In a previous blog, we highlighted a couple of the key elements that go towards fulfilling the goal of digital financial inclusion which is defined as digital access to and use of formal financial services by excluded and underserved populations. Such services should be suited to the customers’ needs and delivered responsibly, at a cost both affordable to customers and sustainable for providers.’. These elements – leveraging the unique capabilities of mobile phones and designing products that align with customer incentives – were captured by some very successful digital financial services companies in East Africa: mShwari and Kopo Kopo . As a follow-up to that blog, we want to continue in the same vein and highlight more companies that have captured other elements of effective, successful products that promote digital financial inclusion.

Frontline Post Pakistan Rocks with 186 Billion Mobile Messages

INCORPORATING CHARACTERISTICS OF THE INFORMAL ECONOMY

Research of financial transactions within the BOP segment has revealed that cash is viewed as convenient and secure when compared to digital payments. This should lead providers to ask themselves how they can develop products and services that match customers’ perceptions of cash transactions. Imposing a top-down perspective based on insights from years of servicing customers of traditional banks can lead to frustration with mobile wallets and therefore be a possible reason for low uptake. An example of an initiative that takes into account current customer norms and behaviors is the result of a collaboration between Airtel Uganda and Grameen Foundation: Airtel Weza.

Airtel Weza was designed around informal women’s savings groups in Uganda and leverages the best aspects of social savings groups while also overcoming some of the drawbacks associated with such groups such as lack of security, convenience, and transparency. The recent FII survey showed that 33% of Pakistanis who save do so via a ROSCA and that women prefer it as a method of savings over men almost 2 to 1. However only 3% of women in Pakistan have any type of formal bank account, demonstrating latent demand. A product like Airtel Weza, that incorporates characteristics of already existing informal savings methods among women, could go a long way towards catalyzing mobile money usage in a particularly underbanked segment of the population in Pakistan. The initiative is in early stages but there is a possibility of linking the group mobile wallet account to a line of credit with a bank.

USE CASES BUT NO AWARENESS

Apart from the supply-side issue of a lack of compelling financial products and services, part of the blame for low mobile wallet uptake can be assigned to consumers who do not always fully understand the spectrum of digital financial services that exists: only 6% of customers think that they can save with mobile money products.

One start-up that first educates customers about savings and then encourages them to save is InVenture. By leveraging the data they gather from tracking customers’ financial transactions via text or IVR, InVenture creates a financial profile for a segment of the population that is usually ignored by traditional financial institutions. This financial profile is used to nudge customers towards better savings habits. Moreover, by making these profiles available to financial institutions for a price, InVenture has built sustainability into a product that also promotes financial inclusion goals. In Pakistan, 32% of respondents of the Global Findex said that they saved at all and only 9.3% of those said they saved at a formal financial institution. If almost 29% of Pakistanis save informally but so few realize that they can save via a formal product such as the mobile wallet, there is an opportunity for such a service in this market.

CONCLUSION

Both Airtel Weza and InVenture are examples of companies that have managed to innovate within the digital financial services space. The former resulted from collaboration between organizations with a commercial agenda and those with socially-oriented goals while the latter has attracted venture capital. Nevertheless, both have managed to promote financial inclusion goals while building sustainable business models. It is early days yet for both initiatives, however we look forward to monitoring their progress to see what lessons we can pull for the local market as we develop similar models that can catalyze the Pakistan mobile money market in a positive direction.