When we think about the way in which going mobile in a rural community might make sense, one of the first answers that comes to mind is “to make remote payments”. After talking to people, we found out that the value and reasons for adopting mobile payments vary in different ways.
In an earlier blog post last year, we shared some early insights into rural adoption of mobile payments in Mexico based on the preliminary results of Telecomm’s m-payment pilot in Santiago Nuyoo, Oaxaca called “Pagos móviles”.
- Telecomm opened an agency in the community and installed mobile network communications infrastructure to offer local voice and text services (local calls, local SMS) along with a mobile wallet (cash in/out, balance inquiries and P2P payments). They provided 316 cell phones to people in the community to test usage of the services (covering 80% of the adult population).
- Preliminary results based on data analysis showed us after eight months of operation that 33% of the customers became active and 50% of them performed one or more P2P transactions. The activity rate is high compared to general benchmarks.
- The quantitative analysis of the transaction pool showed three types of costumer profiles (hypothesis) emerging: Savers, transactional and P2P users.
Now, as part of our last piece of analysis we want to share the main findings of the qualitative research. We conducted in-depth interviews with different types of users (particularly extreme users). After characterizing customers’ needs, we segmented customers based on financial behavior according to the previous identified profiles.
We found out that:
- Higher use of P2P is related to comfort and trust in using technology to make financial transactions and very often the possibility of driving additional revenue through the individual’s core business (i.e. a merchant that increases sales at his shop by receiving mobile payments).
- On the other hand, using the account mostly as a transactional account (as a temporary store of funds, with card-based transactions), is related to short distance to nearest point of access for cash-in/out and higher economic activity.
The results were six market segments.
“Super users," for example, usually link the use of the cell phone to their business. They are intense users of P2P (they use it themselves and promote that others use it), and also live close to cash-in/out points so it makes it easy to also use the account for business purposes. These users are motivated by a potential increase in sales and / or reducing the cost of having cash. “Super users” have the lowest average age and are mostly female. They are willing in most cases to cover all or part of the fee of a P2P becoming the key promoters of mobile payments.
On the other hand, there are users who use the phone as a “substitute of the mattress”. These users don’t find value in the mobile for making P2P transactions, but really appreciate the account as a savings account. They are the older group who ordinarily save for future consumption or for an emergency and find value in using this account as something that makes harder to access. They basically store the money in the account so they don’t spend it. If the P2P transactions were free, probably they would use more to send money among peers.
“Remote” users, in contrast, mostly live outside the village center and have high expenditures in transportation. These customers seek to reduce transportation costs and save time, primarily using it for payment services or to send money to relatives. Although this group is relatively small (5%), we believe is underestimated due to the overall mix of the pilot (only 25% lived in remote areas).
What can we take away from this analysis?
- The adoption of mobile is correlated with the age, economic activity, and location where the person lives or works.
- “Trust” is a major factor for people being comfortable with service and willing to migrate transactions to it. One of the biggest factors that can influence this trust is the proper functioning and predictability of the service.
- Merchants play an important role in driving P2P transactions, promoting usage, and increasing trust in the service.
- The ability to increase “acceptance” at many merchants increases likelihood of network effects, particularly in cash flows between “remote” users of services offered at center of village.
- After characterizing the different use-cases and value propositions, it is possible to identify aspects of the mobile account that can lead to improved use and/or adoption. For example, we speculate that a change in pricing and who pays for the service could increase the number of transactions and the number of users. For example:
- People generally are willing to pay more for bills-pay, but some segments are more sensible to the cost of P2P (i.e. the “mobile-skeptics”). Therefore, increasing the price of bills-pay (i.e. satellite TV payments) and reducing the price of P2P transactions is likely to convert mobile-skeptics into more active P2P users, increasing overall profitability.
- Merchants seem to be willing to pay a fee for receiving M-Payments, therefore a scheme where recipients cover at least partially the cost of the P2P can motivate non-users and users who only use it for deposits and withdrawals to reduce use of cash and pay more through mobile transactions.
In part what this pilot illustrates is the convergence of different services (voice, text, financial transactions) on a mobile device, all of which can have a tangible value proposition to people who day in and day out struggle with the inconveniences of remote payments, informal savings, and cash sales.
We hope this study will provide a more refined view of the potential value mobile payments can bring to customers beyond urban settings. We also hope this study can also help providers design products whose features and pricing adapts more to the different kinds of segments emerging in rural and underserved communities. Even though the study is more relevant in the context of the Mexican market, we would think some of the findings might be applicable to other markets.
The complete results of this study are available in both English and Spanish.
A few quick questions:
A few quick questions:
How mm any transactions needed to be made to justify super user status?
Were P2P transactions limited to the 318 in the pool, or could it impact a larger group?
Were there any discussions of if participants would use the service if they had to buy the phone?
Was there an estimate of the impact on a hypothetical ARPU for a given user?
1. The segment of "super user
1. The segment of "super user" was not defined as users who do a lot of transactions but rather use intensively all features of the product. On average, these users make between 3-6 transactions per month.
2. P2P transactions are limited to the 316 people who have the mobile account.
3. It is difficult to think that people would buy the phone only to use the wallet. Most people will certainly acquire the phone itself because telephone service is extremely important.
4. Even though this study did not assess the potential impact of an ARPU for a given user, it is something Telecomm would do as part of their business case.
I hope this information is useful.
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