The Lurking Challenge of Activating the Inactive Customer

25 January 2011

In the past year, several high-profile branchless banking deployments have publicized the fact that they’ve reached more than one million users. Yet what is never publicized in press releases or speeches is the very low number of active users in most deployments. In a recent CGAP survey, 64% of mobile money managers indicated that less than 30% of their registered users are active, and active rates of less than 10% are not uncommon.

This is a problem for several reasons. First and foremost, since it costs money to acquire customers, low activity rates greatly drive up the cost of acquiring each active customer. The figure here shows the acquisition cost per active customer based on a $5 customer acquisition cost. This covers the commission bonus to agents, fulfilling back-office KYC requirements and a starter kit for customers available with some services. If a deployment has a healthy 50% activity rate, the acquisition cost is a reasonable $10 per active customer. However, if the activity rate drops to 10%, the cost per active customer increases dramatically to $50. Some deployments have activity rates as low as 1% – and they are paying $500 for every active customer, an investment that may never be recouped.

Since the issue at hand is low customer usage, it’s easy to simply think of this as a problem related to customer perception of the service’s value for money, leading to tweaks in pricing or higher investment in marketing and financial education.

These items may very well need to be changed in a particular deployment, but we think the answer is more complex than that. As customers move through the process of first becoming aware of a service, then signing up and transacting for the first time and finally becoming a regular user, there are six levers which impact their experience. These levers are product features (including pricing), marketing, the agent network, customer service, the user experience and the system/network. CGAP has developed a framework to map the process for active customers of moving from awareness to ongoing activity.

Although some of these levers may seem more important than others, if any one lever fails during one of the critical parts of the process, the customer is unlikely to progress to active usage. For example, if there is a network outage while the customer is trying his first remote transaction and it fails, there is a good chance that he may never try again. This means the issue of activating inactive customers should not be thought of as a stand-alone customer issue – it is highly integrated with business operations, the agent network and other areas. It also means that there isn’t a single ‘magic bullet’ that can fix this problem worldwide. Each deployment struggling with this issue will need to do a diagnostic of their own service to understand where the weak links are for their customers as they progress from awareness to ongoing usage.

What do you think? CGAP intends to examine this issue in more detail in the coming months and we’d love to hear if you’re struggling with this issue and what you’re doing to overcome it.


- Claudia McKay


Submitted by didas on
My question is how do i make sure the customers do not turn inactive?.my kpis are low because of inactive customers is there an article that tries to provide more details in multiple strategies in overcoming this problem?

Submitted by Alvin Wong on
Very interesting article, thanks. Is there any information/research available about remote customer sign up (account opening) processes and the impact on customer activity? For example, many providers stuggle to develop real-time remote account opening processes using available technology. This impacts the timeliness and effectiveness of signing up customers in remote locations. I'm just wondering if there's data available that shows what this sign up process has on the ongoing relationship with the provider - are customers turned off by this and don't bother to transact? What is an acceptable time for remote sign ups from a customer perspective? What's world's best practice? Also, do we know what are the expectations of these customers of their financial service provider?

Submitted by Peter Goldstein on
question for you: what is your definition of an ‘active’ customer?

Submitted by Claudia McKay on
Good question Peter. For the purposes of the survey mentioned above, we took whatever definition the service provider used. The strictest definition was one transaction in the past 30 days while the loosest was one transaction in the past 6 months. I’d say the average was somewhere in the middle with one transaction in the past 90 days. As CGAP delves into this topic further we’ll look into this definition in more detail and perhaps propose a standard one so that we are measuring apples to apples.

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