Branchless banking is not new: at the end of 2012, there were 150 live mobile money services around the world. However, around 90 percent of these have failed to be taken up by the market which they were intended to serve customers may sign up, but then never or rarely use the service. Why has this happened? And indeed, why has it continued to happen? Can this trend be reversed, so that deploying Alternative Delivery Channels for financial services show ongoing returns that exceed the cost of their implementation, and simultaneously offer measurable benefits for the low-income clients who they are intended to serve?
Central to this question is the value proposition to the customer. We must remember that whatever service is being offered is not ‘new’ to them; it is an alternative to what they are 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 ago. The bank is not inventing savings either – their target market is already saving with local cooperative groups or by buying appreciating assets such as gold or cows.
No one size fits all solution
Consider the following set of real-life variations in available safekeeping services, comparing the cost and risk of each.
- Country 1 - Small traders in a slum with a history of gang violence keep all their cash on their person. Existing network: low cost, high risk
- Country 2 - Small traders are visited by an informal but established money handler who they pay to keep their cash safe overnight. Existing network: high cost, low risk
- Country 3 - Small traders have easy access to a nearby bank and deposit money there. Bank charges monthly service fees. Existing network: medium cost, low risk
The value proposition of any new branchless banking service will 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, more easily accessible in an emergency? This is one key reason why there is no one size fits all solution when it comes to offering a service. 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.
Does it make financial sense?
The impact of failing to consider local context and the customer value proposition, is low adoption levels. The phrase ‘you cannot market someone into using something that does not 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 makes financial sense for them or not. Here are two examples from actual mobile money implementations where a lack of understanding directly resulted in a lack of take-up:
- Selling to the wrong customer
A money transfer service was promoted to garment factories with the aim of recruiting their workers who send money home on a regular basis. In the country concerned, though, the decision maker in the family was not the young, typically female factory worker but the father at the receiving end – who also dictated the money transfer channel she should use. The father chose the service that was the most convenient to him, and the provider did not have good coverage (compared to existing informal services) in many of the rural areas that the workers came from.
- Assuming a new product will work because you lead the market with other products
A market-dominant mobile phone company launched an agent-based bill payment service which enabled its users to pay household bills, in cash over-the-counter, at any of its airtime sellers. However, the typical customer did not trust the typical agent enough to pay for something in cash without being able to immediately ‘see’ their purchase and the text message they received was not enough to convince them that their bill had actually been paid to the utility company.
Successful by accident
As a contrast, the mobile money service mPesa in Kenya became hugely successful based on its value proposition of ‘send money home’ – alternative methods largely consisted of sending cash through the bus networks, which was both expensive and risky. Interestingly, mPesa was not actually launched for that purpose! It was originally intended as a tool for microfinance loan repayments, but the mobile network users themselves saw the value proposition of mobile money transfer and adapted it to fit their needs. mPesa now has 9 million subscribers and processed around $600 billion since its launch in 2007.
Debbie Watkins, Head Implementation, Alternative Distribution Channels at ShoreBank International