Posts Tagged ‘service design’

3 Myths of Financial Inclusion

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Mama waiting for biashara in Sagana, Kenya (Photo: Niti Bhan)

This article has been co-authored with Michael Kimani @pesa_africa

Banking the unbanked is very popular right now, as financial inclusion is seen as a key milestone on the path to development. In parallel, a plethora of “cashless” or “cash lite” solutions have begun permeating the cash intensive informal economy. These can be broadly described as digital financial services aimed at financial inclusion as they leverage the popularity of the mobile phone as an affordable delivery platform. Yet, their uptake has not been as viral as hoped.

We take a closer look (i) at the challenge from the perspective of market women and micro-traders who form the backbone of informal trade in daily necessities. Without her cooperation, the mass market adoption of digital currency is highly unlikely to become a mainstream part of life. We’ll call her Mama Biashara, from the Swahili word biashara meaning commerce, trade or business.

The United Nations defines the goals (ii) of financial inclusion as follows:

  1. Access at a reasonable cost for all households to a full range of financial services, including savings or deposit services, payment and transfer services, credit and insurance;
  2. Sound and safe institutions governed by clear regulation and industry performance standards;
  3. Financial and institutional sustainability, to ensure continuity and certainty of investment; and
  4. Competition to ensure choice and affordability for clients.

 

Myth 1: Mama Biashara is financially excluded

All of this assumes that Mama Biashara has no option (iii) but to stuff her savings under the mattress. Since Kenya is the world’s leader in digital financial solutions for the unbanked, grabbing visibility with the undisputed success of its M-Pesa mobile money platform, we decided to choose its context for our analysis. Given below are the various financial services and tools available to Mama in the rural context, placed along a continuum from most informal to most formal.

Informal Formal final QZ africa

As you can see, Mama has a large variety of solutions that she avails for her financial needs – its just that they can’t all be classified as “formal”. Yet, technically, by the UN’s definition given above, can we actually say that Mama Biashara is financially excluded from “Access at a reasonable cost to a full range of financial services, including savings or deposit services, payment and transfer services, credit and insurance”? Many of these locally grown alternatives such as Chama*, ROSCA* or ASCA* have been institutionalized in the Kenyan context, able to match the UN goals for points (2) and (3) as well as proving to be valid and viable competition offering choice and affordability (4).

If Mama Biashara’s basic financial services needs are being met right now by the variety of options and alternatives easily accessible to her, then what is the value proposition of a bank?

Her long standing reputation in the community, her relationships with her friends, family and peers, her “credit history” if you will, all becomes null and void when she approaches a faceless formal institution such as a bank. Due to the cash intensive nature of her business, little hard data on her financial history might be available for formal financial service requirements. On the other hand, her social recognition and long standing business relationships serve this purpose in the informal sector. Daily variances in cash flow which might require a quick loan or flexibility in payment can be easily covered by her ecosystem of financial options, something that the formal procedures and processes of financial inclusion solutions aren’t designed to accommodate. There’s an inbuilt component of trust that  the formal system is unable to overcome at scale.

 

Myth 2: Trust lies in the regulations, standards, governance and continuity of formal financial institutions

Trust in financial institutions, as implied by points (2) and (3) of the UN Goals, is embodied in their continuity, their regulations and performance standards, their governance by the laws of the land, and all the rest of the formal structures in place to create sound and safe solutions. This assumption, emerging as it does from the point of view of the sophisticated systems of the developed world, places the onus of trust on the rules and regulations governing the institution rather than the reputation of the individual or their worth in the community.

Yet, over and over, we see that Mama Biashara barely ends up using her bank account even if she manages to obtain one (iv) or is slow to adopt an innovative digital financial service. So we reorganized her financial tools on a continuum of most trusted to least trusted to see what patterns we could observe when we compared the same against the formal vs informal continuum. Was formality indeed the driver for trust?

Trust Continuum QZ africaWe were surprised to note that the least trusted was the most common metric of financial inclusion – the bank. These insights, based on interviews with women in Nyeri by Michael, reflect what Susan Johnson wrote on Kenya (v) –

But the difficulty of gaining loans through them (banks) means that the evidence confronting poor people is that a relationship with a bank is not a dynamic system of exchange in which funds are lent in both directions. The bank does not therefore represent a social relationship of equality and a means through which social connections are developed in ways that offer access to resources.  

