Posts Tagged ‘cashless transactions’

The 5C’s of Cashless

The Reserve Bank of India has unveiled their Vision 2018, an ambitious plan to shove the juggernaut into a cashless future. Here are their pithy yet to the point 5C’s, which focus the framework on a set of objectives.

  • Coverage – by enabling wider access to a variety of electronic payment services
  • Convenience – by enhancing user experience through ease of use and of products and processes
  • Confidence – by promoting integrity of systems, security of operations and customer protection
  • Convergence – by ensuring interoperability across service providers
  • Cost – by making services cost effective for users as well as service providers

The full Vision 2018 report can be found here. Smells like Rajan’s legacy as he wanders back to academia in the Fall. I’m very impressed by the framework’s conciseness, and the fact it embeds periodic customer feedback surveys (continuous user research) as part of the design.

Can digital currency earn trust in hyper-local rural economies?

One characteristic of rural and informal type micro-economies, is irregular patterns in cash flows and money supply.

Mama biashara for instance, finds it hard to replenish stock if business is generally slow within her domain. Even if she could, there is still Mr. boda boda who has to be paid. When he doesn’t get paid, the local bicycle repairman loses out as well; ultimately, a long chain of intra-local value exchange is not originated.

It seems, when there is little or no fiat cash to go round, the aggregate action of actors to yield economic activity within a locale is stifled – business cycles, household and individual consumption patterns.

But, what if they could bypass using cash? And make use of say, an alternative medium to settle biashara, boost short term liquidity and add sorely needed economic value ?

From my most recent immersion in rural Nyeri, I made a couple of notable observations on how slow moving fiat cash inhibits economic exchange where it is needed most:

Cooperative IOUs as trust currency

As a member of a coffee SACCo, my aunt is entitled to periodic lump sum payments for her share of the crop; IOUs that she can literally take to the bank. Every now and then, she settles transactions amongst her peers, by promising her soon-to-mature IOUs.  Since SACCo disbursements are a well known event, her creditors know when to come knocking.

Milk Co-op, Nyeri County, Kenya (Photo Credit: Niti Bhan)

Mutethi, a subsistence farmer, is a member of a dairy cooperative. He carries with him a blue milk card issued by KCC Kiandu milk cooling plant. All of his milk drop offs are weighed and a matching entry appended to his card. He redeems his IOUs during the next scheduled payment in cash, bank or mobile money. Until that time, all he has is this money form, that he cannot exchange for goods and services. Or just maybe, like my aunt, he does.

Valuable insights from the field! Two separate instances of alternative currencies, built around trust and a backdrop social setting – one virtual , the other physical.

Concept to prototype – Bangla Pesa, Kenya’s slum currency

Will Ruddick took this concept to prototype in Kenya’s Bangladesh Slum with Bangla Pesa – a coupon currency. Its multiplier effect, backed up by data, increased small business activity by 22% – that otherwise would not have transpired.

Senior Fellow Mwangi S. Kimenyi and Policy Analyst David Muthaka wrote on Brookings blog:

“Around 83 % of participants […] reported that their total sales were increasing as a result of the vouchers with only 0.05 % reporting a decline in sales. Average daily sales through Bangla-Pesa represent 22 % of the total daily sales […] ”

Take Away thoughts: Trust currency is virtual and so is digital money

In this post, I highlighted the perception of mobile money in informal and rural cash based micro-economies and posited:

“Are attempts at replacing cash with digital money, deep down, really about taking on ecosystems?”

Right now, I am especially interested in the implications of alternative social currencies on mobile money for development in SSA. Can such an approach aid transitions from cash to virtual money in cash intensive rural and informal domains? After all, it is here where the unbanked are likely to be found.


This post is a guest blog by Michael Kimani (@pesa_africa) founder of the African Digital Currency Association

Related post of interest: Systems thinking and the mobile platform for economic impact and wealth creation

Mobile Money Is Driving Africa’s Cashless Future


This article was written for HBR a few months ago. Here are some key snippets:

Three distinct factors are driving this transformation. First and foremost is the desire for financial inclusion. Africa’s unbanked majority needs access to affordable tools for savings, loans, and credit. The second is the need to lower the costs and risk of retail and trade based primarily on cash transactions. The third is the introduction of cashless policies from regulators in countries like Nigeria, Kenya, and Ghana. Low consumer confidence in traditional financial institutions also makes this an opportune moment for new players to enter the solution space. And cellular technology is leading the way.


But the possibilities for ecommerce and consumer marketing are enormous. Nigeria’s ecommerce market alone generates $2 million worth of transactions per week, and online transactions are expected to cross $6 billion by the end of 2014. Interestingly, the fears regarding Ebola and Boko Haram are driving more people to shop online (and stay at home). E-tail could help consumer goods companies leapfrog the need for extensive distribution infrastructure, something consumer product companies are already exploring.

Service design for the prepaid economy: Continuing the case of Google’s Bebapay in Nairobi

The previous post on the sluggish adoption of Google’s BebaPay, a cashless prepaid card introduced in Nairobi as a payment mechanism for public transportation, had me pondering the challenge of designing services for the informal sector.

