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The Better Service Agents Provide, The More Business They Do

Posted on by MSC

One of the major objectives of the Agent Network Accelerator (ANA) project is to determine which aspects of strategic operations really build the business case in the agency business. The Helix Institute has partnered with the Harvard Business School to dig deep into the data that is being collected and some of the initial findings are quite interesting.  Specifically, agents who are more transparent with their pricing and more knowledgeable about mobile money policies experience significantly higher transaction demand than their less transparent and less expert peers. More knowledgeable agents also experience an even greater increase in demand when there are competing agents nearby.

By conducting econometric analysis[1] of The Helix Institute’s rich, nationally-representative survey of agents in Kenya and Uganda, combined with geographic data, the effect of agent service quality can be determined. One aspect of quality, pricing transparency, is measured by the presence (or absence) of a tariff sheet in the agent’s shop. Another measure of quality, expertise, was measured with a difficult question about mobile money policies – highly knowledgeable agents were able to answer this question correctly.

We measured competitive intensity by the number of directly competing agents within a 1km radius of each surveyed agent. After controlling for many factors that were likely to influence demand, such as population and poverty concentration within 1km, the number of tills the agent used, the agent’s gender, and the brand the agent worked under, we find economically and statistically significant effects of service quality on demand.

We find that the presence of a tariff sheet increases demand by over 12% and the ability to answer a difficult question about mobile money policy increases demand by over 10%.  We also find that highly knowledgeable agents reaped even greater rewards for their expertise in the face of competition.

Furthermore, we find that the positive effect of being highly knowledgeable is magnified in the face of competition from other agents – suggesting that expertise is a dimension upon which mobile money agents compete.

The implications of this work to mobile money operators and agents are clear: service quality is critical to a healthy agency.  This provides further evidence for the importance of training and shop appearance. These agent attributes are not only important to the operator, but this work shows the importance of transparency and expertise to agents themselves.

From a strategic operations perspective, the Helix Institute 2013 country reports for Kenya, Tanzania and Uganda give us a good idea of where some improvements can be made in this regard.  Outcomes like transparent pricing are a result of consistent monitoring and support visits, which can ensure that an outlet is branded and compliant.  In the leading East African markets, the below graph shows that providers in Kenya are doing a fairly good job of this, compared to almost a quarter of agents in Tanzania that reported not being visited, and almost half of Ugandan agents.  Therefore, for those providers who are still not regularly visiting their agents, this does seem like a worthy investment.

Knowledgeable agents are a product of quality, targeted, and repetitive training.  While the East African providers were doing a good job of getting the initial training done at the time of the survey (with Tanzania performing significantly lower), the below graph shows quite a different story for refresher trainings.
These follow-up trainings need to happen to remind agents of important information, and update them on any new changes that have happened of which they need to be aware.  They will complement the monitoring and support visits, which when done correctly are also an important opportunity to disseminate information to the agents.  With only 40-45% of agents across these East African countries reporting to have received refresher trainings, we can safely say that providers need to place a greater focus on this moving forward.

The Helix Institute and the Harvard Business School (Karthik Balasubramanian and David F. Drake) will continue to work together as the next round of ANA surveys are conducted in 2015 in East Africa, to use time series analysis to test the effect of different types of service reliability (transactions denied due to stocking out of cash/e-float vs. transactions denied due to system failure) on transaction demand.  Other Harvard work includes an effort to mathematically determine how much cash and e-float an agent should stock in the morning by taking into account historical sales, commission structure, and the cost of capital.

Stay tuned!

[1] To conduct this analysis, we combined the survey responses from mobile money agents affiliated with mobile network operators from the Helix Institute’s surveys with two geographic data sources. First, we integrated data from FSPmaps: the precise locations of over 68,000 financial access and transportation points (including mobile money agents, banks, and bus stands). Next, we add granular (per square kilometer) spatial estimates from WorldPop of overall population and the population in poverty in each given square kilometer of Kenya and Uganda. By using buffer analysis, for each surveyed agent we generate within a 1 square kilometer the number of directly competing agents (same operator), indirectly competing agents (different operator), bus stands, bank branches, population, and the percent of population in poverty. Buffer analysis is a technique that generates circles of specified radii around points of interest (such as mobile money agents) and then calculates the number of other features of interest (such as the number of other agents and population counts) that fall within these circles. The process is described here in greater detail.

“Clients Should Be At The Centre Of Your Business” – So What’s New?

Posted on by MSC

“This may seem simple, but you need to give customers what they want, not what you think they want. And, if you do this, people will keep coming back.” – John llhan, Crazy John’s mobile phone retail chain.

“Investing in quality talent, and ensuring they have the skills, training and tools that enable them to empathize and actively listen to customers are central to providing consistently excellent service experiences.” – Jim Bush, EVP American Express

I remember meeting my Father in 2000 and trying to explain to him what I was doing with my life. “I am running a project that helps financial institutions put the customer at the centre of their business and build products, processes, pricing and marketing on the basis of customer needs”. He looked at me as if I was from Mars, and said, “They don’t do that anyway?”

