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  • Income & Consumption: Many rural households manage multiple, irregular, and seasonal income streams (e.g., farming, casual labor, etc.). Health: Unexpected doctor visits or surgery require payments in cash, and can cost between 7-66% of annual household income. Enterprise Growth: For micro business and growing farms, working capital loans and savings are needed to buy equipment, purchase inventory, and invest in customer outreach 1 . Protection from Bumps and Shocks: The poor try to insure against unexpected illness, economic crises, or natural disasters by saving money and diversifying their income and assets. Life Events: Weddings, rituals, or deaths require lump sums of money as they can cost 3-20% of annual household income and can be unexpected. Education: People need lump sums of money available two to three times per year to pay for their children’s school tuition, textbook costs, and exam fees. Source: Chen, M. and Snodgras, D. “ Managing Resources, Activities and Risk in Urban India: The Impact of Sewa Bank ” (2001); Cohen M. “ Microfinance, Risk Management and Poverty ” (2001). 1 Accessing working capital loans or building up savings are especially important for enterprise growth, because purchasing raw materials and supplies in larger volumes can lead to lower prices.
  • Manage GRANULARITY Reduce customer access costs (travel, waiting time) by placing outlets closer to people. De-risk: Use cell phones to reduce set-up cost per outlet. Make ongoing costs variable by paying agent commissions per transaction. Drive minimum agent profitability in the face of small local customer bases by meeting the broader payments needs of the community. Manage NETWORK SCALE EFFECTS Supply side: Exploit large fixed/low variable cost structure by driving volume. Volume reduces unit cost per transaction. Demand side: The value for an individual of being part of the network increases as the number of network end-points increases. Number of users drives customer’s willingness to pay per transaction. Manage COMPLEXITY There is constant tension between the need to maximize: Economies of scale: exploiting fixed-cost nature of software platforms Economies of scope: offering multiple & evolving products to maximize customer relevance & value Simple cost allocation rules can make lower value customers appear unprofitable. Exception handling is costly.
  • Manage GRANULARITY Reduce customer access costs (travel, waiting time) by placing outlets closer to people. De-risk: Use cell phones to reduce set-up cost per outlet. Make ongoing costs variable by paying agent commissions per transaction. Drive minimum agent profitability in the face of small local customer bases by meeting the broader payments needs of the community. Manage NETWORK SCALE EFFECTS Supply side: Exploit large fixed/low variable cost structure by driving volume. Volume reduces unit cost per transaction. Demand side: The value for an individual of being part of the network increases as the number of network end-points increases. Number of users drives customer’s willingness to pay per transaction. Manage COMPLEXITY There is constant tension between the need to maximize: Economies of scale: exploiting fixed-cost nature of software platforms Economies of scope: offering multiple & evolving products to maximize customer relevance & value Simple cost allocation rules can make lower value customers appear unprofitable. Exception handling is costly.
  • Manage GRANULARITY Reduce customer access costs (travel, waiting time) by placing outlets closer to people. De-risk: Use cell phones to reduce set-up cost per outlet. Make ongoing costs variable by paying agent commissions per transaction. Drive minimum agent profitability in the face of small local customer bases by meeting the broader payments needs of the community. Manage NETWORK SCALE EFFECTS Supply side: Exploit large fixed/low variable cost structure by driving volume. Volume reduces unit cost per transaction. Demand side: The value for an individual of being part of the network increases as the number of network end-points increases. Number of users drives customer’s willingness to pay per transaction. Manage COMPLEXITY There is constant tension between the need to maximize: Economies of scale: exploiting fixed-cost nature of software platforms Economies of scope: offering multiple & evolving products to maximize customer relevance & value Simple cost allocation rules can make lower value customers appear unprofitable. Exception handling is costly.
  • Manage GRANULARITY Reduce customer access costs (travel, waiting time) by placing outlets closer to people. De-risk: Use cell phones to reduce set-up cost per outlet. Make ongoing costs variable by paying agent commissions per transaction. Drive minimum agent profitability in the face of small local customer bases by meeting the broader payments needs of the community. Manage NETWORK SCALE EFFECTS Supply side: Exploit large fixed/low variable cost structure by driving volume. Volume reduces unit cost per transaction. Demand side: The value for an individual of being part of the network increases as the number of network end-points increases. Number of users drives customer’s willingness to pay per transaction. Manage COMPLEXITY There is constant tension between the need to maximize: Economies of scale: exploiting fixed-cost nature of software platforms Economies of scope: offering multiple & evolving products to maximize customer relevance & value Simple cost allocation rules can make lower value customers appear unprofitable. Exception handling is costly.
  • Manage GRANULARITY Reduce customer access costs (travel, waiting time) by placing outlets closer to people. De-risk: Use cell phones to reduce set-up cost per outlet. Make ongoing costs variable by paying agent commissions per transaction. Drive minimum agent profitability in the face of small local customer bases by meeting the broader payments needs of the community. Manage NETWORK SCALE EFFECTS Supply side: Exploit large fixed/low variable cost structure by driving volume. Volume reduces unit cost per transaction. Demand side: The value for an individual of being part of the network increases as the number of network end-points increases. Number of users drives customer’s willingness to pay per transaction. Manage COMPLEXITY There is constant tension between the need to maximize: Economies of scale: exploiting fixed-cost nature of software platforms Economies of scope: offering multiple & evolving products to maximize customer relevance & value Simple cost allocation rules can make lower value customers appear unprofitable. Exception handling is costly.
  • Transcript

    • 1. Four Lessons from the Gates Foundation’s Mobile Money Portfolio Amolo Ng’weno and Dan Radcliffe May 2010
    • 2. Punza’s Cash Flows Income Expenses Collins, Murdoch, Rutherford, Ruthven Portfolios of the Poor Revenue Expenses
    • 3. All Lives Have Equal Value
    • 4. FSP’s Strategy in a Nutshell The poor demand savings services and are bleeding money using inadequate tools Branch-based models are too expensive to bring savings services to the poor Agent-based models are the only way to take enough cost out of the equation…and these must be built on the back of an e-payment system
    • 5. Lesson #1: The “WOW FACTOR”
        • From a customer’s perspective, this is a screwy system
        • (S)he has every incentive to wait
      • Focus first on the service that solves such a big cash pain point, that customers say:
        • “ Wow – I’m willing to try that service TODAY”
      • Does savings have that “Wow factor?”
      • Remote payments?
        • Very difficult to move cash across distances
        • Immediate verification
    • 6. Lesson #2: Mobile Money is a Retail Play
      • Extensive network of stores that can be converted into cash-in/out points
        • Hungry channel – mobile money commissions won’t be that high
        • Two-way liquidity management
        • Active, on-site store supervision
        • Does this require a dedicated mobile money channel partner (e.g. Top Image)?
    • 7. Lesson #3: At first, everything works against you
        • Network effects
        • Chicken and egg problem (two-sided market)
          • Trust
      • Then, once you reach a critical mass of customers, everything turns in your favor:
        • Customers want to sign up
        • Existing customers pull-in new customers
        • Stores want to sign up
    • 8. Lesson #4: The “Big Push” Hypothesis
      • You can’t build these systems incrementally
      • At some point, to break through these barriers, you must dive into the deep end
        • HEAVY above-the-line marketing (TV, radio) – PULL
          • Create a buzz
          • Build trust in a new system
        • Grease the channel ($1.50 per registration) – PUSH
          • Ensure stores are aggressively promoting the service (it’s an intangible service in a cluttered store)
          • Requires deep pockets ($20m-$30m)
    • 9. THANK YOU

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