Guest Articles

June 2

Jacob Winiecki / Malika Anand

Four Lessons Utility Providers Can Learn from the Financial Inclusion Sector

Over 1 billion people live without reliable access to essential services like sanitation and potable water, clean cookstoves and electricity. Though almost 70% of the global population has a cellphone and nearly 9 in 10 individuals have an electricity connection, access to essential services remains a stubborn challenge, especially across Africa. As of 2018, 56% of Africans (573 million people) were living without modern energy, and 2 billion people currently lack access to a toilet worldwide.

At BFA Global, we understand the challenges these communities face because they are largely the same populations who have historically lacked access to financial services: They are low-income, remote and work informally. After decades of effort, the financial inclusion community has made great strides in expanding access to financial services among these individuals, increasing account ownership to over 69% of adults worldwide, as of 2017.

Today, we have the opportunity to take the innovations and lessons learned from financial inclusion and apply them to expand access to essential services, transforming the way underserved and remote communities access and pay for water, energy and other utilities, just as we did for financial services. In particular, utility providers can look to the financial services industry to learn how to:

  1. Understand underserved consumers and their unique financial lives.
  2. Develop financing and distribution channels to reach them.
  3. Create new tech-enabled products.
  4. Leverage tech to accelerate product development.

Below, we’ll explore these lessons in more detail.


Underserved customers need products that fit their unique financial lives

Over time, human-centered design and behavioral research methods have helped financial service providers to better understand their customers, and therefore, design solutions that meet their particular needs. This customer-centric approach drove innovations in group-lending, collateral-free loans and more recently, pay-as-you-go (PAYGo) financing.

These methods have revealed the degree to which underserved people face low, irregular and unpredictable incomes, which limit their ability to make use of services that require fixed, inflexible, calendar-driven payment schedules — either through post-paid utility service contracts or monthly asset loan installments. Such products were developed for salaried employees and do not work for people in the informal or agricultural sectors. Indeed, our experience with PAYGo services has illustrated that low-income people need and value flexibility with regards to payment schedules, channels and amounts to be repaid.

In addition to these specificities in payment structures, underserved people often use feature phones, have low digital literacy, and are easily put-off by interfaces that seem complicated or intimidating. They need processes and interfaces that are simple, easy, and build on their existing habits and access points. Establishing trust and comfort is also critical to scaling uptake and building usage and loyalty.

In designing utility services that match these needs, water and energy providers should think about:

  • Providing payment flexibility using technological advances in smart metering, remote lock-outs, digital payments, PAYGo techniques (see tips here), and predictive data analysis.
  • Designing a user experience for feature phone users and non-digital populations to ensure that services are appropriate and accessible, as well as affordable.
  • Embedding finance in existing payment and service relationships, so that utility payments feel intuitive and convenient instead of burdensome.
  • Bundling asset financing with fees-for-service, so that lump sums are broken down into more manageable chunks that customers can more easily pay.


Solving the last-mile distribution challenge is critical

Underserved populations are often remote and may not have access to transportation, so they need inexpensive ways to purchase and pay for services at their doorstep. Meeting these needs can be difficult and expensive. Geographic challenges have historically made serving remote customers financially unfeasible.

Financial service providers have tackled some part of this business model challenge through the use of agents. Agents are members of the community who can be trained to deliver last-mile activities, whether that involves explaining products, collecting payments or delivering reminders to customers. Since agents aren’t employed by the business and earn a commission for their services, delivering via agent networks is significantly more affordable for service providers. These agents can also be trained and equipped with apps to handle sales and customer engagement, as well as troubleshooting. Often, they serve as a sort of digital hub of the village or community where they operate, and can be entrusted with last-mile delivery for a wide range of services, as is the case with BFA Global’s Catalyst Fund startup Pesakit.

Aside from agents, financial service providers are also starting to drive down costs using data-driven prediction analyses, so that their interventions and products are better targeted to specific kinds of users and points in the customer journey. These analyses allow providers to minimize waste in their interventions, and to increase repayment, avoid customer churn and take action on predicted repayment patterns.

