opportunities in the ghananian payments market
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Moving Money:Opportunities in the Ghanaian Payments
Market
This research was commissioned to Bankable Frontier Associates
April 2012
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Objectives of this household study
• Analyze how urban households move money and why• Identify actionable insights for branchless banking
providers
Opportunities in the marketplace
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How did we research consumers of payments methods?
Secondary research, e.g. FinScope, new census data
“Walk around” intercept survey of traders and long distance drivers in Accra (qualitative)
Interviews with formal service providers (qualitative)
Focus group discussions with 118 people from Greater Accra, Kumasi, Central, Western and Northern (qualitative)
City and semi-urban low-income household survey of 1003 primary income earners and their households (quantitative)
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Defining key terms
•Formal methods: Commercial banks, rural banks, other bank entities and mobile money
•Other formal methods: e-Zwich, post office, bus companies
•Informal methods: Bus drivers, tro-tro drivers, friends/clansmen, family, susu
•Direct: Payer/sender takes money directly to recipient or biller and pays person-to-person
•Urban location: 5,000+ inhabitants (Ghana Population and Housing Census, 2000)
•City: Regional capitals
•Semi-urban: Main towns in districts outside districts of regional capitals
•Household: A person or a group of persons, who live together in the same dwelling, share the same house-keeping arrangements (eat out of the same pot) and are catered for as one unit.
•Primary Income Earner (PIE): One who makes or brings home the most money in the household
•Household income: We obtained the household income and expenditure as well as primary and secondary sources of income by interviewing the primary income earner or other main household budgeter. We created a stylized household cash flow analysis based on this information.
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The Demand-Side Story
Chapter 1: Market opportunity overview
Chapter 2: Driving usage: Improving formal payment services
Chapter 3: Driving usage: Converting informal payers
Chapter 4: Why mobile money has not capitalized on its advantages
Chapter 5: Market opportunities: Key segments to target
Chapter 6: Opportunities and challenges
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Urban Ghanaians make payments of ₵784m (US$470m) a month
Domesticremittances
Bills payments
Loan payment
s
US$1=₵1.67All figures ₵
The value of the market opportunity is vast
₵250mbusiness
31%
₵26mwater3%
₵78m10%
₵277mfriends and
family34%
₵55melec.7%
₵99mschool fees16%
*Calculation excludes households whose only method is direct face-to-face payments and excludes the ₵111.3m monthly urban housing rental market.
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More households pay bills & school fees, but households remit larger amounts to family and for business
USD 1=₵1.67n=1003
2.8m households pay for electricity
1.7m households send avg. ₵173 to family and
friends & 1.2m send avg. ₵230 for business
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Households with these primary livelihoods represent a market size of ₵531m (US$318m) per month
Calculation excludes households whose only method is direct face-to-face payments.
Traders make the most payments, but teachers pay more than other business people
All figures ₵
Traders (₵267m)
Teachers (₵92m)
Business people (₵88m)
Farmers (₵84m)
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Est. # of urban households sending money…
to these destinations from surveyed areas
1 672,000 ACCRA
2 319,200 KUMASI
3 218,400 CAPE COAST
4 184,800 KOFORIDUA
5 100,800 NSAWAM
Origins surveyed…
where this est. # of urban households are sending money
1 KUMASI 235,200 2 ACCRA 168,000 3 OBUASI 151,200 4 ASHIAMAN 134,400 5 HO 117,600
Origins
Destinations
…when sending money to family and friends
n=526Multiple responses
allowed
More money is sent to Accra than from Accra
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Est. # of urban households sending money from elsewhere
to these destinations from surveyed areas
1 520,960 ACCRA
2 355,200 KOFORIDUA
3 236,800 YENDI
4 177,600 GREATER ACC
5 153,920 TAMALE
Origins surveyed…
where est. # of urban households are sending money
1 KUMASI 142,0802 OBUASI 118,4003 ASHIAMAN 118,4004 ACCRA 118,4005 HO 82,880
Origins
Destinations
…but 5 locations are by far the most common destinations
n=375Multiple
responses allowed
The origins of remittances for business are dispersed
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At least 48,000 households send money to friends and family within Kumasi
At least 72,000 households send money to friends and family and 64,000 households send money for business purposes within Accra
“Beat the traffic: use mobile money to send your money safely across town”
Households also send money within cities
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n=1003
The average urban household profile:
• Comprises 3 adults and 2 children• Lives in room in a compound
