The ability to provide financial services via digital channels is opening up new opportunities to reach populations that previously were unserved. But though mobile money access has grown, product usage is still narrow. In response to these issues, progress will need to be made on several fronts to expand the global mobile money ecosystem: new modes of operating in rural communities; innovative partnerships and products; and enabling regulations.
Successful organizations will learn how to reach rural poor customers in new ways: Poor customers require a higher touch, in contrast to the low-touch model that makes technology an exciting and sustainable delivery channel. Success with the rural poor will involve understanding how to deliver marketing, training and on-boarding programs that provide the additional depth of support they need, while remaining cost-effective. Potential models could include:
- Leveraging existing, trusted infrastructures to reach the poor: Tapping into existing structures by partnering with organizations that already work with the poor (such as agro-processors or NGOs) or working through village-level groups (such as informal savings groups) can offer new ways of reaching the poor.
- Making way for new non-bank financial providers: Banks aren’t the only ones tackling the financial inclusion challenge, especially when it comes to serving farmers. Organizations like One Acre Fund, which provides asset-based financing and training to farmers, and Alliance for a Green Revolution in Africa (AGRA), which helps partners develop solutions, are pushing the boundaries of what financial inclusion could be for smallholder farmers.
Innovative partnerships and products will build upon current infrastructure: Connecting financial institutions and mobile network operators is a first step; offering products appropriate for the poor is the next. Bundled savings and credit products already offered by several mobile operators and partner financial institutions (M-Shwari, M-PAWA) provide entry-level products that go beyond payments. In other cases, such as with Tigo in Tanzania, sharing interest earned from the trust account with users creates real value for storing funds in the mobile wallet. Further product and service enhancements might include:
- Cross Border Payments: Tigo in Tanzania and Rwanda have already begun offering person-to-person cross-border remittances, and M-PESA is doing the same across Kenya and Tanzania. Facilitating payments across all borders in not only East Africa, but also across broader sub-Saharan Africa, will open up further use cases for the poor.
- Pushing interoperability: As we have seen in Tanzania, interoperability (the ability of systems to work across network providers) paves the way for business model efficiency, increased competition and greater customer reach, which can be passed on to rural customers through lower costs.
Regulators can be a friend or foe to financial inclusion: Regulation has helped level the playing field for MNOs in Tanzania by removing agent exclusivity, which has shortened the break-even period for agents (per a MicroSave 2013 report). However, regulation has stifled progress in other markets, by requiring bank-led services (Nigeria) or a forced many-to-many model (early approach taken in Ghana). Close collaboration with regulators to create conducive markets for mobile financial services can open up opportunities for reaching the rural poor, for example:
- Know Your Customer (KYC) initiatives: Most of the East African countries still need to solve customer identities; Kenya is the only country with a national ID issued to its citizens. It will be difficult to move beyond basic person-to-person transactions and offer more complex products without a national identity record. Governments and the donor community need to explore innovative ways of registering populations to enable this verification.
Pushing the service to the rural poor will be the next big opportunity for mobile network operators, third-party platform providers and financial institutions.