The demand and supply side survey report for agency banking developed by Financial Sector Deepening Uganda (FSDU) in partnership with MicroSave was launched recently in Kampala, Uganda. The presentation by David Cracknell, Global Technical Director MicroSave highlighted the opportunities that lie within agent banking, but at the same time cautioned banks on the challenges of the model. It gave an industry insight to enable the different sector players plan for the new wave of interventions that will enable them make money but also increase financial services across the country.
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Understanding the financial behaviour of the mass market: The key to financial inclusion
23This study is an extension of the work that MicroSave has been doing over the years on understanding how different types of people practice money management. It draws from industry literature on the subject, such as the financial diaries in Bangladesh, Kenya, Mexico, and Zambia.
Three steps to keeping bank agents happy
Banks eyeing agency banking rollouts in Africa can learn from Kenya, a once purely mobile network operator (MNO) market that saw a rapid expansion of agency banking. Half a decade since the Equity rollout, The Helix Institute conducted a study to understand attitudes, perceptions, and behaviours around agency banking, using our signature Market Insights for Innovations Design (MI4ID) approach. We interviewed industry experts, agent network managers, bank support staff, bank and MNO agents in Nairobi and the surrounding areas. This blog recommends three ways that banks can ensure their agents are happy and actively engaged in the agency business: investing in float, educating customers, and proactively managing liquidity.
1. Craft a strong agent value proposition and highlight earnings potential
Banks hoping to succeed in MNO-dominated markets must craft their agent value proposition to keep agents satisfied with revenues, and committed to investing in float. This entails carefully selecting products agent will offer and designing commission structures based on anticipated demand. To communicate their value proposition, banks should focus on the business model, rewards, and earnings potential rather than indirect benefits of agency.
Our research reveals that in Kenya, where banks have recruited existing MNO agents to also offer banking services, many agents are dissatisfied with banking transaction volumes. Because of their long-standing relationships with MNOs, agents instinctively compare bank customer traffic to that of the dominant M-PESA. Latest Helix data shows that agents do indeed perform fewer daily transactions for banks, a median of 25 versus 46 for MNOs.
At the same time, agents put more effort into conducting transactions for the bank, as these transactions are larger in size[1] and thus require more investment or frequent rebalancing. As a result of comparatively low transaction volumes and high effort, bank agents are unhappy with their agency income, even though in late 2014 median earnings of MNO and bank agents were identical.[2] This highlights the need for the banks to reframe the comparisons from transactions to agency incomes.
Industry experts and bank agent network managers tout the reputational benefits of providing bank services to the community. However, surprisingly, when asked about the benefits of being a bank agent, reputation was cited exclusively by till operators (employees) who are paid a fixed salary. Agency business owners in Nairobi and surrounding areas, on the other hand, focus exclusively on monetary returns on their investment and increased footfall in their shops.
In sum, banks should design a strong agent proposition and keep the “pitch” honest. They should focus on the business case for becoming a bank agent rather than intangible social benefits, particularly in metro and peri-urban areas. To combat negative perceptions of bank agency business relative to MNO, banks could provide income statements and offer alternative reference points (e.g. other bank agents).
2. Provide high quality services to ensure positive agent experience with your bank
Agents and industry experts have a shared perception that bank agents are more sophisticated than their MNO counterparts. They are also deemed to have special partner relationships with their client banks. As such, banks are expected to provide high quality services to their agents, including in-depth specialised training, support for managing liquidity, and additional benefits like preferential credit lines.
Agents interviewed for the study generally appreciated the training they received from banks. But they had high and often unfulfilled expectations about other support services. For example, bank agents lamented the lack of access to credit. Despite the potential to build agents’ credit history from regular transactional data, banks may not be adequately leveraging this opportunity.
Agents also complained about challenges of managing liquidity, particularly after hours when demand for agent services peaks. To date, not all banks offer dedicated counters. Long waits at the bank not only negatively impact agents’ parallel businesses but also disappoint agents, who expect reciprocity from their bank partner. If agents need liquidity to transact on behalf of the bank, the least it can do is to facilitate their rebalancing.
To boost agent satisfaction, banks need to be up front about the relationship with their agents. Even if preferential access to credit is not feasible, banks should support their agents’ liquidity management and offer dedicated rebalancing counters, on-demand float delivery, overdraft float facilities, particularly after hours and on weekends.
3. Enhance systems and streamline processes to facilitate agency business execution
When conducting business becomes a nuisance, the agent will turn dormant. Banks must enhance their systems to provide optimal stability and accessibility. They should also ensure processes for agent transaction reversal and complaints resolution are quick and painless.
