Remittances vs. Savings on the Mobile Money Platform (Part 1)

IMTFI fellow Ishita Ghosh (along with her colleague Kartikeya Bajpai) studied the mobile banking partnership between the State Bank of India (SBI) and Eko in the bank-led regulatory environment in India. The following post reflects on her research findings.

Mobile banking as transformational channel in the developing world can bring financial services to the hitherto unbanked populations in regions that are typically unserved by brick-and-mortar bank branches. Ever since M-Pesa’s unprecedented success in fulfilling the need for secure, convenient platforms for remitting money in the Kenyan market, mobile banking iterations in the developing world has been predominantly built and used for remittances, micro-payments, and micro-transfers. As providers and scholars alike think about expanding the available financial suite of services on the mobile backbone, and especially about moving from remittance to savings services, it becomes important to consider the many factors that may drive the development and uptake of different types of services.

The first thing to consider is the regulatory environment within which the mobile banking model is implemented. As far as the telecom operator-led mobile banking model prevalent in African countries is concerned, there is a general drive for telecom operators to enter into unique partnerships with banks and thus connect mobile money users to formal bank accounts. Although instances of using the mobile money “wallet" as a temporary savings or storage device have been recorded in telecom-led mobile banking platforms in Kenya and Uganda, regulators have not permitted telecom operators to leverage these accounts as interest-bearing savings accounts, thereby rendering this collaboration with banks inevitable. In contrast, the bank-led mobile banking model, such as the SBI-Eko partnership in India, is already capacitated to offer formal bank accounts to its users. While telecom-bank partnerships dictate the sharing of all operations, payment instructions, and branding, which may well displace the telecom’s leadership, banks already possess the infrastructure to design and deliver a wide range of financial services and can provide interest-bearing savings accounts without having to disturb any existing headship.

When we consider the nature of remittance and savings services specifically, it is important to remember that while the former tend to be discrete, unidirectional, one-time transactions, the latter are longer-term financial transactions, where money is locked-in with (typically) a penalty on withdrawals to limit them. What we discovered during our appraisal of the SBI-Eko mobile banking service in India is that this is a crucial difference that may form consumer trust in an atypical banking platform such as mobile banking, and therefore drive the uptake of the financial services. 

An Eko agent outlet in New Delhi (photo by the author)

For instance, due to their discrete, one-time nature, remittance services can be easily tested on an alternative platform. We observed such practice in Delhi where users would remit a small amount of money (between 20 and 40 cents) that they could afford to lose, the first time they were using the SBI-Eko service. They would then call their recipients up to confirm that the money had been transferred successfully. If so, users would then begin to trust the service and use the SBI-Eko remittance service again. Sometimes users would use the service based on the successful trial experience of a friend or family member. We met one user in particular who was sending money to his wife in small amounts, but doing so frequently. He did not fully trust the SBI-Eko service provider, because it was a departure from the traditional, brick-and-mortar banks, despite having successfully sent money many times over. He reasoned that the smaller quantum of remitted money was a loss he could afford to bear, in case a given transaction did not complete. Therefore, we discovered that users were putting the remittance service on trial directly, or they were depending on the successful trials of their friends or family members. In some cases, the outcome of a preliminary trial determined the service’s continued patronage, whereas in other cases the discrete nature of the remittance service permitted the testing of the service even on a sustained basis.

Savings services, on the other hand, inherently do not allow users to put the service on a quick trial - at least, not without sufficient risk to their savings. Therefore, when such an option is lacking, users tend to trust atypical channels such as mobile banking for savings transactions, if they trust the partner bank (users were almost never aware of Eko’s brand). We also observed that in a few instances users signed up for savings services when they trusted the agent directly. In general, users tend to be less obliging of any breakdown in the completion of a savings services, when compared to remittance services, since this would entail the potential loss of a larger chunk of money.
 
In fact, we discovered during our fieldwork that users exhibited dissimilar expectations from remittance and savings products. We observed such behavior in Patna where a collapse in the back-end handling of savings accounts led to a severe erosion of confidence in the Eko-SBI savings product. Due to an operational glitch, all activity had been suspended temporarily on the newly opened savings accounts. When savings customers first realized this, they instantly panicked, and any reassurance provided by the agents or Eko’s representatives was disregarded. As soon as their accounts were reinstated, most customers immediately withdrew all their savings and ceased to transact with their savings accounts. Unsurprisingly, this severely impacted the reputation of the SBI-Eko savings product in Patna. Interestingly, however, customers still trusted the SBI-Eko remittance service. In fact, customers continued to return to the remittance service despite frequent server downtime and other network snags. This example demonstrates a complex picture of how users may trust and consider the same service provider in different ways according to the financial service in use. It also indicates that providers must especially focus on providing seamless savings services, as any failure adversely impacts the reputation and thus the subsequent uptake and activity on these accounts.

