The daily financial lives of the poor are, without doubt, immensely complex. Irregular, uneven income streams are frequently unable to meet recurring and emergency expenses. Savings deposits and insurance schemes are almost non-existent, and reliance on credit is high. These credit instruments in turn are multifaceted; low-income populations diversify their credit sources, from the more formal bank loans (wherever they are actually eligible for these) to semi-formal microfinance loans, to the more common, often reciprocal, informal loans that they give to and borrow from their immediate social networks. The mobile phone is slowly and steadily transforming the culture of lending to and borrowing from one’s immediate friends, family, and neighbors. Moreover, the mobile phone can be a window into the social networks of people, and more specifically, their financial relationships as well as conversations. Jackson is a boda-boda driver from Kampala, Uganda, and his call logs reveal both, his financial relationships, as well as his conversations about money. Read his full profile here.
We are now in the process of analyzing data from last summer’s fieldwork on mobile phone use and money practices (conducted by Ishita Ghosh and Aisha Kigongo – with remote support thanks to Skype and Dropbox from Jenna Burrell). A standard schema of categorization when trying to understand the personal finances of low-income populations is to identify the repertoire of financial instruments used (bank savings accounts, bank loans, microfinance loans, savings groups/ROSCAs, remittances, etc). These instruments are, in turn, often grouped into two broad categories ‘formal’ and ‘informal’ [see Portfolios of the Poor (Collins et al) for a good example]. In development terms, mobile phones are defined within this schema as a gateway, an access point into the ‘formal.’ This is what is communicated by the notion of “banking the unbanked.” We are finding through our more all-encompassing approach to examining the multifaceted ways low-income populations incorporate the mobile phone into money practices that this division (and the presumption of a transition from informal to formal) is too limiting. Rather when considering the consequentiality of the mobile phone (and mobile money) more material concerns – liquidity, security, concealment/privacy, instanteneity, and obligation fulfillment at a distance — are perhaps better terms to reflect the concerns and advantages as they are framed by low-income Ugandans themselves.
Below we have financial instrument usage for our research participants in Kampala, Uganda (the small subset that were interviewed weekly throughout the summer). Color coding offers a sharp all-at-once visualization of this breakdown. Red is for financial instruments the research participant does not use (at all and not ever). Yellow is for financial instruments used, but that are not an important part of the participants routines (such as a bank account opened, but almost never deposited into). Green is for financial instruments used regularly and part of money management strategies.
Clearly the bulk of financial instrument usage remains in the ‘informal’ category rather than the ‘formal’ among these research participants.
formal financial instrument usage (Uganda)
informal financial instrument usage (Uganda)
The mobile phone
In Kampala, mobile money services have taken off (it’s another story entirely in our Delhi, India site). As much as mobile phone-based financial services might in some sense ‘formalize’ financial practices (for example, by creating a persistent record of money transfers and payments and by channeling formerly cash-based money movement through the networks of telecom companies and banks) they also resolve some recognized problems and limitations on the informal side. For example, phone calls and mobile money are a routine part of making requests for small interest-free loans from friends, family, and neighbors. They improve the ease of making such requests and also of seeking repayment. A question rarely asked is whether the mobile phone might make more legitimate and attractive the wide range of ‘informal’ financial practices. Might the mobile phone preserve informality? While the value of money transfer services for remittances (generally seen as ‘informal’) has been widely recognized, the mobile phone appears to have a role to play in small loans channeled through interpersonal relationships, and in the organization of savings groups (ROSCAs or chit funds).
This post continues the conversation that was started here: Vulnerability, Markets, and Insurance in Ghana.
There is a particular event that occurred during my fieldwork in Uganda that is a reminder of how lower-income populations may be prone to natural as well as cultivated risks. We met a second-hand apparel trader who had been collecting her life-earnings in a small, black handbag at home. Since the distance to the nearest bank was almost 50 miles, a trip that would cost her both time and money, she decided to keep her money close at hand, in her own home. Unfortunately, rats got to her savings before she could, shredding almost a $150 in savings to tiny, unintelligible scraps. The bank was unable to ascertain exactly how much money she had in the first place, and therefore, could only return a smaller amount to her. At the time, we believed that access to formal savings facilities would prevent such incidents in the future, however there is some consideration that must be given to microinsurance options as well.