Half a decade after the first agency banking rollout, many bank agents continue to face system downtime. In 2014, Kenya’s bank agents were more likely to experience downtime frequently and for longer periods of time than MNO agents.[3] They were five times less likely to receive a prior warning[4] and therefore their capital was more likely to get “stuck” in the system.
Bank agents also complain about overly formalised transaction reversal procedures, requiring multiple trips to the bank (not accessible on weekends), extensive paperwork, and multiple days to resolve.[5] Larger size bank transactions translate into larger sums of money “tied up” during wait times, be it due to system downtime or pending transaction reversals.
Agents are frustrated to see their working capital idling. Recurring issues with unstable systems or lengthy resolution processes erode trust and dissuade agents from investing in float for the problematic provider. Further, the negative word of mouth can discourage potential agents as well as the current and potential users of financial services.
Banks must ensure system reliability prior to the launch and put in place processes for resolving complaints that are as efficient as possible. If paperwork and delays are required by the regulator, agents must be briefed during initial training to avoid discontent.
[1] 27% of MNO vs. 42% of bank transactions exceed Ksh.5,000 or roughly US$50.
[2] While bank agent commissions on cash-ins are generally lower than corresponding MNO commissions, bank agents are also making money on transactions that MNO agents do not perform such as balance inquiries, bill payments and money transfers.
[3] Ever experienced downtime: 52% Bank vs. 44% MNOs; experienced downtime 5 times per month for bank 1 time per month for MNOs; downtime average duration 14 hours for bank vs. 9 hours per month for MNOs.
[4] 17% of bank agents received downtime warning vs. 84% of MNO agents.
[5] Some of these may be mandated by the regulator and thus unavoidable.
Special thanks to Apphia Ndungu and Mutua Mulanga of FSD Kenya for their valuable contributions to this study.
Is Soil Health Card the Magic Pill for Agricultural Woes?
One of the most common reasons for declining agricultural productivity is deteriorating soil quality due to over-use of chemical fertilisers which are easily available at subsidised rates. The Government of India introduced Soil Health Cards (SHC) for farmers in 2016 under the National Mission for Sustainable Agriculture to promote judicious use of fertilisers amongst the farming community.
Designing User-Friendly USSD Interface for Digital Financial Services
According to Finscope 2014, it is estimated that 33% of Malawians have access to formal financial services. For any non-urban individual in Malawi, travelling to the nearest bank takes an average of more than an hour and a quarter. By contrast, 50% of adult Malawians have access to a mobile phone, 20% are aware about mobile money, and 4% actually use mobile money account. The high rate of access to mobile phones provides an immense opportunity to Digital Financial Service (DFS) providers to offer a diverse range of formal financial services to unbanked Malawians.
For any customer segment, there can be multiple criteria for availing financial services. While some of the criteria, such as product features, channel accessibility, network connectivity, and usage charges have a certain role in the uptake of DFS, the User Interface (UI) plays a more important role than is envisaged by DFS providers. UI plays an integral part in enhancing customer experience and facilitating regular usage of mobile money wallets.
Globally, DFS providers offer their products and services on different access channels such as Unstructured Supplementary Service Data (USSD), SIM toolkit (STK), Interactive Voice Response (IVR), mobile applications and the internet. In the current scenario, USSD (in addition to mobile applications) is one of the most convenient and best available options for reaching the mass market in a cost-effective way. Preference for any channel, however, varies across geographies depending on key factors such as literacy level of users, service offerings, availability of and accessibility to alternative service providers, and ease of use, among others.
When mobile money was launched in Malawi, customers could access their account only through an STK menu. In 2013, however, a leading mobile money provider started offering its services over USSD as well. MicroSave’s market research, funded by UNCDF’s Mobile Money for the Poor (MM4P) programme, highlights that contrary to the popular perception, most users in Malawi have a higher preference for the USSD access channel when compared to STK.
This note focuses on key user insights explaining the preference for USSD, which should remain the core focus area for providers while designing the interface of their access channel.
Key Findings
During the course of our study and also working with other providers in Malawi, we noted that self-use of mobile money accounts was common across the country, especially among young people and the working class, more prominently among men. Although agent assisted transactions / over-the-counter (OTC) services in Malawi are commonplace, our research shows that it is not as prevalent as in countries such as Uganda (30%) and Zambia (67%). Most users have learnt how to use mobile money on their own. This, to a large extent, can possibly be attributed to USSD channel’s intuitive UI, familiarity with easy-to-interpret menu content and simple navigation through menus. Apart from the UI, there are two more compelling factors which drive the preference for USSD channel among customers:
- Past behaviour of users accessing a service on phone, such as self-airtime top-up using USSD channel, results in rapid uptake of mobile money usage;
- Robust technology provides positive experience to mobile money users.