The very nature of the formal system – in this case, the regulated and institutionalized bank – is the barrier to adoption among those active in the informal sector. The system is faceless, nameless and cannot provide the basis for an equitable, social relationship, as compared to a network of peers, a self help group (SHG*), or your friends and relatives. You cannot negotiate with the system as it offers no flexibility to accommodate the individual’s peculiarities or sudden needs.

Sustainable Value Chain 1

And the issues of trust and performance, in closely knit communities, depend upon social relationships, word of mouth and reputation built up over time. If someone doesn’t repay a loan, or if the semi-structured self-help group faces issues with their treasurer, these matters not only become common knowledge but can be dealt with directly by the affected members. For the most vulnerable segments of society, most of whom also fall in the category of being “unbanked”, whom do they turn to if a national bank or large telco fails them? Even M-Pesa is fronted by a human intermediary, the mobile money agent, a locally known member of the community.

 

Myth 3: Financial inclusion is an individual matter, or for the nuclear family

In Mama’s environment, social connections and belonging is very important. It is the foundation of her business, and it matters a lot. Especially in the rural context, your friends, neighbours and extended family are most likely to be your customers. The vast majority of your daily financial transactions are conducted within the community. This is reflected by the patterns seen in the two continuum diagrams of trust and formality. Each points towards local networks and social relationships as an important component of money management by the unbanked.

As Johnson discovered, reciprocity is as much a critical part of the functioning of the informal financial group, as negotiability (vi) is for successful adoption in cash intensive operating environments. The prepaid business model offered by telcos empowers Mama Biashara by giving her control over how much money to spend on her mobile phone, when to spend it as well as how often. In contrast, banks may penalize the early payment of a loan or impose a rigid payment schedule based on the calender year. Give and take is part and parcel of the community life. Groups help Mama in self control, restraint on spending, planning and saving for goals, together with social support in ritualized form.

Yet, the financial inclusion industry focuses counting the number of bank accounts rather than the number of people accessing one together under some umbrella of cooperation – a self help group or a chama might collectively bank their pool of money for safekeeping.  A group account is not about labels eg. Chama,  or a type of bank account, or the social features in a digital solution. There are rituals, practices and human connections embedded in the sharing of value. Entire cultures revolve around the community spirit and coming together in times of need – harambee, it is called.

When what is measured is what gets done, the financial inclusion industry overlooks all these elements in their goal to sign up each individual with a bank account (vii). No wonder such a high percentage of bank accounts become dormant within a year.

 

Mama Biashara’s perspective: What does financial inclusion mean to the unbanked?

These three myths are very powerful ones and they drive the design and implementation of financial inclusion programmes for the unbanked. Assumptions made by the stakeholders immersed in their formal, structured environments from the outset, when left unquestioned, act as intangible and unseen barriers across the formal/informal economic divide. “Banking the Unbanked” is such a catchy slogan that it took M-Pesa’s success in Kenya to expand the definition of financial inclusion in the latest version of the World Bank’s Findex report. Now, we see digital financial services rapidly becoming the holy grail for reaching the unreached. Yet not a single program or research project has begun from the perspective of their target audience of their aims and objectives. What does financial inclusion mean to Mama Biashara? Is there a need not being met by her existing solutions? What are her current alternatives? Until the informal sector is taken seriously in its own right as a vibrant & dynamic market and operating environment, offering stiff competition for Mama’s few extra shillings, we don’t see any of the technological marvels being introduced as viable or desirable in the long run.

