NB Financial Innovation
Customer Loyalty for Social Impact
Editor’s note: This post was originally published on Searchlight South Asia. It is republished with permission.
In India today, it is a fact that more people have access to a mobile phone than to a proper toilet. There are conflicting statistics as to what the country’s exact mobile penetration is: global technology research firm Gartner notes that mobile penetration in India stands at 51 percent, while global telecommunications body GSMA notes that penetration is actually closer to 26 percent since many mobile subscribers own, on average, two SIM cards. According to the Telecom Regulatory Authority of India (TRAI), India’s mobile subscriber base stood at 904.32 million in October 2012 and 703.92 million of those connections are currently active.
Irrespective of which authority is most accurate, it is clear that mobile technology has made strong inroads in India. The functionality of mobile technology is no less ubiquitous amongst the lower-income segments of the Indian population, and it is thus equally popular with the poor. With pay-as-you-go plans being relatively inexpensive, the poor in both rural and urban settings are able to afford the conveniences offered by a basic mobile phone. They are able to use their mobile phone to take care of business-related activities and to access a growing number of mobile applications that makes routine tasks (i.e., personal banking) less cumbersome. For the urban poor in particular, mobile technology has become a useful tool in daily life.
Mobile Applications for the BoP
As mobile technology has grown in popularity in India, so has the movement to leverage technology to help the bottom of the pyramid (BoP). Since a clear channel of service access is the mobile phone, there has been a surge in the number of technology enterprises working towards developing practical mobile applications for the poor. A majority of such applications, however, target the rural poor and not the urban poor: for example, there are a number of enterprises working on delivering accurate and useful information (e.g. weather patterns, crop prices) to Indian farmers via a mobile phone. It is difficult to find the same level of mobile innovation that targets the poor in cities.
Still, there is a missed opportunity in not innovating mobile solutions that target the urban poor. Despite the visible infrastructural challenges of India’s urban areas, cities are without a doubt better developed than rural areas. Telecommunications infrastructure has been established and thereby makes mobile technology a truly valuable and viable channel for all city denizens. Infrastructure has allowed mobile service providers to compete and have strong networks that reach all segments of the population, especially the poor. In and around low-income areas and the slum communities of Mumbai, for example, there are myriad busy shops and stalls where mobile users can easily recharge their mobile accounts as frequently as needed.
By virtue of living in a city, the urban poor have been exposed to mobile technology longer and more consistently than the rural poor. They are aware of the advantages their mobile phone can bring them and have been availing of those advantages as much as they can afford to. This latter fact makes an urban poor person a more sophisticated user of mobile technology than her rural counterpart. Since their exposure and usage of mobile services has been more systematic, the urban poor have proven to be loyal to mobile technology. And now, there may be a solution that rewards them for that loyalty.
m.Paani: Redefining Loyalty
Akanksha Hazari launched her social enterprise m.Paani in 2012. As an MBA candidate at the University of Cambridge, she knew that she wanted to build a technology start-up that focused on “beautifully” designed products and services that affect change. While participating in the competition for the 2011 Hult Prize, Hazari and her Cambridge teammates sought to create a business model that would solve the global water crisis. As they worked on their business model, Hazari realized that high mobile penetration in India and Africa provides an unfulfilled business opportunity with the potential for positive social impact. With so many active mobile subscribers in these countries being poor, there had to be a way to reward them for their customer loyalty, much like how credit card companies issue points for consumers that can be redeemed for products or services at a later date.
The idea behind developing a “loyalty program for good,” known as m.Paani today, was further developed while Hazari and her teammates worked on their business model. Even before going on to win the Hult Prize, Hazari and her team received validation that there was substance to their model: a telecommunications company in Africa committed to working with m.Paani in the future. “It is an innovative and not naïve model,” Hazari says of the m.Paani loyalty program solution. How the loyalty program works is that each time a person recharges his mobile account with a particular mobile services provider, he will earn a certain number of points. When he has amassed enough points and is ready to redeem them, he can choose what product or service he would like from the options m.Paani provides in its development rewards portfolio, based on the partnerships it has forged with organizations in various sectors, including safe water, education, healthcare, energy and nutrition.