It should be noted that unbundled menus are a design feature, and may not actually be an advantage specific to USSD. An unbundled menu may have negative implications as well. For instance, novice and occasional users may find it challenging to navigate to the required option as the probability of a session time-out increases with a more detailed menu.
1. Extension of Status Quo Behaviour
Unlike countries like India, where agents electronically top-up airtime for customers, airtime scratch cards seem to be the most preferred mode of self-top up among Malawi’s growing base of mobile subscribers.
These prepaid users, both semi-literate and illiterate, are not only numerate; but are also familiar with the USSD channel which they frequently use for airtime top-up (i.e., they top-up airtime by entering the scratch card number using a USSD short code such as *XXX*1234 1234 1234#). Starting mobile money USSD sessions and entering numeric responses are not new for these users, but rather an extension of their conventional practice for airtime top-ups. Eventually, these users become confident of accessing their mobile money accounts over the USSD channel.
2. Quick Access to Sessions and Fast Response Time
USSD is simple and easy to use. The user dials a short code *XXX#, presses the call button on the mobile phone and starts interacting with the platform. USSD provides fast access to mobile money menus.
USSD is session based and the system’s response time between an action point and the user’s response is usually fast. In addition, depending on the provider, users have less time during USSD sessions, compared to STK or other UIs, to input their responses and prevent a session drop-out. This, of course, acts as a major deterrent for novice users. Experienced users, however, are familiar with the channel and complete their transactions quickly while using USSD menus. The users also do not need to wait for any text message confirming their transaction status as such communication is received immediately through flash messages.
3. Easy to Recognise Network Downtime
USSD establishes a real-time connection with servers at the back-end and allows true session-based communication. Compared to STK, where users become conscious of network failure at a much later stage after entering responses, USSD users become quickly aware of session drop-outs and hence, can re-initiate the USSD session much earlier than the STK platform.
4. User Friendly Design, Detailed Menu, and Easy Navigation
In multiple blogs, MicroSave has categorised USSD menus as bundled and unbundled. A bundled menu has limited options in the main menu and requires further navigation to explore sub-menu options. The unbundled menu however, is more detailed with a list of various options in the main menu itself. The research found that this detailed menu is commonly preferred by mobile money users in Malawi. The inclination towards USSD is primarily due to the availability of detailed menus and the preferred use-cases being placed at the beginning of the main menu such as money transfer and airtime purchase. This enables users to easily locate their preferred options and complete their transaction without navigating through multiple menus. Furthermore, users find the menu content to be simple, uniform and easy to interpret.
This helps users to complete most transactions with just four to five ‘clicks’ (See figure 1). Eventually, most users complete their transactions within a minute of initiating the USSD sessions.
It should be noted that unbundled menus are a design feature, and may not actually be an advantage specific to USSD. An unbundled menu may have negative implications as well. For instance, novice and occasional users may find it challenging to navigate to the required option as the probability of a session time-out increases with a more detailed menu.
5. Easy and Consistent Menus for Bill Payments
Access to electricity is limited to a few Malawians only but it is used extensively wherever available. Paying electricity bills at dedicated bill payment centres, however, is time-taking due to limited availability and inaccessibility. For these users, mostly based in urban/semi-urban locations, paying electricity bills using mobile money service offers much convenience. The fact that there is an option of paying utility bills without prohibitive service charges has also encouraged customers to use their mobile money accounts for such services.
Additionally, users find it easier to navigate other bill payment menus as they find similar sub-menus while paying for television subscriptions and other payments. For instance, to make a bill payment, a user has to select the type of bill payment, select the payee, enter the amount, customer ID and the MPIN as depicted in figure 2.
Conclusion
Overall, the research finds that most customers are aware of the convenience associated with mobile money services. This primarily includes storing money to avoid cash holding risk, transferring money on their own, the convenience of airtime top-up and paying utility bills anytime and anywhere, among others. Simplified USSD interface and convenience to use mobile money services are the major factors leading to higher uptake and regular usage of mobile money, reduced dependence on agents for transactions and increased self-usage of mobile money accounts by customers.
So, when most mobile money operators in Malawi continue to invest in furthering their operations, particularly in rural geographies, they should bear in mind that nothing beats the convenience and simplicity of use offered by mobile money as well as realise the importance of user interface in enabling a positive user experience. Fortunately, USSD interface scores high on both these key elements. It may not be incorrect to mention that a positive user experience is likely to define the uptake and success of mobile money in Malawi
Digital Financial Services in Bangladesh
Bangladesh’s digital financial services have been much in discussion for rapid growth. Six years since inception – where the market is heading to? What providers ought be doing. This and much more in this video where MSC expert, Akhand Tiwari, talks candidly on the critical role regulation and behavioural sciences will play in shaping the future of mobile banking in Bangladesh.