Poorer households may be particularly vulnerable to risk given their limited resources to moderate the adverse consequences, thereby aggravating their conditions of poverty. Development scholars and practitioners alike recognize the need to disburse microinsurance options in order to combat the persistence of poverty. But many challenges abound, not the least of which is the lack of suitable microinsurance products and services for lower income populations. Microinsurance providers struggle with the high transaction costs, limited information, and imperfect enforcement mechanisms. As is prevalent in financial inclusion ventures everywhere, eventually state-subsidized microinsurance services will remain to insure low-income individuals and households, and even then at a loss.
Of course, lower-income individuals and families may not always be willing to part with their limited resources at hand towards a payout that may or may not happen, especially in an environment that is often saturated with microcredit options that provide instant cash. One way that microinsurance companies have been overcoming this hurdle is by selling microinsurance products as an add-on to services that are in extensive use already. Selecting well-regarded institutions that can be co-branded with these microinsurance products is another way to build trust amongst new customers, as well as to ensure that recurring small payments protect lower income populations against risks without actually selling these products exclusively. One of the utilities that microinsurance products are being bundled with is the mobile phone service.
The mobile infrastructure, and mobile phones specifically, may be leveraged in various ways to deliver and support microinsurance options. A recent report by the GSM Association provides an exhaustive breakdown of how the mobile infrastructure can achieve this (Tellez, 2012). While the technology platform can be used to enroll new customers and submit electronic claims, the voice and SMS channels can be used for advertising the product, handling customer feedback, as well as distributing financial literacy information. The agent network becomes indispensable for handling any service points that require manual managing in the delivery of the microinsurance service, and also to cash-in/cash-out any premium payments and/or eventual settlements that may be made in mobile money. The report also indicates that the insurers may use the data on airtime and mobile money for modeling risk and pricing policies.
Microinsurance, in general, has been slow on the uptake with economists pointing to information asymmetries as a huge challenge. More practical challenges also include the lack of reliable data that impede the calculations of premium payments, the capacity to service small transactions, and the need for reinsuring (Morduch, 2006). Mobile microinsurance has seen even more limited implementations with very few live examples. Even then, most of these microinsurance products seek to insure against basic life and accident risks. For instance, MTN Ghana, in collaboration with Hollard Insurance, MicroEnsure, and MFS Africa, launched a life insurance product, mi-Life, in 2011 which is available on the USSD channel. mi-Life insures the MTN mobile money subscriber and next of kin. Premium payments are deducted from the subscriber’s mobile money wallet on a monthly basis, and the SMS notifications serve as receipts. Tigo Ghana also offers a life insurance product in partnership with Vanguard Life, Bima, and MicroEnsure called the Tigo Family Care Insurance. Tigo Family Care Insurance is a loyalty-based microinsurance product, unlike mi-Life that offers insurance through explicit premium payouts. The more a Tigo customer spends in a given month, the higher is his or her insurance cover that can go up to $550. Customers are informed of their current level of insurance coverage on a monthly basis. Easypaisa Pakistan’s Khushal, a mobile savings product that offers embedded life and accidental death insurance facility, is another example of a loyalty-based microinsurance service. An insured user’s coverage varies according to his or her average mobile account balance. The benefits go up to $10,000 for average account balances of $250 and above.
The only example of a mobile microisnurance service that goes beyond life and accidental death policies seems to be Kilimo Salama (“safe farming” in Swahili) that protects farmers in Kenya against the vagaries of the weather. Kilimo Salama is a partnership between UAP Insurance, Syngenta Foundation for Sustainable Agriculture, and Safaricom. Designated, independent rural retailers manually collect farmers’ premiums and transfer the accumulated amount to the insurance company via M-Pesa. However, the monitoring of rainfall (or the lack thereof) is done through automated weather stations. Payments are disbursed directly to farmers via M-Pesa if the monitoring data indicates an immediate payout, thereby eliminating the need for a formal “claims” process.
- Tellez, C. (2012). “Emerging Practices in Mobile Microinsurance”. In: Mobile Money for the Unbanked, GSM Association. Available at: http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2012/07/MMU_m-insurance-Paper_Interactive-Final.pdf
- Morduch, J. (2006). “Micro-insurance: the next revolution? What have we learned about poverty?” In: Banerjee, A., Benabou, R., Mookherjee, D., (Eds.), Understanding Poverty. Oxford University Press, New York.
