[From Mobile MoneyAsia blog, 21 May 2013]
Here is a collection of concrete ideas I’ve put forth in the
past to make mobile money more useful for customers. Sadly, I have yet to see
any taken up, even as a pilot. Since this is a virgin blog for me, I thought
I’d recycle these ideas here.
1. Allow money transfers over time to oneself
Don’t just help people move money once they have it: help
them put together the money they need to make a payment. Invite customers who
receive e-float to directly assign this money to some purchase(s) or payment(s)
they need to make in the future, thereby preventing the money from being
withdrawn today. Mobile money has broken the distance barrier
in payments, and it should be extended to help people manage payments across time as
well. That’s what money management is all about. This can be done simply by adding
one optional question on the standard send money menu
(transaction value date), and letting people send money to themselves: Me2Me. (Watch a short video on
the full idea).
2. Receipts website
Customers want to be able to show a printed receipt if
there are any questions around a bill paid or a business transaction settled
with mobile money. This can easily be provided through a dedicated website
service: enter your phone number and the unique transaction ID from the
transaction confirmation SMS, and the website generates a printable bill for
you. The possibility of getting a receipt at a cybercafe will offer peace of
mind for business uses of mobile money.
3. Business account numbers with automatic error
A common form of fraud is for people to buy something with
mobile money, and immediately reneging on the transaction by claiming that the
money was sent in error to the wrong number. This can be eliminated by making
all transactions irreversible, but that seems harsh because people do make
errors from time to time. A better solution is to let business users of mobile
money get a business account number distinct from their mobile phone number,
which would incorporate a single check-sum digit.
(Checksum digit is the result of a fixed mathematical operation on the rest of
the digits in the account number, such that if a digit is mis-typed the new
checksum digit does not match the one appended to the account number.) This
allows automatic detection of erroneous account numbers.
4. Optional description field on all money transfers
Another common complaint of business users of mobile money
is that they cannot identify who they got the money from (e.g. if the sender
has used a relative’s phone instead of their usual one) or which order or
invoice it is meant for (if it’s a repeat customer). This can be addressed
easily by providing an optional reference field on
all money transfers, so that the sender/buyer can enter any appropriate
information agreed to with the seller to identify the payment.
5. Lending through peer vouching
Microcredit has shown us that lenders don’t need to know
much about their borrowers as long as the borrowers know a lot about each
other, and there is an incentive mechanism for people to screen and monitor
each other. Mobile money customers who want credit could get other customers to vouch for
them, with the weight attached by the lender to each person being based on
their vouching track-record. Given some positive incentives for good vouchers
and enough time for the system to learn, certain customers would naturally
self-select themselves as de-facto loan agents in their town.
6. Community-level incentives to promote savings
Peer pressure has been a core tool to instill borrower
discipline, but has seldom been used to promote savings discipline. One idea
might be for a mobile money provider that is expanding into a new village to
agree on a community-level reward once
total e-money balances reach a certain level. The reward would be agreed to
with the town elders (e.g. paint for the school), who could then be expected to
play a role in promoting savings and the mobile money system behind it around
town. Total community savings could be displayed on a thermometer at prominent
place, for all to see, prompting people to want to save so as not to fall
behind everyone else.
7. Simplified phone menu structure
Mobile money menus are getting long, as mobile money
providers seek to promote more diverse reasons for doing essentially the same
thing: sending money to someone else (to another mobile phone, to pay a bill,
to buy airtime, to buy physical goods at a store, to get cash, to park money in
a bank account, etc.) For basic users, this menu clutter may be causing
substantial confusion and hindering adoption of new uses which reside in as yet
unexplored parts of the menu. It may be better to consolidate all these uses
into one menu item –send money—and let the system
detect which application the customer wants to do based on what destination
number he/she types in (a phone number, a biller code, an agent number, etc.)
In this way the provider can still market many and diverse use cases, but need
only educate customers on one standard send money process.
8. Depositing money without requiring IDs
Once you are registered as a mobile money customer, the
phone and PIN should be the only things you need to do any transaction. Except
that you are usually asked to show an ID to make a deposit: the regulator wants
to be able to trace who the money came from, and the mobile money provider
wants to ensure that you are depositing it into your own account and not
bypassing P2P charges by depositing it into someone else’s. A solution to all
this is to make customers request a deposit from
their mobile phone at the agent and authenticate with their PIN – essentially
turning the deposit into a pull transaction.
9. Withdraw through a friend
One common reason why people share PINs is so that you can
ask a friend going into town to pick up some cash from your account on your
behalf. It’s an entirely legitimate use case, an especially common one in the
early phases of a mobile money deployment when agents are thin on the ground.
But PIN sharing of course compromises your entire account. Instead of badgering
customers for it, why not design an appropriate solution for it: create a withdrawal request against a one-time password
which you can then share with your friend. Your friend can run away with the
requested withdrawn amount, but no more. This would work much like when one
sends money to an unregistered customer.
10. Focus on the basics
OK, this last one may sound like a cop out, but we need to
recognize that features alone cannot drive demand. In the end, there are some
basics that need to be gotten right if anything else is to work: marketing
concrete use cases rather than general capabilities; driving a consistent
customer experience at the agent; not skimping on agent commissions;
maintaining system uptime; not growing agent numbers wildly ahead of
transaction numbers, because that will kill the business case for most
agents. And, despite all I’ve said above, guard against productitis:
product proliferation that aims to satisfy ever-finer needs of excessively
narrow customer segments.
