Getting Beyond Payments
Last week, my colleague Claudia McKay continued our blog series on our new CGAP Focus Note which tries to answer the question: “Is the hype around branchless banking justified?” To dig into some answers, we gathered data on more than 16,000 clients of branchless banking institutions in 10 countries. Today, I’ll discuss the third and final finding from the study.
How do we meet demand for products that go beyond payments?
Most branchless banking services help clients move money over distance : a money transfer to a family member in the countryside, a bill payment to the utility company, a social benefit from the government. Clients also want products that move money over time – i.e. savings and insurance paid out today to use in the future, credit to be used today and repaid in the future.
We know the poor are very active money managers. Financial diaries used by Collins, Morduch, Rutherford, and Ruthven show low-income families in Bangladesh, India, and South Africa used an average of eight different financial instruments primarily to move money over time, and quite intensively: the average household moved more than US$1,000 through the instruments over the course of a year.
The conundrum is how to design and test effective saving, credit and insurance services. This question is not unique to branchless banking, though the cheapness and ubiquity of electronic delivery channels creates some unique options. We need to lower the cost threshold of experimentation. Most private sector players will see a risky proposition if the only way to test new products is to go to market full scale, with all the cost of internal product design cycles, training staff, and marketing to clients. Donors and investors could craft a “product incubator” that combines new research approaches with financial support for rapid iterations of one or even several product configurations.
While we wrestle with that, the data shows poor people are doing the innovation themselves by using existing payment products in creative ways.
In Kenya, 75% of clients say they store funds in their M-PESA wallet. Twenty-one% say M-PESA is their most important saving instrument; 90% say it is one of the three most important. The most popular suggestion for what clients would like to see added to M-PESA is the ability to earn interest (Pulver 2009). In Kibera, a slum of 1 million people in Nairobi, one-fifth of unbanked clients use M-PESA to save up to a week’s worth of wages in their electronic wallet, either in preparation for sending it home to the countryside, as a safer alternative to carrying cash, or for emergencies (Morawczynski and Pickens 2009).
In the Philippines, without any marketing and with a weak network of agents in many areas, one in 10 unbanked mobile money clients already stores an average of US$31 in his or her mobile wallet. Clients report that this amounts to one-quarter of their household savings. When asked what additional services they would be likely to try beyond mobile money, more than half of existing mobile money clients said savings (54%).
Industry is beginning to respond with some more creative products that address these needs. But perhaps too slowly. We’ll look at this in more depth next week.
- Mark Pickens