Going Mobile with Conditional Cash Transfers

30 June 2015
[T]he enhancements made to effectively pay CCT recipients helped grow the non-CCT customer base from 500,000 to 1.3 million in roughly one-and-a-half years.
DaviPlata is a mobile wallet offered by Banco Davivienda to the general public in Colombia. In 2012 the Government of Colombia contracted DaviPlata to pay conditional cash transfers (CCTs) to 937,000 beneficiaries of the Más Familias en Acción (FA) program. As a result of this contract, DaviPlata became one of the largest-scale mobile-based CCT payment operations in the world. In June 2014 it had 2.2 million wallets, 46 percent of which were associated to CCTs. 
DaviPlata was launched at the start of 2011. In its first year of operation it reached 500,000 customers. Beyond that point, it was difficult to grow without significant investments in infrastructure (agents, ATMs). The contract to conduct FA payments facilitated making the necessary investments to expand access points. It also drove DaviPlata into a high-speed expeditionary learning path to discover how to serve some of the poorest individuals in the country. 
At the end of the road, the enhancements made to effectively pay CCT recipients helped grow the non-CCT customer base from 500,000 to 1.3 million in roughly one-and-a-half years. In 2014, CCTs still accounted for 79 percent of the US$43 million  channeled through the wallet monthly. FA beneficiaries represent approximately 80 percent of all customers who register monthly movements and show a cumulative balance.
This paper describes the key challenges Davivienda faced through this journey: how the service delivery model had to be adapted to effectively communicate with customers to enable them try and feel comfortable using a mobile wallet; how Davivienda dealt with the challenges in cash management; how to dynamically adjust the capacity of the technological platforms to process the volume of transactions concentrated in space and time. 
This study did not evaluate users’ experience, but the transactional behavior observed suggests many wallets remain a mechanism to cash out. DaviPlata’s wallet has been used primarily as a mechanism for access to cash, although it is estimated that about 12 percent of clients have savings balances. The most frequent transactions are airtime top-ups, which account for 23 percent of monthly transactional volume. This behavior seems broadly comparable to that of the group of FA beneficiaries that is paid with a deposit in a savings account with a debit card (through another banking institution). The cell phone and card are primarily used to get cash from an ATM or a correspondent bank.
Going forward DaviPlata has a number of assets that it seems well-positioned to exploit. It has a virtual delivery model that has proven to effectively reach and engage poor customers. This model can be scaled to accommodate a large part of the population. It also has achieved broad coverage in a large part of the territory where it could seek to expand the base of non-CCT customers. It has an important customer base, perhaps critical mass, to begin driving network effects to boost use. Taking advantage of these assets to drive the business’ growth is not simple. However, this could well unlock the real value of FA payments to DaviPlata, a platform for future growth.