[From Center forFinancial Inclusion blog, with P Mukherjee, 8 May 2013]
We recently completed extensive field work on people’s money
management practices in India and Bangladesh, funded by The Bill & Melinda
Gates Foundation. Our ostensible purpose was to develop simplified metaphors
that express vividly how people think about money. You can judge for yourself
how close we came to that by viewing (here)
10 different outputs. While our intent was to simplify, we ended up evolving a
more nuanced view of how poor people think about money management (see here for
a fuller treatment).
We echo Collins and Zollmann’s observation from their research
in Kenya that poor people’s financial talk tends to
relate much more to short term income security than to longer term goals or
risks. Their main concern is that they want to have enough recurrent income to
meet routine expenses. We unpack this into three interlinked concepts which,
while by no means new, deserve more attention.
Shaping income to increase income security
Unlike organized sector employees, the mass market lives on
a diet of irregular and often unpredictable income flows. From this, some
larger routine expenses like school fees need to be met and emergencies need to
be dealt with. Stuart Rutherford has placed lumping of money –
the accumulation of balances into useful lump sums – as the key financial
mechanism people use. What is interesting is that so often people use those lumps to
buy a cow (or a rickshaw, or some merchandise for trading), whose main
attribute is that it produces small daily income rather than being a good store
of value. So they go from collecting a meager stream of small daily cash flows,
to building a lump sum, and from there to creating more small daily cash flows.
What pushes them on this cycle of sacrificing, lumping, and regenerating daily
income – which we call income shaping – is the desire to
change not only the size but also the timing and predictability of cash
inflows. They see that as the key to providing for daily expenses, and building
the routine of setting money aside regularly to build further useful lumps.
Income shaping is people’s preferred mechanism to achieve consumption
smoothing: by building a regular income profile.
Routinizing goals and habit formation
Beyond shaping regular income, the other key financial
concern of households is to establish an appropriate pattern of routine
expenses. Setting a spending routine builds spending restraint through sheer
force of habit (e.g. meat once a week, night out with friends once a
fortnight). On the other hand, overly ambitious spending routines may set
aspirations that are hard to achieve, and hence can increase the sense of
privation and anxiety. This is not only about consumables: Larger, longer-term
goals are more likely to be achieved if they fit within an assumable spending
routine than if they have to be provided for on an exceptional basis.
One way to routinize a goal is to buy the item on credit.
Once a TV is bought on credit, for instance, the TV goal is
satisfied, and it is substituted with a clear the debt routine
goal. Another example of routinizing a goal is investing in a daughter’s
education (a routine expense), as this then reduces the amount of dowry that
will be required (a large one-off investment) to secure the goal of a good
marriage. Money will need to be set aside weekly or monthly to pay the TV
installments or to pay for the daughter’s education, but there won’t be a need
to fret about building and protecting a pool of assets.
Informally employed people without a fixed salary cannot
live by hard and fast spending rules; instead they try to live by routines.
Routines create automaticity in spending decisions; they define needs,
as distinct from wants.
Fuzzy goals, proxied by instruments
The amount of regular household income limits how many goals
can be routinized. There is still an opportunity to achieve other goals by
saving on more sporadic or unreliable components of income. We found that
people who are building up savings typically have a surprisingly loose idea of
what they might use them for. Stated spending goals tend to relate either to
concrete, smaller-ticket, recurrent expenses (food rations, school fees, etc.),
or much longer term, aspirational, and largely unquantified status markers (the
eventual wedding for a young child, land, house, etc.). It is relatively
unusual to hear people say that they are working specifically towards a TV, a
sewing machine, a latrine, or a bicycle.
In fact when you ask people what they are saving up for they
are more likely to respond with what we’d call instruments (jewelry, goats)
than with actual spending goals. These instruments act as a proxy for a loose
collection of potential uses for the money – which we call a fuzzy goal.
They will lock in a purpose in their minds only when something becomes urgent
(rather than important: the child’s marriage is coming up!) or when the lump
becomes large enough to start dreaming up what to do with it (to avoid
temptation, allocate it!). This may be a psychological defense mechanism: why
think up a goal, until it is reasonably within grasp?
So the picture that emerges is one where money management is
focused on bringing regularity and routine to small inflows and outflows,
rather than planning for large future goals. We often go to the field with our
own baggage, expecting people to have clearly defined medium-term goals. They
often don’t. In fact, do you?
[From MMU blog,
2 May 2013, by Philip Levin]
We received some great comments from readers in response to
the recent MMU
Spotlight on direct deposits. Among them, was a
suggestion not included in the publication – addressing direct deposits through
a system solution rather than the policy solutions of
monitoring and disciplining offenders. Ignacio Mas explains:
Mobile money operators should want
to see agents as enablers rather than enforcers, as allies in the fight against
fraud rather than as accessories to petty fraudsters, as respected VIP
customers rather than as subordinate entities. Of course, there will always be
a supervisory function over agents, but that should be limited as much as
possible to branding and liquidity issues which are fundamental to the health
of the service, and to ensuring proper KYC.
Let me offer a system, rather than
policy, solution to the direct deposit problem. It does introduce more
complexity in the customer experience, but in the end mobile money is primarily
about systematizing processes as much as possible.
The solution is to require
customers to initiate deposit transactions at the agent, just like they do for
withdrawals. Instead of treating a deposit transaction as an agent push, treat
it in effect as a customer pull. It would be analogous to the deposit slip
banks ask us to fill and sign at a branch, only you’d do it electronically from
your mobile phone.
So: if a customer wants to do a
deposit at an authorized agent location, he/she selects the (new!) deposit
function on the mobile money menu in my phone, and is asked to fill in the
agent number, the amount and my PIN. Here the PIN is only for customer
authentication, not transaction authorization, since the electronic money
offsetting the cash handed over by the customer is coming out of the agent’s
account. The agent still needs to authorize the transaction with his/her own
The transaction could then be
completed in one of two ways. One way is to implement a real pull transaction
procedure: after the customer requests a deposit, the system automatically
initiates a transaction session onto the agent’s phone showing the details of
the requested transaction and prompting the agent to confirm it by entering
Alternatively, upon requesting a
deposit (which he/she might do while still in line waiting to be served), the
customer receives a one-time code on the phone (valid perhaps for 5 minutes).