 

Glossary:
ASCA –        Accumulating Savings and Credit Associations
ROSCA –     Rotating Savings and Credit Association
SHG –          Self-help group of mamas with common business interest
Chama –      Informal cooperative society used to pool and invest savings
P2P credit –     peer to peer credit eg mama to mama
B2C credit –     business to consumer credit eg mama to her customers
B2B credit –     business to business credit eg a supplier to mama
MFI –          Micro Finance institution
SACCO –     Savings and Credit Cooperative

 

End Notes

(i) Qualitative interviews on digital currency with rural women micro-entrepreneurs in Nyeri, Kenya in February 2015
(ii) http://aid.dfat.gov.au/Publications/Documents/financialservices-fullstrategy.pdf
(iii) Mobile Finance: Indigenous, Ingenious or Both? http://www.pcworld.com/article/154274/article.html
(iv) One out of four accounts ‘dormant’ as mobile money takes over banking http://www.theeastafrican.co.ke/business/1-in-4-accounts-dormant-as-mobile-money-takes-over-banking/-/2560/2727556/-/he4s34/-/index.html
(v) How Does Mobile Money in Kenya Affect Financial Inclusion? http://www.cgap.org/blog/how-does-mobile-money-kenya-affect-financial-inclusion
(vi) “Payment Strategies for those with irregular income at the BoP” (2009) – The Prepaid Economy project by Niti Bhan (UNIID SEA 2012)
(vii) Financial exclusion http://www.economist.com/news/economic-and-financial-indicators/21648642-financial-exclusion

 

Emerging Futures Lab brings to life concept design of innovative products and services by applying years of immediately actionable primary research in the cash intensive informal sectors of the emerging economies of the developing world. We see opportunities and markets where others see adversity and scarcity. Contact us now if you’re interested in the exciting frontier markets of Kenya, East Africa or elsewhere on the African continent.

Uber’s problems with women’s safety in India – my 2 rupees worth

In its mindless rush for scale, Uber leapt into the Indian market with their “hassle-free” service of hailing a car with a push of a button on your smartphone. I call this mindless because “will it scale” is an unquestioned imperative for a startup, not something that is thought through. Nobody asks should it scale, or, is this the right place to scale? Neither does anyone look at the compromises made, to the brand and to the customer experience, in this drive to scale. Thus, its no different from the mindless growth of an amoeba, responding to the instincts imprinted on its DNA.

I’m due to arrive in New Delhi next week. Would I use Uber? No. I’d rather walk across teh street to the Sardarji sitting in his tent at the local taxi rank and ask him for a car and a reliable driver. It could be for the day or for the week but I’ll insist on the same guy showing up, without extra company in the front seat, and register my home address and phone number with the taxi rank. For additional peace of mind, I’ll walk back across the road to the guardhouse at the entrance to our apartment complex and point out the taxi fellow responsible for driving me around.

In the neighbourhood where our apartment is located, we are recognized as original owners, not newbies, and the local taxi standwallah isn’t going to risk his future business and his reputation if there’s even a peep of complaint from me. The eyes of the community should be sufficient to keep the animal instincts of the average Delhi eve teaser under control. A little further down is the auto rickshaw stand, under the shade of a large tree where the chaiwallah makes his brew. More strangers come and wait here unlike the taxi stand, but one can still spot a regular or two. At least, that’s how it used to work back when I was taking a scooty to work every morning.

In neither case would I think of wandering around after dark, if I was alone in the vehicle.

Uber arrives.

Why do we hear of women taking these cars at night all by themselves?

Things might have changed in the last couple of years since the horrific news of the bus rape in New Delhi, what do I know? So I did a little digging to see if my premise on why Uber was enabling women to lower their barriers to conventional common sense in India.

“To the extent that the Uber brand name induces a sense of security and this is used as a business strategy, a proper legal regime should allow the Indian woman’s strategy to succeed,” source

Because it needs a smartphone, knowledge of English, and an internet connection, is there an implied raising of standards of who’ll show up at your doorstep? Implicit here is that education and data plans imply greater security?

On the other hand, this knowledge hasn’t helped this lady in Chennai whose Uber driver kept trying to ‘cancel trip’ in the middle of a secluded location.

The internet’s explosive growth in India, coupled with smartphones, mobile wallets and e-commerce, seems to have lowered the barriers to services such as these, which probably leads to a greater acceptance of an app driven service along with the perception that it’s somehow “safer” than hailing a regular taxi on the roadside.

Yet, the very same internet has always provided trolls with the anonymity and impunity with which to harass and abuse women without consequence. This element of the web seems also to have now transferred itself onto the app driven sharing economy.

SOS buttons in a context where the police aren’t likely to jump in their vehicles and race over to save you, nor can they be trusted not to molest you, is a technological solution meant for the VCs back home.

