James Militzer

Mobile Money on the Move: Part Two of Our Interview With Carol Caruso, Senior Vice President, Channels and Technology at Accion

To truly appreciate the remarkable growth in global mobile connectivity, it can be helpful to take a look back. Here are a few eye-popping stats from the GSMA’s recent Mobile Economy 2014 report that show just how far we’ve come.

  • At the end of 2003, a little over one billion people had subscribed to a mobile service – that number had grown to 3.4 billion by the end of 2013, equivalent to almost half the global population.
  • The number of mobile broadband connections exploded from around 200 million in 2008 to well over two billion in 2013.
  • The number of smartphone owners has jumped from 237 million in 2008 to 1.85 billion in 2014 – and those numbers are projected to grow to almost 3 billion by 2017, by which time Africa will have more smartphone users than North America.

The mobile revolution has reshaped many sectors, but perhaps none has been more impacted than finance. We spoke recently with Carol Caruso, Senior Vice President of Accion’s Channels & Technology unit, about the shifting trends and future outlook of mobile finance (Accion is a NextBillion content partner). In part one of our interview, she spoke about Accion’s efforts to help technology companies and traditional financial institutions leverage mobile technology to reach base of the pyramid clients. In part two, below, she discusses how to maximize the effectiveness of telco/bank collaborations and cash-in/cash-out agent networks, the importance of a highly developed digital ecosystem, and how the sector is likely to change in the next ten years.

James Militzer: Accion works with both mobile network operators (MNOs) and financial institutions, to help them collaborate on mobile financial services delivery. Do your bank clients often find themselves in competition with your MNO clients, and is that a factor in determining which groups should partner with each other?

Carol Caruso: Not often, but we do predict this will absolutely change. If an MNO partner is providing financial services, it’s a matter of looking at the offering; the customer need it addresses, the product, terms, costs and conditions. Is it perhaps a short-term consumer lending loan? Or a bundled offering that may include savings or insurance? Are they targeting the same type of customer? Understanding how and if those products could actually be complementary to a financial institution relationship is key. A product like M-Shwari could be seen as competitive but may also become complimentary if clients seek additional types of savings and credit products that a financial institution may offer. Partnering with an MNO to leverage their strengths isn’t necessarily affected by potentially similar offerings.

We also work with MNOs, so we know that when it comes to the roles between MNOs and financial institutions, there is room for greater collaboration. MNOs could collaborate with financial institutions to support liquidity management or provide agent and merchant financing for e-float or working capital. Financial institutions can also be good partners to support super agents. Hence you can find and promote some basic synergies. When it comes to providing digital financial services, MNOs could perhaps leverage the experience of financial institutions, which clearly have the expertise in delivering financial services. Additionally, they also understand client needs and behavior, especially when it comes to credit – qualifying for credit, being credit worthy and the capacity to repay. They know how to design products. This is usually foreign territory for many MNOs.

JM: Could you talk a bit about other best practices you’ve observed in managing agent networks?

CC: We’ve worked with some partners to roll out new networks as well as diagnose and improve existing ones. Although there are no silver bullets, there are certainly some very good and best practices we have learned and continue to learn. One is tapping into clients of financial institutions to become potential agents or merchants, as mentioned earlier regarding Finamerica. Also, since agents are often merchants, helping them run their businesses by offering access to working capital for liquidity management as well as other SME business services may provide incentives to become quality agents. Financial institutions can provide this type of financing, and companies like Zoona and Kopo Kopo that Accion has invested in, through its Frontier and Venture Lab activities, provide these types of value-added services.

Another good practice is investing in liquidity management, education, monitoring and tools -helping agents understand how to best manage their liquidity and e-float, but also providing different tools for them. It’s a challenging issue on our projects – an Intermedia survey found that agents turning clients away due to ‘float issues’ was the 3rd biggest issue after agent system and network outage problems. Digital tools can improve these common issues, such as helping an aggregator monitor float status and positioning of an agent’s till, and then rebalance for them or increase their maximum balance, so they won’t turn clients away. Manual methods are also helpful, like offering a cash transfer service so agents don’t have to leave their shop and go to a bank.

It’s more often, however, a behavioral issue than a system issue. So supporting those that truly have float balancing challenges and also understanding the reasons why some agents say they have no float, even if they do, is critical to understand, as this highly affects service adoption.

Another critical practice for managing agent networks is making sure that the value proposition is well calculated. If there’s not a value add and a return on investment for an agent, they don’t want to offer these services. If they make more margin off a quick sale of a liter of milk, they’d rather spend time doing that than servicing sometimes tedious mobile money transactions. Taking the time to make sure there’s a value for the agent is essential. We also always recommend crafting a clear set of indicators to track agent inactivity, procedures to uncover and address issues when possible, and then a sensible plan for agent termination to avoid having too many agents that provide poor quality service or pose customer risks.

JM: What will cash-in/cash-out involve if we look 10-20 years in the future?

CC: Surely we’ll see many new actors in digital payments for emerging markets, and it’s plausible that we’re going to have less reliance on agents, because we’re likely to have a myriad of digital services, and those affecting everyday needs will drive adoption. So if you receive regular electronic payments into your e-wallet, and you can efficiently use it to buy goods, or pay for services like utilities or education fees, or reimburse a loan or medical expenses, you’ll be more inclined to continue sending your money electronically. If you have those opportunities and services available, then you need an agent less. However over-the-counter transactions at agents will most likely continue to play an important role – albeit smaller – as there will be people who may never feel comfortable transacting through the mobile fully or at all.

Also by then, more smartphones will be around so when one needs to withdraw or deposit cash – and that will be much rarer than today – we’ll see folks using agents more efficiently; customers will walk up to a machine or a person, scan their phone with the agent or touch it to a device terminal for authentication and then perform their transaction. Base of the pyramid clients will also regularly use ‘one-time passwords’ at device terminals linked to their mobile wallet to cash in, cash out or transfer to their e-wallet. The penetration of innovative technologies will drive transaction simplicity.

JM: Do you think all the talk, research and advocacy around improving agent networks would be better spent in trying to develop more of an ecosystem of vendors that accept digital payments instead, making cash-in/cash-out less necessary?

CC: That’s a good question, yet right now, due to the nascent state of mobile money from a system development, human adoption and cultural perspective, people still want to use cash. So the role of agents remains essential within the ecosystem, especially for bringing full financial services – savings, credit, payments – to the masses. Having a highly developed digital ecosystem is welcome. However, if there is no easy, secure way for cash to enter or leave people’s accounts, at a point of service close to them (rather than having to travel several miles to a branch or ATM) the service fails. Think of a scenario where people are given pre-paid cards and merchants have POS terminals, yet if there is no easy way to top-up the pre-paid card or allow flexibility to withdraw funds from the card, its use becomes rather limited. As such, we need to invest even more in building out quality agent networks efficiently – in order to secure the future of the digital ecosystem. Simultaneously, there is certainly tremendous market opportunity to build up merchant services, building-out digital payment acceptance, for example – agents are also often merchants – expanding the variety of payment options and looking at digitizing B2B transactions, such as distributor and supplier payments.

James Militzer is the editor of NextBillion Financial Innovation.

digital payments, financial inclusion, interviews, mobile finance