The customer then shows or reads out the code to the agent across the counter,
and then the agent sends money to that code rather than to the customer’s phone
In this fashion, depositors would
be identified electronically: no direct deposits, full depositor KYC. Customers
no longer need to show their ID to an agent, once they have registered.
This procedure would have three
further advantages. It speeds up the process for agents, who no longer need to
check IDs and ask for, type and confirm transaction details. It minimizes the
scope for agent error, since the transaction details are entered by customers.
It’s not only about shifting responsibility: it is easier to deal with money sent
in error to the wrong agent number than to a wrong customer phone number.
Finally, it allows the deposit function to feature in the mobile money menu
alongside withdrawals and all the rest. Depositing is now the invisible
function of mobile money, and that surely must confuse new customers.
Would Ignacio’s system solution work in practice? Or would
the usability trade-offs – including customer confusion about the process and
increased technical failure rates from adding one more system transaction – be too
great to justify the reduction in direct deposits? Luckily, we do have an
example from the field. CEO of WING, Anthony Perkins, describes a positive
experience in implementing a similar system in Cambodia:
WING still tackles [the direct
deposit] problem by insisting on two prerequisites: 1. The customer present
their WING ATM card for all agent transactions, including cash in, 2. The
customer has to enter their PIN to confirm the transaction. The combination of
these, plus the two crucial steps also mentioned of identifying transgression
and enforcing strict disciplinary action has made this much harder for direct
deposits to occur.
Regarding the question on how much
hassle this process is, the answer is simply no hassle at all. Both agent
and customer are used to the reverse process for cash-out and this one
additional step of including the customer PIN on cash-in also gives the
customer the chance to review the entire transaction before committing.
I won’t lie that some unscrupulous
agents have indeed stolen customer PINs and transacted thereafter, but these
are easily identified through system logs; agent accounts involved, usually
still holding balance to service other customers, can be suspended and complete
recovery to the customer possible.
The key to success of mobile money,
not just this issue, is almost entirely the integrity of the agent network, not
the technology or process. Strict discipline of agents from launch is crucial
to build trust – the foundation of any financial system. WING has zero
tolerance for fraud, even for one cent; agents are terminated immediately and
put on a blacklist never to return; one dishonest agent’s loss is an honest
agent’s gain. As a mobile money service becomes well known, you’ll have new
agents falling over themselves to join, culling bad ones is not an issue.
Our system is not perfect by any
means and can still be played if a customer gives their card to a
friend/relative along with their PIN.
Thanks Anthony and Ignacio for raising this alternative. If
anyone has experience (positive or negative) implementing a similar system
solution for direct deposits, please let us know in the comments.
[From Mobile MoneyAsia blog, 27 April 2013]
Disruptive innovation typically occurs when market outsiders
conceive of a service with a radically simplified user experience, offer it at
a much lower total cost, and –crucially— incorporate an order-of-magnitude
improvement in one key dimension that really matters to the mass market. It’s a good
enough service, with a wow factor. Meanwhile, established
players engage in a proliferation of features and pricing plans that only
appeal to larger, more sophisticated users, who happen to be the customers they
listen to more closely. As Clayton Christensen emphasizes in The Innovator’s Dilemma and
subsequent writings, the disruptive service is often so basic that established
players don’t even see it as competition, giving it plenty of room to grow –
until it’s too late.
This plot fits perfectly with the development of mobile
money, and especially Safaricom’s M-PESA service in Kenya. Mobile money reduces
banking services to a bare-bones store of value and means of payment function,
and blows away banks in terms of sheer retail footprint.
It is natural and entirely desirable for mobile money
players, once established, to seek to improve and broaden their offering,
adding features that appeal to their better customers. This comes at the cost
of higher product complexity and, eventually, a more expensive service for
ordinary users. They become incumbents, opening the possibility of history
On the complexity point, take a look at the M-PESA menu. You
can now send money to a phone number (P2P), pay bills (send money to a corporate),
buy airtime (where Safaricom itself is the biller), buy goods (pay a store bill
on the spot rather than at the end of the month), withdraw cash (pay a store in
return for taking cash rather than goods), and send money to your own bank
account (M-Shwari or M-KESHO). The only difference between these is who you are
sending money to and why. They are use cases around a basic money transfer
Mobile phone user interfaces have tended to productize the
use cases: the menu directly exposes a variety of things you can do, such as
the above list. It reminds people of what they can do each time they look at
the service phone menu, and advertisements for use cases can incorporate a
call-to-action linked to a specific item on the menu.
On the other hand, a user interface built around a product
logic has the drawback of appearing to customers like each of these
use cases is something new and different, needing to be explored and understood
separately. Menus first get long, then nested, eventually burying the lesser
known use cases. Service categories and names seem increasingly arbitrary and
confusing in customers’ minds. Menus need to be updated frequently to fit new
services in, disrupting customers’ sense of familiarity with the service. All
this can constitute a barrier to customer experimentation: many people will
stick to what they know (largely, P2P) and ignore the rest.
