What drives usage of branchless banking and mobile financial services? Three lessons from the field

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.

  1.  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 dept1h. 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.

  1. 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.

  1. 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.


Dreaming of Digital Goats

Written by Jesse Fripp

Recently, my wife and I supported a client of hers, a Malawian woman, victim of trafficking, to make a trip home to visit her family for the first time in fourteen years. Her mother and family are low-income farmers who live off-grid in a remote area of the country. Upon her arrival, she reported that they were so thrilled at her return and our support for her that they wanted to send back a prize goat for us, as an expression of their deep appreciation.

My wife and I were deeply touched by their gesture, knowing that in much of the world a goat is a key element of a low-income family’s investment portfolio – an accessible, secure, reliable and generally very productive asset.

A young boy in Kyrgyzstan holds his family's goat

A young boy in Kyrgyzstan holds his family’s goat

However, it reminded me that the goat (and other such instruments of value in the informal economy) is the primary competition to the true success of digital and mobile banking in achieving financial inclusion. In a low-income, emerging-market environment, a goat is a prized “liquid asset,” with a good outlook for return and security.

Contrast this with the opportunity to put precious cash savings into a seemingly ephemeral “mobile wallet” savings product. There, the hard-won cash the matron of the family hands over at the local kiosk disappears into a notation in a passbook or lightly printed receipt, where it will earn a return (if at all), only marginally better than inflation or sometimes even less. The asset cannot be seen or felt, and can sometimes be difficult to access on short notice.  Complex and opaque fees of the agent, the mobile operator, bank partners, and others eat away at the value of each transaction. And ultimately, there is limited social satisfaction, nothing to point to or be secretly envied by neighbors as a result of her efforts.

However, if that same farm matron invests her savings in a goat, she is reasonably assured of a few things. She can keep an eye on the goat on a daily basis. The goat can produce valuable dairy products for consumption and sale. The goat has the capacity to literally pay dividends by reproducing and making a host of kids (little goats, for you city-slickers) who can be sold, raised for dairy and/or meat. The goat keeps the weeds down, and entertains the children. Aggressive male goats are even decent “guard dogs.” A tribe of healthy goats indicates village status. And when push comes to shove, the family can sit down to a nourishing meal of goat stew.

So, the financial inclusion answer seems clear. Enclude’s Digital Channels & Linkages team is certainly working hard on this one, with partners in Ethiopia, India, Pakistan, Nigeria and elsewhere.

Yes, a Digital Goat.

This electronic equivalent to real goat value could be an m-savings product explicitly presented in goat-value terms, benchmarking the return on a Kwacha invested in savings vs the risk-weighted average return of a goat – offering real return over time, linked to real objectives. Possibly even purchase of a pair of goats or other high-value household investments as the explicit marketing outcome.

Enclude’s current deployments in Ethiopia and India include a focus in the area of such out-of-the-box thinking around customer-centered products for smallhold farm households, as well as broader areas, such as incorporating partnerships with ag input providers to integrate payment and input distribution channels to provide a “one-stop” information, ordering, distribution and payment point for rural farmers. Not a goat, perhaps, but certainly feed for one.

And with the recent discussion by Bill Gates at Sibos (view a clip here) around the future of the financial sector, and mention of several specific examples of what this might look like, there may be more to explore. These include the potential of innovations like BitCoin (Gates also flagged long-time Enclude partner and client bKash as an example of what this future might look like). Does this open an opportunity to develop “GoatCoin” for rural emerging markets? Perhaps with a farmer-friendly customer interface and a national goat-based commodity index backing up value (a “Goat Standard,” so to speak). The farm matron might buy whole or partial “GoatCoins” on a periodic basis, which maintain and grow in value until she is ready to cash them out – either for currency or goats, perhaps. We will explore this type of innovation and others further in a future BBB blog.

Whatever the case, until we are able to offer a Digital Goat that can compete with the tangible value of a real goat, or the other informal payment and investment alternatives of the two-thirds of the world’s population that remains largely outside the formal economy, broad-based financial inclusion will remain elusive.

Context and Culture: Designing Relevant Financial Services

This post is written by Debbie Watkins, SBI Senior Advisor, Channels & Linkages.

Humans have a propensity to label people, ideas or things based on our initial opinions of them. Ori and Ron Brafman, the authors of “Sway – the irresistible pull of irrational behaviour” term this the “diagnosis bias,” and it includes our inability to reconsider those initial value judgments once we’ve made them. Once a person is given a label (and even indirectly, a diagnosis), it’s hard for us to see other people in a way that isn’t biased by that label.

One-off quantitative demand surveys have a tendency to do this – by capturing information of people at a single point in time, they tend to infer that what the person was doing at that moment in time is all they ever do, and of course that isn’t the case. Making strategic decisions based on a limited set of data is referred to by behavioural economists as the “what you see is all there is” mindset – and can often set you off down the wrong track.

