MobileActive.org

Governments make regular payments to at least 170 million poor people worldwide—far more
than the 99 million or so who have active microloans. In this Focus Note, we look at government-to-person (G2P) payments, which include social transfers as well as wage and pension payments. With appropriate experimentation, these payments have the potential to become a vehicle for extending financial inclusion and improving the welfare of poor people. Yet in most countries, far fewer than one-quarter of G2P payments to the poor land in a financially inclusive account—i.e., one that enables recipients to store G2P payments and other funds until they wish to access them and make or receive payments from other people in the financial system, and one that is accessible, in terms of cost and distance.

The first section of this Focus Note reviews the state of G2P payments today, including how we arrived at a figure of at least 170 million poor G2P recipients and a country example (Colombia) showing that several types of G2P payments reach the poor. The second section looks at the early experience with providing financial services to poor G2P recipients. We find that 45 percent of G2P programs launched in the past 10 years use an electronic payment mechanism that creates a foundation on which a financially inclusive account can be offered. Examples where this is already being done (Brazil, India, and South Africa) are discussed. The third section deals with five common concerns of policy makers and social development program managers. Recommendations to government, the financial industry, and donors are
summarized in the conclusion.

Due to the increasing penetration of mobile phones even in poor communities, mobile-phone-enabled banking (m-banking) services are being increasingly targeted at the “unbanked” to bring formal financial services to the poor. Research in understanding actual usage and adoption by this target population, though, is sparse. There appear to be a number of issues which prevent low-income, low-literate populations from meaningfully adopting and using existing m-banking services.

This paper examines variations across countries in adoption and usage of existing m-banking services by low-literate, low-income individuals and possible factors responsible for the same. It is observed that variations are along several parameters: household type, services adopted, pace of uptake, frequency of usage, and ease of use. Each of these observations is followed by a set of explanatory factors that mediate adoption and usage.

Due to the increasing penetration of mobile phones even into poor communities, mobile payment schemes could bring formal financial services to the “unbanked”. However, because poverty for the most part also correlates with low levels of formal education, there are questions as to whether electronic access to complex financial services is enough to bridge the gap, and if so, what sort of UI is best.

In this paper, we present two studies that provide preliminary answers to these questions. We first investigated the usability of existing mobile payment services, through an ethnographic study involving 90 subjects in India, Kenya, the Philippines and South Africa. This was followed by a usability study with another 58 subjects in India, in which we compared non-literate and semi-literate subjects on three systems: text-based, spoken dialog (without text), and rich multimedia (also without text). Results confirm that non-text designs are strongly preferred over text-based designs and that while task- completion rates are better for the rich multimedia UI, speed is faster and less assistance is required on the spoken-dialog system.

This review considers the differences between the adoption rates of M-PESA in Kenya and Tanzania and tries to highlight some of the reasons that the same service launched in seemingly similar countries has yielded such different results. This paper is intended as a discussion document for mobile network operators considering launching a mobile money service.

Safaricom launched M-PESA in Kenya in March 2007 and has since become the most famous and probably the most successful implementation of mobile money service to date. In May 2008, 14 months after the launch, M-PESA in Kenya had 2.7 million users and almost 3,000 agents. Today, over two years since its launch, M-PESA has gained 7 million registered customers and has 10,000 agents spread across the country. This exceeds the reach of any other financial service in Kenya.

Finaccess 2009 showed that M-PESA has become the most popular method of money transfer in Kenya with 40% of all adults using the service. The same Kenyan survey also shows a dramatic increase in national remittances; from 17% in 2006 to 52% in 2009, which may be attributed to the ease of money transfer through ubiquitous M-PESA agents. Many mobile network operators have been eager to repeat M-PESA’s success in Kenya, but the formula for this success is not yet clear. One year after the Kenyan launch, Vodacom launched M-PESA in April 2008 in Tanzania. The user uptake of the service in Tanzania has been much slower compared to its northern neighbour. In June 2009, 14 months after the launch, M-PESA in Tanzania had 280,000 users and 1,000 agents (Rasmussen 2009).

This paper puts forward explanations and backgrounds to the remarkable difference in user uptake of the m-banking service M-PESA in Tanzania compared to the same service in Kenya. Data gathered from user and industry interviews, conducted during a field study in Tanzania between March-May 2009 is together with literature from Kenya used to compare the m-banking environment in the two countries.

M-PESA is provided by mobile network operators (MNOs), Safaricom in Kenya and Vodacom in Tanzania. Both are the leading MNO in their respective country although Vodacom has a substantially lower market share and turnover compared to Safaricom. This simple fact resonates in many areas affecting M-PESA, such as: size of marketing budget, M-PESA's priority within the organization and the company's ability to quickly sign up agents and attract initial customers. Differences in the general economic situation, the geography and political history are also put forward. Kenya has a stronger economy, a higher GDP and a more developed banking system. This has contributed to the financial literacy in the country which is an important factor when communicating a service like M-PESA.

Among the differences between the two implementations, we suggest that the three most influential factors to the user uptake have been the two companies ability to transform their airtime distribution into an agent network, the marketing strategy which needed to be adopted to the specific settings in each country, and the geographical and demographic conditions.