Taking a taxi ride is not the same thing as purchasing a book or making a restaurant reservation.  Can you scale trust and local context as instantly as you do an app?

The curious case of Google’s Beba Pay: a mobile payment app that users refuse to adopt

This week, news from Nairobi, that hotbed of mobile money innovation, opened up a Pandora’s box of reflections on payment plans, service design issues and the challenge of technology adoption in the mass markets of the African informal economy. None of these are ‘bad’ things in their own right, but taken together, they have resulted in a perfect storm for innovation planning.

Standard Digital published an article on the 23rd of February, titled “Matatu operators opposed BebaPay“, viz.,

Matatu operators are opposed to the BebaPay — a cashless payment system for commuters. The platform, launched last April by Equity Bank in conjunction with Google, is facing challenges.

A single sentence. Yet when parsed further, it contains many implications for what exactly has been happening in the informal transport sector in Kenya and the potential opportunities as well as possible repercussions for players in the mobile payments space.

The Background

Back in September 2013, the Kenyan government announced a ban on all cash payments for bus fares and this will go into effect on July 1st, 2014.  By January of this year, there were debates by reputed  bloggers on whether this move was even one that could conceivably be implemented realistically speaking, given that top down imposition of a technology has rarely prospered. Kachwanya said,

Yes cashless payment is much better and I personally have campaigned for it  for years. But you can’t say you outlaw cash payment. There things which are good and need to be done but the society needs to evolve before going out right into some of those things. At this point in time cashless payment will be great for some in Kenya, but unfortunately majority of Kenyans are still not ready for such drastic shift. To start with, this should be left for market forces to determine the time and speed of adopting cashless mode of payment and not some sort of directive from the Government.

This is a move to formalize a sector of the informal economy, and conceptually a worthy one where benefits to multiple stakeholders – transport business owners, banks, payment service providers, the tax authorities and the government – are immediate and obvious.  The real world challenges of attempting to bridge the formal and informal economies I will cover in a subsequent blogpost.

The Business Case 

This has the potential to become an extremely lucrative opportunity for service providers and application platform owners, not to mention the intermediary banks. The formalization of an entire industry, public transport, has meant a new scramble for this legislated pie. Safaricom, the service provider behind MPesa, didn’t need investment in developing new services and simply started signing up bus operators and here are the numbers on the potential ROI,

The Economic Survey 2013 values Kenya’s road passenger transport business, which is dominated by matatus, buses, motorcycles (boda bodas) and three-wheelers popularly known as tuk tuks, at Sh205 billion. This means that providers of electronic payment systems as demanded by the Safaricom and Equity Bank stand to potentially earn upwards of Sh2 billion annually assuming a transaction processing fee of one per cent for payments.

And for Google and Equity Bank, who launched their product 6 months earlier, the opportunity is manifold:

Equity Bank said it is targeting the more than 1.5 million Nairobi residents who use public transport daily.

“This system will help eliminate the cost and risk of handling cash. It will also help formalisation of the transport sector because as banks, we can now fund this sector without fear since we will have the financial status statements of the industry players at hand,” said Equity Bank CEO James Mwangi.

The public transport sector is a key economic driver whose growth could power the economy, but has been held back by the disorderly nature of the industry.

Furthermore, stakeholders such as the matatu owners, are said to be pleased with the aspect of the payment system directly depositing passenger fares into their bank accounts, bypassing the crew of the matatu, eliminating opportunity for fraud, theft, corruption and loss of income.

The Technology and Process

From the same article linked above, here are the relevant snippets about BebaPay:

Equity Bank has partnered with global IT giant Google to introduce a cashless commuter fare payment system that involves the use of pre-paid plastic cards to settle public transport bills. The partnership marks Google’s first introduction in Kenya of its Near Field Communication (NFC) technology, which it has been promoting in some developed economies.

The card-based system dubbed BebaPay is based on Google’s NFC technology, which runs on the Android mobile phone operating system. Users will swipe pre-paid cards against android-based smart phones [with a special app] that will be given to public transport customer attendants.