As a tool to help a mobile financial services provider design a business strategy, therefore, a point-in-time one-off research exercise is arguably not going to be much help. People’s financial behaviour and needs tend to fluctuate based on varying circumstances – the season, time of month, even time of day can have an impact – and therefore the answers that may be given when they’re planting this season’s crop are unlikely to be the ones you may have obtained at 3pm on the Wednesday afternoon when they were interviewed.

Previous research we have conducted to help financial institutions determine people’s needs for financial services has highlighted that people tend to use a range of financial services simultaneously –  both several sources of borrowing and several forms of savings –  and that they often continue (or even increase) their use of informal services when they get access to formal financial services.  In order to gain true insight into the “big question” of the type of services that a low-income customer will recognize as having value to them, an in-depth understanding is required of what they do now; how often; where; why; how much they pay; and what the challenges (pain points) are of the current methods.

At the same time, it is important to record not just facts, but the individuals’ perception of the facts. Why do they make the choices they currently make? What is their own perception of their current coping strategies? How much do local culture, informal networks, and immediate community have on the decisions they make? Are ways of doing things that seem perfectly normal to them, totally abnormal in another setting?

The main driving force behind gaining this kind of insight is to determine how (or whether!) the proposed service will be perceived as valuable to the intended customer base.  It won’t be “new” to them; it will be an alternative to what they’re using already. The mobile money provider is not inventing money transfer – their target market has been doing it through informal channels ever since they discovered that more work was available in urban areas (a very, very long time). The bank is not inventing savings – their target market is already saving with local cooperative groups or buying appreciating assets such as gold or cows.

To further understand how context and current networks can have such an impact on the value proposition of a planned new service, here are a number of real-life existing safekeeping scenarios, with an (evidence-based) evaluation of the cost and risk of each.

blog post

The value proposition of any new service will therefore be evaluated and compared against the services that the customer is using already. Is the money transfer cheaper/quicker/more convenient? Is the savings account more flexible/safer/easily accessible in an emergency? This is one key reason why there is no “one size fits all” solution – the answers to these questions will not be the same in Kenya as they are in Bangladesh; will not be the same for urban rickshaw drivers and rural farmers.

The impact of failing to consider local context and the customer value proposition is low adoption levels. The phrase “you can’t market someone into using something that doesn’t make sense for them” is particularly applicable to low-income populations – who are extremely difficult to sell to, and capable of quickly working out whether something is useful, relevant and valuable. By ensuring you really understand the complexity of the lives of your customers, not just as it is on the 3pm on a Wednesday, you can make sure your “something” is.

Delivering social program benefits using mobile financial services

This post is written by Muhymin Chowdhury, the Deputy Project Manager for the bKash Mobile Money project in Bangladesh.

Photo credit: Raisa Chowdhury

Photo credit: Raisa Chowdhury

On a recent work trip I had the opportunity to visit Chars Livelihood Programme (CLP) beneficiaries in the northern part of Bangladesh. ‘Chars’ are riverine islands created and destroyed by floods and erosion. These islands are located in very remote areas, requiring a minimum of twelve hours (via bus, car, motorbikes, boat and motorbikes again) to get to the nearest island from the capital city, Dhaka. The project beneficiaries receive a monthly stipend of Tk 350 (equivalent to $ 4.38), which is delivered to them in cash. In order to reduce the hassle of travel and carrying cash, CLP has started using bKash (a mobile financial services company) to transfer the stipend directly to their project beneficiaries. Our main motivation for the trip was to:

  • Observe how the service is rolling out
  • Understand whether people start using bKash for other purposes (e.g. savings, money, domestic money transfer)
  • Identify spillover effects of the service to non-project beneficiaries. Continue reading

Marketing – for whose benefit?

This post is written by Debbie Watkins, SBI’s Head, Implementation for the Alternative Delivery Channels practice.

Photo Credit: Marketing Sherpa

An unfortunate truth:  the vast majority of advertising agencies design beautiful campaigns that will get THEM new clients, when they should be designing relevant campaigns that will get YOU new clients. Mark Stevens, the author of “Your Marketing Sucks” and owner of MSCO.com (I’m a big fan), advises his readers to check whether the company they’re hiring has won any awards for creativity – and if so, not to hire them.

I like that approach. The aim of your marketing campaign is not to get people to say “ooooooh, that’s a nice ad” but instead “that product can really solve some problems for me.” As the old adage goes, when you want to sell a drill, don’t actually sell the drill – sell the hole…

Trying to convince low-income consumers currently operating in an almost exclusively cash-based society to change their financial services provider is not easy. And when their existing “financial services provider” could be a hole in their mattress, or the next-door neighbor, relevance and clearly understood value is essential . A large percentage of the informal services they’re using right now are “free” (although they undoubtedly have a cost associated with them).

So marketing messages shouldn’t focus on the phone and how cool it is. They also shouldn’t focus on the bank and how large it is – the consumer knows that anyway, and they haven’t been using it for a reason (and I hope you know what that reason is, and if it’s for any reason other than accessibility I hope you’ve done something to fix it).  Marketing should focus very clearly on how your solution addresses the problems faced by your target market that were identified in the market research you undertook. bKash, SBI’s mobile financial services client in Bangladesh, has some great examples.