Wednesday, March 27, 2013

Situating Financial Decisions

by guest blogger Ignacio Mas

A job waiting to be "hired." Photo courtesy of Ignacio Mas.

Understanding customers’ purchase decisions is the core of the marketing challenge. We know it’s about segmenting in order to get more granular customer insights, identifying customers’ alternatives in order to put a given product in a wider context, evaluating the needs and the benefits as well as the barriers to adoption. But all too often the analysis becomes mechanical, customer and product market lines are drawn rather arbitrarily, and it is all expressed in a cool technocratic language that customers themselves wouldn’t recognize.

In Finding the Right Job for Your Product, Clayton Christensen and his colleagues offer a very crisp approach to keeping the customer at the center of the analysis. Think of it as customers finding that they need to get a job done, and seeking which products or services to hire to do the job. It may appear to be a mere switching of words: "job to be done" rather than customer "needs" or "benefits;" "hiring products" rather than "buying." But consider some of the implications of the job-to-be-done mindset.
First, buying decisions are most often driven much more by the particularities of situations rather than by intrinsic customer characteristics. To use the milkshake example in the article referred to above, the job fulfilled by a milkshake sold at 8am on a Monday morning to bored commuters is not the same as that of a milkshake sold at 5pm on Saturday afternoon to the same person with kids in tow. It is more useful to segment by the circumstances of the situation (e.g. time of day, day of week) rather than by assumed customer socio-demographic factors.
Second, the range of alternatives that customers might consider for the job can be much broader than is usually recognized. To use another Christensen example, we should want children to "hire" school in order to help them feel a little bit successful every day. Indeed, teachers’ battle daily for their pupils’ attention and motivation; win that, and education follows. Looked at in this way, going to school competes with the local soccer club or even belonging to a gang.
Third, purchasing decisions are driven in part by the capacity of the product or service to fulfill the functional needs felt by the customer, but also by the emotional elements surrounding the decision, such as fear, decision fatigue, pride, or the desire to fit in. Christensen explains how IKEA is organized to do a particular job very well: “We need to furnish this apartment today!” What a powerful synthesis of functional and emotional needs. Injecting drama and emotion is much easier if we are cognizant of the situation, and not just of the nature of the characters involved.
Logical as all this is, applying the "job to be done" framework to finance may not be so straight-forward. Financial considerations seem to touch every aspect of living the desire for your children to lead a better life than you had, to minimize life’s daily hassles and humiliations, to feel like you are keeping up and fulfilling your obligations to kin and kith, to reduce the feeling of present or future dependency. And financial considerations stretch over time: Unlike the milkshake, they don’t appear in our lives momentarily. Breaking up the customer experience into situations may therefore seem artificial.
Still, the key situations may be those "moments of determination" when people decide to set money aside or borrow in order to try to beat what the future has in store for them. Through these determinations people gain a greater sense of control over events, whether of the daily, occasional or life-cycle kind, and need not be accompanied with any concrete expression of goals. These determination moments are hard to identify but an indirect way to access them might be to interview people at the moment when they are acting on the benefits of that determination, such as when they are at the shop to buy a new pair of shoes. It is then possible to work backwards to what got them there: how they developed that determination, what were the circumstances leading up to it, what jobs they felt they needed to get done, what they "hired" to get it done. That involves recall and we know the hazards of memory, but it is hard to make sense of people’s financial practices without putting things on some sort of timeline.
Much of both quantitative and qualitative client research is focused on classifying people (their income, education, prior financial history) and their living environment (their location, culture, available financial services). We may need to put more emphasis on a third element: classifying the situations in which they find themselves when they make financial decisions.

Ignacio Mas is an independent consultant on technology-enabled models for financial inclusion.

Wednesday, March 20, 2013

Psychological Barriers to Mobile Money Adoption among Poor Internal Migrants in India

IMTFI fellow Deepti Kc reports on IMTFI-sponsored research among rickshaw pullers in Delhi, India undertaken with Mani Nandhi.

