Enabling the community to embrace digital payments as the new normal after the COVID-19 pandemic

Posted on by MSC

“I thought that mobile money is only used to receive and send money. I can now pay electricity bill, make merchant payment, and even pay my vegetable vendor using mobile money. I see many in my neighborhood use mobile to transact. COVID has taught us many things.” says Kabita, a mother and a MFS user from Bangladesh.

Kabita is 26 years old and a mother of an 8-year-old girl. She graduated from Dhaka University and lives in Louhajong with her in-laws. Her husband Karim works in Saudi Arabia and often sends a significant portion of his earnings to his family as inward remittance, which Kabita withdraws through a local bank branch. Kabita has no trouble receiving the remittance.

Kabita uses a smartphone and is an active Facebook user. She came across bKash, a leading mobile financial service (MFS) provider of Bangladesh, six years ago while exploring easier ways to receive money from her family to pay the university fees. “I downloaded the bKash application on my smartphone earlier this year. It is easy to navigate and I no longer have to visit the local market for airtime recharge,” says Kabita.

Born and brought up in the vicinity, Kabita is well known among her neighbors. Women come to her to seek advice and learn how to operate a smartphone or a basic phone, in some cases. They often request her for an airtime recharge using the application. Kabita has become an influencer in her community.

Despite being an advanced smartphone user, she remains oblivious of other mobile financial service providers in Bangladesh. For over a year, Kabita has been receiving quarterly government stipend under the Primary Education Stipend Program (PESP) for her daughter’s education through SureCash, another MFS provider. However, when asked about other service offerings of the MFS provider, Kabita was unable to respond. She says, “I am comfortable using one provider and do not know much about others. I do not need to look into any other providers since they offer similar services.”

Unfolding the impact of the pandemic

With the onset of COVID-19 and restricted mobility due to subsequent lockdowns in Q2 2020 in Bangladesh, Kabita’s life has transformed completely. The government asked people to stay at home at all times, except to purchase essentials, such as food and medicine. Kabita never thought her recent rendezvous with a digital wallet app would become a necessity and a way of life. Digital payments helped her manage her household during the pandemic. Kabita could pay electricity bills, make merchant payments, pay her regular vegetable vendor digitally, and also receive government benefits. Online payments of utility bills, such as electricity bills saw a rise from 5% to 60% during the lockdown in Bangladesh.

Kabita says, “The pandemic changed people’s reliance on cash payments. Many of my neighbors resorted to direct money transfers (P2P) as they could not collect the cash physically. Having a bank account with adequate savings helped me during the pandemic.” With the government’s push toward digital payments and growing concern over cash as a potential vector of COVID-19, people in her community started to appreciate the safety and convenience of digital payments.

Kabita appreciates the various initiatives of the government, such as the digital payments of salaries of ready-made garment (RMG) factory workers, advance disbursement of government benefits, and distribution of COVID-19 relief to 5 million new households. She says many in her community received these benefits through their MFS and bank accounts. This support helped their community build resilience to fight the COVID-19 pandemic. Kabita feels that mobile money is a promising avenue for communities, with the potential to make transactions quicker, cheaper, and safer in the current unprecedented times.

With time, more people prefer to purchase products online and make cashless payments to avoid health risks. Kabita claims this trend further accelerated during the festive season of Eid-ul Azha from June to July, 2020. Merchant payments shot up dramatically by over 400% in July, 2020 over April, 2020.

Key takeaways

While agent and merchant networks continue to grow in Bangladesh, providers must offer a good value proposition to customers like Kabita to sustain this rapid progress in digital payments. The providers also need to align their product offerings, such as digital savings, credit, and insurance, among others, to the needs of the low- and moderate-income (LMI) segment. They may also consider a new category of mobile agents to encourage customers. These mobile agents can encourage the adoption of digital payments and help more customers, especially women, adopt and appreciate their service offerings.

