Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Customer Value Proposition
Page 1
Customer Categories
Customers are the key to any successful business. This is as true for a mobile money venture as it is for
any other enterprise that serves customers. Yet a detailed understanding of the needs of customers has not
been adequately addressed by many MFSPs. Mobile money businesses around the world are trying to
identify the customer value propositions and the killer application(s) that will lead to large volume
adoption. This document provides some insights to the elements of the value propositions that are
emerging.
In most mobile money conversations, the term “customer” refers to the retail consumer – the individual
that will require the service for their financial needs. But that is only one category of customer– and in
some markets the retail consumer might not even by the most important customer.
Figure 1. Mobile Money Customer Categories
Source: Janine Firpo, Manila, December 2009.
Agents are actually the first set of customers an MFSP should consider. They have to have a mobile
account and they have to be able to use the MFSP’s products. Otherwise, they cannot function as agents.
Not only are retail and master agents an MFSP’s first customers, they are also the MFSP’ face to the retail
consumer. Therefore understanding the needs of the retail agents and getting the value proposition
correct for them will be incredibly important for the MFSP. Details about agent value propositions and
selection can be found in Parts 7, 8, 9, and 12 of the Toolkit.
Another important category of customers is businesses, government agencies, and other entities that
disburse funds, such as salaries, pensions, and subsidies. In some markets these entities are actually the
drivers of mobile money uptake. So they are very important customers. More information about
government and corporate customers can be found in Part 3 of the Toolkit.
Page 1
Universal Value Propositions
Retail Consumer Segmentation
Part 4 of the Toolkit provides a set of tools to perform market research at the retail consumer level. For
more information, refer there. This document only notes that in any particular country or region, retail
consumers cannot be viewed as a homogenous market. This customer base is highly diverse and each
segment has different financial needs.
Figure 2. Retail Customer Segmentation
Source: IFC Mobile Money Market Research Results. 2008.
The graph depicts eleven different consumer segments in a country that was analyzed by IFC. Each of
the sub-groups is very different, ranging from people living on less than $100/month to families making
more than 5 times that much. It includes people who are just surviving, young people who have recently
left rural homelands for the city, and everything in between. Yet this variety is often overlooked when
mobile money is being considered for a market. During the IFC study, each of these eleven segments was
profiled based on the description of the individuals, their attitudes toward money, usage patterns, financial
needs, and so on. The World Bank conducted a comprehensive financial markets study in Indonesia over
a two-year period. 1 More than 3,500 people were interviewed. A basic finding of both the IFC and World
Bank studies was that each market segment has very different aspirations and needs.
1
Refer to the Comprehensive Demand Study Questionnaire in Part 4 of the Toolkit. This document is the survey
instrument that was used by the World Bank in Indonesia. Other tools in Part 4 describe how to conduct Market
Research for mobile money.
Page 2
A review of Figure 1, shows that some aspects of the value proposition are similar across all three types
of customers. Retail agents may want foot traffic and disbursing entities may want extended reach, but all
three categories of customers want convenience, reduced transaction costs, increased security, and ease of
use. These four principles show up in some many global instances for mobile money, that they can be
thought of as almost universal value propositions. The challenge is finding where these value
propositions intersect with pain points that individuals face when they try to perform financial services
within the existing infrastructure.
Convenience
What does convenience really mean? Is it a measure of how long someone has to wait at a bank or a
utility company’s office to perform a financial transaction or pay a bill? In Papua New Guinea, individual
wait 30 to 90 minutes in the hot sun to get into a bank branch. That is inconvenient. And it is
inconvenient enough that people will be willing to change their behavior to have a better solution.
Is convenience a matter of how far someone has to travel to perform a banking transaction or to pay a
bill? This can even be a problem in urban areas. In Jakarta, customers have to visit the utility company
to pay their bills. While this might not seem to be much of a problem, the traffic in the city is so bad that
it can take several hours to get to and from the utility company’s office. That is inconvenient.
Figure 3. Distance - One of Five Reasons Not to Use a Bank
Distance
A study that was conducted by McKinsey & Company 2 showed that low-income households in India and
the Philippines want quick access to their funds. For MFSPs that means that retail agent outlets need to
be close to where people live and work, and they need to have long flexible hours. According to the
McKinsey study, more than 50 percent of the unbanked in India have considered using banks, but only
about half have done so, and their survey showed that distance is one of the top five obstacles.