The cards, Mr Mwangi said, will be available free of charge at Equity Bank service agents, where they can also be loaded with money. The cards can also be reloaded with cash through the bank’s mobile banking platform, without incurring additional cost, or through M-Pesa Paybill.

Matatu owners will be able to access the money paid by commuters immediately, and can access records of their bank accounts in real time through a system interface, allowing them to track the inflows from their vehicles.

The public service vehicle operators will be required to have the BebaPay application on smart phones in order to accept payment from commuters. Commuters on their part will receive free SMS receipts once they make payments.

On the look of its, given the context of the regulatory changes in the operating environment, the lucrative opportunity for a successful service and the ease of use and accessibility of the technology, the solution seems like a no brainer. In fact, both MasterCard and Family Bank have announced the impending launches of their own solutions during this past month as well. A scramble in a teacup, one could say.

The Discussion

So why does the news that matatu operators are unhappy with the system continue to make me hesitate to state that its just a matter of time and people are always unhappy with change and everybody will settle down and stop complaining and get used to it by the time the deadline in July rolls around?

The original article quotes some matatu operators as saying that the system leaves them with no cash in hand at the end of the day, or that they end up in the lockup due to some unhappy cop. Additionally, some are ‘losing’ their android smartphones as a way to revert back to cash transactions.

These are all ‘bad’ things – I use the air quotes deliberately as I am not in the habit of making value judgements on observed and existing user behaviour, merely documenting them as elements of the operating environment in which this system must succeed – and from the matatu owner’s perspective, per the article, the new payment systems will eliminate them.

Matatu Owners Association chairman Simon Kimutai, speaking during the launch of the card in April 2013, said the cashless system would help investors in the industry to control their cash flows and reduce losses that they incur from theft by matatu crews.

Yet, in an aside to a tweet by Emrys Schoemaker requesting a comparison of news articles against reality, one does note how everyone seems to be saying the same key talking points. Whether its the public relations person quoted in the very first article, or other major stakeholders in the subsequent ones, the benefits stated are not only all sounding alike but none of them benefit either of the end users – the operators of the transport vehicles and the commuters.

Where is the user’s voice in this huge shift that will impact their daily bread? And what is the benefit to commuter?

This all too common oversight in traditional approaches to product and service innovation, based as they are on opportunities created by top down regulations, is what has been bothering me all day about the news. The implications throughout have been that because commuters will have no choice but to adopt this new system of payment, all the various providers have to do is throw their services out there and make a big fanfare around the launch whilst signing up as many routes as possible.

The reality, which Kachwanya highlights,

There things which are good and need to be done but the society needs to evolve before going out right into some of those things. At this point in time cashless payment will be great for some in Kenya, but unfortunately majority of Kenyans are still not ready for such drastic shift.

is that even while the public transport industry might be regulated into the formal economy using the technology of mobile payments, there is still the rest of the informal economy, on which the majority of the commuter’s depend upon for their income, to take into consideration. And this one, which is being regulated, is one of the main arteries pumping blood into the that system, as matatus transport those informal business women and men to their markets, transport goods and materials and act as a conduit to the hubbub of the hustle.

Should a Google be thinking of phasing in the payment plan, taking behavioural change and the economic operating environment of the majority of those who must use their service into account?

Have these prepaid commuter card services given a thought to the way cash flows in the informal economy and the purchasing patterns of those who make their living within it?

If the matatu operators are refusing to adopt these services, were any alternatives offered in the system to replace the benefits that the existing cash based offered them?

You instantly remove all flexibility from an ecosystem, leaving it rigid and non-negotiable viz.,

“With the system, you cannot be left with some cash at the end of the day to even buy milk since we depend on salary,” said Peter Mwangi, a conductor on Route 33.

Despite aggressive marketing, BebaPay is still struggling with few matatus embracing it. Normally, the conductors and drivers only remit the amount collected from people who board the matatus at initial departure points.

Flexibility* in time and money is the characteristic that distinguishes the informal economy from teh formal for those who manage on irregular income streams from a variety of sources, and this is also why the prepaid business model is adopted by 96% of all mobile phone users on the African continent.*

Given the stakeholders are the government, the banks, the transport owners and the mobile payment service providers, whose responsibility is it to understand the elements of the informal economy that make it work and seek to identify the touchpoints to bridge the gap between the formal and informal successfully?

