Target Market Segmentation and Education: Comparing agriculture digital payments systems
In 2007, the same year that the pioneering M-Pesa in Kenya was launched, another, lesser-known digital payments system was started in Colombia.
In partnership with the Colombian Coffee Growers Federation, the Bank of Bogota launched Cedula, a smartcard digital payments initiative that was meant to be a digital channel through which the federation would pay its 574,000 coffee farmers for their beans.
A traditional agriculture cooperative, the federation provides agriculture extension services (knowledge transfer) and technical assistance as well as purchases coffee beans on behalf of its coffee farmers – the pride of Colombia’s agricultural economy. A key function of the federation – or any agriculture cooperative – is the transfer of knowledge to farmers about good agriculture practices in a wide range of areas, including better production quantity/quality, better post-harvest handling, agriculture marketing and much more. Within its scope as an agriculture cooperative, the federation sought to leverage the membership ID card of member farmers by partnering with the Bank of Bogota and converting it to the Cedula magnetic strip smartcard.
The federation deserves credit for its visionary pursuit of this digital payments mechanism that it initiated in 2007 – the same year that the pioneering M-Pesa in Kenya was launched without much notice. The Cedula was designed to mitigate the security risk of transporting cash in areas occupied by armed groups involved in the civil insurgency as well as address payment constraints due to the closure of rural bank branches in the aftermath of a local financial crisis. But the Cedula initiative – at least as originally conceived – failed for two main reasons: A lack of target market segmentation and the absence of farmer education about the features and benefits of the Cedula smartcard.
According to a Better Than Cash Alliance (BTCA) evidence paper, the federation-funded Cedula initiative would have died a natural death if not for the Colombian government’s fortuitous notice of the Cedula smartcard. The government used it as a channel to distribute $740 million in various government subsidies to farmers, in 5.3 million separate transactions, thereby saving $15.5 million (relative to cash disbursement). In December 2013, the federation relaunched the Cedula as a more modest mobile banking savings account as a preamble to eventually returning to the original goal of serving as a channel for payments to coffee farmers and shifting the rest of the value chain to digital.
I was recently invited to speak in Cartagena, Colombia, at the 10th International Regulatory Workshop titled “Digital Economy,” hosted by the Communications Regulation Commission (CRC). My task was to present the results of my “Mobile Payments: How Digital Finance is Transforming Agriculture” primary research in Uganda, Zambia and Ghana for my client, the Technical Center of Agricultural and Rural Cooperation (CTA). This was my first visit to Colombia, where my mother is from. So, with great care, I sought to frame my presentation by comparing and contrasting the research outcomes – the three steps for strategically inserting mobile money into an agriculture value chain – with the Colombian Coffee Growers Federation and Bank of Bogota’s Cedula smartcard digital payments initiative.
One of the outcomes of my research is the need for Cash Usage Behavioral Research (CUBeR), or target market segmentation, specific to understanding the patterns of daily life for farmers and others in rural communities. (This concept was first described in this NextBillion blog and, in my view, is a requisite for launching any product or service at the base of the pyramid.) In the case of the federation/Bank of Bogota Cedula smartcard digital payments initiative, the first time a farmer was interviewed or participated in a focus group was during the fourth quarter of 2013. And those sessions were conducted to inform the relaunch of the Cedula, seven years after the original launch in 2007! According to the BTCA evidence paper, “Not fully assessing the needs of farmers resulted in mismatched deployment of Cedula.”
Another outcome of my “Mobile Payments: How Digital Finance is Transforming Agriculture” research in Africa is the need to promote awareness of, and education about, the features and benefits of digital finance. Referred to in the research as Embedded Mobile Finance (EMoFi), this concept was also previously described in this NextBillion blog. EMoFi proposes that "agriculture digital finance" become another area of agriculture knowledge transfer, equal in importance to content about better production quality/quantity, post-harvest handling, cooperative formation and more. Those working in agriculture development are well aware that from country to country and from commodity to commodity there are government, private sector, donor, NGO and/or other infrastructures in place for transferring agriculture knowledge to farmers on an ongoing and continuous basis. In the case of the federation/Bank of Bogota Cedula initiative, there was no EMoFI in the sense that education was limited to the initial, and one-time-only, distribution of the smartcards by bank employees. According to the BTCA evidence paper, the relaunch of the Cedula emphasized the need for “information campaigns” and noted that “coffee growers need more training and information.” An EMoFI approach will address these concerns by, for example, training the federation’s 1,000-plus agriculture extension agents/agronomists on how to transfer knowledge about agriculture digital payments on an ongoing and continuous basis.
The success of agriculture digital payments initiatives relies on target market segmentation to inform the design of the overall ecosystem of agents, merchants and subscribers. Success will also depend on a systemic approach to promoting awareness of, and education about, the features and benefits of mobile finance to farmers which aligns with the recent "National e-Agriculture Strategies" policy brief by the UN’s FAO, CTA and others. Agriculture has such a complicated supply chain that any digital payments programs without the requisite target market segmentation and a robust education approach – that places farmers at the center of consideration – will likely fail. Agriculture is a time-consuming and risk-adverse profession, so it is essential for farmers to have a comprehensive awareness about the features and benefits of digital payments before they will consider adopting any new way of doing their business.
Kelly Ward, Corporate Partnerships manager at KaBOOM!, contributed to this article.