MicroSave Consulting (MSC), with support from MetLife Foundation, has been implementing the i3 Program in Bangladesh and Vietnam since 2018. The i3 Program, which stands for “Innovate, Implement and Impact,” works to utilize digital technology and uncover deep insights into the needs, aspirations, and behaviors of low and moderate-income (LMI) people to build and deliver financial services for the mass market. MSC has been working with frontrunners in financial services, from banks to FinTechs and wallet providers to governments, to help LMI segments move toward better financial health by supporting customers like Kabita through demand- and supply-side interventions. We look forward to continued dialogue, learning, and supporting financial inclusion in Bangladesh. Stay tuned for more updates on www.i3program.org

 

 

Enabling the community to overcome the pandemic through digital payments

Posted on by MSC

“We are at the beginning of a change. The pandemic has jolted us out of what was familiar till now and made us value safety, hygiene, and convenience in our daily lives. More people are now willing to try out digital payments than before. I am simply helping my community to embrace this change,” says Duong Thi Thuy, a mobile money agent in the Quang Ninh province.

Thuy runs a small grocery shop with her mother in Quang Ninh, a coastal province in north-eastern Vietnam. Once she completed high school, Thuy wanted to pursue language studies at the local university. However, in light of her mother’s poor health, Thuy took charge of the shop. The mother-daughter duo manages one of the oldest shops in the community. They serve nearly 100 customers of all ages and backgrounds each day.

“The customers at my shop usually make cash payments, and even my suppliers prefer cash over bank transfers. While I have a bank account for savings, I still have to keep enough cash at hand,” says Thuy.

Thuy considers herself “tech-savvy” and likes to try out new technology. After learning about mobile money services from a friend, she quickly signed up as an agent for a leading local mobile money operator in March, 2019.

Mapping Thuy’s journey as a mobile money agent

When asked about her journey as a mobile money agent, Thuy revealed that she did not receive any formal training on mobile money and her role as an agent. She says, “The sales staff from the mobile money operator only provided basic instructions on how to use the agent app. I learned how to navigate the app mostly by myself. Initially, it was difficult for me, and I made some mistakes.”

Before Thuy started as a mobile money agent, her community was not aware of mobile money services. The new signage about the mobile money service at her shop piqued the curiosity of some regular customers, especially the younger ones. Thuy encouraged her customers to download and try out the mobile money app. She notes, “Most of my customers were apprehensive about the app as they did not know how to use it. Initially, I had to help a customer every time they wanted to conduct a transaction. Many times, I was busy with regular work in the shop, and a customer had to wait for my help to carry out a simple mobile money transaction.”

Thuy adds, “I help customers conduct cash-in and cash-out transactions. I have a daily customer footfall of around 20 to 50. Some of the services I offer include cash-in, cash-out, and bill payments. I earn about VND 3,000-5,000 (USD 0.13-0.22) per bill payment. Most customers come to me for postpaid telecom payments or payments of utility (water or electricity) bills.”

Unfolding the impact of the pandemic

The onset of the COVID-19 pandemic saw restricted mobility due to lockdowns since Tết, the Vietnamese New Year. People were instructed to stay at home unless they had to buy food and medicine. Businesses were closed, public transport was suspended, and the government prohibited public gatherings. This had a debilitating impact on the businesses of micro-merchants like Thuy due to a drop in demand as well as revenues. The pandemic forced 50% of such women-led enterprises to temporarily suspend operations or completely stop or reduce business operations.

Digital payments helped Thuy keep her business up and running in times of crisis. She says, “The pandemic changed people’s reliance on cash payments. Many suppliers resorted to bank transfers and mobile money payments as they could not collect the cash physically. Having a bank account with adequate savings helped me during the pandemic.”

With the growing concern over cash as a potential vector of COVID-19, people in her community started to appreciate the safety and convenience of digital payments.

Thuy says, “Local shops provide more than just goods. These shops and markets are vibrant community hubs as many families have shopped here for generations. Over the last three months, I have helped many people in my community try out the mobile money app. The pandemic has boosted their confidence in trying out new methods of payments.”

New users value and demand human interaction, given a lack of trust and confidence in technology-based, self-initiated transactions. Agents like Thuy offer a conduit to electronic payments and transfers to build consumers’ trust in digital financial services. “These days, some of my customers have started to transact on their own. Some of them still need support to load money in their wallets, especially during a promotional period. However, most of my customers prefer over-the-counter service,” says Thuy.