An alternative is for the phone menu to expose the basic
functions rather than the use cases of the service. Let’s call them send
money, get money and view balance. Undersend
money, to identify the recipient you could enter indistinctly a phone
number, a biller or merchant code, an agent code, a bank account number – or
you can access a menu of pre-defined destinations (your own bank account
number, frequent billers, buying airtime from the operator, etc.) In all cases
you are then asked to enter the value of the transaction, and an optional
description for the transaction. How the latter is precisely worded
might differ based on who you are sending money to: it might say ‘your
purpose’ for basic P2P, cash withdrawal, or transfer to your own
bank account; ‘your account number’ for bill payment; ‘for which
phone’ for airtime purchase; etc. Having captured these three
standards bits of information, the user interface then displays the full
intended transaction, including the applicable charge (since different amounts
and use cases might incur different charges), and asks the customer to confirm
it by typing in his or her PIN.
With this approach, the phone menu remains simple, short and
stable. Two steps in the menu protocol are skipped (selecting the service, and
confirming the transaction which we have combined with entering the PIN),
making transactions faster. Because there is only one send money option
and all transaction types work the same way, customers feel they have to learn
the mechanics of sending money only once. Different use cases can still be
advertised, but they would be promoted as one more reason to send money rather
a new service that needs to be discovered and understood separately.
Similarly, the get money function would
offer a standard way of getting electronic money from various sources, and
could conceivably incorporate a loan feature (i.e. get money from the provider,
as with M-Shwari), pulling money from your own bank account, and possibly
requesting a cash deposit from the agent (which would achieve electronic rather
than offline authentication of the depositor, thereby eliminating the risk of
P2P bypass and improving KYC compliance).
When you want to promote many diverse use cases, should you
differentiate them into products through the user interface (like an á
la carte menu in a restaurant) at the risk of creating overly long
menus, or should you consolidate them into a minimum set of distinct
functionalities (like in a Swiss army knife) at the risk of not expressing the
use cases explicitly? The question is ultimately an empirical one: which one
will stimulate more usage? I am not sure what the right answer is, but I do
think it’s worth asking. I don’t get the sense that this has been given due
attention either by operators (who are merely replicating established formulas)
The user interface logic needs to be looked at with a
long-term perspective, since mobile money use cases and functionalities can be
expected to grow quite substantially, and legacy practices will become more and
more of a burden with time and success. (Do you remember when your operating
system fit in a floppy disk?) Mobile money operators need to give serious
thought to how to future-proof their user interface strategy.
[From The Guardian,Global Development Professionals Network, with David Porteous, 24
In the past two decades, the world's information grid has
expanded massively. Digital signals are all around us. In developed markets,
many of these digital exchanges involve electronic payments, but most people in
developing countries are still stuck moving paper. Financial transactions lie
at the heart of doing commerce, selling goods and services, managing a
business, and taking care of one's family. Making these transactions safer,
cheaper, and more convenient should be on the development agenda of every
developing country. Yet building a digital payments fabric linking all citizens
and businesses in a country is rarely a development priority, in part because
the benefits are intangible and diverse.
To put a spotlight on the importance of effective retail
payments, the first step is laying out a vision: we subscribe to the term
inclusive cash-lite. Inclusive cash-lite is not necessarily a cashless world,
but a world where cash is increasingly relegated to the 'edge' of the
electronic grid, and used predominantly within local communities for small,
face-to-face payments. In a cash-lite world, physical and digital money
compete, each finding its own niche applications, with a gradual diminution in
the role of physical cash over time. The logical transition toward a cash-lite
world starts with people transporting less cash, then storing less cash, and
finally using less (or no) cash in daily payments and transactions.
Benefits of a cash-lite world
Closing the digital payments divide between developed and
developing countries and between rich and poor people may well become a
cornerstone of the 21st century approach to economic growth and poverty
reduction. Freedom from physical cash helps business innovation, increases
people's control over their lives, and can support governments' efforts to
fight crime and corruption by letting people and businesses transact more
safely and cheaply across a much broader geography and across payment
Access to electronic payments can be a driver for business
innovation. Bundling electronic payments information and software creates
opportunities for businesses to streamline and automate processes relating to
procurement, dispatch, inventory management, and payment collections. Being
able to centrally initiate and control all payments electronically
substantially reduces barriers to entrepreneurship by reducing the risk of
fraud and theft to which entrepreneurs are exposed through interactions with
employees, agents, and customers alike. Entrepreneurs might also have greater
access to credit through credit scoring based on transactional histories.
Access to digital money can also increase people's control
over their financial lives. The ability to make electronic payments instantly
and conveniently may lead to more efficient risk sharing among family members
and social networks. It opens up a range of formal financial services they can
use for investment or risk management purposes. Electronic payments also bring
a much higher level of privacy over financial matters, which may increase a
household's incentives to accumulate more savings (with less social pressure to
share it) and may help women to gain a greater degree of financial security and
independence from the men that control their households.
Finally, the spread of digital money can also bolster the effectiveness of
government and the rule of law by helping fight crime and corruption. The
prevalence of cash is as much a problem for law enforcement as it is for
financial inclusion: criminals can operate much more easily in a cash-based
economy. Digitising transactions and making cash suspect is a good way of increasing
costs for criminal operations as well as increasing the chances of their
detection. And since government is generally the largest micropayer (of
salaries, pensions, and social welfare payments, for example) and collector
(taxes) in each country, it stands to gain substantially from a cheap,
transparent electronic payment platform with adequate traceability of payments.
The way forward
Achieving an inclusive cash-lite world may take time, but it
need not take forever. By clarifying the objective and by creating a roadmap to
get there, we can ease the concerns associated with departing from cash and
smooth the path forward. When financial sector policy makers show clarity of
vision and purpose in this area, inertia and the clutter of vested interests
can be overcome.