2
McKinsey Quarterly. Capturing the promise of mobile banking in emerging markets. February 2010.
Page 3
The fact that bank branches are often too far for people to use is generally known. What is less well
documented is the distance that individuals are willing to travel to perform financial transactions.
Research conducted in Cambodia by IFC looked at this question. The researchers measured three
different overlapping distances:
• Neighboring: very close proximity - from next door to a maximum of 500 meters away. This is
considered a zone of very high familiarity. An individual would know all the people who live in
this zone and would be able to find one’s way around with “one’s eye’s closed
• Near: from as little as 250 meters to about 1 or 2 km. People in this zone are mostly familiar,
though some might not be known by name. The places, shops, and scenery are very much part of
one’s everyday world. This is an intermediate zone - not really ‘my own world’ yet it is still
familiar and comfortable.
• Further Away: starts at 1km to 2km. A zone in which people are no longer recognized or known,
where shops might be unfamiliar, and where one might not automatically find one’s own way
around.
Even a relatively short distance of 1 to 2 km can be considered “farther away” and less familiar. This is
very important because, as you can see in Figure 4 the willingness of a consumer to venture farther from
home for a financial transaction diminishes with the size of the transaction.
Figure 4. Customer Convenience Measures
Source: IFC Mobile Money Market Research Results. 2008.
There is a direct “convenience” correlation between distance and size of transaction. These findings are
supported by research that IFC and Harvard University conducted with Coca-Cola in Africa. In several
East African countries, Coca-Cola’s bottlers are creating very small wholesalers for their distribution
network. These wholesalers cover a territory of only 1.5 km radius and have up to 200 retailers in that
geographic zone. That is a lot of coverage! And it brings the coverage very, very close to where people
Page 4
live. Since a Coke is a small purchase that would fall into the $1-$4/1 km distance in Figure 4. These
findings have important implications on the convenience value proposition for mobile money providers.
Matching Financial Needs
Another aspect of convenience is how well the services offered meet the financial requirements of the
customer base. Although it started out as a money transfer service, one fifth of the unbanked customers
using M-PESA in Kenya are using it as a savings mechanism because they think it is safer than a bank
account. According to them, money stored in a bank is at a high risk of being lost, especially if there are
monthly fees. The unbanked are an increasingly important demographic for mobile money, so
understanding their needs, their pain points, and their definitions of convenience will become increasingly
important.
As stated in the McKinsey study mentioned earlier, “The primary requirements of its low-income
households go beyond simple savings vehicles. Many households are looking for a way to help them
manage their money or cash flow. But for these consumers, money management is different from pure
long-term savings or credit. Its principal focus is balancing times of cash surplus and cash deficits over a
typical salary cycle—for example, 30 days.”
Figure 5. Monthly Income Cycles
Lower transaction costs
This value proposition requires little explanation. The cost of the transactions relative to other
mechanisms for accessing services will be a major factor in the success or lack of success of a mobile
money service. Almost 70% of the consumers surveyed in 2006 said they used WIZZIT mobile money
services because they were cheaper than any other form of banking. Similarly, customers in Kenya
believe that the money transfer services offered via M-PESA are less expensive than any of the
alternatives. However, in Cambodia, the uptake for money transfer services via the mobile phone is not
as successful because it is possible for citizens to transfer any amount of money for only USD 1 through
Page 5
foreign exchange brokers. Even a 50% reduction in the cost is not sufficient for people to change their
behavior because the USD 1 fee is already considered inexpensive.
When assessing the cost of mobile money transactions against existing solutions, it is important to take
travel time and expenses into consideration. Additionally, it is important to consider all the fees that
customers will pay for their mobile money transactions, including deposit fees, transfer fees, and
withdrawal fees. And it is important to consider the cumulative fees that consumers will pay. If a
customer has an option of obtaining $50 USD in cash for $1, they are not likely to hold the $50 USD in a
mobile money account and withdraw the funds in smaller tranches of say $10 USD, if they are charged $1
for each transaction.