Note: Three members of our team (Ishita Ghosh, Jenna Burrell, and Janaki Srinivasan) attended the IMTFI conference Dec 5th-7th at UC-Irvine as recipients of IMTFI research grants.
This year’s annual conference at the Institute of Money, Technology & Financial Inclusion (IMTFI) showcased projects from around the world. While attending the conference, we noticed some salient themes and trends emerging from the corpus of work presented at the IMTFI conference. This work appraised mobile money innovations and interventions in two ways: i) by considering financial behaviours in general in the developing world, and ii) by assessing mobile money culture & practices directly. In this way the projects presented some compelling ethnographic detail about the culture around the use of mobile money, especially around remittances, but at the same time also shed light more broadly on the nature of financial transactions & behavior, across distant, disparate cultures as well as in immediate, delimited spaces.
The Larger Financial & Economic Landscape
It certainly remains important to understand the financial behaviours and cultures in the developing world before the intervention of mobile money can be conceptualized and implemented. Katherine Martineau and Pradeep Baisakh presented work from the state of Orissa in India where they brought up the idea of visibility and invisibility of money. The invisibility or obscurity of money and other financial assets was practiced through hiding money within the house, under rags or elsewhere, and by avoiding trips to the nearest bank (which may still be a substantial distance away). This was practiced to keep theft at bay by avoid outsiders from being able to perceive a households wealth. Any visibility of money was more of a marker within a household, for instance bills may be kept within sight (such as by being suspended from the ceiling) to constantly remind the household members to pay them on time. In this manner, the visibility and invisibility of money and its markers were transformed within and outside the boundaries of a home space. Moreover, it remains important to understand that financial cultures may greatly vary across different contexts. In keeping with the theme of visibility and invisibility of money, Magdalena Villarreal and Isabelle Guèrin provide an example where gold as a financial asset is hidden from public view in Mexico to prevent theft, whereas gold as a social asset is proudly displayed in India, most often as jewelry, to signal wealth and position.
Many presentations described existing financial practices and outlined relevant lessons which may (or may not) directly impact mobile money innovation. Rosina Nasir described self-help groups in the state of Andhra Pradesh where women’s groups may self-organize to save small amounts of money over time in order to disburse informal loans to its members, as well as to improve the group’s credit-worthiness to qualify for formal bank loans. Nasir noted that trust, shared knowledge, social relationships and reciprocity remained important for the seamless administration of these self-help groups. Eric Osei-Assibey described SUSU, a similar financial model where SUSU operators collected small amounts of money from market women on a daily basis then returned the full amount, less a day’s amount towards commission fees, at the end of each month. In this way, the SUSU operators are able to enforce discipline towards the accumulation of small amounts of money by the market women. Interestingly, Osei-Assibey cited the overdependence on trust (in the SUSU operators) as being one of the main challenges of this traditional financial system. In the event that a SUSU operator decamped with the collected money, there was no legal recourse for those who lost money. Therefore, trust remained an important factor in facilitating these informal, traditional financial systems, but without any real check on potential fraud, distrust could very easily defeat the real objectives of these systems. Allerine Isles did observe specifically during the course of her research that savings among her subjects remained mostly at their homes, and that credit was governed by informal loan histories and systems. However, it must be noted that the prevalence of these informal practices go beyond her case study in the Philippines; if anything these informal modes persist in a large part of the developing world as the earlier examples also demonstrate. Indeed, Mani Nandhi and Deepti KC noted during their presentation that compelling unbanked customers to open and maintain bank accounts may be an uphill task, as existing informal options may be perceived as satisfactory. Persuading unbanked customers about the benefits of banking may be faced with cynicism and a lack of interest.
Eduardo Diniz, Adrian Kemmer Cernev, Charlotte Guy, and Nathalia Moreira’s work in Brazil focused on a semi-formal system where contained communities (known as neighbourhood associations) were encouraged to be self-sufficient through vocational and economic activities, through limiting purchases to local shops and businesses, and in some cases through internal currencies that were specific to a particular neighbourhood association. The researchers emphasized that the formalization of these communities, and consequently of their currencies, bore interesting lessons for mobile money initiatives. Along the same lines, Woldmariam Mesfin Fikre pushed for more research on the physicality of money as currency, rather than on abstract systems of value transfer. Not only did Fikre find his subjects distinguishing currencies based on colour, size and/or the pictures on the notes, he also discovered that his subjects were grappling with the physical environment where they kept and stored money, where theft and fraud were bigger concerns, but where handling money, managing balances and constant budgeting also remained matters of interest.