house• Pays for electricity, owns a radio &
has access to a public or private water tap
• Earns 200 per month from ₵trading or other business & rarely has a second regular income
• Makes an average of 2 payments per month, paying 27 per ₵payment
• Sends an average of 196 to ₵family & friends or for business, 1 time per month
• Owns a cell phone
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In fact, at least one member owns or has access to a cell phone in 96% of urban households
64% of Primary Income Earners (PIEs) have more than one SIM
50% of PIEs spend ₵1-5 on airtime per week
66% of PIEs send airtime to someone else
Does this show that people can also
learn to use mobile money? n=1003
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I-banking on data-enabled cell phones for the average urban household may not be too far around the corner
23% of PIEs (736,000) have an email or Facebook account
n=231
63% of these email or Facebook account-holders have completed high school, compared
with 34% of the overall sample
78% of those who have an account are between 18 and 34 years of age
43% of those who have an email or Facebook account say they access it on a cell phone
Cash in – cash out points could be promoted on Facebook
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Households save cash in the house
• 80% of urban households have access to at least one bank account
• 43% of households have savings in a commercial or rural bank
Only 15% of all households have access to at least one ATM card that
they use at least once a month
4% of households use an e-Zwich card
Mobile money schemes may be able to attract the many
Ghanaians that like to save cash
But less than 1% currently store value on their cell phones
n=1003
91% of all households set aside savings or liquid assets of some form; 27% make
loan payments
At least 34% of urban households have cash savings at home
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The Demand-Side Story
Chapter 1: Market opportunity overview
Chapter 2: Driving usage: Improving formal payment services
Chapter 3: Driving usage: Converting informal payers
Chapter 4: Why mobile money has not capitalized on its advantages
Chapter 5: Market opportunities: Key segments to target
Chapter 6: Opportunities and challenges
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76% of all households who make payments have used at least one formal payment method in the past year
1.8m urban households have used a formal method in the past 12 months
n=748
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Banks are the preferred payment method
n=748Multiple responses
allowed
The use of informal services is less than anticipated
41% of bank users go to GCB only;
31% use other banks only;29% use both
59% of MM user households used MTN, only; 7% have only used Airtel and 10% have used Tigo
Active usage is defined as having used in the last 12
months
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Usage of MTN Mobile Money is highest among the three MM schemes
n=748Multiple responses
allowed
GCB
BoA
Barcla
ysUBA
Ecobank
Cash 4
Afri
ca
Oth
er bank
transf
erARB
Rural b
ank
Oth
er bank
entities
MTN M
obile M
oney
Airtel M
oney
Tigo C
ash
Post o
ffice
E-Zwich
Bus co
mpanie
s
Bus driv
ers
Tro-tr
o driv
ers
Friends/
clansm
en
Family
Susu
Pay/deliv
er money
direct
ly0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
14%4% 5%
% Aware% Using
Thanks very much for joining us in Ghana; we really appreciated your insights, advice and of course your company.
Active usage is defined as having used in the last 12
months
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The income bands and usage tendencies of urban households
n=1003
28%
8% ₵201-250
33% ₵151-200
13% ₵101-150
18% ₵76-10043% use GCB43% use other banks17% use MM
49% GCB41% other banks14% MM
44% use GCB35% use other banks17% use MM
52% GCB38% other banks21% MM
44% use GCB39% use other banks17% use MM
GCB is the predominant method across all income segments
₵251+
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Households prefer using banks to send almost any amount size
n=748
…but especially when sending large and very large amounts
22% of GCB users do not have a bank
account
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Security drives usage of all methods
Multiple responses
allowed
Over 60% choose formal methods because they are secureWhy did your household choose the method(s) you use?
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People say they are worried about carrying cash
n=1003
40% say carrying cash locally has become more risky
But even more (65%) say carrying cash over long
distances has become more risky
And our analysis suggests that people are
particularly worried about security along the
Kumasi-Accra route
…and 8% of users of informal methods and 5% of those who pay person-to-person have experienced money lost or stolen
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Consumers tell stories about the risks of carrying cash
Charity lost her mother in bus accident along the Kumasi-Accra road and, to compound the loss, Charity received her mother’s body without the ₵18,000 she was carrying. Now she travels with a check and cashes it as soon as GCB opens.