Increased security
Security is a major issue in many countries around the world. It was one of the drivers of the rapid uptake
of mobile money in Kenya, and it is likely to be a key driver in other regions as well. In Papua New
Guinea, IFC and the UNDP conducted a money movement study. Everyone interviewed, from business
leaders to barefoot village women described issues related to cash security as a major challenge. Security
is an issue for those who have to carry cash from one location to another. It is an issue for merchants who
accumulate cash throughout the day and then need a safe place to store it. And it is a concern for
government agencies, corporations, and other organizations that need to push large sums of money to
pensioners, employees, or large numbers of recipients. Using mobile money as a mechanism to remove
cash from the system has a significant benefit for many people in the market.
Ease of use
The major competition for a new MFSP entering the market is not other mobile money solutions, banks,
or moneylenders, it is cash. Cash, while insecure in many regards, is highly efficient, extremely
accessible, widely accepted, and easy to use. Mobile money solutions will be competing with cash, and
therefore, they need to be as efficient and easy to use as cash. Or at least close to it.
When credit cards were first introduced in the United States, the merchant needed to call the customer’s
bank to verify that funds were available. Thus, the transaction could take as long as 4 to 5 minutes. But a
cash transaction took less than a minute. It is not surprising, then, that not many people were using credit
cards. It was only when the credit card system become electronic, resulting in transaction times that were
almost as fast as using cash that credit cards began to be widely accepted by consumers.
Other elements that are related to ease of use include:
• Enrollment —needs to be very easy. The information that is required to enroll in the mobile
money system should be readily available and limited to what is needed for regulatory purposes.
It is best to provide multiple channels for enrollment, if at all possible
• Education – consumers need to be continually educated about the benefits and use of the
solution. The MFSP should offer various avenues for customers to get answers to their questions
• Marketing – provide clear, concise, and actionable messaging. Continually promote the mobile
service through as many touch points as possible
• Give customers control – provide options to consumers, so they have control over the way they
use the service
• Incentives for agents –whether internal or outsourced, your agents are your face to the retail
consumers. Whether your products are successful depend on them. It is critically important to
give them the right incentives to keep them selling your services. Your agents are your sales
team – and your customers.
• Research is the key - ongoing research and usability testing to understand consumer behavior to
Page 6
make product and user interface improvements.
Trust
A final critically important value proposition is trust. Customers need to trust the MFSP, even more than
they trust the retail agents. Refer to Field Report - Exploring Trust in Part 5 of the Toolkit for a detailed
look at this issue.
Page 7
Customer Uptake Patterns
Understanding that convenience, lower transaction costs, increased security, ease of use, and trust are the
critical value propositions for customers is one thing. Translating that knowledge into an appropriate
product mix is quite another. What is required is a way to make customers say, “I really need this
solution.” The mobile money solution needs to address a critical need or a severe pain point if it is going
to be sufficient for customers to change their behavior dramatically and to shift from cash – both of which
are required when customers start using a mobile money solution.
Establishing an Anchor Product
Although it is tempting to offer an array of services through multiple channels, a best practice is to enter
the market with a single, compelling benefit to the customer. As Figure 6 shows, the anchor product is
different in various markets. Domestic money transfer, bill payment, and electronic top-up services seem
to be most common. However, in Afghanistan, the mobile money business is being built through a
relationship with microfinance institutions. Hence loan payment was the first critical application. As M-
PAISA continued to perform market research, they learned some unexpected things. For example, they
found that police were having a problem because their officers were going AWOL after they were paid.
As it turns out, the officers were going home to give money to their families. So now, salary
disbursement is becoming an anchor product for Afghanistan. As mentioned earlier, security could be the
critical pain point in PNG that leads to a related anchor product. IFC will be testing this assumption soon
through a pilot that eliminates cash from the coffee supply chain.
Figure 6. Examples of Anchor Products
Source: Janine Firpo, Manila, December 2009.
What this shows is that the anchor product is not always immediately evident, and sometimes it takes
experimentation to determine which service will be most compelling in a particular market. Once the
Page 8
anchor product is established, it is easier for the MFSP to gain traction in the market. Even though an
anchor product is important to build momentum, one product is not sufficient to achieve viability. So
MFSP expand to a range of other services as shown above. Even M-PESA in Kenya, which went into the
market with the perfect anchor product for that country, is now expanding to provider other financial
services. In order to be successful, a portfolio of products is required – not only for the service provider,
but for the viability of the agents as well.
The success of M-PESA in Kenya led to the assumption that money transfer was the “killer application”
or anchor product for all other markets. But this has not proven to be the case as Figure 6 shows. It
wasn’t even the case in Tanzania where Vodacom went to replicate the success of their venture in Kenya.