Steering away from financial practices specifically yet providing a snapshot of an economic setting, were Jenna Burrell, Janaki Srinivasan, and Richa Kumar who presented their work on mobile phones in fisherfolk communities in the state of Kerala, India. More specifically, their work was appraising the position and the value of mobile phones in seeking market price information within a trading context, finding that scholarship and media coverage has tended to overplay the role of this practice of market price acquisition and comparison which is practiced only by a narrow subset of roles in the fishing industry. Their ethnographic work was also able to reveal how the mobile phone may empower women with long working hours to achieve a semblance of work-life balance by keeping in touch with their family back at home. Gender empowerment, especially for women, was a recurring theme in the work of researchers looking at mobile money directly, as we will see later.
Mobile Money Practices & Culture
Much work presented at the conference spoke about mobile money implementations (or the lack thereof) directly. While most of this concentrated specifically on the nature of services offered on the mobile platform, other work looked at the inclusion (and more importantly, exclusion) of patrons, as well as mobile money’s capacity to offer external, organized services (such as the disbursement of conditional cash transfers).
Remittances and payments dominated the conversations about the services offered on the mobile platform. As Sibel Kusimba noted remittance services can be categorized as three types: urgent needs, everyday expense, and social payments. This categorization may also reveal to us the nature of the remitter and the recipient of mobile money payments. For instance, in times of emergencies (urgent needs), receivers may appeal to peers, instead of elders or children in their families to avoid worrying them. Social payments via mobile money, on the other hand, were common although did not substitute for the presence of the remitter during a funeral or coming-of-age ceremonies. It is certainly important to understand who is sending and receiving money, and why they are doing it, in order to better understand the mobile money culture.
Ndunge Kiiti and Jane Mutinda’s research was also able to demonstrate who was not using mobile money services. Their work showed that visually impaired users lacked complete autonomy while conducting mobile money transactions. They had to necessarily part with their PIN numbers in order to complete transactions, thereby exposing them to fraud by the middlemen (typically, the agents). Their work certainly revealed the inadequacies of the mobile money platform for use by persons afflicted with disabilities. Gender was another recurring theme in the discussion of mobile money platforms and use. Sibel Kusimba noted that mobile banking may empower both men as well as women. Simiyu Wandibba, Stevie Nangendo, and Benson Mulemi found that women were typically recipients of money over the mobile platform in Eastern Kenya. Both Kusimba and Wandibba’s team found that mobile money may lead to divorces in certain communities as men could now engage in clandestine transactions, thereby compromising their responsibilities towards their families.
Ishita Ghosh and Kartikeya Bajpai’s research shifted the focus from remittances on the mobile platform, to savings. They outlined the differences between remittance and savings services, and how they may or may not be delivered seamlessly within the mobile money model (the mobile money models will differ from country to country as per the prevailing regulations). They asserted that given remittance’s one-time, discrete nature when compared to the long-term locking in of savings, the mobile money platform seemed more suitable for supporting remittances. Tonny K. Omwansa and Timothy Mwololo Waema’s research demonstrated the capacity of the mobile platform to deliver and recover loans to and from its clients. Safety was cited as a primary motivation for linking credit practices to the mobile phone. But mobile money linkages may not be suitable everywhere and all the time. For instance, when Vivian Afi Dzokoto and Elizabeth Appiah recommended the use of mobile money for church donations, their subjects emphasized the importance of hard cash as a marker for inclusion in rituals and ceremonies.
Can these linkages of financial transactions to the mobile phone replace informal practices, or will they merely act as additive channels in regions that are not served by physical bank branches? Operators of existing informal financial systems may certainly perceive mobile money as a threat as Osei-Assibe observed in his research of the traditional SUSU model. Indeed, this tension between informal practices and mobile money’s semi-formal options exist not only amongst potential users and their uptake, but also amongst the operators of existing informal financial systems.
(Please note that we haven’t referenced all the work presented at the conference. More details can be found about the individual projects on the IMTFI website. Also, Elizabeth Losh from UC San Diego was blogging about the event and has provided a detailed description of each of the presentations up at the IMTFI blog.)