To conclude, we want to point out that, despite these important differences in their temporal spans and in the possibility of testing them, remittance and savings services may not be in practice completely divergent. As a migrant in Delhi, who was originally from Bihar, told us, “I send what I save to my family.” It begs the question: does this count as a remittance or savings practice? Typically, this difference is recorded on the provider’s end based on the service platform used to complete them. But remittance and savings services demonstrate some inherent affordances that can collapse any disparities between them, if provisionally. For instance, we met one user in Delhi who sent money to his wife in Bihar 2-4 times a month on average. However, instead of using the SBI-Eko remittance service to transfer money to his wife’s account, he was actually depositing money into his own savings account at a lesser fee. He had left his ATM card (and the PIN) with his wife back in Bihar, who could now go to the nearest ATM machine and withdraw money directly. We met another user in Delhi, who had a regular savings account that was registered in the state of Madhya Pradesh. He was therefore incurring a severe liability for making deposits out-of-state. To prevent the fee, he was using the remittance service to send money into his savings account at a lower cost. He then used his ATM card to withdraw money from the many ATM machines around the city. These examples demonstrate that users may use the savings service as a remittance service, and vice versa. This is something that providers and scholars must remain mindful of while designing financial products and services for unbanked and under-banked populations.

Can social transfers boost electronic payment adoption and financial inclusion? Lessons from Palawan, Philippines

IMTFI fellow and researcher Anatoly (Jing) Gusto’s project looks at dispensing cash grants in the Philippines. You can find out more about the project here.

The potential of social transfer schemes to boost electronic payment adoption and ultimately financial inclusion is starting to gain recognition (see, for instance, Zimmerman 2012).  Our findings are drawn from a study involving a group of beneficiaries of the “Pantawid Pamilyang Pilipino Program” (4Ps), a conditional cash transfer (CCT) program based amongst an indigenous group in the Philippines. They point to three major issues that stakeholders need to think about when selecting channels to make it an effective gateway for financial inclusion. The following is a roundup of how continual changes in Technology, user and cultural contexts and the denomination of bank notes are major factors in promoting financial inclusion and particularly savings among the poorest of the poor.

ATM dispenses only 500 & 1,000 peso bills

1. Continual Changes in Technology
Regulators have made a concerted effort to help distribute cash grants to beneficiaries by thinking about how to apply new technology. But just as project proponents, channels, and direct beneficiaries are starting to get accustomed to one mode, new technologies and models begin to appear.

In the Pantawid Pamilyang Pilipino Program (4Ps), several disbursement modes were adopted by the Department of Social Welfare and Development (DSWD) and the Land Bank of the Philippines (LBP), a depository and disbursing bank of the Program. At the start, cash grants were disbursed through the LBP Cash Card (non-interest bearing debit card account) and could only be withdrawn from Automated Teller Machines (ATMs). Today, a portion of the grants are already released via the over-the-counter method in the LBP bank branches and through other conduits including rural banks, cooperative banks, cooperatives, non-government organizations, merchant partners of one electronic money issuer, and through the Philippine Postal System (PhilPost).

Each new technology brings not only new business models and processes, but also new information that needs to be learned and accepted by all concerned. The pace of change is daunting, especially for organizations that must work with millions of individuals nationwide, not to mention other social welfare functions they have to attend to.

Positive effects of technological changes

LBP has shown its openness to other disbursement channels, most recently one that involves point-of-sale (POS) terminals. Post fieldwork meetings with DSWD and LBP revealed that there is an effort to explore how other channels, including biometrics and POS terminals, can be used in partnership with conduits and merchants. In a recent payout in Palawan in 2013, CCT beneficiaries reportedly got the chance to purchase and pay for goods in the merchant’s store without using cash by swiping their ATM cards on a POS terminal and entering their Personal Identification Number (PIN) which is the same PIN used in the ATM.

A payment transaction which results in an electronic deduction of the purchase amount from the beneficiary’s cash card and corresponding credit to the merchant’s deposit account is believed to be convenient as it eliminates or reduces the need for beneficiaries to take the extra step of going to the ATM to withdraw money.