Moving from cash to digital money has been an inexorable if
slow trend in developed countries, but it has been hampered in developing
countries by the lack of penetration of banking institutions, by regulatory
rigidities, and by the paucity and high cost of communications networks. An
estimated 70% of the population in developing countries is untouched by the
formal financial system. In many regions of the developing world, the gap in
access to finance is starker than the gap in access to primary health,
education, and clean water.
With the spread of mobile networks, we can now address these
issues and transform the financial opportunities faced by businesses and
households in developing countries. The commercial success of Safaricom's M-Pesa
mobile payment service in Kenya, which penetrated into the majority of the
adult population in just three to four years, has shown that there is pent-up
demand for convenient electronic payments even among the poor. Yet the state of
electronic payment systems in most developing countries is akin to the state of
the electrical grid a century ago: fragmented, reaching only the wealthier
third or so of society, and unreliable.
To harness the power of the grid in developing countries
where typical balances and transactions are very small, we will need to think
differently about payment regulation and business models. Despite the many
obvious advantages of digital money, it has to be at least as good as cash in
two key areas: convenience and trust. A sufficiently broad base of electronic
devices is needed for people to operate and access information about their
accounts, quickly and conveniently. Marketing must be fair and not misleading.
People must feel fairly treated and have their privacy respected by the financial
institutions that manage their accounts. And the regulatory and supervisory
frameworks over financial institutions and their electronic platforms must give
people confidence that their money is safe and their claims to it will be
Most people who are new to such a system will want to
maintain a foot in each payment world: the physical cash world they have
learned to live with and the digital cash world that opens new opportunities to
them. It will take time for people to become familiar with and entirely
trusting of the new payment grid. Bridges will need to be built to create
backward compatibility between these two monetary worlds, in the shape of a
network of cash merchants willing and able to accept cash for electronic value
and vice versa for a reasonable commission.
Building an inclusive cash-lite system requires both scale
(to maximise network effects and minimise unit costs) and granularity (offering
convenient services to/in every community). While the full vision may take a
long time to realise, it will be important to get sufficient traction with
customers early on to sustain the investments in marketing and technology
roll-out required to achieve both scale and granularity. A range of players —
banks, telecom companies, distributors, and regulators — will have to work
together to create an interoperable digital payments grid.
inclusive cash-lite vision is now within the grasp of many countries for the
first time. When the history of development in the 21st century is written, it
is likely to feature prominently those countries that have made the transition
and gone cash-lite.
[From FinancialAccess Initiative blog, 5 April 2013]
If there’s a growth industry in financial inclusion, it’s in
data and measurement. And if there’s something experts are increasingly
agreeing on, it’s that it is illusory to try to define financial inclusion in any
precise, universal way. John Gitau says he’s
confused, and so am I. Bu then, how can you measure financial inclusion?
Forgive me if you think I’m splitting hairs, but while you
might not be able to measure financial inclusion itself, you can still measure
things that indicate either actual, or the potential for,
progress. Such indicators are what we should be after, but
let’s not confuse them with actual measurement of financial inclusion.
There are two broad types of indicators which can be applied
to fuzzy concepts like our cherished financial inclusion, and let me illustrate
each with an example of an equally fuzzy concept from outside our field.
The first set of indicators relate to more concrete things
that enable the desired, fuzzier outcome. Think of it as pieces of the jigsaw
that we know are important even though we never get to see the full image of
the puzzle. We can call these antecedent indicators.
If we want to know how to measure the state of democracy in
the world, for example, we would start by listing the specific set of ideas
that we expect would form part of democratic governance. Just looking at which
countries run regular elections would be seriously misleading: we’d also want
to know whether there’s freedom of the press so that people have a chance of
making informed decisions; how easy it is to register to vote, as that ensures
representativeness; how parties and campaigns are financed; how transparently
do votes actually translate into who holds power; the levels of government at
which there is democratic election; the list goes on. And then there’s of
course another pile of important considerations of democratic interplay during
the time between elections, like mechanisms to protect
minority rights or how to handle recalls.
These would all be fine indicators, but each only tells part
of the story and it is doubtful that all of them together could ever tell the
full story of the state of democracy. The bottom line is: if you simplify the
measurement then you need to nuance the interpretation, and you can’t let the
data speak entirely for itself.
In the field of (formal) financial inclusion, we might deem
that having an account at a bank, being able to understand some basic financial
literacy concepts, and being on a convenient interoperable payment platform are
essential requirements for meaningful inclusion. But it would be a tremendous
stretch to argue this backwards. Having an account, knowing how to compute
compound interest and having an option to pay electronically does not make
you automatically (formally) included in any real sense.
The second set of indicators focuses not on what are the
minimum conditions for there to be the desired (fuzzy) outcome but what
concretely happens in a state where the desired fuzzy outcome is fulfilled. We
can call these impact indicators.
Take the notion of gender equality. Can anyone claim to be
able to measure what percent of women are equal in any
particular country? No, but we can look at pay differentials between men and
women and infer something about equality in the workplace. We can count how many
women are battered by their husbands and infer something about equality in the
home. More equality should lead to less/no pay differential and less domestic
violence. But there’s an assumption of causality there, and we have better be
sure that the causality is strong before assuming that the concrete indicators
tell us anything about the fuzzy outcome we are trying to measure.
In the field of financial inclusion, the impact indicator
logic would have to be something like the following. Because people are
financially included, they can enjoy smoother consumption, and hence experience
more stable caloric intake and their children miss fewer school days. Because
people are financially included, they can mitigate risks better, and hence they
have more stable incomes and fewer serious diseases. The problem is of course
that caloric intake, school attendance, income volatility and health have so
many drivers that it is hard in any given situation to disentangle how much of
that was due to financial inclusion. One could in principle establish the
causality through appropriately designed randomized control trials (RCTs), but
that would have to be tested against so many different locations, population
segments, personal circumstances, quality and scale of services, etc., as to
make the basic causality proposition unprovable, in my humble opinion.