This post continues the conversation that we started here: Branding in Branchless Banking
If you find yourself in East Africa, India, the Philippines, Brazil, South Africa, and a host of developing countries around the world, you will be able to remit money over the mobile platform at a local retail agent’s shop. It will be a quick, one-time transaction and you will be in and out of the shop. If, on the other hand, you wanted to open up a savings account which is linked to your SIM card, that accrues interest, and through which you can make deposits and withdrawals at the same agent’s shop, then you might be faced with a more complex set-up. That mobile banking solutions continue to support remittance and payment services in the developing world is fairly recognizable in ICTD literature and practice. However, savings services are only gradually evolving on the mobile backbone. My research experience in Uganda and India was particularly focused on the provision (or lack thereof) of savings facilities on the mobile platform to unbanked customers. The fact that Uganda has a telecom-driven mobile banking model, and India has a bank-led mobile banking model bears implications for formal savings account support. This is primarily due to the position of the bank itself in the mobile banking structure, since the bank hosts the actual savings account. While it is generally agreed that stored value in a mobile banking account may well count towards a form of savings in an informal sense, the capacity to offer a long-term, structured money storage facility that offers interest as per the prevailing national interest rates, is a provision that typically only formally regulated banks can offer.
In a telecom-led model, savings facilities can be offered through a partnership with a bank, where the sharing of operations, payment instructions and branding may well displace the telecom’s position. Therefore in the telecom-driven mobile-banking model, such as the one that I studied in Uganda, the bank is outside of the existing mobile banking model. In Uganda specifically, the telecommunications company partnered with the bank to arrive at a hybrid framework that supported remittances and payments on the telecom-driven platform, but savings and transaction accounts on the bank’s backbone. In that sense, the financial processes were disconnected, although the hybrid mobile banking partnership was marketed as a cohesive unit to users. However, due to this inherent disconnect, users were frequently transacting with their mobile money wallets and their bank accounts in isolation, depending on the service they were using most.
What we discovered over time was that to successfully support savings services within a telecom-driven mobile banking infrastructure, it is inevitable that there will be an electronic link enabling the partnership with a formally regulated bank such that savings accounts can be supported on the mobile phone. An electronic link would allow users to cashlessly send money back and forth between them and their bank accounts using their mobile phones. This would ensure user engagement with both the mobile platform as well as the bank account. We did test a human-enabled electronic link during our study in Uganda, and found that people preferred an electronic link because it saved them both time and travel (Ghosh, 2012).
The bank-led mobile banking system in India ensures that the mobile banking entity works as a business correspondent for a bank. This means that the business correspondent is responsible for furnishing the electronic link over which financial transactions may occur. Moreover, the business correspondent also supplies the retain agent network who interface directly with the customers. The most prominent and transformational bank-led mobile money model in India is the State Bank of India and Eko partnership.
Indeed, the bank-led mobile money model may be better positioned to offer savings services to its users. Specifically, the bank-led mobile money model can offer formally regulated financial products without having to disturb the status-quo. In fact, the Eko-SBI partnership in India was forged initially to offer no-frills accounts to low-income, unbanked customers. Gradually, they evolved into a remittance provider as well, and currently Eko is driving SBI’s remittance product given its natural uptake and the minimal marketing investment required to sell it. It is important to note that since the bank-led branchless banking model in India was born out of the financial inclusion mandate, banks are compelled to ensure that their services are reaching unserved regions and unbanked populations.
In the bank-led model in India, the agents are the direct representatives of the banking correspondents, however they act as indirect affiliates of the bank as well by conducting transactions on behalf of the customers with their bank accounts. The bank’s branding is prominently displayed at the agents’ shops. In this way, the business correspondent and the banking institution is presented as a cohesive unit to consumers for the purpose of conducting branchless financial transactions. Moreover, customers are offered both remittance and savings services on the same technology platform that is furnished by the business correspondent. They have to interface with the same mobile money agent for conducting either or both types of transactions. But which financial service is more popular and why?