To expand acceptance of and enthusiasm for the m.Paani business model, the team spoke to many key players within the business landscape they were to enter, such as loyalty program experts and development organizations (e.g. WaterAid), to ensure that their idea and resulting model were sound. Hazari notes that Hakeem Belo-Osagie, chairman of the telecommunications company Etisalat Nigeria, has become an invaluable advisor and supporter of m.Paani’s work.
Lifeline for the Poor
m.Paani has launched a pilot program, or “design lab,” to test their loyalty program in Mumbai’s Dharavi slum. The m.Paani approach to a successful pilot is unique and relies heavily on disciplines like behavioral sciences and gaming techniques. “It’s research by implementation,” says Hazari.
Choosing the pilot community was a rigorous process. The m.Paani team visited many communities throughout India, but recognized the advantages of testing their loyalty program in a city like Mumbai. “The young adult [mobile] user in a Mumbai slum is doubling his spending on mobility every month,” says Hazari. Another key advantage about Mumbai is the size of its urban poor population, which therefore makes the hypothetical impact of the m.Paani model easy to observe and monitor.
Once the design lab has been completed and the model perfected, m.Paani plans to launch in Maharashtra and eventually throughout India. m.Paani also has its eye on other emerging markets with plans to bring its loyalty program solution to Africa in the future.
Innovating Development Finance
m.Paani’s rewards partners are corporations and nonprofit organizations. For corporations, Hazari notes that the m.Paani model is a compelling service. Though the BoP is the fastest growing consumer segment worldwide, not enough is known about its consumption patterns. “The reason for big companies not understanding the BoP is because they have not focused on this [type of] customer,” Hazari says. “The BoP accounts for more than half of mobile phone use in India, but it’s a high volume-low margin game.” m.Paani partners with a telecommunications company for whom they develop the loyalty program, transforming the corporate’s brand story while catering to the BoP segment. While effectively giving large companies access to this critical, new consumer segment, m.Paani is able to leverage the competitive value of BoP customers to enhance their access to key basic services.
For nonprofits, the m.Paani solution is equally influential. It enhances the reach of nonprofits working in major development areas. For example, m.Paani is working with the major education nonprofitPratham to design education products as part of its loyalty program rewards. This will enhance Pratham’s reach, as well as make important products available and affordable for in-need BoP customers.
From the customer point-of-view, the urban poor’s expenditures on mobile usage have been growing steadily. There is already a lot of choice when it comes to which company’s mobile services they can use, but the perceived value of those services would be further augmented if they could gain a sustainable benefit from being a loyal mobile consumer. “Valuable customers should be rewarded,” says Hazari. Since m.Paani works with corporates and nonprofits to deliver much-needed products and services to the BoP, Hazari sees the work of her enterprise as a model of “the next big thing in development financing.”
For all the progress and innovation that the m.Paani model offers the urban poor, Hazari acknowledges that there is much more that needs to be done. As they conducted their research on different urban poor communities, the m.Paani team observed an acute asymmetry of information. For instance, the urban poor rely on word-of-mouth from family, neighbors and the community to know which school to send their children to or which water filter to buy. It may be helpful to get advice from these sources, but basing decisions on the experience of others does not guarantee the best possible option. There is need for a consumer report focused on the products and services used by the BoP. Going forward and as the m.Paani model matures, Hazari envisions that the enterprise will “evolve into providing [such] information for all [its] rewards categories.”
On-the-ground evidence continues to emerge and demonstrate why catering to the BoP makes business sense. If innovation is the seed of any business, then social entrepreneurship continues to be one avenue that can meet the challenges and needs of the poor head-on. India is known as the hub for social enterprise, and with the rapid, unplanned growth of its urban and peri-urban areas, a certain level of sensitivity and innovation is required to make sure that the urban poor are not left behind. Technology has emerged as a tool that may well be the best way to narrow the product and service gaps the poor have grown accustomed to.
Already, m-Banking and m-Health applications have become quite popular throughout India, as well as Africa, but the urban context provides a different set of challenges and opportunities that can be met with mobile technology. m.Paani showcases where and how such opportunities can arise. If more time, research and investment were made into translating commonplace services and programs into the urban poor context, there is no doubt that as empowered citizens they may find the best solutions that help them help themselves and their communities.