, let’s take a MNO as a money service provider. If (1) the MNO runes that business as a stand-alone P&L (and not another telecom product) and (2) they can make use of their existing distribution, then they are likely to see mostly variable costs. As illustrated in the chart, in a typical mobile money business, MNOs may incur marketing and agent/distribution commission costs with heavy spend upfront on marketing and increasing on agent commissions as their distribution network grows.

Third, regulation and what the regulator will permit set up incentives for what kinds of partnerships businesses strike, if any.  Philippines, India and Kenya are countries where the impact of regulation on business models is quite explicit.

Yesterday I listed five  business arrangements. There is a sixth business worth mentioning. You don’t see much of it and, frankly, it is not entirely a new business to begin with: a bank pursuing an agent+mobile channel as an alternate to branches. While not an entirely new business model, we know that this “mobile+agent” model presents a unique set of challenges for banks. It is not business-as-usual for them. It is not only fee-based transaction products, but the service is being delivered at scale to people transacting at low values. It is no surprise that we see banks and microfinance providers having limited success with this channel. Basix’s bank in India has set-up a distribution network and they have been successful in servicing loans through that channel. Tameer Microfinance Bank had modest success with agents in the slum of Orangi in Karachi but that channel has now been scaled-up in their tie-up with Telenor.

Bolsa Familia is a conditional cash transfer program that delivers monthly allowances to the poorest 12 million Brazilian families, including indigenous people in extremely remote areas. The transfers target the “head” woman in each family, who is then responsible for fulfilling a number of “conditions” such as keeping the children in school and keeping up with their vaccination schedule. The total number of people impacted by Bolsa Familia is around 45 million (family members and others). In the outset of the financial crisis, the Brazilian government increased the program from 11 million beneficiaries to over 12 million.

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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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We’ve written before about how government-to-person (G2P) transfers could be a conduit for increasing access to financial services. But how do you connect the world of cash with the electronic systems that deliver benefits? The U.S. government has successfully operated its Electronic Benefit Transfer (EBT) program across all of its states and territories since 2004. Rather than receiving paper benefits, participants open an EBT account – not affiliated with a bank – and receive a debit card that can be used for in-store purchases or ATM cash withdrawals at specially branded terminals. State governments provide electronic transfer for benefits, such as Supplementary Nutrition Assistance and Temporary Assistance for Needy Families, and vendors, such as JP Morgan Chase and Affiliated Computer Services, manage account information.

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In a recent CGAP Focus Note, Ignacio Mas and I wrote about six cases of e-money schemes in developing countries. Going Cashless at the Point of Sale: Hits and Misses in Developed Countries intended to draw lessons from these experiences to inform the work being done with e-money in developing countries. The last post in this series looked at the mobile operator-centric payment scheme Simpay. Now we turn to the second such scheme, Osaifu-Keitai in Japan.

DCM is Japan’s leading mobile communications operator, with 53 million subscribers as of March 2008, representing over half of Japan’s cellular market. It launched a mobile wallet service, Osaifu-Keitai (meaning: wallet-mobile phone) in July 2004.

Osaifu-Keitai is based on a FeliCa card embedded in mobile phones (the same that was used by Octopus in Hong Kong). Osaifu-Keitai is a device-based mobile payments solution, supporting both proximity payments in shops that have a FeliCa chip reader and remote (online) payments. Read the rest of this page »

A few months ago, Ignacio Mas and I wrote a CGAP Focus Note entitled Going Cashless at the Point of Sale: Hits and Misses in Developed Countries. Our aim was to analyze the history of electronic money schemes in developed countries, more specifically in Europe and Asia. We thought it would prove a useful exercise as CGAP works towards sustainable branchless banking models in developing countries. As expected, our research revealed several important insights.

In the paper, we discuss three broad approaches, and in each case we look at two providers who met different degrees of acceptance in the marketplace. Already on this blog, I have highlighted the two cases of smartcard-based electronic-cash providers: Mondex in the UK and Octopus in Hong Kong; as well as mobile operators facilitating existing payment instruments: Mobipay in Spain and Moneta in Korea.  Now I turn to the final approach, mobile operator-centric payment schemes. The first example of this is Simpay in Europe.

Simpay was launched in February 2003 by a consortium of the four leading European mobile operators: Orange, Vodafone, T-Mobile, and Telefonica Moviles. Its mission was to develop and operate a pan-European payments system for mobile phones, focused on micropayments (less than 10 euros). Despite the company’s tagline—“pay for stuff with your mobile”—the system was also designed to allow purchases from PCs connected to the Internet. Read the rest of this page »