Mobile banking is now a reality in a number of developing countries. Rather than the traditional branches, mobile money services in India use non-bank agents (also known as business correspondents) to facilitate financial transactions on behalf of banks. In cities like Delhi, India, where millions of poor migrants come from rural areas, such mobile banking services with nominal Know Your Customer (KYC) norms present an immense opportunity for reducing barriers to financial inclusion. Yet, the uptake among the poor of mobile banking services, especially of savings products, has not been encouraging. A number of mobile money professionals are increasingly looking into specific behavioral patterns that may illuminate why, despite the availability of low-cost and higher-security financial services, many of the poor continue to rely on expensive and high-risk methods of saving and credit (see, for instance, Mas 2012). Reflecting similar questions, in this post I highlight some preliminary observations on psychological barriers to mobile banking among rural migrant rickshaw pullers in Delhi. These observations have emerged through the course of the research project that Mani Nandhi and I are currently conducting in Delhi, India, with funding from IMTFI.

Rickshaw pullers fixing their bikes before starting their day in Delhi, India.

While the main barrier to financial inclusion of India’s rural migrants is unawareness of mobile banking and persistent culture of distrust of financial institutions, we found that, often other forms of psychological hurdles also act as barriers. For our research, we visited an illegal slum settlement inhabited by migrant pullers. Most of these pullers are involved in agricultural activities in their native villages and visit Delhi during off-season with a sole focus to maximize earnings during the migratory period.  Our study focused mainly on the mobilisation of those pullers with no identification cards so we could help them obtain government Unique Identification cards and link them to mobile services. As a first step of our study, we asked some pullers who already had an identification card and a mobile phone to use a mobile bank account to save. This was done to examine whether an initiative to promote savings using mobile banks can help these pullers to switch from informal to formal savings mechanisms. At the time of our meeting, all of these migrants were saving on a daily basis with their “tekedhar” (the rickshaw owner). This case study highlights psychological barriers that hindered the savings capacity with mobile banks of four migrant pullers.

Ready to work after a morning meal of rice.

"I am not a valuable customer." 
Since he first reached Delhi five years ago, Man Singh has tried multiple times to open a bank account. Even though he manages to save and remit money to his village through informal mechanisms (such as sending money with their friends and other fellow rickshaw pullers or the Hawala network), there are times when he cannot provide money when his family members urgently need it. He was earlier misled by an NGO staff member, who charged him to fill out the application form to open a bank account. To this day he has not been successful in opening an account, making him extremely cynical about mainstream financial institutions. At this point, he strongly believes that he is not a valuable customer and does not want to save with a bank where he is not valued. Despite our encouragement and information about mobile banking, he refused to come with us and open a mobile bank account.

"It is expensive to save with mobile banks."
Raja opened a mobile bank account because his friend opened one, yet, he does not see any benefits in saving with mobile money services when there is a cost for every transaction when saving is free with his tekedhar. Like Raja, most poor people are highly loss-averse, and this tendency can create reluctance to save with mobile banking. While mobile banking can provide a safer mechanism to save, one should also understand that informal saving mechanisms have their own inherent advantages, which appeal to the poor when conducting savings transactions.

"The mobile counter is not at a convenient location."
An enthusiastic rickshaw puller Bharat approached us to help him open a mobile bank account. He believes that he spends more when his money is easily accessible to him and believes if he keeps his money in the bank, he will be able to save more, as this will help him not spend on temptation goods such as alcohol and gambling. However, even though the mobile bank counter is around 2 km away from his place, for him the location of the counter is the problem, as he generally does not visit that area. Thus the location of the counter appeared as a potentially “real” cost for Bharat despite knowing the advantages of opening a bank account. This highlights that a sheer hassle such as the location of a service provider can rationally underlie the decision to be unbanked.