Lost her mother
and her cash Carries thousands
of ₵ from Accra to
Burkina Faso
Adelaide travels to purchase tomatoes in Burkina Faso, carrying as much as ₵11,000 because banks are not open early enough to withdraw the money. She has heard of other groups who have been
robbed. Her group is careful: “We do not travel during the night and we keep the day we will travel a secret as much as possible.”
BB would make life a lot easier for these women
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Security is necessary but not sufficient
Multiple responses allowed
Trust to send large amounts is also a significant decision point
Why did your household choose the method(s) you use?
Users find mobile money to be as secure as banks
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The paradox: users trust mobile money, but non-users do not
The other banks also have a problem with lack of trust
Multiple responses allowed
Households who do not use MM cite lack of trust
as the #2 reason
Reasons for not choosing the method in question
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Households also dismiss methods, notably other banks and MM, that are inconvenient for the sender and recipient
Inaccessibility appears to be a pain point except for GCB. This is part of GCB’s success and bodes well for providers that overcome this hurdle through BB services.
Multiple responses allowed
Reasons for not choosing the method in question
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Banks suffer from the perception of high costs
Non-users aware of other banks say these formal services are expensive
What does this mean for mobile money?
Multiple responses allowed
Reasons for not choosing the method in question
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Mobile money is cost competitive
A comparative advantage of MM is clearly price
When sending small amounts to non-accountholders, mobile
money is the cheapest method
Based on prices from October 2011
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And no one likes payment systems unavailable
Problems that users have with formal methods they use
Agent training and selection
issues?
Providers with problems with convenience & accessibility & an unreliable system will be
hard-pressed to expand market
share.
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The Demand-Side Story
Chapter 1: Market opportunity overview
Chapter 2: Driving usage: Improving formal payment services
Chapter 3: Driving usage: Converting informal payers
Chapter 4: Why mobile money has not capitalized on its advantages
Chapter 5: Market opportunities: Key segments to target
Chapter 6: Opportunities and challenges
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Households use family, friends and drivers to send money to family and friends, but not often for business purposes
n=383Multiple
responses allowed
…and they prefer to pay their bills and school fees directly
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Nevertheless, 65% of those who use informal methods also use formal methods, primarily banks
This segment may be converted to branchless banking
n=383
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Informal payers choose family and friends: They are low cost and secure for sending small amounts
“Low transaction fees” appears to be the primary reason households using informal
methods choose those over formal methods. Mobile money can compete.
Why did your household choose the method(s) you use?
n=383
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Mobile money users say it is secure and has low transaction fees
Why did your household choose the method(s) you use?Mobile money is considered more
secure than informal methods and lower
cost than banks
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Informal payers perceive banks to be inconvenient and costly
BB providers may capitalize on this opportunity by realizing their potential convenience advantage
n=383Multiple
responses allowed
Why don’t you use this method?
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Converting informal users to mobile money is a strategic marketing challenge
Drivers and susus are vulnerable informal providers in the payments market
The top 3 reasons why households stopped using the
methods are that the money was lost, they did not feel safe
using it or the money arrived too late or was delayed.
A direct messaging campaign targeted at users of drivers and susus and those that have stopped using
them may be effective
Also, 26% of households using
bus companies have had problems with
hidden fees
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Summary: Capitalizing on the opportunities of branchless banking
Users feel as secure about mobile money as they do about banks
In contrast, non-users of mobile money are skeptical and do not trust it
Mobile money and other banks suffer from perceived inconvenience and inaccessibility
Non-users perceive banks – even GCB – to have higher transaction fees than mobile money
GCB benefits from accessibility, and bodes well for BB providers that can achieve high accessibility
But users of family and friends say this method is cheaper than mobile money
Opportunities Challenges
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The Demand-Side Story
Chapter 1: Market opportunity overview
Chapter 2: Driving usage: Improving formal payment services
Chapter 3: Driving usage: Converting informal
Chapter 4: Why mobile money has not capitalized on its advantages
Chapter 5: Market opportunities: Key segments to target
Chapter 6: Opportunities and challenges
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Above the line marketing has not translated into high usage of mobile money
n=748Multiple responses
allowed
Awareness of mobile money is high but usage is low
90% of households say they are aware of at least 1 mobile money scheme; only 17% of all said they have used at least 1 MM scheme in the last 12 months
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And even having registered accountholders has not translated into usage
19% of households aware of at least 1 MM scheme are
registered and using at least 1 MM
scheme in the last 12 months
53% of households aware of moving money through banks have access to an account and have used a bank in the last 12 months
MM Users19%
Reg. non-users19%
Neither registered nor users
62%
Bank Users53%
Dormant accounts
29%
Non-users18%
Mobile moneyn=673
Banksn=729
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Above the line advertising is effective at raising awareness of payment services…
Multiple responses allowed
How would your household likely hear about a new payment service or branch opening?