2.  User and Cultural Contexts

Regulators and providers must understand that the CCT beneficiaries are a new and unique client segment that enjoys regular, steady flows of capital (sometimes into a deposit or debit account). While technological advancement offers new options in the distribution of cash grants, the context with which the “target clientele” operates is still the same.  CCT beneficiaries are economically vulnerable, with relatively low levels of education, they may also be more comfortable operating in the informal sector. In the case of Indigenous groups, their traditional cultural practices and rudimentary experience in using/storing physical cash causes problems. Regulators may be ill-equipped at the moment to serve and monitor this market if their focus is limited to formally regulated institutions.

In the Philippines, indigenous people, particularly from the uplands, had initial doubts with the program and at first could not believe that the government would give them money for the betterment of their children’s education and health. Fortunately, with the help of locals known by the indigenous group (municipal links and parent leaders), DSWD was eventually able to allay fears and gain their trust. Municipal links and parent leaders were able to help by carrying out the transactions for the indigenous groups.

At least in the areas visited, cash is perceived with little value beyond its function as a means of exchange. In fact, storing cash in physical wallets or purses among indigenous groups is not a common practice. When asked where they store their money, they said they just put them in plastic bags or in an envelope containing their other CCT documents.  There are a few who set aside some amount of cash for covering future school related expenses of children, in particular school projects and food and transportation allowances, and for emergencies. What is more common are baskets that indigenous groups carry in their backs which they use for transporting goods they barter, sell, or purchase.

Making things work for financial inclusion

There is evidence that regulators can be flexible and creative which is what is needed to develop digital strategies that work in a specific context. For example part of the recent enhancements carried out by LBP and DSWD involves partnering with non-bank financial institutions as well as civil society organizations (CSOs) in the implementation of the program. Furthermore, there are signs that they are interested in knowing whether cash is really a prerequisite to be able to promote access to investment goods for the education and health of children. Is there a way for poor households to have better access to these funds or equivalent goods for education and health without using cash?

Merchant paying in candies due to
lack of coins and smaller bills

3. Denomination of Bank Notes
vs. Amount of User Transactions 

A conditional cash transfer, paid in high-denomination banknotes can result in “value leakage” as problems of access to the entire amount of the grant arise. For example, take a payment of ₱2800. If the ATM only dispenses ₱500 or ₱1000 notes, this is disbursed as two ₱1000 and one ₱500 bills, forcing a “leftover” of ₱300. Some merchants who sell goods during payouts have difficulty in giving the exact change as most transactions involve high-denomination banknotes for small purchases (e.g. less than ₱100).  One merchant resorted to using candies in lieu of coins when he runs out of smaller bills for change.

We have seen that while technology can be considered a limitation in terms of providing recipients the immediate access they need to the exact amount of the grant, we have uncovered practices and a growing mindset among beneficiaries associated with the denomination of banknotes and coins that provide opportunities for mobile and electronic money development. In particular, ATMs that dispense only high-denomination banknotes force people into “saving” amounts of their cash transfer between those denominations—and some report satisfaction with this outcome, saying that it helps them to cover unexpected expenses in schools and buffer financial crises. In one instance, a recipient even inquired if it is possible to credit those funds to a deposit account. Banks that serve as conduit partners for CCT must grab the opportunity to help with account opening in order to ensure that recipients get a CCT payment.

Key Takeaways and Challenges

Not just to withdraw money but to shop “cash-lite” if not “cashless” 

The objective of conditional cash transfers is for poor households to be able to invest (spend) in the education and health needs of their children. Our research has shown that CCT proponents must not only ask about “how to improve the delivery of grants,” but also “how to ensure an affordable and convenient way to purchase/deliver the needed goods/investment in the poor households.” The relevance for CCT beneficiaries of any form of value is not just related to its ability to be transferred and cashed out (liquidity), but also the ease of dividing it into smaller units of value (divisibility) conducive for small purchases.

Need not for “new” but “better” technology

Aligning technology with the actual delivery capability in the field is a challenge that CCT proponents will need to face in considering any other distribution channel. In the case of the Philippines, cash grants are often still disbursed through a non-interest bearing debit account. Banks that serve as conduit partners might be able to take advantage if beneficiaries are offered the opportunity to open a savings account where payments can be made via SMA. This way beneficiaries can be given incentives to save and maintain a higher balance. The accounts can be made more appropriate if they also include features such as bank transfer/remittance, bill payments, airtime top-up, insurance availment, etc.

Need for end-user education

The example of indigenous groups using the ATM machines indicates that while there might be a relatively simple technology already available, the CCT segment is still typically characterized by lower education levels and lower exposure to technology. These will require that any new technology introduced will need to include a significant training component that emphasizes the benefits of using the service as well as the mechanics of accessing the service.