So we have seen that, if we cannot measure the concept of
financial inclusion itself, we can only measure factors that are known to be causing financial
inclusion, or impacts that are caused by financial inclusion.
These can be thought of as giving rise to leading and lagging indicators.
Unfortunately, unlike with the other examples I have cited, what these causal
factors are at either side of financial inclusion are almost as fuzzy as the
notion of financial inclusion itself.
Porteous argues, the lack of a standard definition of financial
inclusion can be both a strength and a weakness. But the lack of clarity about
what are reasonable causal indicators is a lot more troubling.
None of this is an argument to stop trying, but we do need
to be cautious about what conclusions we draw from all the data. It also helps
me understand (or maybe rationalize) why I feel like I get so little out of so
many financial inclusion surveys that get conducted annually across the globe.
[From IMTFI blog,
27 March 2013]
Understanding customers’ purchase decisions is the core of
the marketing challenge. We know it’s about segmenting in order to get more
granular customer insights, identifying customers’ alternatives in order to put
a given product in a wider context, evaluating the needs and the benefits as
well as the barriers to adoption. But all too often the analysis becomes
mechanical, customer and product market lines are drawn rather arbitrarily, and
it is all expressed in a cool technocratic language that customers themselves
In Finding the Right Job for
Your Product, Clayton Christensen and his colleagues
offer a very crisp approach to keeping the customer at the center of the
analysis. Think of it as customers finding that they need to get a job done,
and seeking which products or services to hire to do the job. It may appear to
be a mere switching of words: "job to be done" rather than
customer "needs" or "benefits;" "hiring
products" rather than "buying." But consider some
of the implications of the job-to-be-done mindset.
First, buying decisions are most often driven much more by
the particularities of situations rather than by intrinsic customer
characteristics. To use the milkshake example in the article referred to above,
the job fulfilled by a milkshake sold at 8am on a Monday morning to bored
commuters is not the same as that of a milkshake sold at 5pm on Saturday
afternoon to the same person with kids in tow. It is more
useful to segment by the circumstances of the situation (e.g. time of day, day
of week) rather than by assumed
customer socio-demographic factors.
range of alternatives that customers might consider for the job can be much
broader than is usually recognized. To use another Christensen example, we should want children to "hire" school in
order to help them feel a little bit successful every day. Indeed,
teachers’ battle daily for their pupils’ attention and motivation;
win that, and education follows. Looked at in this way, going to school
competes with the local soccer club or even belonging to a gang.
purchasing decisions are driven in part by the capacity of the product or
service tofulfill the functional needs felt by the customer, but also by
the emotional elements surrounding the decision, such as fear, decision
fatigue, pride, or the desire to fit in. Christensen explains how IKEA is
organized to do a particular job very well: “We need to furnish this
apartment today!” What a powerful synthesis of functional and emotional needs.
Injecting drama and emotion is much easier if we are cognizant of the
situation, and not just of the nature of the characters involved.
Logical as all this is, applying the "job to be
done" framework to finance may not be so straight-forward. Financial
considerations seem to touch every aspect of living the desire for your
children to lead a better life than you had, to minimize life’s daily hassles
and humiliations, to feel like you are keeping up and fulfilling your
obligations to kin and kith, to reduce the feeling of present or future
dependency. And financial considerations stretch over time: Unlike the
milkshake, they don’t appear in our lives momentarily. Breaking up the customer
experience into situations may therefore seem artificial.
Still, the key situations may be those "moments of
determination" when people decide to set money aside or borrow in
order to try to beat what the future has in store for them. Through these
determinations people gain a greater sense of control over events,
whether of the daily, occasional or life-cycle kind, and need not be
accompanied with any concrete expression of goals. These determination moments
are hard to identify but an indirect way to access them might be to interview
people at the moment when they are acting on the benefits of that
determination, such as when they are at the shop to buy a new pair of shoes. It
is then possible to work backwards to what got them there: how they
developedthat determination, what were the circumstances leading up to it, what
jobs they felt they needed to get done, what they "hired" to get it
done. That involves recall and we know the hazards of memory, but it is hard to
make sense of people’s financial practices without putting things on some sort
Much of both quantitative and qualitative client research is
focused on classifying people (their income, education, prior financial
history) and their living environment (their location, culture, available
financial services). We may need to put more emphasis on a third element:
classifying the situations in which they find themselves when they make
[From SavingsRevolution blog, 27 March 2013]
Are you an avid book reader and haven’t got a Kindle?
You may want to try it. Digital consumption of books has improved my enjoyment
of reading in three ways. Peace of mind: I know I can download a book anywhere
I happen to be, I no longer have to worry about running out of books (I travel
a lot). Readability: I can standardize the size of the font, I can adjust the
text displayed on the reading device itself rather than having to adjust the
focal point of my eyes by wearing a passive device on my nose (I’m pushing on
50). Multi-tasking: when I come across a word whose meaning I don’t precisely
know, I can highlight it and its definition pops up (like most people, my
curiosity is often overridden by laziness).
Against this, resisters proclaim that they’ll never give up
the sense of smell and touch of their beloved books. They may not, but their
children most certainly will. Literature itself has no smell and touch, we only
project the sensory attributes based on our personal past experiences. Are you
missing the horsy smell in your parking garage?
Notice that few if any of the benefits that I’ve mentioned
so far –ubiquitous availability, vision aids, dictionary look-ups— would
normally be considered essential features of packaged literature. Yet they are
important because in our minds we consider the whole experience around
consuming literature. And if there’s one thing that the digital world does
well, it’s creating much broader customer experiences around basic acts – like
shopping or reading.