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…but below the line marketing would be more effective at driving usage
Multiple responses allowed
How did your household learn about this method that you use?
Family and friends tell households which method to use
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Incentivize security-conscious, price sensitive Ghanaians to use mobile money
87% of households said they use methods that they learned about from friends and family
Community demonstrations in markets and public places to promote trust in branchless banking and learn how to use it to pay bills, store value and send money
Link specials on airtime for getting family to use mobile money: if you can send airtime, you can use mobile money and buy discounted airtime at the same time
Putting social networks to work and marketing via word of mouth
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MNOs may counter low trust by stressing the similarity between MM and airtime transfers in their marketing
n=1003
66% of households have sent airtime to someone else96% of household
members own or have access to a cell phone
Can MNOs message airtime senders about mobile money at the time of transaction?
“Did you know it’s this easy to actually send money as well?”
“Did you know that if you had bought the airtime you just sent via MM you’d have been able to send X% more for free?”
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And there may be groups interested specifically in branchless banking
n=1003
23% of households use ATMs:Likes: ATMs are always open
Dislikes: ATMs can’t take savings deposits and systems unavailable
45% go get more cash when carrying
₵10 or less
Almost 50% of all households think that
receiving a SMS is adequate proof of payment for utility and school fee payments
At least 34% of households have cash savings at home
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The Demand-Side Story
Chapter 1: Market opportunity overview
Chapter 2: Driving usage: Improving formal payment services
Chapter 3: Driving usage: Converting informal
Chapter 4: Why mobile money has not capitalized on its advantages
Chapter 5: Market opportunities: Key segments to target
Chapter 6: Opportunities and challenges
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Market opportunity #1: Households do “send money home” to family and friends for a total of ₵277m / month
28% of households still have close family living in another region
26% of these PIEs have family in Volta, Central, Ashanti or Eastern
but live in Ashiaman or Accra66% of these PIEs have family in other urban areas
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Send money home faster, cheaper and safer
n=526Multiple
responses allowed
Almost all this remittance is for family obligations – use this in
BTL marketing
69% of households send money to family and friends for one purpose
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Households send money to family and friends at least once a month
Emphasize the convenience of regularly sending money from wherever you are in a trusted manner
Seasonal and for school fees
Regular and frequent
n=526
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MM is secure for sending large amounts regularly to the ones you love
58% are sending these large amounts to Accra at least once per month
n=201
This finding may be important if the regulator contemplates tiered KYC
62%
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Market opportunity #2: 40% of all monthly remittances for business purposes are made by traders, teachers or farmers
The average household with these
occupations sends ₵230 for business each month
All households send a total of ₵250m monthly for business purposes
Total of ₵111m (US$66.5m) per month by these 3 occupations
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Customer opportunity example: trader-households are a key segment
Trader-householdsCite slow service
and lack of security as top reasons why they do NOT use
GCBThis is an opportunity
to attract traders to mobile money
44% of trader-households use GCB39% use other banks
17% use mobile money86% of trader-households have a bank
account32% ₵251+
10% ₵201-250
28% ₵151-200
12% ₵101-150
17% ₵76-100
Income ranges of trader-households
Traders want to do business, even when the banks are closed
53% (528) of households reported having no second source of income, but22% (219) of those households that do are trading
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Clothes Seller-Trader from Takoradi
Frederick has bank accounts with Barclays Bank and Opportunity Savings & Loan. All four members of his household have mobile phones and 2 are registered for mobile money with Tigo and MTN. But they never used it for business purposes.
Before becoming a clothes seller, Fredrick was a teacher. As a teacher, his salary was paid into his Barclay’s bank account monthly.