Key takeaways

Thuy believes mobile money is a promising avenue for communities like hers. She feels it can make transactions quicker, cheaper, and safer, especially during unprecedented times like the current pandemic. However, mobile money operators need to make a dedicated effort to support agents like Thuy.

“With time, more people will get familiar with mobile money services and conduct transactions on their own. However, mobile money operators need to invest more in training and provide better support to their agents. They also need to think along the lines of educating customers while making the app easier to navigate and use,” says Thuy.

While agent networks continue to grow in Vietnam, they are nowhere near the density of some of the matured markets, such as Bangladesh. Developing a broader and better-equipped agent network is critical to reach and onboard more customers onto digital financial service platforms. As Thuy’s story demonstrates, providers can handhold their agents to deepen the usage of DFS. Such interventions will help them reach a critical mass of DFS users, initially through assistance and eventually to the desired state where most of them can conduct self-initiated transactions.

MicroSave Consulting (MSC), with support from MetLife Foundation, has been implementing the i3 Program in Bangladesh and Vietnam since 2018. The i3 Program, which stands for “Innovate, Implement and Impact,” works to utilize digital technology and uncover deep insights into the needs, aspirations, and behaviors of low and moderate-income (LMI) people to build and deliver financial services for the mass market. MSC has been working with frontrunners in financial services, from banks to FinTechs and wallet providers to governments, to help LMI segments move toward better financial health by supporting mobile money agents like Thuy through demand- and supply-side interventions. We look forward to continued dialogue, learning, and supporting financial inclusion in Vietnam. Stay tuned for more updates on www.i3program.org.

Existing KYC practices in Indonesia and opportunities for implementing e-KYC to accelerate financial inclusion

Posted on by MSC

The study provides insights into the challenges, time, and costs involved in the KYC processes of service providers. It also outlines policy recommendations to promote a public infrastructure for e-KYC to accelerate digital inclusion.

Impact of the COVID-19 pandemic on MSMEs

Posted on by MSC

Relaxations in the large-scale social restrictions (PSSB) in July and August have marginally revived the revenues for the MSME sector while easing the pressure on supply chains. Although the government announced support measures, the overall realization of these programs continues to be low due to issues around identification and targeting. In this report, we present the impact of the pandemic on MSMEs and provide policy recommendations to address the current situation.

Read the report for the first round here.

 

What impact does social distancing have on global remittances?

Posted on by MSC

When the coronavirus epidemic first appeared in China in December 2019, no one thought that by March 2020, the world and many of its economic activities would be at a standstill. The measures brought in to fight the epidemic, turned pandemic, brought certain activities to a halt, forcing many businesses to close. Money transfer outlets feature among the long list of closures, handicapping people used to cash-to-cash transactions. Such measures have disrupted people’s habits and left many migrants and their families without bearings. Remittance flows have shown significant growth in recent years, reaching $554 billion worldwide in 2019 and accounting for more than foreign direct investment or development aid in low-income countries. With the COVID-19 pandemic, global remittances are projected to decline by about 20 percent in 2020.

To what extent do digital channels provide attractive alternatives and opportunities for partnerships between money transfer services, governments and FinTechs?

“As part of my activities, I often received money from Africa via the usual money transfer companies (MoneyGram and Western Union). During the health crisis period brought about by COVID-19, it was no longer possible for me to make cash-out transactions. The lockdown implemented in France limited outings to essential activities. Thanks to a friend, I discovered the company Small World, which allowed me to receive money from Africa directly into my bank account with relatively low fees in less than three days,” says Mylène, a business owner who lives in Paris, France, with businesses in Abidjan, Côte d’Ivoire.

