Based on over 2,600 mobile money agent interviews carried out in 2015, the survey report highlights findings on the mobile money agent landscape in India covering agent profitability, transaction volumes, liquidity management and other important strategic considerations. The report highlights that agent networks in India are still at a nascent stage and differ from most other ANA studied countries in that their proliferation has been driven primarily by government policy (as opposed to business considerations). This has led to an extremely high proportion of agents in rural areas, many of whom conduct transactions for government programs like Pradhan Mantri Jan Dhan Yojana (PMJDY)– a government program with the goal to provide all households in the country with banking facilities by January 26, 2015.
In the month of May 2015, Government of India launched its flagship Jansuraksha insurance schemes which in its first 3.5 months, reached an impressive scale of 109million policies. While the government is celebrating the largest global success (in terms of outreach) of a contribution driven insurance programme, there is criticism around uniqueness and continuity policy for the schemes. In this Policy Brief, we analyse the performance trends of the three Jansuraksha insurance products (Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana and Atal Pension Yojana). We trace the similarities and uniqueness of the schemes with their social insurance predecessors and comment on how the schemes are a departure from the hitherto subsidy driven social insurance / social security schemes. In the second section, we have analysed the current and potential challenges for Jansuraksha schemes regards to targeting of clients, managing claims and ensuring continuity. The Policy Brief concludes with key policy level suggestions that can ensure the policies are delivered to the intended target clientele, banks and insurers are adequately incentivised for their effort in effective delivery and that the Jansuraksha schemes are continued over a long term horizon.
The financial inclusion in India was primarily driven by the full service banks or universal banks. Realising that this needs more / differentiated player, one of the largest worldwide experiments has been initiated in India by the central bank-Reserve Bank of India (RBI). This was set in motion in Dec 2014.
Key highlights of payments banks
Payment Banks can keep deposits not exceeding Rs. 1 Lakh by end of day from Indian customers only.
The deposits would be covered under DICGC.
They are not allowed to give any kind of credit including issuance of credit cards.
They have to mandatorily invest their 75% of demand deposits in specified government securities / treasury bills.
Their major source of income would be on account of providing payment and remittance services.
Following the recommendations made by the External Advisory Committee, the Committee of Central Board released the list of 11 players (out of 41 total applicants) who have received “in principle” approval from RBI to operate a Payments Bank in India.
The distribution of license has covered a wide spectrum of players in the market. As expected and considering the reach of mobile in India, majority of the players (5) are Telecom companies or having some tie up with Telecom companies; a couple of NBFCs; and one each as Over-the-top (OTT) player, technology provider and government entity.
A quick glance through the list of awardees suggest that RBI is willing to experiment with different business models and going forward will use the learnings to further strengthen its effort to fulfill the vision of complete financial inclusion. The same has been highlighted in the selection process of the regulator.
The other interesting fact to note is that some of these players were already active in the market by way of Pre-paid Instrument (PPI) license in the same name. However, some are completely new in this market. Given the wide list of successful applicants, all would like to play to their respective strength. Telecom players have the reach by way of their existing distribution network, others would scale up and come up with new and innovative distribution strategies.
The Government has also taken issuance of license seriously and with Department of Post with its reach and trust through 1.5 lakhs post offices which are moving on to core banking system (CBS) would provide enormous reach and competition to rest of the players.
It will be interesting to see how different business models emerge with so many players. Some of them would be in a hurry to launch their payment bank operations in the next few months, instead of waiting for long, as they already have a fair degree of connected infrastructure which can support their initial phases. As per the current wisdom, the revenue will be driven on the basis of transactions and break-even will take a few years.
To be successful, the Payment Banks would be better off by redefining the “Digital” with keeping persona of “Customer” in the center and build products and processes around that. The long term survival of the new category of banks would depend upon proper customer service to retain customers or there would be high possibility of churn.
In the end, a lot is expected to change. This would mean that more choice would be available to a variety of customers including the people sitting on the fringe and far flung areas, at a lower cost. All these would definitely require a paradigm shift in business strategies to incorporate customer centricity, with fair degree of investment over a sustained period of time and right marketing strategy.
Mr. George Muruka, Domain Leader, Private Sector Development at MicroSave discusses financial product development processes in scaling up sanitation finance in Tanzania.