Beyond the digital payments systems and data-driven predictions noted above, technology has also vastly improved how providers collect, analyze and deploy data to supervise agents, improve products, target interventions and manage portfolios of clients.

Utility providers can take note of the business model innovations pioneered by financial service providers, particularly in the use of agents, by:

  • Deploying smartphones, apps and other digital tools for agents, to allow them to assess, onboard, serve and deliver services to end customers at the last mile.
  • Creating agent management and compensation policies that properly incentivize long-term loyalty and high service levels.
  • Designing credit risk management policies and processes to ensure portfolio health under an agent-driven model.
  • Collecting and analyzing data about customer payments and usage patterns to better tailor products and design offers.


Look to new technologies to develop new products

Technology has dramatically expanded access to finance through more efficient operations, but also through wholly re-imagined products such as index-based insurance, peer-to-peer lending and crowd-based platforms.

Essential services have similarly been transformed through more streamlined, intelligent and efficient operations, as well as access to digital payments and direct-to-consumer communication. However, there are many more technologies that can be developed or repurposed to create more value for underserved consumers by opening up new utility markets, and continuing to create opportunities for business model disruption.

For example, interoperable remote lockout technologies and PAYGo software platforms are making it possible to extend flexible financing to a wide range of services, including solar energy, cooking gas (LPG and biogas – as provided by Catalyst Fund company PayGo Energy, for example), and water. Integrating these technologies with digital payment options has created a channel for serving lower-income and more remote populations.

As new technologies are developed for water filtration, sustainable energy, sanitary latrines and other essential services, providers can integrate digital payment and financing methods to extend access to these services for underserved populations.

Utility providers can take note of the product innovations pioneered by financial services providers by:

  • Seeking out ways to adapt tech innovations for low-income, remote households.
  • Stacking value for end-consumers by distributing and financing additional equipment that extends the usability and “stickiness” of the service. In the case of essential service providers, these may include refrigerators, toilets or televisions.
  • Looking for advanced technologies such as remote sensing, Internet of Things and others, to continue improving product offerings and ways to finance them.


Advanced analytics and partnerships are key to developing the next generation of services

As providers have developed new financial products, they have also pioneered a tech-driven iteration and distribution process that more quickly achieves product market fit and reaches scale.

Fintech startups have paved the way for the use of advanced analytics and cloud-based data storage to create a runway for rapid product and user experience experimentation, accelerating the timeline to product-market fit for new products. These fintech startups have demonstrated how agile product development and data-driven decision making can accelerate the journey to product-market fit.

Once new products are introduced, advanced data collection and analytics as well as third-party data can allow providers to monitor, measure and customize products at a much more granular level. Data-driven decision making and operation methods can drive cost efficiencies and improve customer targeting.

Financial service providers have also used technology to more easily partner with incumbents and reach vast numbers of customers quickly. APIs, alternative data and Business-to-Business-to-Customer models are ways that essential service providers can build partnerships for scale.

In particular, distributed utility providers should explore opportunities to leverage financial sector technologies and experiences by:

  • Utilizing data-driven methods for lean product development.
  • Leveraging third-party data sources — i.e., satellite imagery, national credit reference data, mobile money and airtime use — to better target sales and installation, and improve credit risk management.
  • Partnering with incumbents to enhance credit risk management practices via APIs, to extend reach through payments aggregation, and to support customer repayment through utility-to-financial institution graduation models.


In all, the financial inclusion experience provides a number of lessons for essential services providers that are seeking to enter the digital age and reach the underserved. At Catalyst Fund, we believe there is incredible untapped potential for innovation at the nexus of fintech and micro-utilities. We look forward to supporting many more innovators in this space, capitalizing on lessons from the financial inclusion as well as the pay-as-you-go solar sectors.

Learn more about the Catalyst Fund fintech startups pioneering these business models, and about BFA Global’s work in the energy and water sectors.


Jacob Winiecki is a principal consultant at BFA.

Malika Anand is Head of Insights & Learning at BFA’s Catalyst Fund.


Photo courtesy of Russell Watkins / DFID.




Energy, Finance, WASH
data, energy access, financial inclusion, fintech