When a service fails to be adopted, such as BebaPay, is it the fault of Google’s service design process or Equity Bank’s? Is the problem with marketing or is it with “corruption in the system”?

Or, as I see it, are those the easy answers to this problem and  a goodly dose of contextual understanding and user research to support the desk research and boardroom strategies could have offered insights on how to introduce formalization to a hitherto informal yet extremely critical industry?

I’ll explore both the issues from the point of view of the informal (or prepaid economy) and service design and innovation for these environments in subsequent posts.

*From my 5 years of user research documented here.

Systems thinking and the mobile platform for economic impact and wealth creation

I have been meaning to write this post for quite some time now, percolating as it has in the back of my mind but it was Mark Kaigwa who finally spurred this writing. This is not all about MPesa, though it will take a look at some of the issues why its runaway success in Kenya has not yet been duplicated elsewhere, beyond the obvious brought up in most articles of “its the banking regulations” or “its the distribution network”.

Much credit of the fundamental thinking that will underlie this post’s premise must go to Wambura Kimunyu with whom I’ve discussed these issues on Twitter.  Furthermore, I believe that if we can frame the problem (and thus the potential solution) correctly, we may be onto something that could in fact make a big difference to the many ways  we attempt to enable and support social and economic development.

Some background

The topic today is the mobile phone (which I’ll also refer to as the mobile platform, since the phone aspect is but a feature of this handheld device) and its role among what is popularly known as the BoP or those at the Base or Bottom of the Pyramid, yet when I think about the very many pilot programs and attempts to spur development via the mobile platform or, as in the case of MPesa, to launch game changing mobile money transfer et al systems elsewhere, what immediately comes to my mind is a reflection on the issues that plagued the analysis of the success of Asus’ eeePC when it was first launched back in late 2007.

We take very affordable and very portable netbooks for granted today but back then in time, the category did not exist until Asus launched their 7″ linux based, open source, rugged and durable beauty for around USD 400.  It was referred to as a “subnotebook” back then and caused much head scratching among the developed world’s leading lights, even as it spurred all manner of competitors to focus on the two most obvious elements of its perceived success criteria – “price” and “form factor”.  Whereas I argued, that what made the Asus eeePC so successful was its fundamental premise – to be an easy to use affordable device squarely aimed at emerging markets and how it was this positioning that drove every other element, including its form factor and price. By focusing only on the obvious, without taking the holistic thinking and underlying value proposition into consideration, competitors were overlooking many of the details that supported its initial success.

Some framing

I see something similar happening with one of the most obvious success stories in the “Mobile as a platform for economic development of the BoP” bandwagon.  MPesa shows up in most analyses of “Business models or mobile thingies that are helping the poor” reports churned out so faithfully by researchers everywhere, yet the question arises, should it be even considered in that sandbox of things that help the poor in the first place? And by doing so, are we overlooking some of the factors of what makes it work so well in Kenya as well as misinterpreting that it was meant to be used only by the poor?

When the first reports of MPesa’s hiccups in South Africa came to light, it was then that Wambura first tweeted about the lack of the banked that were critical to spur the unbanked and thus the overall uptake of the service.  That is, if the MPesa ecosystem did not have enough banked people with money to circulate, then there wouldn’t be enough unbanked nor would there be enough money to circulate etc etc leading to the challenges that they are facing in South Africa now.  You needed the banked to bank the unbanked.  It sounded counter intuitive to me back then but over time as I observed many different facets of this activity across different strata in Kenya it came to me just how much sense this made and also how relevant this aspect was for the success of anything that should be considered as a means to improve incomes among the BoP when using the mobile platform (or otherwise, to be honest).

Why so?

Some systems thinking

That is, for any solution designed to enable the flow of wealth – mobile money transfer for example – or improve wealth creation at the BoP – it was not enough to simply target the poor alone. It would not work as a “Solution for the BoP” primarily because the BoP do not have any liquidity,  even if they do indeed have assets especially in rural areas, or they do not have the cash for it to flow through the system in the first place. Thus solutions aimed at improving economic activity for the poor needed ‘non poor’ actors in the ecosystem in order to inject cash into the system and thus make it flow (and one hopes, grow).