Some alternatives to cash-to-cash transactions already exist:

  • Cash-to-account transfers: a minimum of 48 working hours is required. Western Union (WU), Small World (SW), RIA, MoneyGram all offer this service.
  • Card-to-card transfers: only possible between cards of the same nature, but the transaction limits are low. The WAEMU GIM’s Baraka prepaid platform allows transfers of up to 100,000 FCFA a day.
  • Transfers to mobile money accounts: partnerships with mobile money operators have made this option possible. This is the case of RIA and Orange Money in Senegal with the Kalpé offer for example.
  • Money transfer applications and products developed by banks: Rapidtransfer, BOA Express, Oryx, and SC Mobile, for example.
  • Money transfer service websites and applications: WU, SW, worldremit, Taptap Send, RIA and MoneyGram offer transaction options, especially for western residents

Challenges faced by customers and money transfer services

Cash point closures imposed by lockdown measures have forced money transfer customers to look for alternatives – including digital alternatives – which they are not familiar with. Moreover, concerns relating to cybercrime, appeal challenges and the complexity of certain customer processes, do not argue in favor of using new channels.

Ali, a money transfer user in Dakar, explains that he faced difficulties installing and using one of the money transfer operators’ applications, which led him to disable the application and settle for cash transactions.

Money transfer service providers do not communicate enough with their customers regarding these new channels, except for WU. Some services, such as cash-to-account transfers, are not available in every outlet and recipients do not always have an account.

Remittances via online platforms continue from the West to countries where cash withdrawals and mobile money cash-outs are still possible. However, current limitations (market closures, curfews, etc.) affecting informal activities, which account for about 55% of GDP in Sub-Saharan African, due to the evolution of COVID-19 cases in Africa, are likely to continue weakening economic activities. This may result in liquidity issues at mobile money agent outlets, for example. Customers, keen to limit any travel, are also increasingly looking for local solutions, recommended by friends and family.

Not all remitters have stable and formal jobs; the measures imposed by the COVID-19 epidemic have had a severe impact on migrant workers, forcing many to suspend their activities, sometimes without any compensation. Without income, these workers are unable to continue to support their families, with significant consequences given the impact and the role such support provides (health, education, investments, etc.). “My sister, a babysitter in France, used to send me 100 euros per month for the rent. Since the beginning of the lockdown and the suspension of her contract, she is no longer receiving enough income and is not able to send me the 100 euros in time. As a result, I have had to turn to friends or family members in Congo, which is not without consequences,” explains Ester, a Congolese student in Dakar. Maintaining money transfer operations is key; digital platforms provide an opportunity to ensure service continuity with limited disruptions, through strategic partnerships.

Some measures taken to support money transfers, in relation to COVID-19

Little has been done to adapt money transfer offers to COVID-19 realities. RIA, for example, recommends that their clients use its location platform, which is regularly updated, to find transaction outlets, or else to go to outlets providing cash-to-account services. Western Union makes the same recommendations with the addition of their wu.com application.

To limit cash circulation, some companies such as MTN in Guinea have waived some money transfer fees. The BCEAO has adopted seven measures to promote digital payments, including making certain transfers free of charge, eliminating and reducing merchant fees, and raising balance limits on electronic wallets.

What is the impact on the economies of Sub-Sahara Africa?

According to a World Bank report published at the end of April 2020, a 23.1 percent decline in remittances to Sub-Saharan Africa is expected in 2020. While it would be felt globally, the impact of such a decline would hit the weakest economies hardest. A study by MSC assessing the impact of COVID-19 on FinTechs, shows that regardless of their size, experience or sector, FinTech companies and mobile money operators have been affected by the crisis and have seen their activities slow down.

In this context, where remittances represent a significant share of GDP, it is important to ensure that money transfer outlets remain open and that the needs of the most vulnerable that depend on them are met. There is an opportunity to expand digital service offerings to ensure they can adapt to current constraints. What role do regulators, governments, but also the private sector, FinTechs, start-ups, banks and mobile money operators have to play in the promotion of digital innovation with regards to money transfers? How can financial literacy and digital adoption rates be increased to ensure the most vulnerable are not excluded in this period where contactless is the new norm? What measure have been taken at the sub-regional level? Can digital technology save the 20 million jobs at risk, as forecasted in a study by the African Union? These are some of the questions we will seek to answer in our next blog. Keep an eye on our website for more!