Change is upon us. After eight years of market dominance Safaricom’s M-PESA seems to have finally met a potential contender, the banks. Data from The Helix Institute of Digital Finance shows that between 2013 and 2014 banks in Kenya (in particular Equity Bank) have aggressively grown their agent networks, and now account for 15% of the agent market share, up from 5% in 2013. In addition to increased touch points, banks have introduced a greater diversity of sophisticated offerings to the market, such as savings and credit. Both product development and the growth of the agent network are moving in the right direction to provide customers with more options, in a more competitive market.
Whilst celebrating this transmutation, we must also remain mindful of the risks these developments pose to customers, and how to mitigate them in order to drive trust and activity on the network. In CGAP’s recent publication ‘Doing Digital Finance Right: The Case for Stronger Mitigation of Consumer Risks’, seven key customer risk areas were identified. This blog will draw on three of these risks: (1) Inability to transact due to network and service downtime; (2) Insufficient agent liquidity or float impacting ability to transact; and (3) Poor customer recourse at the agent level. I also encourage you to read the three blogs preceding mine, which outline and delve deeper into the seven risks and potential solutions.
Inability to transact due to network/service downtime
Over the years, platform migration has been a key area of investment for providers as they try to overcome restrictions on growth due to limited functionality and capacity. Following the trend, earlier in the year Safaricom upgraded to a second generation (‘G-2’) platform, now hosted and managed in Kenya and with the ability to handle up to 900 transactions per second.
Extending credit to agents is often cited as a quick win in terms of alleviating liquidity issues, but it may be more complex than we may think. During interviews carried out with 40 agents in Kenya, some interesting insights into liquidity management emerged. It appears that some agents falsely report being out of float in order to reserve it for their loyal customers, or opt not to rebalance due to either indecisiveness as to how much to invest, or fear of being robbed or defrauded.
To add to these enduring challenges, in July last year Safaricom removed its exclusivity clause opening up their network to rival providers. Although this has a positive impact in terms of an added revenue source for agents, non-exclusivity forces them to manage multiple pools of liquidity simultaneously, and therefore can further complicate the process of rebalancing. This is especially applicable for banks whose agents are increasingly non-exclusive (74% in 2014), compared to their mobile network operator (MNO) counterparts (12%), and carry out higher value transactions (median value of $US33 per day, compared to $US22 for banks).
Poor customer recourse at the agent level
Given the negative experience customers often encounter with customer care offices and call centres, it is no surprise that they often look to agents to resolve their issues. But are agents able or willing to provide adequate service in return?
“The biggest barrier [for agents] to expanding their business is really the fear of calling customer care when anything goes wrong, which is interesting because we would expect this to happen in countries […] where institutional setups are not yet operating optimally.” Kimathi Githachuri, Head of The Helix Institute of Digital Finance during the CGAP “Doing Digital Finance Right” event on June 29, 2015
When asked to rank the major barriers to expanding their mobile money business, agents in Kenya rated ‘dealing with customer service’ second, ahead of threat of armed robbery.
In terms of willingness, regular agents are used to selling fast-moving consumer goods (FMCG) such as cigarettes and Coca Cola, which are quick, easy transactions. They are not accustomed to spending time helping customers deal with service problems they encounter. Through sophisticated analysis of our agent data, we see direct correlations between good customer service and increased business, with the agent’s ability to answer a difficult question about a mobile money policy increasing their transaction volume by over 10%.
Banks are bringing in a greater diversity of services, beyond the popular cash-in/cash-out and bill payment products championed by MNO providers. As service offerings become more varied and complex it will become increasingly important for providers (especially banks) to identify sophisticated segments of agents that can explain these offerings and help customers deal with problems that arise.
Conclusion
Although an exciting and much needed development, the rapid growth of bank agents in Kenya comes with both its risks and rewards. Not only must banks ensure that their systems and processes develop at the same speed with which the market matures, but also that competition on the ground remains healthy. Ensuring customers are supported and protected every step of the way is a prerequisite to increased uptake and usage, and is particularly true for new and more complex products. Data from The Helix Institute of Digital Finance and MicroSave’s “A Question of Trust” study, along with CGAP’s landmark Focus Note highlight the damage these risks are doing to consumers’ trust in, and thus use of, digital finance. Those providers wishing to sprint ahead and drive healthy margins from their digital ecosystem, will need to respond accordingly.
In this the second of three videos they discuss: 1. How can we better track the customers behind OTC transactions to address KYC/AML concerns? 2. How can we improve customer protection for OTC customers? and 3. What are the drawbacks of an OTC model for DFS providers?
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