SAVINGS VS. REMITTANCE
In India, we observed an organizational shift in focus within the business correspondent company to concentrate on promoting remittance services rather than savings activity. The primary reason for this shift in focus is that remittance services are quick on the uptake amongst customers, without much marketing investment by the service provider. Remittance services, unlike savings services, are explicitly needs-driven. This means that if there is a gap in the market for moving money around, an efficient and inexpensive remittance service will rush in to fill that gap. Savings services on the other hand demonstrate a more implicit need within a lower-income population. This population may recognize the need to put small amounts of money away on a regular basis to accumulate money over long term and earn interest on it, but they require initiative, discipline and restraint to actually practice savings given their lower and irregular income streams. The mere availability of suitable savings instruments will hardly drive their uptake; indeed appropriate financial literacy programs must accompany the customer acquisition process.
Here itself, the marketing costs for promoting remittance versus savings services start becoming highly disproportionate. Moreover, remittances are one-time transactional services when compared to savings that require a sustained locking in of money. As discussed in a previous post, this makes remittances amenable to a quick test for confirming the service’s reliability. For users to lock their money away in a savings account however, they need to really trust the provider (either the bank or the business correspondent, or both). Unfortunately, savings services do not lend themselves well to being “tested” for their reliability without a sufficient risk to the consumer, something that they will be reluctant to take on unless, again, suitable financial literacy campaigns can convince them otherwise. Therefore, the customer acquisition process for savings accounts is expensive and demanding for the service provider. Furthermore, both in Uganda and India, the success of the savings product was measured by the number of accounts opened, and not by subsequent activity on these accounts. Therefore, providers invest resources to drive the acquisition of first-time customers, but seldom invest in financial awareness programs that may convert these diffident customers into actual savers. It is little wonder then, that there remain plenty of dormant accounts that see no financial activity since their inception. In India, specifically, the banks demand the uptake of savings accounts of their business correspondents as part of the national financial inclusion agenda. This “non-profit” agenda immediately signifies the challenges of selling savings accounts in a lower-income, unbanked population.
To conclude, it seems unlikely that offering savings services within the mobile banking infrastructure (either telecom-driven or bank-led) will be a profitable venture for the providers. Indeed, the challenges of driving savings amongst lower-income (and therefore, lower-transaction value) populations are the same as those faced by banks in offering these services at their physical branches. Branchless banking options may reduce the costs of the provision of savings support, but acquiring and maintaining customers will remain difficult without an intensive financial literacy initiative.
Ghosh, I. 2012. The Mobile Phone as a link to Formal Financial Services: Findings from Uganda. The Fifth International Conference on Information and Communication Technologies and Development (ICTD2012). Atlanta, Georgia USA.
Ghosh, I., and Bajpai, K. 2012. A Case Study on the Business Correspondent Model in India: Technology Service Providers as BCs. World IT Forum (ifip). New Delhi, India.
Jos, A., and Wright, G.A.N., Beyond Remittances: How to Expand Your Mobile Money Product Suite, MicroSve India Focus Note 113, 2011.
Lahiri, A., Bangari, S., and Mehta, S., Graduating SBI Tatkal Customer, MicroSave India Focus Note 79, 2011.
M-BANKING IN THE DEVELOPING WORLD
Imagine you have just migrated from the state of Bihar to the glamorous, full of promise, chaotic capital of New Delhi. You have moved so that you can earn more money and therefore, provide a better life for your loved ones. But how do you send this money back home? Often there are informal systems that involve trusting your precious money over to a friend, a friend of a friend, or possibly even a stranger, who will be travelling back to your home village or town. Sometimes they may do this for you without a charge, but more often than not, this service will cost you. And once your money has been dispatched with your messenger, so to speak, you will wait for a few days, a week, to call home and check if the money ever made it to its destination or not. This method involves a substantial time lag between sending and receiving money which may seem inordinate given the inherent risks associated with the informal system. Formal options for the transfer of money do exist but are expensive and therefore not very popular.
Mobile banking is a type of branchless banking that leverages the mobile phone as a platform over which financial transactions, especially remittance transfers as current trends indicate, may be conducted. Mobile banking as a transformational platform in unserved regions has generated a lot of buzz in the technology and development world, with Kenya’s M-Pesa being presented as an ideal, although its success has not quite been fully replicated (this has been attributed to certain economic, social and political factors, as well as Safaricom’s unique position within Kenya). Remittance transfers over the mobile phone are immediate, convenient and comparatively inexpensive. In the development context specifically, mobile banking solutions have a human interface, or agents, as they are known as more commonly.
