Expanding Access to Finance through Mobile Payments. Lessons Learned for MFI-Mobile Network Operator Partnerships

Transcription

1 Expanding Access to Finance through Mobie Payments Lessons Learned for MFI-Mobie Network Operator Partnerships June 2015

2 Introduction Over the past year, as FINCA has engaged in a partnership with The MasterCard Foundation to significanty scae up our outreach to cients through the depoyment of new deivery channes, we have earned some important best practices about partnering with MNOs and impementing mobie payments, which we hope are usefu to the broader microfinance industry. Since 2013, FINCA Tanzania has been in a partnership with Vodacom, the argest mobie network operator (MNO) in the country. Through the FINCA-Vodacom partnership, FINCA customers can now use Vodacom s mobie waet patform, M-PESA, to make transactions to a FINCA account for both oan instaments and savings. This arrangement enabes FINCA customers to transact directy from their e-waet, saving them significant trave and other transactiona costs typica of microfinance operations. One year into the partnership, 28% of the tota vaue of deposits and 34% of the tota number of transactions were being remitted through M-PESA, and FINCA Tanzania represents the fifth argest source of transactiona voume for Vodacom in Tanzania. Benefits of Mobie Banking for Cients Saves Time Transactions from Anywhere Lower Costs 2

3 This case study shares essons earned from FINCA Tanzania s partnership with Vodacom. It is hoped that it wi provide vauabe information for other microfinance institutions (MFIs) seeking to create a partnership with an MNO to introduce digita finance to their customers. The Seven Lessons for Success 1 Conduct an institutiona assessment and sign a Service Leve Agreement before engaging in a partnership 2 Ensure business ownership of the deivery channe right from the start 3 Piot before commercia aunch 4 Do not force od manua microfinance processes into a modern eectronic payment structure 5 Conduct continuous risk anaysis 6 Incude a customer awareness and education campaign 7 Institutions must be ready to change how they interact with customers 3

4 Lesson #1: Conduct an institutiona assessment and sign a Service Leve Agreement before engaging in a partnership MFIs are often at a negotiation disadvantage when it comes to partnering with MNOs, given the sheer size of MNOs as we as their market power. MFIs may come under pressure to bend to the demands of the MNO, which may dictate how the reationship unfods and offer sub-standard quaity services that can expose the MFI to operationa and reputationa risks, shoud the channe not deiver on customer expectations. An institutiona assessment shoud be done prior to impementing a mobie payments channe, in order to aow both parties to devise appropriate methods of engagement to ensure a win-win reationship without having one party dictate the terms of the partnership. Some important areas the assessment shoud cover are: Strategy Aignment: Does the MFI s strategy aign with the MNO s commercia objectives? Organizationa cuture and vaues: An MFI s organizationa cuture can confict with that of an MNO, which is typicay much more profit and commerciay driven. How might this affect the partnership? System compatibiity: Can the systems of the two organizations interface and tak with each other? Is the MFI going directy through the MNO, or through an aggregator? What additiona investments are needed, and who wi pay for them? Reationship management: Who is managing the reationship at the MFI and at the MNO? At which eve of the organization shoud that individua be, and from which business unit (e.g. IT, commercia, etc.)? Customer support: Who is taking care of which areas when it comes to customer support? The customer is not ony a customer with the MFI, but aso with the MNO. Once the assessment has been competed, the MNO and the MFI shoud enter into a Service Leve Agreement (SLA) that outines the terms of their partnership before aunching the channe. The SLA shoud stipuate the expectations with regards to the services provided and the consequences for both parties in case of non deivery to the agreed service eve standards. Furthermore, the two parties shoud estabish a working committee to address any risks and issues that are identified from the assessment, so as to ensure a smooth impementation. When FINCA Tanzania entered into partnership with Vodacom, discussions focused primariy on the systems compatibiity, and not enough attention was paid to service and reationship management. In fact, FINCA and Vodacom did not sign an SLA prior to the aunch of the channe. As a resut, FINCA found itsef deaing with various departments within Vodacom as issues arose, 4

5 resuting in confusion and inconsistency among both partners on how operations were carried out, which caused deays in impementation and roout. Eventuay FINCA and Vodacom agreed to estabish a singe point of contact on both sides and signed an SLA, which ceary aid out how the reationship management woud be handed, as we as the expectations with regards to the services. This greaty improved the responsiveness and fow of information between the partners. A FINCA cient making a transaction on her phone 5

