As one of the pioneers of mobile money (cutting my teeth on the initial service proposition and business model for M-PESA, way back in 2004, three years before commercial launch), I’m always naturally inclined to see its potential in a positive light. But I’m starting to wonder if maybe we need to give it a bit of a nudge – realign it, if you will.
One of the more interesting phenomena we’ve seen in recent years is the rise of Over The Counter (OTC) transactions – those transactions carried out by agents on a customer’s behalf, in many cases without any link to the real people relating to a transaction. We’ve seen cases where agents maintain four or five mobile money accounts, on different phones, so that they can spread their customers’ transactions across accounts and so avoid transaction limits.
The reasons for OTC can be various, but certainly include illiteracy, lack of appropriate language support on mobile handsets, and – fairly commonly – liability (after all, if things are going to go wrong, you want someone else to blame, don’t you?). But the obvious potential for money laundering means that this situation can be a financial regulator’s nightmare.
Of course, it doesn’t have to be this way, and there are examples of it being done properly, with even in some cases biometric authentication of all parties to an OTC transaction. Worldwide, however, this is rare.
But I digress. What I really wanted to talk about was the somewhat self-congratulatory attitude we in the industry are all guilty of at some time – after all, an industry that has grown from nothing to something more than 270 services in over 90 countries in only fifteen years is undeniably impressive. But I do wonder if we’re all kidding ourselves sometimes. I mean, sure, for the middle classes, and for many of the employed poor, it has been an amazing opportunity, and has transformed access to financial services. But there are gaps – possibly some big gaps.
As an example, I’d like to relate a recent experience. First, you have to understand that I believe you can’t develop anything new without spending time with the people who are going to be using it; so I like to go out to the field, and see what people are actually doing, not what the research tells me. Just sit and watch, and ask the occasional question. It can be very educational.
So we were working with this mobile money operator (MMO), who has a deal with an MFI for the delivery of MFI services through MM. On paper, it all looks very good, plenty of transactions, lots of people receiving loans and making repayments, all through MM. I was very keen to go to a group meeting and find out what the customers thought, how they used it, what else they did – the usual.
We turned up at the meeting, and the first thing that was happening was training from the field officer. Great. But there was a surprise in store; the training included the following advice about security: “Always keep your PIN secret. Never tell anybody. EXCEPT the Agent – you should whisper it quietly into his ear” – uh oh. The alarm bells started to ring.
And then the Agent turned up. At this point the field officer started to gather repayments, in the traditional way for group lending – laboriously entering everyone’s name into a list, checking that they have the cash to make the repayment, noting down the repayment amount, all at a glacial pace (now this is one area where investment in IT could make an immediate impact) – and then the mobile money part started. Each person making a repayment took their phone and their cash, one by one, to the Agent – who took their phone, ‘deposited’ the cash for them, then forwarded the repayment to the MFI.
There were also three loan disbursements that day, and the process was much the same: hand your phone to the Agent, whisper your PIN to him, walk away with a wad of cash.
All of these people at the group meeting are in the MMO’s books as active mobile money subscribers. So I have to ask: in what way are these people mobile money subscribers? How is this empowerment? All that I can see is that the MFI has outsourced their cash management problems to the Agent, who walks the streets with a bag full of cash. Glad that’s not me.
So there are clearly a large number of people, down towards the bottom of the pyramid, for whom the step from a pure cash environment to being asked to use a mobile money wallet or account to manage their finances is just too big. Expecting people who’ve never had a bank account to make the conceptual leap from paper cash to mobile finance in one step is asking too much. Without help many of them will never do it.
Maybe the way forward is to make the steps a little more manageable. Introduce an intermediate step. And I think the way to do that is to embrace OTC, but to do it in a way that formalises it and addresses the concerns of the regulatory authorities: give this section of customers a card, which identifies their account. Maybe secure it with biometrics, if you want. Let them visit an agent, and get the agent to do the transactions for them, but now with all transactions linked to the card/the account. Link it to their mobile phone, so that the more adventurous can see their balance via the MM service. Make sure they’re comfortable with this, and make sure there’s a migration path that leads to the full MM service over time.
After all, this is the long term migration path we’ve seen in Europe over the course of decades; the move from cash, to bank accounts, to debit and credit cards, to Internet banking and mobile payments has happened, of course; but with each step taking years or even decades. Expecting people immersed in a world of cash to make the leap in a matter of days or weeks is just unrealistic. Why should they be any different?
Footnote: Yes, the author is well aware of Safaricom’s moves to issue a companion card for the use of M-PESA for retail transactions. That’s somewhat different to the case described here, though in itself interesting.