Blog

Balancing Left-Right Bias in User-Centric Design Processes

Posted on by Parul Tandon

Success of any product ultimately depends upon whether clients prefer, choose and use it. Understanding clients’ life and mental models, therefore, is a prerequisite first element for product design. However, researchers and designers often overlook the second element – the organisational buy-in and strategic feasibility of the creative ideas. Market research and user-centric design starts to look less meaningful when excellent product ideas are not adopted by the institution. We credit this failure to lack of focus to address the left brain and right brain bias.

The left and right hemispheres of our brain process information in different ways. While creative work and ideas are attributed to the right brain, the left brain is considered responsible for logical and analytical thinking. In terms of product design, institutions and investors tend to design products focusing on business logic and performance analysis; while researchers and designers promote creativity and innovation in design.

In this Note, we discuss MicroSave’s MI4ID approach to Concept Distillation and how it balances these biases in the product development process. The Concept Distillation process of MicroSave’s MI4ID approach provides as many creative and disruptive ideas as possible, yet is able to cull out ideas that are not strategically feasible. This Note gives glimpse of the approach through which MicroSave is able to engage business managers in design process and ensure ownership and feasibility of the product designed.

A Banking Agent in Every Village – The Last Mile Challenges

Posted on by MSC

In its current form at least, the success of digital finance is dependent on front line agents – to open accounts, provide cash in/cash out services and market products. High quality agent networks are the key to developing knowledge, trust and regular usage amongst the users of digital financial services and thus to achieving scale.

India has struggled to build high quality agent networks, and thus uptake and usage of digital financial services remains a challenge – despite all the efforts of the government and the banks. This presentation examines the problems underlying Indian agent networks – providing guidance to organisations seeking to build robust, trusted and well used agent networks.

Design Principles for Successful Payment Banks – Lessons from International Experience

Posted on by MSC

GSMA’s State of the Industry Report 2014 tells us there are 255 mobile money services in operation across 89 countries; digital financial services (DFS) are now available in over 60% of developing markets. An increasing number of services are reaching scale: 21 services now have more than one million active accounts, but 234 have failed to do so. So what separates these 21 “sprinters” from those deployments that limp?

There are, of course, many factors, but at the core of all the successful deployments has been a serious investment in at least three core pillars: 1. Understanding the market; 2. Technology; and 3. Building a robust & reliable agent network development.

This presentation highlights these three core design principles for successful Payment Banks and the lessons from international experience.

G2P Payments in India – How a 1% DBT Commission Could Undermine India’s Financial Inclusion Efforts

Posted on by MSC

Weak Bank Mitr networks (with a reported annual attrition rate of 25-35%) in India could severely undermine the PMJDY and the DBT plans of the Government of India. Many Bank Mitrs have stopped offering services because of low commissions for processing G2P payments. However, the government released an Office Memorandum on 16th January 2015 setting the DBT commission rate for rural areas at 1% – much below the costs of delivering the monies and could potentially derail the entire financial inclusion effort of Government of India.

Task Force on Aadhaar-Enabled Unified Payment Infrastructure estimated that a 3.14% DBT commission would be adequate. A new MicroSave costing exercise found that the cost for processing transactions through the agent network is at least 2.63% for each transaction– much higher in more remote rural areas. Prima facie cost to the government for paying DBT commissions appears high, however it could be offset by huge potential savings from reduced administrative costs and reduced payment leakages. A 2011 McKinsey & Company analysis of India’s government payment system, estimated it to be Rs. 1 lakh crore annually (US$22.4 billion).

If the Bank Mitr network needs to be made more sustainable and ensure quality services, an adequate commission rate (MicroSave estimates this to be a minimum of 3%) for the first few years of PMJDY should be considered which can be reduced as the programme scales.

G2P Payments: Concerted Efforts Will be the Key

Posted on by MSC

There is increasing evidence from countries such as Pakistan, Brazil, Columbia, Mexico and South Africa that the government-to-person payments offered through digital and branchless banking channels could be a stepping stone to financial inclusion. The Government of India and the Reserve Bank of India have adopted a similar path to financial inclusion in India. While the target beneficiaries and the channels used under social benefit schemes and subsidy programmes and FIP are the same, financial inclusion is not being achieved as the efforts of the stakeholders driving these are not aligned. This Note analyses the demand as well as supply side impediments to realising the potential of G2P payments to further the cause of financial inclusion in India.

Small Finance Bank Licences: Not the End of the Road for Non-SFB MFIs

Posted on by MSC

Eight NBFC-MFIs received ‘in-principle’approval from RBI to set up SFBs. However, a few big NBFC MFIs missed out or did not apply for SFB license. Once transformed SFBs will enjoy better legal identity, access to public deposits and capacity to expand varied market segment. However, it may be not the end of the road for non-SFB MFIs. The transformation phase of SFBs likely to provide short to medium term advantage to non SFB MFIs. SBFs may face challenges in producing majestic growth numbers as funding under priority sector lending and managed loan portfolio will dry up gradually. This will be time for Non-SFB MFIs to strengthen operational processes and develop robust control structures to increase their competitive advantage. Non-SFB MFIs can also find ways to increase their market share, some may – Expand through strategic tie-ups, take up segments/geographies that SFBs may vacate and expanding off balance sheet portfolio. This note discus all these aspects in details.