Taking this thought one step further, MPesa – assessed as a holistic ecosystem for financial transactions – has been so very obviously successful in the Kenyan context primarily because it is used by everyone, regardless of their economic standing or bankedness (if I may coin a non word).  In fact I believe that the number of banked actually surpasses the number of the unbanked – there is a link there that right now is not in the scope of this post but we can look at it later.

And thus, when ‘Solutions on the mobile to help the BoP or poor’ are considered, they should be looked at in terms of the complete ecosystem including the critical question of Where will the money come from into the system in the first place?  Without which, they will limp along as a cash poor system with little wealth to circulate, achieving nothing for the BoP in question. Look at this article on MPesa repositioning itself in South Africa towards higher income brackets and away from the original target audience of poor rural women. QED.

Solutions meant to improve economic conditions for the BoP cannot be focused only on the BoP.

Rather the focus needs to shift to complete ecosystems that fill a vacuum of need – usually in infrastructure or services – that include actors from differing socio economic strata in order to make a viable difference to larger population involved.  Not only is MPesa a clear example of this framing – it filled the vacuum of “how to securely and affordably send money” – but it did so for everyone and anyone who wanted to do so.

Similarly, when I consider my favourite example of the Mumias Sugar Company and their payroll management pilot program for their daily wage sugar cane cutters, I see the same potential for a greater impact on social and economic development for the lower income demographic involved in this system. The solution is one that is win win for all stake holders – from the company who doesn’t need to send armed guards with cash into the fields to the workers who now not only have savings accounts but don’t need to carry lumpsums of cash around with them on payday.

I also hear that real time inventory management and other enterprise level solutions for supply chain management are also moving onto the MPesa/mobile platform in Kenya – again involving the tiniest duka as well as the big name manufacturers or distributors.  Again we can see the potential impact on inventory management and thus, cash flow, even at the bottom of the retail pyramid, where its most critically needed and we can project the potential that it will improve the economic standing or at least help smoothen the variability of income streams that these smallest players in the informal economy require.

Will all stakeholders benefit? Yes. And will the members of the ecosystem who happen to fall into the so called BoP category benefit? Most likely. And more likely than if only the lowest segment was involved in a system of this sort rather than participating in the larger ecosystem of buyers and sellers.

Bottom line

Bringing all this back to the framing of the solution space or rather, the analysis of the success factors, I believe that a simple shift away from seeing only the obvious – mobiles! money! BoP! –  system level solutions that fill critical infrastructural and service gaps in locales where there are few or inadequate alternates and that serve many including the BoP can and will do far better to improve the economic wellbeing across the board of society that those that focus on one demographic alone.

Note: This was the original post that inspired the editor’s version published on Afrinnovator.

M-PESA and the service innovation framework (review)

A former student of mine just mailed me this article “Extracting Key Lessons in Service Innovation” (pdf) by S.Wooder and S. Baker, recently published in the Journal of Product Innovation Management, January 2012 edition. Here is the abstract of the article:

This paper describes how Sagentia—working with Vodafone, Safaricom, and other organizations—played a significant role in the creation and delivery of a landmark mobile money transfer and payment service for emerging markets, starting in Kenya. In this profile we examine the organization aspects and approach that contributed to the success of the service: the lessons we learned as the technology provider and how the experience has informed and strengthened our service innovation processes.

Reading through, what I found most valuable among the basic principles so simply and clearly articulated, was this insightful description of service innovation, as pertaining to the ways that a human centered design innovation team can work to improve the customer experience for any company, large or small:

What Is Service Innovation? Creating and Delivering Value

We are familiar with service innovation examples such as music download, loyalty programs, franchise chains, ticket/check-in kiosks, and online tax returns.

