[From Mobile Money for the Unbanked blog, GSMA, 7 September 2011]
Mobile money providers are increasingly pondering the path from payments to savings. If people were comfortable keeping higher e-money balances it would likely increase the activity rate on mobile money transfers, as well as reduce the proportion of transfers that are converted back into cash – a costly step.
Let me start with three points, which might help orient the development of suitable savings propositions on mobile money platforms.
Point 1: At the heart of any savings discussion ought to be the question: saving for what? Tough question, when you are poor and have a range of planned expenditures and contingencies you’d like to fund (school fees, home improvements, bicycle, buffer against health emergencies), but you’d also quite like to reward yourself today.
Point 2: To build up savings discipline, people have a tendency to ritualize their savings behaviors: the allocation of moneys to envelopes, the hoarding of jewelry as a prized family possession, the attendance of weekly savings group meetings.
Point 3: People’s emphasis regarding savings is on consumption possibilities rather than time periods. Economists and bankers think of goals in terms of time periods; people think in terms of products and activities.
What are the implications for aspiring providers of mobile savings services? Savings tools should begin by helping people triage across a range of savings purposes (thanks to Kim Wilson for this nice term). Savings needs to be conceived as an experience, not just as a set of receptacles for funds. And each savings receptacle needs to be directly related to specific goals in customers’ minds.
Doing all this through a mobile phone is a challenge and an opportunity. A challenge, because the kinds of phones that poor people have in developing countries do not present rich user interface options. And an opportunity, because the personal, always-with-you, connected nature of the phone can be used to conceive savings services as a conversation between the client and the provider.
In a recent paper with Colin Mayer, we describe how savings goals can be defined and managed as a system of deferred payments (committed today but paid tomorrow). This means that a whole savings edifice can be constructed merely by adding a couple of optional fields in a standard mobile money transfer user interface: what is the value date for the transaction (default: immediate), and what is the purpose (an alphanumeric field or selectable from a standard list of options).
This allows customers to earmark money they receive today to (for instance) send it home when the rent is due, construct their own sequence of installments to buy a bicycle, or establish a commitment savings pattern to create their buffer against medical emergencies (deferred payments to self).
All these deferred payments would in effect constitute a system of sub-accounts, allowing a very personalized way for customers to view and use their account, but all would operate from the single customer mobile money account. Moreover, imagine the possibilities for credit scoring if the provider knew what a customer’s goals were, how intensively they used the commitment payment/savings feature, and how regularly they contributed to these.
Because savings is mainly delayed expenditures, the savings service experience is a logical extension of the payments experience. Savings are about adding a time dimension to basic money transfers. Presenting savings opportunities as deferred payments has the advantage of reminding people more directly of why they are saving at all.