Link to their final report: "Delivering Cash Grants to Indigenous Peoples through Cash Cards versus Over-the-Counter Modalities:  The Case of the 4Ps Conditional Cash Transfer Program in Palawan, Philippines"

Where is the data? Analyzing customer footprints for better product design

by guest blogger Jacobo Menajovsky, Senior Data Analyst – Grameen Foundation / @jj_menajovsky

These are my daughter’s old shoes.

We just took them out of the closet to pass them on to her younger brother who’s recently started walking, but when I took a closer look at them, I wondered if their best days weren’t behind them. Call me crazy, but I immediately started decoding all the signs and indicators of their usage. Yes, to me, data is everywhere.

We are constantly gathering, interpreting and acting on data. Think about it. Every time you walk into a new situation, your “decision support system” starts to process past data to help you adjust to the new experience. Your brain is actually modeling those signs and symbols (data), building connections and classifying them into categories.

What if you wanted to understand how these shoes were used? Do you think you could reconstruct the past simply by looking at them? There are lots of signs and indicators: a broken ankle wrap, a heavily-rubbed toe cap, and many holes.

Now let’s move from data gathering to data modeling. When we put all this data to work we can build a great profile of how the shoes have been used. It looks like they went through a lot of kicking and dragging, and plenty of crawling.  If you look at the soles, though you’ll see that they’re unworn. So, it seems the upper parts of the shoes were used more than their bottoms. This observation might even give you a few ideas about how to improve shoes like these and make them more durable. This is exactly what we call improving your product using customer footprints. In this case, the footprints are literal!

As a data scientist and microfinance practitioner, I am always searching for signals and indicators that show how poor people are using products and services. I believe the best way to understand their behavior is by analyzing their footprints. This data can come to me in various formats (e.g. digitally or on paper) and platforms.  I often have to put in a lot of work before I begin analysis, but if done correctly, it gives me a lot in return.

In an ideal world, records would have unique customer IDs and information about the products that each uses as well as past transactions. If you are really lucky you may also have some socio-demographic information like age, gender, rural/urban indicator, branch or location, household composition, family size, and poverty level.

The more data the better.   Your data set can help you answer some key business questions: What’s the penetration of product A at different locations? Is this affected by poverty level or household composition? What about understanding our customers’ lifecycle? Do we see differences in outstanding balances at different customers’ tenures? Our recent study on implementing data analytics provides an exhaustive list of business questions and analytic approaches.

At Grameen Foundation we are working towards helping pro-poor organizations crunch their numbers, understand their customers better, and make more informed decisions. We are also refining our data collection process, using the right set of mobile data collections tools and state of the art analytics to better understand the challenges and needs of the poorest. After all, it’s only by gaining better insights that we will contribute to the development of more tailored products and services – from baby shoes to microfinance products– and that’s essential if we want to improve the lives of the most vulnerable people in our planet.

Mobile payment in India: learning from M-Pesa

Researchers at the Indian Center for Micro Finance have turned to work on Kenya's M-Pesa in an effort to understand how similar payment schemes might be implemented in India. In a recent article, IMTFI fellow Deepti Kc and IFMR programme head Mudita Tiwari asked what lessons can be taken from the vast amount of work that has already accumulated on Kenya's M-Pesa scheme and how they can help India's emerging mobile payments system.

Despite initiatives by a number of different partners, the researchers describe the uptake of mobile payment technology among the low-income population of India, as "cautious". Over- regulation, mobile companies targeting the rich and the need for internet based transactions are given as reasons for the lack of a strong client base among India's poor.

Nonetheless they are optimistic that lessons can be taken from Kenya's M-Pesa to tap into this market. They suggest that client protection and regulation that ensures profitability are key. They also believe a dedicated fund from the Reserve Bank of India should be created in order to promote the use of mobile payments among low-income clients and incentivize private partners to develop platforms to reach them.

frog about town

IMTFI researcher Jan Chipchase's work has been featured all around the web in the past month.

Chipchase and the team at frog were also interviewed for a recent Atlantic article on banking in Afghanistan. The interview draws on Chipchase's new publication with Mark Rolston, Carla Silver, and Joshua Blumenstock at frog design brings their skills photographic and ethnographic documentarians to bear on financial services, particularly savings, in Afghanistan. Their report is called In the Hands of God, and it's both lovely and thoughtful.

Chipchase,  Rolston, and Silver also recently wrote about their work on CGAP and for Core 77. Their series for Core 77 focuses not only on their findings but also provides a window into their experiences in the field. It is particularly worth a look for industry professionals and researchers alike. Here, they write on risk mitigation in the field, gender and research in Afghanistan, the experience of conducting this kind of research, and managing their expectations. They have not one but two excellent posts on conducting life-changing research in rural places.

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.

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.