Fredrick makes payments averaging GHS 500 to his suppliers in Tema by depositing the money into their bank accounts. The suppliers then send the items through drivers to Takoradi.
What interventions will make him use mobile money for business?
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Bills payments opportunity: The vast majority of urban households regularly pay bills and school fees
n=748Multiple
responses allowed
Bills payments is a broad opportunity
MM users report that traveling to the bank or biller’s office takes the same amount of time as traveling to a mobile money agent
MM users say they pay ₵0.50 to reach banks and nothing to reach biller’s offices, but ₵0.75 to reach MM agents
And almost 50% of all households think that receiving a SMS is adequate proof of payment for utility and school fee payments
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The vast majority of urban households pay large, regular amounts for school fees three times a year
USD 1=₵1.67n=1003
Amount paid in school fees is 77% per txn greater than the amount paid for electricity
₵78
₵35
₵136
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Plus, 40% of households sending money to family and friends do so for education
44% of these households send money several times a year…
…and 40% of these households send
money at least once a month
Remind households to securely pay school fees AND send money to other family members for education
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Of those households who send money for education…
Children in the
household
Send money for education
Pay school fees
81%
18%
81% of these households have
children in the household, send
money for education and pay school fees
Families help each other out to pay school fees
1%
18% of these households
send money for education and
pay school fees but do not have children in the
household
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The Demand-Side Story
Chapter 1: Market opportunity overview
Chapter 2: Driving usage: Improving formal payment services
Chapter 3: Driving usage: Converting informal
Chapter 4: Why mobile money has not capitalized on its advantages
Chapter 5: Market opportunities: Key segments to target
Chapter 6: Opportunities and challenges
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Findings are opportunities –and challenges
1. Demand for electronic payments is high, and urban households are willing to tolerate problems even though quality of service may be low.
2. Security drives usage, but achieving trust and convenience are key pain points to overcome for formal payments providers; GCB is dominant
3. ATL raises awareness, but people say they use what their family and friends use
4. Users of mobile money trust it, and find it cheaper than other methods. Non-users do not trust it and appear unknowledgeable of pricing.
5. Sending money home for family reasons and sending for business are the biggest segments by value and frequency.
6. Payments by traders and payments of school fees are potential viable segments for targeted strategic marketing.
Message: Use BTL that promotes security, price and convenience targeted at traders, and schools where families pay fees.
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…yet potential customers do not seem to be responding
• Almost 90% are aware of mobile money. Customers continue to use informal methods that are less safe, and formal that are more expensive
• Partly due to known agent issues: the lack of availability is confirmed as a major obstacle
• But partly also due to misperceptions of MM▫ Non-users are skeptical of MM security while users cite
security as the #1 reason they use it▫ Many non-users complain about cost when
it is cheaper and users cite low cost as #2?
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Marketing is key: Not more, but different
• Marketing spend has been high and its success is surprisingly notable: nearly all are aware of MM
• But its failure equally so: actual usage still very low• Results suggest marketing method a key factor
▫ Majority learn of new products from ATL marketing▫ But nearly everyone uses what their families use▫ Thus marketing emphasis must shift to BTL in a big way▫ Messages should focus on specific comparisons:
• Price margin for sending a given amount with competitors
• Extra hours spent paying school fees, utility bills
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Specific segments can be identified
• Contrary to the views of some, domestic money transfers are a big value segment also in Ghana▫ ₵277m/month for family, ₵250m for business: sizeable ▫ Surprisingly much of this is into Accra, not out
• Traders send ₵111m but dislike the insecurity of informal services and like the speed of formal ones
• School fees outstrip both water and power bills and can be targeted by both time and geography
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Capture a greater share of the payments market by getting BTL messaging right to overcome paradoxes
Tigo Cash Agent kiosk at Agbogbloshie market, Accra
Advertise straight price comparisons with other providers and demonstrate
how to use it
Promote locations of top agents on internet and SMS for staff, agents and
users to access information
Use more BTL to incentivize users to sign up family & friends and then incentivize again when they use it
Send SMS when customers send airtime to someone else and promote MM
incentives
Banks: Establish agent networks to lower costs, capture more savings,
decrease wait times in branches, capture more of bills and school fees payments &
potential new borrowers
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Advancing financial access for the world’s poor
www.cgap.org
www.microfinancegateway.org