My Father was ahead of his time, but even in 2000, business 101 courses had figured out that a market-led (as opposed to product- or sales-led) approach was the key to success. Understanding clients’ perceptions, needs and aspirations is the foundation for successful business.

Initially inspired by Stuart Rutherford, for 15 years MicroSave has used a wide variety of qualitative research techniques to understand these perceptions, needs and aspirations. On the basis of the resulting insights we have not just innovated to build new products, but also achieved a series of much lower cost “quick wins”, through tweaking existing products, delivery systems and communications, in response.

From 2001-2007 MicroSave’s ten partner financial institutions in Africa developed or refined 9 savings products and 11 loan products.  These products were used by <150,000 customers in 2001; by the end of 2007, they were being used by nearly 2.5 million people – a growth of more than 1,500%.  The savings balances in these 2.5 million accounts soared to more than $530 million (an average balance of $212).  At the end of 2007, 373,705 customers had outstanding balances on these loans were $300 million.

So we had made important stride forwards, but two important and valuable new approaches have now been added to the mix.

“Human-centered design. Meeting people where they are and really taking their needs and feedback into account. When you let people participate in the design process, you find that they often have ingenious ideas about what would really help them.” – Melinda Gates in Wired

Human (or User) Centred Design has, in many circles become short hand for “ask your customers and/or conduct mystery shopping” –and of course there are many ways of doing this. However, HCD approaches have highlighted a very important technique and an extremely important issue:

1. The Technique: Rapid prototyping: HCD has moved this from a series of mini focus group discuss the product ideas on the basis of cards/a brief presentation to approaches that try to create the actual buying experience of the customer and iterate /build on these ideas as they observe customer and receive feedback. This is an important step forward and one which we have incorporated into the new Market Insights for Innovation & Design (MI4ID) approach now used by MicroSave.

2. The Issue: Understanding the context and supply side: Initial HCD work in our sector paid inadequate attention to the supply side, or even in some cases the regulatory environment – clearly there are times when “optimal ignorance” needs to be calibrated. Although overlooking supply side or regulatory issues are more debilitating, perhaps my favourite example of this was when one excited HCD team delightedly announced that they had “discovered” Susus in Ghana and that these had profound implications for product design. A little less ignorance would have revealed that Susus are one the oldest financial systems in Africa, and were well documented from as early as 1957!

“Wouldn’t economics make a lot more sense if it were based on how people actually behave, instead of how they should behave?” ― Dan Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions

Behavioural Sciences have even more to offer, as the theory of the “rational economic man” has always been a stretch given the way we all really behave with money. MicroSave has started to look in detail at how the realities of human behaviour impact the design and delivery of savings, credit, insurance and remittance products. We have already applied some of these insights and ideas already including: how tweaking an account opening form triggers  usage or how modifications in financial capability approach spurs average deposits in banks and microfinance institutions.

The target customers for mass market digital financial services (DFS) and financial inclusion are not used to (making a decision or taking an action to) access formal service channels, and seldom use technology. Insights generated through the behavioural research approach can radically alter the way  DFS products and services are designed, delivered and marketed … and thus their uptake and use.

MicroSave has also used the MI4ID approach to: conduct research on household money management and decision-making; design of insurance products; find solutions for MFIs in India to tap savings, create financial education programmes for microfinance institutions, and assess agent behaviour in East African mobile money markets. The latter highlights how understanding customer/agent behaviour can help with management of the supply side. Indeed, almost all the supply side work we do at MicroSave, (process-mapping, product pricing, pilot-testing, strategic/product marketing, staff incentives etc.), necessarily involves research to understand customer/agent perceptions, aspriations, needs and behaviour. This is the core of any market-responsive approach.

These are exciting, and rapidly changing, times – my Father would have been delighted to see the renewed emphasis on putting the client at the centre of our business and moving towards what MicroSave has been calling a “market-led approach”.

“The more you engage with customers the clearer things become and the easier it is to determine what you should be doing”. – John Russell, President, Harley Davidson.

Behavioural Economics and User Centred Design – Opening up New Vistas in Research Processes

Posted on by Parul Tandon

To understand  the customers better, it becomes imperative to not only understand their needs, decisions, or actions; but also understand the context in which they take decisions, various tendencies that are basis of their aspirations, choices and actions. Behavioural economics is a useful science to be applied in such explorations as it provides insights into customers’ cognitions along with a neuroscientific, evolutionary anthropology and genetics lenses. This Note is an high level peek into behavioural research method that MicroSave’s MI4ID approach uses to understand customers financial behaviour

Indonesia: The Quiet before the Storm

Posted on by MSC

Lessons from our Agent Network Accelerator Survey – Indonesia Country Report – Launched February 2015

Click here to read the blog in Bahasa

Last year, The Helix Institute discussed the importance of focusing on the “Launchpad Stage” before rolling out a DFS deployment. The Launchpad Stage is the developmental phase which concentrates on identifying a value proposition in the market, defining an anchor product, designing processes, structuring management, streamlining protocols and crafting a marketing and communications strategy.

