The cash to mobile money transition – Insights from Uttar Pradesh’s microfinance clients

June 15, 2015

A mobile money agent shows Sonata clients how to do transactions on a phone

By Sharada Ramanathan

Imagine that your loan payment is due. You have two options: either physically carry cash to your bank or make this payment instantaneously via your mobile wallet. It is safe to say that most of us would choose the latter option, even if it costs us more. To us, the benefits of mobile money – safety, efficiency and speed – skew the decision firmly in its favor. Now imagine that it is a microfinance client in rural Uttar Pradesh, India, who needs to repay her loan. Presented with the same two options, would she make the same decision? Not necessarily, in our experience.  

The mobile channel holds tremendous potential for delivering financial services economically to the poor in rural, remote areas. However, it is unlikely to be able to deliver on this promise if adoption rates remain low, as we see currently. 

With support from the Citi Foundation, Grameen Foundation India, in partnership with a mobile money provider and Sonata Finance Pvt. Ltd., a microfinance institution, is using a human-centered design approach to deliver mobile banking services and education to Sonata’s female borrowers in Uttar Pradesh. 

In preparation for the project pilot, we did customer research to understand barriers that inhibit the poor, particularly women, from adopting the mobile channel. We wanted to challenge our own assumptions about how mobile money is perceived by these clients and to understand ways to translate benefits of mobile money in a manner that resonates with these clients, given their own needs and expectations. We also wanted to assess what could be done to drive the adoption of mobile money among these women, not just as a channel for payment of loans, but also eventually for other financial transactions. 

Working with our research partner Propellerfish, we spent four days in and around Lucknow interviewing more than 120 customers, their husbands, mobile money agents, Sonata staff and others who could offer insight on our questions. This is what we heard –

The dependence trap – Validating what we anticipated, we found that Sonata’s female clients are financially dependent on their family members, usually their husbands, to a very large degree.

"Our man will help us pay the loans; he is the one making money."

Knowledge is power – Most women, even those who are not literate, consider that knowledge is the key to both status and hope.

Even older people respect me now because I am educated.”

Cash control – Cash can be a double-edged sword. Women appreciate the immediacy of cash but this also makes it an asset that needs strict control. 

“The money in the phone, I can’t spend it easily. It helps me save.”

Mobile is the man’s domain - In most cases, the only mobile phone in the house is in the hands of the husband or son, making them key to driving adoption.

“My husband takes the phone with him when he goes to work. We don’t get to keep it.”

Don’t believe that banks are for them - These women do not believe that banks welcome small transactions, which is what they usually make.

“Our expenses are high and savings low. It doesn’t make sense to go to a bank.”

Safety is not a huge concern – Contrary to our assumptions, safety issues in transporting the centre’s repayment funds to a branch was not perceived as a key concern by clients.

“No one knows that we are carrying cash. We don’t tell anyone.”

Money trumps all opportunity costs – Money is the supreme currency, and trumps all other opportunity costs such as time and convenience. Mobile money is not perceived as a time-saver that is worth paying for.

“I’d rather save the money than time.”

These findings offered us key actionable insights, which we have incorporated into the design of our own mobile money pilot. These are important learnings for other players in this space who are working on creating behavior change to drive uptake of mobile money among the poor.  

Leverage existing roles within a lending group – Each lending group demonstrates a distinct hierarchy. There is an accepted “Pradhan” who serves as an informal leader. There are also usually one or two “Progressives” – women with significantly higher levels of literacy and familiarity with the mobile phone as compared to others in the group.  These women are respected by the others and can be used to influence and endorse mobile adoption. Securing the buy-in of husbands and eldest sons is also important as they typically own the mobile phone and also make the loan payments. 

Cascade skills transfer – Leverage these existing roles within a client’s ecosystem to drive an “Each One, Teach One” approach to skills transfer. This is likely to be more effective than conventional teaching approaches. Women are more likely to absorb and act on information they receive from others they trust and respect. And for a teacher, tutoring others will reinforce her own learning.  Focus on the benefits of mobile money that appeal to these clients – its use as a tool to save and the ability to make small, secure transactions without visiting a bank. Do not automatically assume that the benefits of mobile money that are important to you, such as safety and convenience, are also equally important to your clients. 

Target husbands – Do not neglect the husband. In most cases, it is the husband who owns the mobile phone and makes loan payments. Women usually do not have access to the phone and are heavily dependent on their husbands to make financial decisions. To influence behavior change and ensure that loan payments are transitioned from cash to the mobile phone, husbands need to be educated about the benefits of this channel. 

Make it easy to get started – Keep registration and sign-ups simple. Understand that your clients may not all be literate or familiar with use of the mobile phone. To the extent that it is possible, be flexible on documentary requirements. Create simple, visual training materials and simplify processes where possible. For example, you can reduce required key strokes by ‘saving’ key steps. In fact, previous studies conducted by Grameen Foundation in India, Uganda and the Philippines also point out that simple mobile usability issues are hindering the reach of this channel among poor women.  

Make user incentives work harder – Create value for the end user, incentivize the right behavior and be open to making changes as appropriate. For example, if users gradually start to use the mobile phone for payments more regularly as they become comfortable with the channel, shift to rewarding repeat usage rather than just sign-up and first use. 

Human interface is also important

The significance of human interface remains high in the context of financial services in the developing world.  For the poor to trust and participate actively in formal financial services, intermediaries such as loan officers and agents are required to play a key role in engaging with and assisting clients with their transactions.  Hence, our research also focused on what we could do to leverage and optimize these resources, to ensure the channel’s success. Here is what we learned would help. 

Put structure around desired loan officer behaviour – To a client, the loan officer is the face of the microfinance institution. Unless he understands the mobile money product, how to use it, and why it is beneficial to clients, he will never be able to encourage uptake. Training front-line staff effectively and aligning their Key Responsibility Areas (KRAs) and incentives with the overall goals of the institution for the new channel is critical to get any traction.   

Sell acquisition to mobile money agents – Agents don’t necessarily see mobile money as a stand-alone profitable business opportunity. However, selling mobile money ensures that these agents, who are typically small stores selling a variety of consumer goods, see a much larger number of footfalls, adding to their overall business. So, positioning mobile money as a customer acquisition tool to them is more likely to sustain their interest in this product.

Watch this video to learn more about our research findings.