Graham Wright

Five Trust Issues That Are Undermining Mobile Money: Surprisingly, says MicroSave, fraud is not customers’ biggest concern

After years of preoccupation with overcoming the core challenges of establishing large-scale, sustainable digital finance (largely mobile money) systems in developing countries, we are seeing growing attention to consumer protection. It’s high time, too. But actually many of the key consumer protection issues relate to basic customer service – and they appear to be creating real problems for providers by undermining trust in their digital financial services (DFS), and thus reducing both uptake and usage. Let’s explore these issues in more depth:


To be honest, at MicroSave (where I’m the founder and managing director), our initial motivation to push consumer protection for DFS was a fear that a high-profile DFS provider would be subjected to widespread fraud at the agent or (even worse) the customer level, and that a regulatory clamp down, similar to what we saw in Andhra Pradesh, would follow. To date this does not seem to have happened, although this is not for want of fraudsters trying, and it still remains a distinct possibility. The only major DFS fraud that is in the public domain is the one committed by employees at MTN-Uganda, through which MTN lost $3.4 million in 2012. But industry insiders speak of many more such “inside jobs” that have been swept under the carpet.

But when MicroSave conducted a review of consumer concerns and issues in Bangladesh, the Philippines and Uganda for CGAP, fraud was not a major issue for DDS users in any of these markets – and it was only a relatively minor one in Uganda where fraud is so prevalent. Instead, DFS customers were above all concerned about service downtime, agent illiquidity, their fear of sending money to the wrong number, and the charging of unauthorised fees by agents.

These concerns have a significant negative impact on the customer experience, costing them money and, in some cases, increasing their exposure to frauds by agents. They also negatively impact customer registration and usage.

Service downtime

As with all systems, including those used to run ATMs across the globe, there are times when the service is unavailable for a while. This can be the result of systems being down or (where several institutions are involved) of one system being unable to get access to another to complete a transaction. Irrespective of the source of the problem, service downtime results in delays in effecting cash-in/cash-out transactions, which denies customers access to their own money, a serious problem for any financial service. Service downtime also leads to another important risk: Where people trust the agent, they leave their money with him to conduct the transaction as and when the network improves. This leaves scope for the agent not to complete the transaction when the network is back up. In India, MicroSave has seen at least one instance where an agent took cash deposits for four days, explaining that the system was down and he would complete the transaction as soon as it was back up again … before fleeing with in excess of $2,500.

Agent illiquidity

Agent illiquidity also has parallels in ATM systems – we have all stood, frustrated, in front of an ATM that has run out of cash to dispense. It is also common for DFS customers to run into agents without sufficient liquidity. As a result, customers are either denied transactions, and/or are required to visit multiple agents to send or receive money. While notably less common in Bangladesh, The Helix 2013 Uganda ANA report highlights that (on average) three transactions are denied each day per agent due to lack of float. This is equivalent to 10 percent of average daily transactions being denied across the country. In the Philippines, the problem manifests in the form of a large number of dormant agents without any liquidity at all. This causes problems for customers, who have to search for another agent and face delays in transactions. It is reported that by 2013 there were a total of 24,000 registered agents in the country; however, it is estimated that only 10,000 agents are active.

The fear of sending money to the wrong number

This fear is prevalent amongst DFS customers in both Uganda and Bangladesh. There is a clear understanding that money sent to the wrong recipient as a result of putting in the wrong number is rarely recovered from the lucky beneficiary. Indeed it is clear that this is one of the (many) drivers of the extensive market for over the counter (OTC) transactions, with all the negative implications for the long-term profitability of DFS and for financial inclusion. Agents are trusted to be able to effect the transactions accurately … and besides, the sender can call the recipient to confirm that they have received the money before handing their money to the agent.

Unauthorised fees

Charging unauthorised fees by agents is common across both Uganda and Bangladesh – especially for OTC transactions. There is a growing, but no means universal, acceptance that some agents will charge a bit extra to conduct transactions for their clients. In the Philippines, under their regulations, different agents are permitted to charge between 1-5 percent depending on their agreement with the service providers. This means that different agents charge different fees – typically according to how remote the agent’s location is. This gives rise to the relatively widespread perception that some agents are overcharging.

All these issues and concerns undermine customers’ trust in DFS systems. While customers are not being defrauded of enormous amounts of money, the perceived unreliability of systems, the uncertainty about whether agents will have the liquidity to conduct transactions, and the amount they will charge for doing so, as well as worries about whether money remitted might be lost, all reduce confidence.

Why these issues matter

Both Uganda and Bangladesh continue to see impressive growth in the number of mobile money users and transactions. But (according to the InterMedia surveys) only 29 percent of Ugandan and 3 percent of Bangladesh adults have a registered mobile money account – and not all of these are active. Driving registration, and then regular use, at scale remains one of the key challenges facing the rollout of digital financial services in Africa, Asia and Latin America. Trust is key to the uptake of any financial system and, because of its ground-breaking nature, this is particularly true for DFS. It is clear that there are immediate potential wins for DFS providers that address consumer protection issues.

In a recent study on the customer journey for UNCDF’s Mobile Money for the Poor (MM4P) in Uganda, MicroSave examined the barriers to non-users starting to use mobile money. Non-users in urban areas cited: 1) unstable network, 2) high tariff charges, and 3) unreliable customer care for issue resolution as their top 3 barriers. Rural non-users ranked: 1) unstable network, 2) unreliable customer care, and 3) lack of documents to fulfill know-your-customer requirements as their top three barriers. It is important to note that these barriers are cited by non-users as a result of word of mouth from users.

However, though addressing these issues is challenging for providers, assessing the cost-benefits of doing so should be a priority for them. Ultimately, it is essential that these issues are addressed before questions about accountability for, and ownership of, these risks become too persistent and pronounced, and regulators step in to enforce many of the existing laws, or add new ones.

Editor’s note: This post was originally published on MicroSave’s blog. It is cross-posted with permission.

Graham A.N. Wright founded MicroSave and is currently its group managing director.

digital payments, financial inclusion, mobile finance, regulations, research