"I will open my bank account tomorrow instead of today."
Ram intends to visit a nearby mobile bank counter whenever we ask him. He does not think the mobile counter is far away or at a inconvenient location. In addition, he sees value in opening a bank account. However, no matter how much we insist, the day of the proposed visit, he is conflicted as he prefers to go to work and declines to come with us on that day, promising that he will visit the following day. As a matter of fact, this was the most common problem that we faced while getting these rickshaw pullers their bank accounts. The pullers who had earlier shown interest to open bank accounts simply refused to visit the nearby mobile counter.

Rickshaw pullers in their road-side tents.

These stories speak to common psychological barriers that the poor face when accessing formal savings institutions. Therefore, encouragement is needed to overcome these psychological barriers to saving through MM services. First, mobile bank agents should understand that when a client enters a counter, he/she may lack the necessary knowledge about the benefits of mobile money and, at the same time, he/she may be reluctant to join the new service based on a feeling that he/she could never be a valued customer. When such client enters the counter, it is important that agents guide them well, and explain the product properly. If agents do not value such customers and treat them with an abrasive attitude, this will further dissuade the unbanked from pursuing the mobile banking option.

Second, psychological barriers occur due to potential clients’ failure to see the value of the product or service. Thus, products must be designed to address the psychological constraints faced by the poor when accessing formal savings products. To increase uptake, products must have add-on features such as basic financial literacy about the products. More generally, as Jake Kendall recently suggested, mobile money service design must seek to simplify financial accounting interfaces in order to be accessible to a broader public. Mobile banking agents can play a role in raising awareness among the poor about disciplined saving practices and about the added security of mobile banking, which can provide better protection from from risk of theft and from temptation to spend money. In addition, agents should inform their clients about the interest that one can earn from formal savings—something that is not always possible in informal saving practices. Mobile banks can facilitate greater awareness campaigns in partnership with trusted local governance institutions regarding savings with formal institution, which can play a vital role in overcoming these psychological constraints that the  poor face.

Third, while saving with mobile banks is safer, the poor still turn to informal savings mechanisms because of their flexibility and accessibility. Formal savings products must therefore be designed and marketed in a way that accommodates savings preferences of the poor. Product enrollment procedures should be simpler, transparent and convenient. Finally, there might be value in encouraging mobile banks in India not just as a means to remit but also as a means to save.

Monday, March 18, 2013

Eleven Tips to Help Ensure that Your Mobile Financial Services Program Is Successful

In the following post, guest bloggers and researchers from the Grameen Foundation offer best practices for microfinance institutions operating mobile financial services programs.

While “mobile money” is a common term, the reality is that money programs vary across regions and between implementing partners, mobile money products are not all the same, and the clients who use them vary. That said, we have found a number of “dos” and “don’ts” that apply for all microfinance-related mobile financial services (MFS) programs. Microfinance institutions (MFIs) should consider the following tips as they roll out and tweak their mobile financial services programs.