6 Lesson #2: Ensure business ownership of the deivery channe right from the start Mobie payments and any other deivery channe depoyment wi usuay start off as a project to drive the initia set-up, technica support and piot testing. At FINCA we have earned that a new channe ike mobie payments can be started up as a project, but even then, the business unit namey the Chief Operating Officer and the Head of Retai Banking must drive its deveopment and impementation. This is because successfu saes and uptake of these new services are organized out of the branches, and the branches are under direct contro of the business unit. FINCA initiay started the project with its back office staff, but since they do not have direct contro over branches and thus cannot set key performance indicators and directives, initia uptake was ow. Therefore, it is critica that the business unit fuy embrace the new channe right from the start and take ownership of it, with IT and operations taking on a support roe. Lesson #3: Piot before commercia aunch Like most other technoogicay-driven soutions, mobie payments have a significant impact on the MFI s operations. Extensive testing is required to iron out as many technica and functiona gitches as possibe prior to impementation. It is recommended that an MFI run a piot phase with a imited group of interna customers to make sure that there are no operationa surprises after the commercia aunch. FINCA tested the mobie payments channe with interna customers (i.e. staff) to hep identify any operationa issues that needed to be fixed before offering the service to externa customers. This aowed FINCA to iron out some important technica issues between the IT soution provider and the MNO, and ensured that fu-scae roout took pace without any major gitches. This approach can identify technica as we as operationa probems (such as reconciiations, process aignment, etc.) that can be addressed prior to market goive. It shoud be noted that operationa and technoogy issues may sti emerge during impementation, so it is important to continuousy monitor performance after roout, and address any new probems as they appear. Like most other technoogicaydriven soutions, mobie payments have a significant impact on the MFI s operations. 6

7 Lesson #4: Do not force od manua microfinance processes into a modern eectronic payment structure Deivery channes such as mobie banking and agency banking add a new ayer of compexity to the MFI s processes and procedures. It is important to recognize that with these new compexities, the MFI shoud undertake process mapping to aign its existing processes with the new channe requirement. These processes shoud be automated whenever possibe. At FINCA, we have earned that mapping the processes is necessary, but not sufficient, to ensure success of the new channe. In addition to process mapping, it is important to ensure that a stakehoders that are impacted by the new channe understand these processes, the risks invoved at each step, and their roe in managing these processes and risks. It is important to recognize that with these new compexities, the MFI shoud undertake process mapping to aign its existing processes with the new channe requirement. Lesson #5: Conduct continuous risk anaysis Before aunching a mobie banking initiative, it is important to have a cear view of a risks associated with the channe at a stages of the process from a technica, operationa, business, operating environment, and reguatory perspective. Not ony shoud a risk anaysis be undertaken prior to aunching the channe, but more importanty, this shoud continue throughout the ife of the mobie payments channe to identify new and emerging risks, such as new types of fraud. FINCA Tanzania conducted a risk anaysis prior to engaging with Vodacom, and we identified a number of important risk areas that we were abe to mitigate prior to aunching the piot. Some of the risks identified incuded: Cient dissatisfaction when not being fuy reimbursed after making a wrong transaction; FINCA has a imited iabiity when a customer sends money to a wrong account. This is being mitigated by customer training. Reputation and financia oss when data entry errors ead to posting customer transactions into wrong accounts. This is being mitigated by staff training and interna contros. Data and financia oss when the MNO fais to inform FINCA of process changes. This is being mitigated by ensuring cear communications protocos as part of the agreement and interna contros. Interna fraud when staff credit their own accounts as recipients or conduct other 7

8 fraud. This is being mitigated by staff training and interna contros. Third party fraud when agents or other partner organizations use customer data and accounts to conduct crimina activities. This is being mitigated by rigorous due diigence and monitoring of agents and partners. Lesson #6: Incude a customer awareness and education campaign Mobie payments are a fairy new transaction method for many customers, and they may have questions about the benefits of using the channe, as we as how to use it. It is important that customers have fu information regarding why they shoud sign up, step-by-step instructions on how to use the channe, and cear information on the security of their money whie transacting. FINCA aunched a comprehensive customer awareness and education campaign to sensitize customers on these topics and aso provide education on how to send payments correcty to avoid rejected transactions. Some of the customer awareness campaigns incuded print materias outining steps and processes on how to use the channe, saes drives with the saes team providing training to customers, and training sessions by Account Reationship Officers during Viage Bank meetings. Rahisi Furahia MPESA na FINCA Saama, Bure, Wakati Wowote Mahai Popote! Tumia namba sahihi ya akaunti Kamwe usitumie simu ya mtu mwingine Daima hakikisha kuwa namba ya akaunti unayoingiza kwenye simu ni sahihi. Daima tumia simu yako mwenyewe kufanya miamaa kwenye simu. Waweza kupoteza hea ukitumia simu ya mtu mwingine au ukitumia namba ya akaunti isiyo sahihi. FINCA haitahusika na upotevu wa fedha utakaosababishwa na kukiuka hayo. A FINCA customer fyer on mobie banking 8

