Opportunities in the Ghananian payments market


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  • Not an academic exercise but an attempt to understand the demand side and identify opportunities and challenges in the domestic payments market’Household, not an adult study.
  • Remote payments only, calculation of valuation is based on median payment amounts and frequencies for each type of payment
  • Aggregated based on verbatim answers from all 1003 PIEs; 22% of those households with a secondary source of income are traders also.
  • Orange: # of households sending money from this origin/location to friends and familyBlue: # of households sending money TO these destinations/locations from somewhere else
  • Tamale and Yendi are significant markets in the North for business remittances; initially identified in focus groups in Nima
  • Larger value of remittances for business comes out of working capital and not necessarily from income;3 adults means if you can get one adult to use branchless banking then may be able to show other adults how to use
  • Information on location of agents is available for access by MM or bank staff as well as agents and end-users
  • Forms of savings =Deposit it in commercial Bank, Deposit it in rural Bank, Deposit it with NGO/MFI, Keep it with a cooperative, Keep it with a susu, Keep it with input supplier, Keep it with savings group, Keep it at Home , Store it on my cellphone, Invest in business, Buy Building materials, livestockTo liquidate in case of necessity
  • GCB is market leader in domestic payments market
  • 201-250: n=52101-150: n=9676-100: n=135251+: n=223151-200: n=242
  • Unbanked using GCB services; GCB is the financial inclusion bank
  • Formal: banks, MM, e-Zwich, post office, bus companiesInformal: drivers, friends and family, susu
  • Value of stolen or lost money is significant; may explain why people use informal methods for smaller amounts
  • Impact of recipient on choice is different than Philippines study BFA undertook for Gates Foundation
  • Still a significant number of non-users of mobile money cite cost as a reason for not choosing MM
  • The cost of accountholders sending money to non-accountholders is cheaper when using mobile money; October 2011 prices
  • Regardless of purpose or method
  • Regardless of purpose or method.
  • Multi-response; privacy is an important issue
  • Of those who stopped using direct:3 switched to GCB1 switched to MM4 switched to family and friends1 switched to another bank1 stopped making payments/sending money
  • HH upkeep n=242Medical expenses n=113Education n=212Family events n=122Business n=109
  • Plenty of room for both banks and MM to take market share from households who pay their bills and school fees over-the-counter, but direct payers may choose this method to also negotiate problems with electric or water company and partial pay school fees
  • - We think some children live with family elsewhere to attend school Of those 212 who send money to F&F for Education:172 (81%) have children (under 18 years) in their household, send money to F&F for education, and pay school fees locally39 (18%) do not have children in their household, send money to F&F for education, and pay school fees1 (1%) have children in their household, send money for education and do not pay school fees
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  • Opportunities in the Ghananian payments market

    1. 1. Moving Money:Opportunities in the Ghanaian Payments Market This research was commissioned to Bankable Frontier Associates April 2012
    2. 2. Objectives of this household study• Analyze how urban households move money and why• Identify actionable insights for branchless banking providers Opportunities in the marketplace
    3. 3. How did we research consumers ofpayments 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)
    4. 4. 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 secondarysources of income by interviewing the primary income earner or other main household budgeter. We createda stylized household cash flow analysis based on this information.
    5. 5. The Demand-Side StoryChapter 1: Market opportunity overviewChapter 2: Driving usage: Improving formal payment servicesChapter 3: Driving usage: Converting informal payersChapter 4: Why mobile money has not capitalized on itsadvantagesChapter 5: Market opportunities: Key segments to targetChapter 6: Opportunities and challenges
    6. 6. Urban Ghanaians make payments of ₵784 (US$470m) a mmonth The value of the market opportunity is vast Domestic Bills Loan remittances payments payment s ₵277m ₵99m ₵26 ₵250m ₵55m friends and school m ₵78m business elec. family fees water 10% 31% 7% 34% 16% 3% US$1=₵1.67*Calculation excludes households whose only method is direct face-to-face All figures ₵payments and excludes the ₵111.3m monthly urban housing rental market.
    7. 7. More households pay bills & school fees, but householdsremit larger amounts to family and for business 1.7m households send avg. ₵173 to family and friends & 1.2m send 2.8m households avg. ₵230 for business pay for electricity USD 1=₵1.67 n=1003
    8. 8. Households with these primary livelihoods represent a market size of ₵531m (US$318m) per month Traders make the most payments, but teachers pay more than other business people Traders (₵267m) Teachers (₵92m) Business people (₵88m) Farmers (₵84m) All figures ₵ Calculation excludes households whose only method is direct face-to-face payments.