  1. Be prepared. As a general rule, business models are not easily transferable, because no two markets are identical. Therefore, before launching any services, MFIs should carry out all the necessary research, including a cost/benefit analysis, client-focused market research, assessments of internal structure, processes and IT capacities, business models and market environments. 
  2. Communicate. It is just as important for an MFI to proactively communicate to their staff about strategy as it is for it to externally brand the new product and/or service. Without buy-in from the staff, especially loan officers, the chances of success are significantly reduced.
  3. Establish a change-leadership plan. Implementing mobile financial services can have a significant effect on an organization’s internal structure and processes. Therefore, it is important to ensure that the new applications are fully understood by your staff as well as your clients. Staff may need to acquire and develop new skill sets.
  4. Seek partnerships. Although it is possible for an MFI to develop mobile financial services from scratch, given the state of the MFS market today, it usually is easier and cheaper to seek partnership with a mobile network operator (MNO), a bank or third party. 
  5. Test and monitor services. Because the MFS market is still relatively new, it is constantly changing, with new technologies and developments occurring every day. An MFI must regularly test and monitor its market environment and be prepared to make necessary changes to re-adjust their strategy.
  6. Timing is key. An MFI should take its time in developing its MFS strategy in line with the market environment. However, once the decision is made and the business case exists, it should act decisively, to ensure that it doesn’t miss out on market opportunities as new, non-traditional entrants compete in the space.
  7. Innovation is needed around products. As more MFIs offer repayment and disbursement services, and MFS becomes more commonplace, there is a need to be more creative about the use of the mobile phone for new product innovation to remain competitive.  This could involve bundling products, creating tools to increase savings, combining data sources for alternative credit scoring, or partnering with other channels, to name a few options.
  8. Take a customer-centric approach. Mobile phones offer a unique opportunity to provide a tailored touch for clients and improve customer service.  Listening to customers can lead to keen insights on potential products or services. In addition, keep in mind that once adoption of mobile financial services takes place, customers begin to have higher expectations about services.
  9. Develop an integrated system. An MFS that is integrated to an MFI’s management information system is crucial to the success of its implementation. Manual reconciliation should be avoided at all costs.
  10. Develop or leverage an extensive agent footprint. Without a channel and well-designed distribution network, an MFS will only have a limited reach.
  11. Collaborate with regulators. In addition to analyzing the regulatory environment, it is important to build relationships with regulators and provide them with insights about the market. Remember – mobile financial payments are still relatively new for most players, supervisory authorities included.

To learn more about Grameen Foundation’s Best Practices in Mobile Microfinance study and download the complete document, please visit This study was supported by IMTFI.

Disclaimer: Any opinions, findings, and conclusions or recommendations expressed in this material are those of the author and do not necessarily reflect the views of IMTFI.

(updated--previous post contained broken link)

Friday, March 15, 2013

Starting a Conversation on Financial Inclusion and Design in China

Attending Reboot’s publication launch of "Embracing Informality: Designing Financial Services for China's Marginalized," February 28, 2013.
by Ivan V. Small

Panel Discussion on Designing for Financial Inclusion, from left to right: Nicole Stubbs CEO First Access; Patrick Ainslie, Reboot Embracing Informality co-author; Tricia Wang, Global Tech Ethnographer; Panthea Lee Reboot Embracing Informality co-author; Ethan Wilkes, Reboot Director of Communications

On a cold February Thursday night, a crowd gathered at GreenSpaces loft in New York City’s Tribeca neighborhood near Chinatown for the launch of Reboot’s publication on Embracing Informality: Designing Financial Services for China’s Marginalized. The report is based on field research conducted in China by Panthea Lee and Patrick Ainslie, supported by the Institute for Money, Technology and Financial Inclusion (IMTFI). Panthea and Patrick were part of the third cohort of global researchers studying issues examining the role and challenges of mobile money for promoting greater financial inclusion for the world’s poor. Mobile money, which potentially makes value storage, transfer, and payment easier for those who are dealing with small amounts across distances and involved in a precarious and often unbanked economy, is looked upon as a hopeful tool for poverty alleviation. Yet perspectives gained from three cycles of IMTFI supported global research on mobile money (over 100 projects in 36 countries thus far) demonstrate that mobile money uptake is not as simple as providing telecommunication services and infrastructure. Local monetary ecologies, financial practices, and histories must be taken into account when developing new mobile money systems. When they are not, mobile money services may fail to reach those that might be most helped by it.

In China, mobile money is often seen as the domain of “rich people.” Business-men with fancy smart phones and linked bank accounts may be riding the emerging trend of mobile money in the country, but the majority of rural and urban poor do not have access to smart phones or bank accounts. Reboot queries how we might better design services to engage the “bottom billion” who remain financially excluded. There are a lot of regulatory issues involved of course, particularly when it comes to cash out services, but Panthea and Patrick challenge us to look beyond and below the macro to how such services might better respond to micro needs at a local level. Chinese rural to urban migrants, who face many obstacles including in the first place their very right to migrate under China's Hukou household registration policy, are limited in their ability to send remittances home by the practical challenge of how to physically move their money from point A to B. Formal remittance and banking services are limited, costly, and often intimidating. Reboot’s report begins with the story of one migrant worker who was robbed of an entire year of savings when boarding a train to bring his hard earned money back to his family in the countryside.