In the physical world usefulness is about
the product, usability is mainly about the packaging, and convenience is
largely about the (sales and service) channel. In the digital world, these
notions of usefulness, usability and convenience become blurred. In which
category would you put the peace of mind, font-size control and multi-tasking
benefits I spoke of above? That’s what makes the Kindle so powerful: it’s just
You consider me a technofile? What’s remarkable about the
Kindle is how retrograde it is. As Gabriel Zaid points out in So Many Books,
e-books are a return to the scroll as a linear textual format rather than the
more flexible codex format consisting of discrete pages. And with that we lose
the ability to easily browse the book, to make sense of it more comprehensively.
Reading an e-book is now experientially more akin to watching a movie on DVD:
we can only alter the normal temporal sequence in clumsy spurts.
And just like it’s hard to browse within e-books,
it becomes more difficult to affix them in our memories. You can’t mark
up bits or write notes on the margin, which we often do more to enhance our
mental retention than for future reference. E-books leave no idle cues in our
lives to remind us about them (unless you make it a habit to actively search
your hard disk). I even find myself not remembering the title of the book I am
currently reading on my Kindle, because when I start it opens straight to page
one and subsequently it opens to the page where I last left off. You may never
get to see the book’s cover. This is a clear area for product improvement.
I suppose that this loss of browsing versatility and reading
memories is precisely what people mean when they express attachment to the
tactile experience of reading books. Until solutions for these side effects
aren’t found, I fully expect physical books to continue to exist alongside
e-books. Old technologies will survive as long as there are entrenched use
cases that the new technology model cannot support. For some kinds of books
(books you want to study attentively, picture books, maybe poetry), the ability
to browse is essential.
What does all this tell us about the opportunity from
digital financial services in developing countries? The unique opportunity from
going digital is in creating better customer
experiences with enough hooks into your mental
models and habits and minimizing your daily frustrations. It need not be at all
about conceiving of superior products, such as a never-thought-of before
savings account. In the same way as e-books are more akin to ancient scrolls
than the codices that came afterwards, digital financial services may actually
be much more limited in what they offer than conventional financial services
(think M-PESA here). We cannot judge mass-market financial services by some
abstract notion of need or usefulness; what matters is
how readily people can incorporate them into their daily life. (See in this
context Susan Johnson’s analysis of how M-PESA connected
with people’s informal money practices in Kenya.)
In addition, like physical books, cash has certain crucial
characteristics which are very hard to replicate digitally. The fact that cash
enjoys universal acceptance, no questions asked, while e-money depends on the
availability of acceptance devices. The anonymity of cash versus the traceability
of e-money. The fact that notes are fixed-denomination instruments, while
e-money entails exposing the full balance of your account. Each of these
benefits of physical cash translates into irreplaceable use cases. So I for one
firmly believe that physical cash will co-exist with digital money for a long
time, if not forever. Which is why my interest is in finding ways to make physical and digital money
interwork better, rather than in replacing cash.
[From CGAP blog, 19 March 2013, with Agathamarie John; see original post to view graphs]
The Financial Sector Deepening Trust of Tanzania (FSDT) undertook
a census of cash outlets in the country, and we previewed the results on the
physical distribution of outlets in a previous post.
Here we delve deeper into the situation of M-PESA agents, exploring how busy
they are and how exclusively they are tied to an operator. As you read this,
please keep in mind that transaction at agents are self-reported on a recall
basis by the agents themselves, and are unverified by the mobile operators.
Almost two-thirds of
M-PESA agents are exclusive
Figure 1 shows the split of agents by the number of mobile
money systems they serve. All of them
serve M-PESA by definition, since the census only included M-PESA agents. The
figure shows that 62% of M-PESA agents are exclusively dedicated to M-PESA, 29%
serve one other mobile money system (Tigo Cash, Airtel Money or Ezy Pesa) in
addition to M-PESA, and 9% serve three or four mobile money systems.
Agents near a bank branch or ATM (and hence presumably in
busier, more densely populated areas) are only marginally more likely to be
non-exclusive. (67% of agents within one kilometer of a bank branch – as the
crow flies— are exclusive, against 70% for all agents.)
Half the agents do
more than 30 transactions per day
All mobile money agents included in the census perform at
least 3 transactions per month, as that was taken as a basic threshold of agent
activity. However, transaction volumes vary widely. Some may not be considered
as reliable cash points by the public, whether because they don’t wish to trade
in cash often or because they run out of liquidity on a regular basis.
Figure 2 shows the distribution of agents by the average
number of transactions they report on a daily basis. (Here we only consider
deposits and withdrawals combined for all the mobile money systems served by
each agent.) Most agents do significant business: 93% of agents do more than 10
transactions per day, 71% do more than 20, and 51% do more than 30. At the high
trading end, 27% do more than 50 transactions per day, and 13% do more than 75.