Tanzanians did not respond in the same way to money transfer via their mobile phones because urban
migrants do not send money back to family as frequently they do in Kenya. In addition, there is less
crime and insecurity in Tanzania, which further detracts from the attractiveness of a pure money transfer
play. M-PESA in Tanzania is offering a range of services, including bill payment, airtime top-up, and
microfinance loans repayments, to meet market demand and find the products that will result in
significant customer uptake.
Figuring out the right anchor product is a matter of diligent market research followed by experimentation.
There does not seem to be a prescription for immediate success.
Figure 7. Mobile Money Usage in Kenya3
Source: McKinsey Quarterly. February 2010.
3
Goldstein, P and Bowen, H. “The Mobile Money Revolution?” AudienceScapes. 2009.
Page 9
Technology Adoption
Uptake patterns among mobile money customers are going to be iterative, because some types of
consumers will be attracted to the product before others. Even M-PESA saw an initial uptake pattern that
favored urban males first and rural women, who were money transfer recipients, second. Not everyone
adopted the solution simultaneously. There were people who were early adopters. These initial users
were then followed by other types of customers.
It is widely accepted in the information and communications technology (ICT) industry that technology
adoption follows a phased approach that is described by a “technology adoption life cycle”. This life
cycle is so well accepted in ICT circles that it is considered a norm.
Figure 8. Technology Adoption Life Cycle
According to this model, the first individuals to accept a new technology solution are the Innovators.
They will try anything at any cost because they are simply excited about new things. The second group is
the Early Adopters. Innovation excites them too, but they are a bit more practical. The solution has to
have some appeal to their rational side and it has to be somewhat affordable. These two groups – the
Innovators and the Early Adopters – make up about 12% of the total population. The next group, the
Early Majority, require a solution that meets their core needs and is affordable. Moving a technology
product or solution from the value proposition that appeals to Innovators and Early Adopters to a value
proposition that appeals to the Early Majority can be so dramatic that it is referred to as a “Chasm.” It
takes a lot of energy to shift from one side of the chasm to the mass market. Changes in product
offerings, marketing campaigns, and partnerships can be required. It is a difficult leap. So difficult that
many companies fail here.
It is quite possible that mobile money is following a similar pattern. The rapid uptake of the M-PESA
solution appears to be an anomaly rather than the norm, especially in countries where money transfer is
Page 10
not the anchor product. Research that was conducted by ACCION International with some of its partners
in Latin America was laid over the technology adoption life cycle – and the parallels were quite marked.
The McKinsey study mentioned elsewhere in this paper suggests that for viability MFSPs must sign up
between 15% to 20% of the addressable market, 4 which would push the uptake over the chasm. Yet,
many providers are not reaching those numbers. According to the same study, McKinsey claims that
take-up rates vary with some of the greatest successes in Eastern Europe (22 percent) and the lowest
uptake in Asia (around 5 percent). It is interesting to note that 5% is the value often ascribed to the
Innovators in a market.
Creating Awareness
Another key element to achieving customer uptake is creating customer awareness, which is a
combination of financial literacy, consumer awareness, and recognition of the value proposition.
Generating education is a multi-pronged strategy, but marketing is a key ingredient. As Figure 9 shows,
the key reasons that Ghanaians are not using mobile money is because they have not heard of the service.
While this figure is 51% for Ghana, it is only 5% for Kenya.
Figure 9. Kenya Mobile Phone Usage
Source: AudienceScapes 2009.
M-PESA spent a significant amount of money advertising their solution. They had billboards around the
country, television spots, radio advertisements, and a host of other media. In addition, M-PESA came to
market with a very easy to understand message that was accompanied by strong visuals that helped people
understand how to use the solution. Their “send money home” campaign was so successful that it has
4
McKinsey Quarterly. Capturing the promise of mobile banking in emerging markets. February
2010.
Page 11
been widely copied around the world. Lemon Bank in Brazil built their market with an equally clear
and compelling message - “we’re everywhere Brazilians are”. When VISA first entered the market in
the 1960s, one of the value propositions they offered their bank partners was to underwrite and carry out
the marketing and advertising campaign for credit cards – on behalf of all their partners. Marketing is
key – top-down, bottom-up, through agents, multi-media.
Figure 10. Marketing Opportunities
Source: AudienceScapes. 2009.
Page 12