After gaining insight into migrants’ experiences with and needs for financial services in China, Reboot came up with recommendations on how one might design a domestic remittance service in China using mobile money for greater financial inclusion. The researchers at Reboot suggest that for such a service to appeal to economically marginal potential users, it must build upon rather than compete with existing informal financial services. Specifically, service must be convenient, practical to use, and build on existing trust networks. The report is filled with a range of ethnographic examples drawn from interviews, participant observation, and focus groups in rural, peri-urban, and urban areas of China. For the full report click here.

The importance of engaging ethnographic design for effective development was highlighted at the publication launch event Reboot hosted at Green Spaces NYC. To feature this, Ethan Wilkes, Director of Communications at Reboot hosted a lively public discussion with Panthea and Patrick, two of the study’s co-authors, along with global tech ethnographer Tricia Wang who specializes in ethnographic design and technology in China and Nicole Stubbs, CEO of First Access who specializes in credit and microfinance in informal economies. Starting with a video taken of migrant workers in the field, each of the panelists engaged in a lively conversation on financial inclusion, design, and ethnography before turning to discussion with the audience. Taking advantage of Reboot’s location in New York City, home to many social entrepreneurs, international policy experts, financial inclusion advocates, and technology start-ups, the organizers had invited a wide range of attendees and potential issue stakeholders with diverse institutional backgrounds ranging from Kiva to Social Science Research Council to IBM. Attendees asked about the investment and legal environment in China, how to think about credit histories in the informal sector, and the challenges and potentials of ethnography in development research design. For many, the chance to meet others interested in the still emerging field of financial inclusion issues was invaluable.

With cold Tsing Tao beers and hot dumplings added to the mix, the launch was altogether an enjoyable and informative evening. Who knew that going to a financial inclusion round table on a wintery Tuesday night could be so fun and productive?! IMTFI looks forward to Reboot’s research dissemination and sharing efforts going forward as they continue to provoke and catalyze discussion about not only financial inclusion, but the importance of ethnography in designing services and products for the poor – illustrating that such attention is compelling not only from a development perspective but from an emerging consumer market one as well.

Thursday, March 14, 2013

Reaching the Unreached: Day 1 Conference Summary

IMTFI fellows Richard Zhixin Kang and Edwin Cliff Mensah report on the first day of the IMTFI-sponsored conference "Reaching the Unreached: Mobile Money Uptake in Ghana" in Accra.

IMTFI-supported researchers, conference organizers, and invited guests gather at the "Reaching the Unreached" conference in Accra, Ghana. From left to right: Joel Patenaude, Dr. Mani Nandhi, Dr. Vivian Dzokoto, Dr. Richard Zhixin Kang, Dr. Edward Omane-Boamah (Ghana Minister of Communications), Dr. Edwin Cliff Mensah, Abena Offe, Dr. Robert A. Baffour (Vice President of Ghana Technology University).

The first day’s activities in the conference started from the Welcome Address made by the Vice President of Ghana Technology University College (GTUC) Dr. Robert A. Baffour, who emphasized  the importance of doing research on mobile money in Ghana. Then GTUC’s Registrar Dr. Patrick Bobbie pointed out how new technologies may generate significant impacts for a society in his speech titled “Technology and Change.” The Minister of Communications Honorary Dr. Edward Omane-Boamah enumerated in his 10-minute speech the major efforts made by the Ghanaian government in pushing the development and expansion of the mobile money in recent years.

In his keynote speech, Mr. Peter Zetterli from the Consultative Group to Assist the Poor (CGAP) provided detailed coverage about the current status of mobile money development in Ghana. He listed the possible reasons why Ghana has very low uptake in the Mobile Money and suggested what might be done to boost the expansion of mobile money in Ghana in the near future. He pointed out that mobile money providers play a very important role in accelerating mobile money uptake.