TELECOM-DRIVEN VS BANK-LED M-BANKING MODEL
During the course of my research over the past two years, I had the opportunity to appraise two different types of M-banking models: a telecom-driven model in Uganda and a bank-led model in India. This basic distinction implicates the primary stakeholder that owns the complete operational process, and whose brand is typically dominant (Porteous, 2006). The different types of models also determine who exactly the agent in the system will be, and what entity will select specific individuals as agents. In a telecom-driven model, as in Uganda (and also the massively popular M-Pesa in Kenya), the agent is usually a small shopkeeper who sells airtime (and more often than not, a range of other products), and who is certified as an M-banking agent by a process unique to that particular telecom company. In this case, the telecom company’s brand is dominant. In the bank-led model in India, a Technology Service Provider (or TSP) may become a banking correspondent for the banks (Ghosh & Bajpai, 2012), who then source and recruit their own agents. These agents are similar to the ones observed in Uganda, in that they are usually shopkeepers who sell airtime amongst other products. However, they are certified as agents to handle cash-in/cash-out activities by the TSP directly. Therefore, these agents will be representatives of the TSP and not the bank, although they are still selling the bank’s financial services. Interestingly, in this case the bank’s brand is dominant, although the agents as the TSP representatives must display their brand as well.
BUT WHO DO WE TRUST?
Typically, when agents are recruited (both in Uganda and India), the longevity of their business is taken into account. Therefore, agents are often longstanding members of their immediate communities. Their customers will know them well, sometimes for years. In this case, the customers trust the agents directly, rather than the telecom company or bank, and will therefore be willing to transact with the M-banking solution. In certain cases, customers will even be willing to keep their money on hold with the agents until their transactions are completed at a later time, without any formal receipt. However, in cases where customers are not acquainted with the agent directly, it is highly possible that the telecom company or bank led them to the M-banking service. This can be through direct or indirect marketing techniques, or through referrals where a bank may offload customers directly to the M-banking solution to ease up the traffic at their branches. Therefore in these events, the brand of the telecom company or the bank will impact the decision of a consumer to approach an unknown agent and trust him or her with their precious money.
For one-time financial transactions such as remittances or bill-payments, consumers may test the reliability or trustworthiness of the M-banking solution by remitting money or paying a bill one time. If the transaction goes through, the consumers will begin to trust the system and conduct future transactions. In this case, consumers will be driven to try the M-banking financial service for the first time by the brand associated with the service (MTN in Uganda or SBI in India, for instance), or by the influence of a familiar agent. However, whether or not they continue to trust the system will be governed by the success of that first transaction. On the other hand, for transactions that require a continued relationship with the financial solution such as transactions with formal bank accounts (savings or current) do, the brand of the telecom company or bank will impact the consumer’s decision to sign up and, more importantly, stay invested in the system. The acquaintance of an agent may lead potential customers to sign up for a bank account, but it is unlikely that they will continue to transact with this M-banking solution unless they believe in the brand administering it.
|WELL-REGARDED (Telecom or Bank-Institution Brand)||NOT WELL-REGARDED (Telecom or Bank-Institution Brand)|
|WELL-REGARDED (Agent Brand)||A potential customer will be willing to perform both one-time transactions (such as remittance) as well as long-term transactions (such as savings)||A potential customer will be willing to sign up for the service.
|NOT WELL-REGARDED (Agent Brand)||A potential customer will sign up and may stay invested in the service on the basis of the faith they have in the telecom company or bank administering the service.||It is unlikely that a potential customer will use the service.
- Porteous, D. 2006. The Enabling Environment for Mobile Banking in Africa. Department for International Development Report.
- Ghosh, I., and Bajpai, K. 2012. A Case Study on the Business Correspondent Model in India: Technology Service Providers as BCs. World IT Forum (ifip), New Delhi, India.
- Ghosh, I. 2012. The Mobile Phone as a link to Formal Financial Services: Findings from Uganda. The Fifth International Conference on Information and Communication Technologies and Development (ICTD2012). Atlanta, Georgia USA.
- Mas, I., and Morawczynski. O. 2009. Designing Mobile Transfer Services: Lessons from M-Pesa. Innovations: Technology, Governance, Globalization, 4, 2, 77-92.