Service innovation can be described as a combination of technology innovation, business model innovation, social-organizational innovation, and demand innovation, with the objective of improving existing services (incremental innovation), creating new value propositions (offerings), or creating new service systems (radical or transformational innovation) (IfM and IBM, 2008). The key components of service innovation can be distilled down to “participative” value delivery; […]

So if the service is considered to be:

• something that may or may not entail physical product delivery or consumption
• a value delivery mechanism that connects the enterprise to the customer
• the combination of a value proposition, a delivery mechanism, and a customer’s experience

Then service innovation is simply innovation applied to one or more of the following areas:

• new concepts and/or value propositions
• new delivery mechanisms and/or business models
• new experiences

[…] Successful service or product innovation encompasses progress from the creative act (the so-called fuzzy front end) to the commercialization act (execution) and beyond that to sustainability and evolution of the innovation. Our simple framework for service innovation is shown in Figure 3

And they share with us the mapping of MPESA on to this service innovation framework.

The authors conclude their informative article with the following words:

Key lessons that were highlighted by our experience with M-PESA include:

• Learning in a detailed sense the needs of users in new markets and ensuring that it is possible to implement these needs and requirements as part of a pilot process;
• “Keeping it simple”; particularly in the early stages of the service, it is important to focus on a small set of compelling, marketable functions and features;
• Ensure that flexibility and agility, the ability to react and to respond to changes in the business model, are designed into the system; and
• For a service to succeed, it requires a critical mass of users as soon as possible; identifying mechanisms to motivate users to take up the service is an important part of the service innovation process.

The results of the study cannot claim to be generally applicable; however, it has allowed the “usefulness” of the conceptual stages in the service innovation framework to be empirically tested in a real-world example, and the vulnerabilities and strengths are better understood as a result.

This post was published previously in December 2011

M-PESA and the service innovation framework (extract)

A former student of mine just mailed me this article “Extracting Key Lessons in Service Innovation” (pdf) by S.Wooder and S. Baker, recently published in the Journal of Product Innovation Management, January 2012 edition. Here is the abstract of the article:

This paper describes how Sagentia—working with Vodafone, Safaricom, and other organizations—played a significant role in the creation and delivery of a landmark mobile money transfer and payment service for emerging markets, starting in Kenya. In this profile we examine the organization aspects and approach that contributed to the success of the service: the lessons we learned as the technology provider and how the experience has informed and strengthened our service innovation processes.

Reading through, what I found most valuable among the basic principles so simply and clearly articulated, was this insightful description of service innovation, as pertaining to the ways that a human centered design innovation team can work to improve the customer experience for any company, large or small:

What Is Service Innovation?  Creating and Delivering Value

We are familiar with service innovation examples such as music download, loyalty programs, franchise chains, ticket/check-in kiosks, and online tax returns.

Service innovation can be described as a combination of technology innovation, business model innovation, social-organizational innovation, and demand innovation, with the objective of improving existing services (incremental innovation), creating new value propositions (offerings), or creating new service systems (radical or transformational innovation) (IfM and IBM, 2008). The key components of service innovation can be distilled down to “participative” value delivery; […]

So if the service is considered to be:

• something that may or may not entail physical product delivery or consumption
• a value delivery mechanism that connects the enterprise to the customer
• the combination of a value proposition, a delivery mechanism, and a customer’s experience

Then service innovation is simply innovation applied to one or more of the following areas:

• new concepts and/or value propositions
• new delivery mechanisms and/or business models
• new experiences

[…] Successful service or product innovation encompasses progress from the creative act (the so-called fuzzy front end) to the commercialization act (execution) and beyond that to sustainability and evolution of the innovation. Our simple framework for service innovation is shown in Figure 3

Service-Innovation-FrameworkAnd finally, they share with us the mapping of MPESA on to this service innovation framework.

mpesa matrix

The authors conclude their informative article with the following words:

Key lessons that were highlighted by our experience with M-PESA include:

• Learning in a detailed sense the needs of users in new markets and ensuring that it is possible to implement these needs and requirements as part of a pilot process;
• “Keeping it simple”; particularly in the early stages of the service, it is important to focus on a small set of compelling, marketable functions and features;
• Ensure that flexibility and agility, the ability to react and to respond to changes in the business model, are designed into the system; and
• For a service to succeed, it requires a critical mass of users as soon as possible; identifying mechanisms to motivate users to take up the service is an important part of the service innovation process.

The results of the study cannot claim to be generally applicable; however, it has allowed the “usefulness” of the conceptual stages in the service innovation framework to be empirically tested in a real-world example, and the vulnerabilities and strengths are better understood as a result.