An Innovator’s Dilemma: Teaching Mobile Payments

As mobile money spreads across the world, more and more start ups plan to rely on digital payments to reach the holy grail of scale. Pitch decks talk about engaging clients remotely and transacting digitally, bypassing expensive face-to-face interactions. Innovators assume they will be able to plug into existing platforms (mobile network operators or banks) and rely upon their well-developed cash-in-cash-out networks. But what many entrepreneurs have discovered is that although providers have built payments systems, the hard work of familiarizing customers with this technology has not yet been done – or has not been done well.

This is not true everywhere. In East Africa, businesses have leveraged mature digital finance products to grow quickly (e.g., M-KOPA in Kenya). But in emerging digital financial services markets, start ups offering everything from solar energy to water are forming unexpected partnerships to educate customers, and we are seeing a more complicated story play out.

The nonprofit organization Safe Water Network is an interesting example of how this work can pay off. Safe Water Network wants to connect millions of rural and peri-urban Ghanaians with clean, affordable water. But for years its payments process was decidedly analog: In front of every water tap sat someone collecting cash. That person would pass the cash on to an operator, who had to reconcile it with volumes. The operator would then transport the money to a banking point, where it could be remitted to headquarters and reconciled again. It could take nine days before Safe Water Network was able to deploy its revenue, with at least one of those days spent with a senior executive bent over a desk, signing checks as fast as his cramping hand would allow.

It was not hard for Safe Water Network to see the value in adopting mobile money for internal payments. They expect to save 2 percent on their operational expenditures from reduced travel and to pay vendors in one day instead of nine. But shifting revenue collection to mobile money, as part of a larger shift to prepaid meters, was harder. Users, particularly those who already had wallets, were excited to use mobile money — in theory. But after a few initial payments, almost everyone reverted to cash. This is not an uncommon story. Although Ghana has almost 24 million registered mobile wallets, fewer than 50 percent of the wallets are active, and many people have never used their wallets for more than receiving remittances. In some cases, customers can rely on agents to make payments for them, but that approach has risks. Like any new technology, somebody must show customers how mobile payments work. In the villages and towns that Safe Water Network wanted to enter, that “somebody” was likely to be them.

This was not a cheap or easy challenge for a water company. USSD interfaces are notoriously unfriendly to users, particularly illiterate and older adults. Making a payment requires multiple numbers to be on hand (paybill number, account number, PIN), seven to 12 steps and a certain speediness, lest the whole session time out before completion.

Providers were meant to piggyback on the important work already done by banking agents and mobile money operators. But most customers do not understand how to pay with their phones because they have never needed to before. It may come as a surprise to companies who want to collect digital payments that they must build this capacity, yet that is the reality of doing business in many areas. Even in Kenya, many rural customers did not know how to use their M-Pesa accounts before One Acre Fund carried out weekly training sessions on how to make payments.

Customers want a human touch: a patient person to walk them through the payment process, do it again, and do it once more for good measure. The concern for companies like Safe Water Network is that this level of training will be the death of scale. How can you hit growth targets when you have to contact a customer repeatedly to reinforce payment lessons?

There may be some clever solutions available, such as PEG Africa letting its users initiate transactions over the phone. But in the long-run, this problem illustrates the need for better partnerships and communication between mobile money operators and the service providers that want to use their payments platforms. And to overcome its revenue collection issues, Safe Water Network did just that.

Safe Water Network began a collaboration with MTN Ghana, the largest mobile money operator in Ghana. MTN recognized potential in Safe Water Network to act as a use case for rural mobile money users and offered their support in mobilizing payments. Together, the two entities carried out mobile money activation campaigns in each of the pilot communities. Workshops were put on, in which Safe Water Network customers were given reminders of the importance of safe water while MTN staff walked them through the mobile payment process and highlighted the benefits of paying with their phones. Safe Water Network announced a promotion campaign, offering small prizes (like T-shirts) to users who made the most mobile payments.

The results were impressive: Mobile money’s share of revenue quadrupled in the month following the activation campaigns, from 7 percent to 29 percent, and held steady thereafter.

Most Safe Water Network users are still paying for water with cash. But this is just the beginning of a partnership that could yield dividends for both parties. Safe Water Network and MTN are working together to develop a strategy for mobile payment education in new and old sites. For MTN, water providers offer an opportunity to mainstream mobile payments by linking them to daily usage, while Safe Water Network can benefit from MTN's widespread agent networks and digital communications. As these two unlikely partners find ways to support each other, Safe Water Network will be able to bring safe water within the reach of millions, and the next provider to come along will find the ground has already been seeded. Somebody just had to go first.