Mobile Banking: What Providers are Thinking
Microsave and CGAP recently organized a workshop with providers in the midst of launching mobile banking solutions for low-income customers. These were the common themes and challenges in the comments made over the two days.
There are multiple M-Banking experiments underway in diverse geographies and various regulatory environments. Various players are experimenting including Banks and Telcos (sometimes alone and sometimes in partnership), but there are also third party payment platforms and agent networks emerging. Overall experimentation is at a very early stage and therefore drawing firm conclusions are premature.
Experience is that traditional pilot testing and incremental entry is difficult, since these services are in many ways revolutionary combining simultaneously elements of entirely new channels, new agents/players, new technologies and sometimes in uncertain/unclear regulatory space. The reaction over time is unpredictable and can only be fully tested when the new offerings reach a larger scale. Smaller experiments may not be strong indication of longer term directions. Experiments can also not stress test at a large scale.
The uncertainty of the actual uptake by clients, role of different players makes pricing or business modelling is very difficult at this early stage, it is better to retain flexibility in this regard, and treat initial pricing as “promotional” so as to manage customer/agent expectations.
Uptake by customers appears easiest when the service emulates and existing service already in use (overlaying an existing ecosystem). Customers are more familiar and there is a demonstrated demand for this service.
The Customer Value Proposition: The customer value proposition, essentially the proposition that attracts customers to m-banking appears to be similar in most cases; including ease of use, accessibility - usage at any location, and reduced cost for transactions. The reduced cost for transactions finding is supported by recent research by CGAP, which showed cost reductions from 35% to 85%.
Customer Education and Marketing: Simplicity comes into the marketing message too – both in terms of keeping the message simple, but also in terms of feeding messages to the market in a controlled fashion. In different markets too, the most effective marketing message has been different. In Afghanistan for example, affordability was found to be a major issue, with the price of a transaction at one third of comparable transactions through the formal banking sector.
Approaches to launching the product are influenced by the market and adoption barriers, which in turn influence the amount and type of customer education that is required. For a “big bang” launch mass education is required. Agents need to be carefully prepared to handle both the volume of business and the range of queries that customers ask. Clearly incremental approaches are safer than big bang launches, as it is very difficult to stress test systems at volume. M-Pesa, in Kenya discovered this, as did Airtel in Pakistan.
Learning from Pilot Tests and Preparing for Rollout: Pilot tests at scale are difficult to perform some can operate at relative scale using staff based pilot tests, which were regarded as a useful form of pilot test, as staff were more likely to provide informed feedback on usability and performance. In the case of one solution in Pakistan the pilot was used to establish expectations, test the offering and to document the system. In documenting the system, care was taken to examine MIS reporting, fraud detection and thereby to establish the required infrastructure. In a second pilot test the platform had to be redeveloped to make it easier to use. In a third the offering was radically simplified.
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