9 It shoud be noted that deivering effective customer awareness and education requires mutiayered interventions that go beyond printed brochures avaiabe in branch ocations. Beow are some exampes of the initiatives FINCA has undertaken: Ensure that a staff members are we trained, particuary those who have direct and daiy interface with customers. Customers often ask staff how to use the technoogy, and a staff members shoud be prepared to answer questions thoroughy and demonstrate to customers how to compete transactions. FINCA has ensured that a of its empoyees from teers to accountants are aware of how to use the mobie payments channe. Ensure that education and awareness materias directed to cients are avaiabe and pubished in the oca anguage, with cear guideines on where and how to sign up and use the service. If materias are ony avaiabe in Engish, this may excude potentia customers who speak a different anguage. FINCA has created materias in the officia Tanzanian oca anguage, Kiswahii. Education and awareness campaigns shoud invove ive demonstrations and presentations, in addition to printed materias. Many cients may not know how to read. FINCA trained its Account Reationship Officers in its branches to provide demonstrations at soidarity group meetings, so that they can work one-on-one with cients and hep them fee comfortabe making the payments using their mobie phones. Customer education shoud not be a one-off activity, but an ongoing component of the digita financia operations. Some institutions make the mistake of aunching a customer education campaign at the time of the channe aunch, but fai to continue providing ongoing support in this area. As new customers are drawn to the service, there is a constant need for customer education and training that goes beyond the aunch of the piot and eventua roout. Looking to the future, FINCA may expore fiming short videos in Kiswahii that describe the mobie payments service, which FINCA Account Reationship Officers can pay on their notebooks or tabets at group meetings. 9

10 Lesson #7: Institutions must be ready to change how they interact with customers The introduction of new deivery channes for financia services wi affect customer behavior. The abiity to conduct remote eectronic repayments may eiminate the perceived need for customers to meet as groups to make repayments manuay and coectivey. This may have impications for institutions such as FINCA that use group ending approaches, as it may impact the group dynamics and require a rethink in service deivery methods. Any MFI that has heaviy invested in group ending shoud be prepared to offset the potentia of reduced socia cohesion upon the introduction of mobie payment and banking channes. FINCA is now working to introduce additiona services for its cients such as financia education, medica, heath and business management tips, and agricutura extension services through its Viage Bank meetings to ensure that group meetings remain reevant to our cients. A FINCA oan officer with one of his cients 10

11 Concusion FINCA Tanzania successfuy pioted and then aunched this service to our cients as a new method that enabes customers to transfer payments from their e-waets to their FINCA accounts. FINCA s depoyment of this channe has deivered benefits both to our cients and to FINCA at a business eve: Our cients no onger use third party banks to make payments, as they did in the past. Cient research has reveaed that the convenience provided by this service is highy vaued by cients, especiay in ocations where FINCA does not have operations. With the advent of FINCA s mobie payments services, we are abe to provide customers with the convenience of greater access, whie eradicating the reconciiation probems associated with conducting third party transactions. Transactiona costs for FINCA have been reduced from $1.21 for a branch-based transaction to $0.85 using the mobie payments soution. In addition, cient research indicates that customers are benefitting not ony from the savings in terms of transactiona costs, but the reduced time and trave costs as we. The service has eased congestion in the branches consideraby, which in turn improves customer service by reducing wait time for other services conducted at the branches. FINCA is now committed to expanding the service, and it wi engage with the other MNOs in Tanzania to ensure that the service is avaiabe to other MNO cients as we. The mobie payments channe remains an integra part of FINCA s deivery channes strategy for Africa. The essons earned from the experiences in Tanzania wi inform FINCA s operations as we depoy the strategy in the rest of our African subsidiaries. Based on FINCA s experiences to date in both Tanzania and the Democratic Repubic of Congo, where we have estabished a successfu agency banking network, FINCA anticipates that mobie and agency banking wi support at east 70% of tota transactions within any subsidiary where these channes are fuy adopted, within three years of impementation. Digita financia services offer a major opportunity to increase the incusion of the poor within the financia sector, everaging existing technoogies such as ce phones to reach the most remote and marginaized communities. We hope that this case study is usefu in encouraging other MFIs to embrace mobie banking for their cients so that they, too, can expand their networks and reach unbanked popuations. 11

12 FINCA and The MasterCard Foundation are working together to scae up financia incusion in Sub-Saharan Africa. By everaging the use of technoogies such as mobie payments, we wi significanty increase our outreach to unbanked individuas, enabing owincome microentrepreneurs and househods to improve their famiies ives and have a positive impact on the economic deveopment of their communities. This case study was written by Nathan Were, with the support of Edward Greenwood, Bram Peters, Frank Gambe, Gerry Lanigan, Grace Akinyi, Christina Hannum, and The MasterCard Foundation staff (0)