The paper presentations, panel discussions, and onsite mobile money demonstrations by the vendors provided the audience with rich information about mobile money research and practice. It was clear that convenience, trust, security, and cost are the major determining factors in promoting mobile money services to potential customers. Educating poor or marginalized populations about the basic features of mobile money also plays a pivotal role in attracting them to this new service. Others highlighted accessibility of mobile money in rural areas as one of the concerns. And finally, many focused on regulations as necessary in monitoring mobile money practices, but that more coordination is needed among the different regulators in Ghana. Interestingly, some researchers and panelists pointed out that one of the reasons for low uptake of mobile money in the rural areas in the country is that Ghana has the rural banking infrastructure that can meet these areas’ basic banking needs.

The audience engaged in very close interaction with the presenters, panelists, and the industry representatives by asking many questions, making comments, and providing suggestions.

Below we list some of the takeaways from attendees on the first day of the conference: 

"The experience of meeting with key players in the various Industries and with key national dignitaries has been really fulfilling."

"I have learnt a lot about the banking system, especially, about savings and mobile money. I will advise everybody here present to use mobile money."

"Mobile money will help us [traders] to do business in a more secured way, especially those in the Kaneshie Market. I will advise my friends to join."

"I have witnessed the demonstration on Tigo Money and it is unbelievable. This conference has really exposed me to the reality and effectiveness of mobile money."

"I will advise women in my market to register and use the mobile money system. The success story of the Kenyan M-PESA has been really good."

"I attended this conference to learn about the hindrances to digital financial services."

"I will tell my colleague market women who sell tomatoes (especially those who travel at dawn to Kumasi and are often attacked by thieves) that the mobile money system will be very good for them."

Tuesday, March 12, 2013

Mobile Money Adoption in Ghana: Why So Long?

IMTFI fellows Cliff Mensah and Richard Zhixin Kang report from Accra, Ghana on the conference "Reaching the Unreached: Mobile Money Uptake in Ghana." See the program here.

Are Ghanaians tired of change or reluctant to change? Or they simply do not know about “it?”

What is IT? she asked.  
Mobile money, we answered.  
Is IT here ... in Ghana? How does IT work?  

This is an excerpt from a dialogue we had with a respondent while collecting data in the streets of Accra, the capital of Ghana; unfortunately, it reflects the views of many Ghanaians who could benefit from the use of mobile money (MM). Without apportioning blame, we ask: How can “IT” be used, if “IT” is not known?

In light of Ghana’s longue duree of monetary instability and financial transformations, it would be safe to say that, for Ghanaians, the past has been a fog of monetary transitions. From the use of cowrie shells to barter, fiat money, colonial currencies used alongside local currencies, and other currency modification exercises, Ghanaians’ (as well as much of West Africans’) experience with multiple and changing currency regimes is well entranched in people’s daily lives (see, for instance, Jane Guyer’s introduction to Money Matters (1994). Given this historical penchant for adaptability, the reticence to the adoption of newly introduced financial instruments—such as mobile money services—is surprising.  Further, given the successes of other MM services in comparable African countries (such as the success of MPESA in Kenya), new MM initiatives in Ghana were seen as having the potential to combat poverty in a country where the gap between the “Haves” and “Have not” is widening rapidly. Unfortunately, this is yet to be realized

The case of mobile money uptake in Ghana, thus far, has been anything but successful. One wonders whether this is due to the regulatory environment, the lack of trust in the service providers, a simple lack of knowledge, or the spate of fraudulent online activities plaguing the nation. To address the low uptake of mobile money, a diverse body of researchers, practitioners, retailers and consumers of telecommunication products is convening to discuss the issue at a 2-day conference on MM uptake titled, “Reaching the Unbanked,” and scheduled to take place at the Ghana Technology University at Tesano, Accra-Ghana on March 12th-13th. The conference is bringing together all the relevant stakeholders in the mobile money industry in Ghana to deliberate on the slow adoption of mobile money and strategies to improve its uptake.