Early Insights into Rural Adoption of M-Payments in Mexico

“Sending money home” has for a long time been the mantra for the adoption of mobile money. However, early evidence suggests that in a small, isolated community in southern Mexico, people find mobile accounts more useful for saving and conducting local P2P transactions.CGAP has worked closely with Telecomm Telégrafos in Mexico to find out if people in isolated communities who lack cellular coverage, and are far away from any financial institution are willing to use a mobile account, and if so what kind of transactions are they more likely to carry out.  We want to understand how mobile accounts are adopted under these conditions and what is the value proposition in the eyes of the consumer.

Earlier this year, we wrote a blog post, where we shared the launch of a pilot that tested mobile account adoption, rural mobile telephony and the viability of low-cost access points that connect rural communities to service networks. The program, designed by Telecomm Telégrafos in partnership with Banorte and REV, was deployed in Santiago Nuyoo - a rural community of 2,000 people, in the southern state of Oaxaca, Mexico. Located in the “Sierra Mixteca”, it can take locals over two hours by truck to reach Tlaxiaco, the closest town with mobile coverage and bank branches.

In this pilot, Telecomm Telégrafos enabled satellite coverage for 950 people in the community that allowed them to conduct local calls, as well as to send and receive local text messages.   "Pagos Móviles" users were also given a debit card, in addition to being able to conduct balance inquiries and P2P transfers.  In this phase, there were no charges for local-switched voice service and local text messages. In addition, mobile payments remained a closed-loop system, in which P2P transactions could only be done between members of the community participating in the pilot.

After eight months of operation, CGAP conducted an analysis that looked more closely at the transactional data generated by the use of these mobile accounts, identifying transaction patterns and inferring consumer behavior that explained general activity trends and usage of the product.

Some of the early insights we gained into rural mobile adoption are:

• After 8 months of operation, 316 mobile accounts were opened (80% of adults in the community).
• Despite the short time span for product testing, the activity rate has consistently increased, reaching a 26% average for the last 4 months of operation.
• 45.9% of the costumers never transacted.
• 50% of active users sent or received P2P.
• 5.7% of active users made more than 20 transactions in 7 months.
• The total number of transactions consistently increased.
• Although the preference for making deposits remained, 11% of the total transactions made in the 8th months of operation were P2P transactions.
• After performing individual vintage analysis, we could find that even though the vintage is positively correlated to the activity level, all of them reached a 33% activity rate in August.

We were also able to identify 3 types of customer profiles: savers, P2P users, and transactional users.

• Savers:  The balance in their accounts consistently grew, and they predominantly conducted deposits. 46% of the active costumers were identified to be primarily savers.
• P2P users: They preferred to use the account to send or receive money among community members. Merchants and people who lend or pay loans from family or friends are believed to be the most likely users.  21.9% of the active costumers were identified as P2P users.
• Transactional users: They carried out a lot of transactions and had a very low balance in their account. This type of profile used the service within and outside the community and 2.9% of active users fell in this category.

CGAP expects to conduct additional qualitative research with different user profiles to (i) more deeply understand and validate the profiles; and (ii) understand the value proposition of this instrument when compared to other options.  So far, the early results are both interesting and encouraging, and we expect these analyses will help refine and strengthen the value proposition that mobile payments can have for rural communities in Mexico.

Photo Credit:  Martha Casanova