In Nigeria, providers seemed to have skipped the Launchpad Stage, and attempted to scale without strategic clarity.  In Indonesia, regulatory uncertainly has kept all the big players from investing to scale aggressively; however, with the newly released regulation at the end of 2014, that may soon change.  The viability of commonly used anchor products is still unclear in the face of low levels of market research, meaning initial attempts at on-boarding agents are disjointed, and the ability to register customers through them, and therefore scale effectively, is extremely limited.

Indonesian Regulatory Environment

E-money regulation (No.11/12/PBI/2009), issued by the Central Bank of Indonesia (Bank Indonesia), permits only big banks with a capital of more than US$ 2.5 billion—known as Book IV Banks— to build agent networks of small individual stores as done in East Africa. Meanwhile smaller banks and MNOs can only partner with registered legal entities, such as convenience chain stores. As a result, MNOs and small banks are struggling to scale up operations and expand their footprint into the rural areas where many of these unregistered entities (such as small mom and pop shops) are found.

For MNOs and small banks wanting to offer money transfers/person to person (P2P) transfers where scale and density are needed to reach dispersive populations, this restriction can be a challenge. Helixresearch in East Africa demonstrates that small individual entities played a major role in spreading DFS footprint especially in rural areas. According to the research, 53% and 31% of agents in Tanzania and Kenya respectively, operate small general stores (considered unregistered entities in Indonesia).

Remittances & Bill Payments are Pervasive, but not the Corresponding DFS Products

In a 2013 Gallup survey, 83% of Indonesian respondents reported sending or receiving a remittance or payment transaction, and 57% of them used informal mechanisms to send the cash, such as through family members, friends, or informal money couriers. A sender typically sent $87.40 (International Dollars [1]) domestically about 1.6 times a month.  Yet currently, mobile wallet customers can only withdraw their money from the system once they are registered, and Helix research found that service providers are not providing clear incentives to agents to register customers. Interviews with agents indicated that many found registration burdensome and some MNOs only offered registration at a minority of their outlets—primarily in urban areas.

Furthermore, the research demonstrated that whilst agents had marketing collateral, they were not targeted towards specific segments of the population (i.e. rural women, illiterate labourers).  Robust market research and sophisticated customer segmentation has not been done to ensure that products are positioned correctly for customers. In fact, only 3% of Indonesians are aware of mobile money services and only 0.1% has used them. It seems that Indonesians are not aware of how DFS can provide an alternative to their remittance and payments needs.

Having said that however, Indonesia has more than 50,000 over the counter (OTC) bill payment providers that are present in urban and rural areas. Some banks are partnering with these providers and present a good opportunity to DFS providers to scale quickly. However, as bill payment providers can serve customers without integrating with a DFS provider, interested players will have to find clever ways to add value to an already popular service.

Focused Internal Teams and Agent Selection

Once providers define their anchor product, it is necessary to structure management and design protocols and processes around this. Though the interviews shed light on one provider’s best practice in DFS team alignment and agent selection, many service providers’ internal teams were shared between departments, leaving no one solely focused on driving success, and breeding confusion between departments as to who was ultimately responsible for outcomes.

Additionally, agent selection seems a bit haphazard as opposed to searching for key demographics that are aligned with the prevailing value proposition. Agents varied from government officers, airtime distributors, to convenience store agents who did not have a clear understanding of DFS or in some cases even understand how to operate a mobile phone. Agent demographics need to be customized to specific value propositions and the tasks they will be asked to execute (i.e. customer enrollment).

Launching to Success

The new regulatory policy seems to unfairly favor the big banks, but at least for now it gives more clarity to the arsenal of players that have been showing interest in this space, yet reluctant to invest.  However, pilots of the past have been worryingly small, and initial attempts at building agent networks on small scales do not seem governed by well researched strategies.  Indonesia is still in the Launchpad Stage, and it is hopeful to see all the big banks and telecoms there, interested in garnering market share.  However, before big investments are made, it does seem that more strategic clarity is needed.

 [1] The Gallup report uses International Dollars (ID) to compare payment and remittance amounts across the countries studied. The source of ID comes from: Global Purchasing Power Parities and Real Expenditures: 2005 International Comparison Program. Rep. World Bank, 2008. Web. 17 Dec. 2012. www.siteresources.worldbank.org/ICPINT/Resources/icp-final.pdf. Gallup used Global Purchasing Power Parities and Real Expenditures: 2005 International Comparison Program to compare currencies and exchange rates across countries and time using the baseline year of 2005.

Agent Network Accelerator Survey – Indonesia Country Report 2015

Posted on by MSC

Digital finance services (DFS) was launched several years ago in Indonesia but has not scaled without agent networks. Recent regulation in 2014, begins to pave the way for different players to build their networks and could be an exciting catalyst for the country, but players must approach this complex task methodically and strategically which does not yet seem to be happening for the most part. The research is based on qualitative agent interviews carried out between October and November 2014, in seven locations on Java island, Jakarta, West Java (Bogor & Cirebon), Yogyakarta, Central Java (Gombong), and East Java (Surabaya and Pasuruan). Read the full report here