Written by Vanina Vincensini
Digital financial services, or services which use electronic platforms to expand the reach of banking, have shown promise to contribute to financial inclusion in emerging markets. However, not all initiatives are met with the level of success seen as deployments like M-PESA in Kenya or bKash in Bangladesh. Finding customers who make usage of the service, and, in particular, regular usage of the service, is the goal of every provider in this business that relies on large transaction volumes to be sustainable. There are some barriers to usage that can and cannot be lifted by the providers. With our recent work in different regions of the world, we have learned a few key lessons which, despite being simple, are often overlooked by providers.
- Addressing a customer need or solving a customer pain will yield greater usage
Easier said than done! Too often, we’ve seen providers replicate a model that they have seen elsewhere without conducting proper analysis of the local environment and customer behavior. Actually, the local environment is generally well known by the provider (e.g. what the regulator allows them to do or not), but what the customers do with their finances, or what they like and dislike about a current service, is not always studied in depth. One of the success factors of M-PESA was to listen to its customers during a pilot phase and really understand the behavior and value they saw with respect to the original service that was proposed to them, which led to recognize that there was a bigger opportunity with a virtual money transfer service than the original concept. Similarly, bKash in Bangladesh incorporated in-depth market and customer understanding throughout the product development cycle, before launch, post launch, and regularly since then, in order to always stay abreast of behavioral developments and attitudes towards the service amongst Bangladeshis. Thus, launching a “copy paste” money transfer service in a country where the population is not used to sending money to family members will likely not take up. Encouraging formal savings amongst a group that has never saved before will take time, awareness raising campaigns, and a good incentive for the customer to change behaviors. On the other hand, focusing on a habit, and improving the experience of comparable alternatives is often more successful than trying to create a new habit or a need. In essence, placing the customer at the center of the product development process is a winning strategy for our partners.
- Proper customer segmentation is key
Whether they are urban or rural, young or older, male or female, customers of digital financial services will have different attitudes and usage patterns of the service. Oftentimes, the customer segmentation considered by providers is limited to these basic demographic characteristics, while there are many more dimensions influencing the behavior of customers. After all, does separating customers amongst males and females create homogenous groups? Not necessarily. Segmenting customers in terms of behaviors and attitudes, as opposed to simply along demographic characteristics, can make a lot more sense to understand the different profiles of customers (super users, influencers, receivers, senders, etc.) and target them with offers that are meaningful to them. Looking at one dimension of the customer is rarely the best way to understand their behavior. In a recent project, our client asked whether gender was an important factor that would differentiate customers’ usage of the mobile money service. In fact, it is a common belief that women will be worse off than men with technology or financial services. When we concluded our analysis, we actually disproved this hypothesis by showing that there was not much difference in behavior and usage between men and women. Other elements characterizing customers can be much more important to explain their level of engagement with the service, in particular how they receive their main source of income (in cash or on a bank account), whether they are senders or receivers of money transfers, and whether they have their own business or not. Data mining of the customer database can yield precious information to better understand the drivers of usage and barriers to more frequent usage of the service.
- Trust in the channel plays an important role
Whether it is the agent, the ATM, or the mobile phone, the issue of trust is very important in driving usage of branchless banking and mobile financial services. It is common that banks are perceived by the banked and unbanked as trustworthy institutions where the money is safe. However, their agents, the mobile phone, and other means of electronic transaction are less favorably perceived. In Brazil, where banked and unbanked can make payments in cash at ATMs, customers who prefer to stand in line at the bank branch to perform the same transaction say they are afraid the machine will “eat” the bills and not confirm the transaction. Others mention they fear that the person in charge of counting the bills will not be as supervised as the teller is, and could easily steal a few bills. In Nigeria, customers prefer to transact at the bank even though they enroll in a mobile money program, because they feel it is safer than at the agent. The agent, or the shopkeeper who represents the bank, does not always offer the same privacy as a bank branch, for example. Therefore, providers should endeavor to build more trust and explain more clearly to their customers where the money goes after it is deposited at one of the available alternative channels.
Although there are many more lessons from the field that we could present here, these three lessons all have to do with the way in which the customer makes decisions to use a service or not. Providers should pay more attention to the different kinds of customers they are dealing with, and focus on customers’ habits and what can be improved compared to their current experience. Thus, understanding and listening to your customer is a central strategy to drive usage of branchless and mobile financial services up. We’d be interested to read your experience with drivers of service usage in the comments to this blog post.