This is the first in a ten-part series covering the 10 Lessons Learned about Using Mobile Money to Promote Financial Inclusion. The idea for these series of blog articles came during the recent 6th Mobile Commerce Summit Asia. What surprised me during the event were the number of participants who came from emerging markets and the particular interest and discussion about utilizing mobile money to better promote financial inclusion.
During the event, all players discussed the importance of developing an appropriate implementation strategy in offering mobile money services that I refer to as “developing a road map.” While working with rural banks in the Philippines to make use of mobile money services back in late 2004, one year before MPESA launched in Kenya, we had no such road map to use so we developed our own steps. At that time, I was inspired by a paper produced by David Cracknell for MicroSave entitled Electronic Banking for the Poor Panacea, Potential and Pitfalls . Although this paper was not written with mobile money in mind at the time, the lessons set forth in this document guided the development of our own road map for rolling out mobile financial services and especially our approach to introducing mobile money to low income clients in the Philippines and other markets we have worked in.
Based on this report and our experiences to date, the most important aspect to developing a road map for offering mobile financial services is to start with a customer-centric approach. The basic questions we always ask are:
- Does the target market own mobile phones? What types of mobile phone models are most commonly used (feature phones, smart phones)?
- Which mobile network operators do they use?
- How is the network strength in different target areas?
- What do people use their phones for (texting, calls, MMS, data)?
- In offering mobile money services, what would be the value proposition for the customer? What would they really need and use it for? What are the use cases?
- Are there enough planned agent (cash in/out) transaction points?
- Is it affordable?
- Is it easy to use and user friendly? What are the security concerns?
In addition, mobile money providers must take into account the unique market conditions that exist in each country and even within different regions of a particular country. While there are lessons to be learned from successful mobile money operators in other countries, the unique aspects of the environment in which you will operate in will be key to take into account.
The key questions that we analyze include:
- Nature of financial and retail market; in particular, how developed is the payment market?
- How many POS machines exist in the country?
- What is the domestic and international remittance market like? How many existing transaction points exist?
- What banking services are offered and what is the banking infrastructure like? What is the coverage and usage of ATMs?
- What is the overall level of financial/electronic literacy? Are people comfortable texting and using SMS?
- How many people are already banked?
Regulatory and Policy Framework
The overall regulatory and policy framework for mobile money and mobile financial services is also one of the most important aspects that every player will need to take into account. A supportive regulatory environment is key. Fortunately, many regulators are now more open to their role as economic enablers rather than just gatekeepers so it is important to start the dialogue with regulators early. There are some great resources out there including the Alliance for Financial Inclusion (AFI) which now works with over 100 Central Bank regulators around the world and has a very active mobile financial services working group that is advising central bankers around the world.
In looking at the regulatory framework, the key questions to ask are:
- Is there an existing electronic money or electronic payment law or circular?
- Does the Central Bank take a risk-based approach to mobile financial services?
- Who can offer mobile money services?
- What are the KYC requirements?
- What are the mobile money wallet restrictions?
- What are the rules on setting up agents?
- Are there other relevant circulars and regulations (make sure to obtain copies and understand how they impact on mobile money services)?
If a mobile network operator, bank, microfinance institution, credit cooperative, or third-party operator wants to offer mobile money services either directly or in partnership with another player, what are the real benefits/objectives that they want to obtain?
The key questions to ask about the institutional perspective include:
- What are the existing products/services that mobile money or mobile financial services will complement or replace?
- What is the appropriate revenue strategy?
- Will offering mobile money-enabled services reduce costs, improve efficiency and/or security?
- Does the institution have the right level of technical competency to commit to work on offering mobile money enabled services?
- Is there sufficient high-level management commitment/oversight to ensure this new strategic service?
Product Development Phase
Just like any other product or service, mobile money services should start with the steps of understanding the client, the environment, the regulations, and the institutional capabilities during the product design phase. The design phase also includes building a business case, desk testing the product, feedback from focus group discussions with the target market, and beta-testing services. In particular, the following should be taken into consideration:
- Defining the product features based on target “use cases”
- Decide on which mobile money formats to choose (USSD, STK, and/or IVR services). For more information on various formats to choose, see a paper I prepared with Ben Davis for MicroSave entitled: Choosing a Mobile Phone Banking Format
- Ensuring a proper monitoring system is in place
- Well defined implementation plan with roles & responsibilities and timetable agreed by all players.
- Process flow and user-friendly guides
- Ensuring appropriate back office support
- Contingency plan in place to take into account issues such as system downtime, network failure, or other network-related issues
- 24/7 customer service should be available and staff should be well versed with the mobile money services being offered. A proper Customer Relationship Management (CRM) system should be in place. One important thing is to make sure there is an online tracking system in place for all customer calls to ensure appropriate follow-up can be provided.
- An appropriate marketing budget is key and is something that many mobile money providers often under-fund.
- The marketing budget for mobile money providers should take into account above-the-line (ATL), below-the-line (BTL), and direct marketing to the product development phase. For more information and examples, take a look at GSMA’s Marketing Mobile Money: Top 3 Challenges.
- It is also essential to plan and/or to ensure that there are plans in place to provide for rollout and management of an agent network. There is a lot written on this but some of the better articles out there are the GSMA’s Building, Incentivising and Managing a Network of Mobile Money Agents: A Handbook for Mobile Network Operators the Agent section in the IFC’s Mobile Money Toolkit and an article that Ben Davis and I prepared for MicroSave that, while focused on banks, is also relevant to non-bank mobile money providers entitled: Incentivizing 3rd Party Agents to Service Bank Customers.
Pilot Testing Phase
Too often, those offering mobile money services do not adequately conduct pilot tests or stress test their products before launching them as there is always a lot of pressure to go to the market. Even Safaricom spent over two years understanding the market to design and pilot test their services before rolling out M-Pesa.
For banks and microfinance institutions wanting to make use of mobile money, lessons pointed out by ACCION International in their Insight publication Accelerating Financial Inclusion through Innovative Channels 10 Obstacles for MFIs Launching Alternative Channels— and What Can Be Done About Them include the importance of the pilot test phase. As ACCION correctly pointed out, the use of a service such as mobile money to promote financial inclusion, especially for a bank, requires “proof-of-concept” testing. This means that much of the functionality and customer value proposition need to be in place before going to market. It also means that it is difficult to isolate the variables that create success or failure in terms of adoption and usage. For example, if a bank were to pilot a mobile banking service that would allow clients to transact using a mobile wallet to repay loans and found that resulting uptake was low, it would be challenging to determine whether low uptake resulted from lack of product awareness, insufficient training, poor product design, entrenched competition, or some other factor. An otherwise promising mobile banking service utilizing a mobile wallet might be abandoned, even though perhaps all that was missing was a personalized marketing campaign to increase adoption.
In addition, those offering mobile money or relying on a mobile money platform should make sure to adequately stress test their services and ensure that they work as designed. If any potential weaknesses are identified, mobile money providers should carefully check what is not working and make appropriate adjustments to ensure that the service works before rolling it out.
During the pilot test, as mentioned before, you need to make sure the systems are working, the network signal is sufficiently strong enough, customer services and back-office staff are able to understand and manage the service, and, more importantly, that customers and businesses understand the services and can make use of them. The lessons learned during the pilot will help the mobile money provider or other institution making use of mobile money to determine the best approach to launching the product in the market. As mentioned during the product development phase and as stressed by others such as mobile financial services colleague Hannes Van Rensburg, ATL and BTL marketing are one of the most important and under-estimated steps to successfully roll out mobile money services.
We will discuss the product launch and more lessons learned in upcoming blog articles in this series.