There are two main challenges that I see here, which don’t seem to have been taken into consideration during the development and implementation process:

1. The impact of introducing this service on the end-users

and the second

2. The characteristics of the cash based informal sector.

That is, if one were to say that the design of a new service should take the people and their operating environment into account as much as the actual technology and platform, then this is yet another example of technocentric design failing to meet its promise once introduced in the market.

Why are these elements so critical in this context?

The wananchi and their kadogo economy

Ensuring at the design stage that all possible effort have been made to lower the barriers to user adoption of your new product or service is one of the key ways to  maximize its chances of success in the operating environment.

Here, the people who are going to be using this service on a daily basis are not necessarily the stakeholders involved in the design, implementation and launch of this new cashless payment system. Matatus are operated by drivers and conductors, not the owners themselves. They, together with the commuters, are the end-users. Call them the wananchi, as they do in Kenya.

From the technology point of view, the implementation of the cashless payment service using Near Field Communications on an Android smartphone and a plastic prepaid card, was a very simple matter. All you need is an app downloaded on a mobile in the hands of the conducter who can then swipe passenger’s cards when accepting fares. Passengers can pick up these cards for free at any Equity Bank agent – ubiquitous in Nairobi – and top them up either directly at the agent or through the MPesa system.

Photo via @rnagila on 5th March 2014 of matatu strike in Nairobi

But from the people’s point of view, and this is where the distinguishing elements of the operating environment come in to play when looking at the informal economy prevalent amongst the mass majority, often called Kenya’s kadogo economy, this payment method comes with some drawbacks. Here are some that come top of mind:

From the operators’ perspective

The shift from daily cash flow and living in the ebb and flow of the kadogo economy is a shock to the people whose livelihood has been directly affected by this system. Where the operators of the matatus were accustomed to managing with a fluctuating yet constant flow of daily cash in hand, with all the habits of household expense management and purchasing patterns consistent with that volatility, they are now expected to accustom themselves overnight to a monthly budget. Was any financial education offered to them to ease this sudden change? Do we know if they have received sufficient salaries to cope with their expenses? The recent Nairobi matatu strike seems to imply not.

From the commuter’s perspective

Cash in your pocket is the most flexible payment mechanism when managing daily expenses. A prepaid card locks in your cash, particularly if its only usable for one type of purchase. For example, you might need to purchase milk and bread on the way and make a decision trading off your matatu fare for food, choosing to walk home instead.  At the moment, prepaid payment cards have not yet scaled beyond the transport sector, so if you have 200 shillings in your Bebapay card, it becomes an inflexible tool without options for alternatives. How likely are you to lock in extra cash when you’re accustomed to the flexibility required to manage expenses, especially if you too are employed in the informal economy? And how convenient is it to top up your card at the nearest Equity Agent as opposed to jumping on the nearest bus with cash in hand?

From thinking about today to planning for tomorrow, without the accompanying infrastructure.

The system imposes planning for the future out of context of the entire ‘prepaid’ or kadogo economy’s rhythms. This is a huge change in behaviour required from all the end users of the system. To go from the daily rhythms of irregular income streams where coping mechanisms are habituated to minimize the volatility between expenses and cash flow to suddenly budgeting transport costs, planning in advance to top up your matatu card, changing the way you think about money is far more complicated and challenging than simply adopting a new transport payment service.

via @denniskioko on 7th March 2014

So, what about Lipa na MPesa?
Why then, as Dennis Kioko noted on Twitter yesterday, are Google’s BebaPay posters being torn down in City Hoppa buses and replaced by Safaricom’s Lipa na MPesa?

Looking at the Mpesa system only from the point of view of the barriers to adoption raised in the preceding paragraphs, the first and foremost advantage it offers the wananchi is Flexibility.

Your money is not locked into your MPesa account to be only used for your matatu fare. If you did need to send some to your teenager in school or make a purchase, you could access it. From the operator’s perspective, accepting an Mpesa payment ensures that they will follow the regulations banning cash fares for matatu travel yet the unspoken options on which MPesa account receives payment remains flexible.

From flexible and negotiable to rigid and non-negotiable

Until the system design finds a way to cover the operator’s loss of income it will not be an acceptable option. We don’t know if owners raised the salaries of the bus drivers and conductors or offered them any incentive at all to change not only their own financial management behaviour but also to adopt this new streamlined (and rigid) payment system.

Design of services for the flexible, negotiable, cash based informal economy

Can service design for the informal economy afford to overlook this fundamental aspect of the end user’s behaviour and mindset, arising as it does from the very volatility of their operating environment and income sources?

Can service design afford to assume that any new payment plan or revenue model that is meant to operate for the mass majority in the developing world will operate in the same way as it would in the first world?

Can service design as practiced in the sophisticated and structured formal economy afford to overlook the very human challenges faced by prospective customers halfway around the world?

Stakeholder interviews and technology testing is not the same as fundamental understanding of the people, their problems and their purchasing patterns. Focusing on the platform alone without wholly visualizing the impact of introducing such new services on people will only raise the barriers to adoption, not lower them. This case is not a simple of of a new product introduction but one that not only impacts incomes and livelihoods but also requires massive behavioural change from the end users.

I’ll be following up on writing further on formalizing the informal after a literature review.