This means that well over half the agents are probably
operating profitably as mobile money agents. Using a notional average agent
commission of 10¢ per transaction, 30 transactions per day (which, as we have
seen, at least half the agents do) translates to $3 daily margin contribution
to the store, enough to pay a qualified clerk’s daily wage in many instances.
and agents further from banking outlets tend to do more transactions
Next we explored the relationship between agent activity
levels and factors such as agent location and exclusivity. Figure 3 shows the
distribution of agents by transaction bracket. The solid blue line is
equivalent to the line in Figure 2, but without accumulation of values across
The pattern is broadly similar for the agent sub-categories
shown in Figure 3. However, the
dotted green line shows that agents that only service M-PESA are in fact more likely
to fall in the lower 10-20 transaction bands. In contrast, the broken red line
shows that agents that are more than 5 kilometers away (as the crow flies) from
a bank branch or ATM are more likely to fall in the higher 30-50 transaction
One of the main challenges in building mobile money systems
is to balance two competing business imperatives: on the one, hand to sign up
as many agents as possible to deliver ubiquity and convenience to the customer,
and on the other to control agent growth to maintain a healthy, profitable
In the past, Vodacom Tanzania has opted for faster agent
growth, probably in order to cement a first-mover channel advantage over its
mobile money competitors. The growth of the agent channel to almost 17,000 (according
to the survey conducted in mid-2012) has put pressure on agent economics. But
we can see from this analysis that at half the agents are conducting at least
30 transactions per day, which should translate into a daily revenue
contribution of somewhere in the order of $3 per day, which might be considered
a minimum profitability hurdle. These numbers should be taken as a very rough
indication: it must be remembered, though, that this data is self-reported by
agents on a free recall basis, and are not externally validated.
At the same time, Vodacom’s first-mover development of an
agent network exposed it to cherry-picking by its competitors. In a country
where no operator is big enough to force exclusive agency contracts, later
entrants into the market were able to run faster by signing up M-PESA agents as
their own, thus reducing their own cost of agent selection and training. But
the data in this census suggests that almost two-thirds of M-PESA agents remain
exclusive to Vodacom in practice.
[From World Bank
PSD blog, 13 March 2013]
It has become mainstream to think that digital technologies
will have a significant role to play in addressing the financial inclusion
challenge in developing countries. This may be so, but if all we in the
financial inclusion community do is merely add the mobile phone (or the smart
card) to our stock of dearly-held beliefs, we will accomplish little.
Technology will not work additively; if technology-based models work it will be
because they will have changed pretty much everything. I’m not saying that
everything will change: I’m just saying that that should be the bet.
Let me illustrate by making two provocative claims.
1. We need to get over our productitis
Now that we have some agent banking and mobile money networks out there, it is
clear that enhancing access alone will not solve the financial inclusion
challenge. Availability does not automatically translate into usefulness, and
the usefulness of electronic payments does not automatically translate into
usefulness of other electronic financial services. Therefore, much of the
expert talk now tends to center on product innovations – appropriate products,
This is taking us down the path of fragmenting customer’s
needs into finer slices, so that we can design tailored products for each need.
Save for school fees this way, lump up your daily income like this, use this to
borrow short-term, insure your cows that way.
But is this really the way people think and act? These needs
are not so separable in people’s minds: they just want their drippy earnings to
stretch over all the routine payments they need to make over the month, to find
ways to improve their living conditions one small step at a time, to have
options if someone in their family falls sick. Marketing such a specialist
collection of services is an enormous challenge – one that we can see already
in MFIs and mass-market banks whose long product lists - the solar loan product
sits next to the school fees savings account, child savings account, home
improvement loan, productive asset loan and the lowly current account (which is
often the only account with any significant uptake and usage). Imagine this
productitis in a branchless banking scenario where a plethora of
lightly-trained or supervised agents are supposed to be doing the
propositioning to customers. Scary, isn’t it.
What we need are service concepts which help people manage
their financial lives the way they think about it. They need to give shape to
their own customer experiences, and that means offerings conceived as tools
rather than products. Tools that help them manage their payments in space and
time (see example here), to build up a
stronger case for credit (see example here),
and to visualize their financial situation more intuitively (see research
Not products that represent preconceptions on how one must save or borrow, but
real solutions that allow people to realize their own financial thoughts.
Maintaining some ambiguity on the nature of individual
products and instead focusing on the broader financial support that people need
is consistent with what we know about informal financial services. Between
friends and family, it’s often hard to distinguish what’s a gift, what’s an interest-free
loan and what’s an investment – that depends on circumstances. Likewise,
community-based finance groups are not a product but an experience – in the
double sense of savings and credit being combined in more or less flexible
ways, and adding a social dimension to finance. It is also consistent with what
we know about digital services in general. The internet has undermined many
products (music records, newspapers), but it has created even more powerful
customer experiences (iPod/iTunes, Kindle/Amazon bookstore, Google reader) that
hook customers ever more tightly.
2. It’ll take an engineer to crack the financial
Well-intentioned bankers who want to cater to the poor feel they must do
constant battle with their banks’ IT systems. When it comes to serving the base
of the pyramid what stands in the way of a truly customer-centric culture
within banks tends to be a rigid technology platform. With today’s banking
platforms, it is hard to design the kind of flexible service offerings
envisioned above, to push appropriately simple and secure mobile interfaces
right into customer’s hands, to scale up transaction volumes massively.
No wonder many fear that an increased reliance on technology
will lead to a distancing from the customer. It doesn’t need to be that way.
The role of technology should be to help marketing and service development
staff within banks to sift through customer data to find actionable insights,
to figure out new ways to increase the quantity and quality of customer
interactions, to rapidly test new service features.
In the future, banks will emerge that feel increasingly
confident about addressing the opportunity to bank the poor, and my expectation
is that they will probably be led by an engineer. A nerdy CEO who is able to
implement a technology infrastructure that truly enables, rather than
constrains, marketing and product development activities. Banking is an
information-based service, just like music and news, so banks will have to look
a lot more like Amazon and Google.
This will require a banking IT architecture with a core
platform that handles a defined set of basic transaction types industrially –
fast, scalably, safely and reliably. It will include a service management
environment which translates these basic transaction types into customer
experiences, either designed by the financial institution based on customer
insights or defined by customers through their own usage. It will also
incorporate good interfaces for third parties to propose additional value to
the bank’s customers and to further broaden and entrench the usefulness of the
bank’s own platform.
we prepared to change how we think about what banks do, how they interact with
their customers, and how they are managed?