    9. 9. More money is sent to Accra than from Accra …when sending money to family and friends Origins where this est. # of surveyed… urban households are sending money1 KUMASI 235,2002 ACCRA 168,0003 OBUASI 151,200 Origins4 ASHIAMAN 134,4005 HO 117,600 Destinations Est. # of urban to these households destinations from sending surveyed areas money…1 672,000 ACCRA2 319,200 KUMASI3 CAPE COAST n=526 218,400 Multiple responses4 184,800 KOFORIDUA allowed5 100,800 NSAWAM
    10. 10. The origins of remittances for business are dispersed …but 5 locations are by far the most common destinations Origins where est. # of urban surveyed… households are sending money1 KUMASI 142,0802 OBUASI 118,4003 ASHIAMAN 118,4004 ACCRA 118,400 Origins5 HO 82,880 Destinations Est. # of urban to these households destinations from sending money surveyed areas from elsewhere1 520,960 ACCRA2 355,200 KOFORIDUA YENDI n=3753 236,800 Multiple4 177,600 GREATER ACC responses5 153,920 TAMALE allowed
    11. 11. Households also send money within cities At least 72,000 households send money At least 48,000 to friends and family and households send 64,000 households send money to friends and money for business family within Kumasi purposes within Accra“Beat the traffic: use mobile money to send your money safely across town”
    12. 12. 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 ₵27per payment • Sends an average of ₵196 to family & friends or for business, 1 time per month • Owns a cell phonen=1003
    13. 13. In fact, at least one member owns or has access to acell phone in 96% of urban households 64% of Primary Income Earners (PIEs) have more than one SIM 50% of PIEs spend ₵1 on airtime per -5 week 66% of PIEs send airtime to someone else Does this show that people can also learn to use mobile money? n=1003
    14. 14. I-banking on data-enabled cell phones for the averageurban household may not be too far around the corner 23% of PIEs (736,000) have an email or Facebook account 78% of those who have an account are between 18 and 34 years of age 63% of these email or Facebook account- holders have completed high school, compared with 34% of the overall sample 43% of those who have an email or Facebook account say they access it on a cell phone n=231 Cash in – cash out points could be promoted on Facebook
    15. 15. Households save cash in the house At least 34% of urban households have cash savings at home Only 15% of all households have 91% of all households set aside savings or access to at least one ATM card that liquid assets of some form; 27% make they use at least once a month loan payments 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 • 80% of urban households have access to at least one bank account • 43% of households have savings in4% of households use an e-Zwich card a commercial or rural bank n=1003
    16. 16. The Demand-Side StoryChapter 1: Market opportunity overviewChapter 2: Driving usage: Improving formal payment servicesChapter 3: Driving usage: Converting informal payersChapter 4: Why mobile money has not capitalized on itsadvantagesChapter 5: Market opportunities: Key segments to targetChapter 6: Opportunities and challenges
    17. 17. 76% of all households who make payments have used atleast one formal payment method in the past year n=748 1.8m urban households have used a formal method in the past 12 months
    18. 18. Banks are the preferred payment method The use of informal services is less than anticipated 41% of bank users go to Active usage is defined as GCB only; having used in the last 12 31% use other banks only; months 29% use both 59% of MM user households used MTN, only; 7% have only used Airtel and 10% have used Tigo n=748 Multiple responses allowed
    19. 19. Thanks very much for joining us in Ghana; we really appreciated your insights, advice and of course your company. Usage of MTN Mobile Money is highest among the three MM schemes Active usage is defined as having used in the last 12 100% months 90% 80% 70% 60% 50% 40% 30% 20% 14% % Aware 4% 5% 10% % Using 0% n=748 Multiple responses allowed
    20. 20. The income bands and usage tendencies of urbanhouseholds GCB is the predominant method across all income segments 44% use GCB 39% use other banks 17% use MM ₵251+ 52% GCB 38% other banks 21% MM 44% use GCB 35% use other banks 17% use MM 49% GCB 41% other banks 14% MM 43% use GCB 43% use other banks 17% use MM n=1003
    21. 21. Households prefer using banks to send almostany amount size …but especially when sending large and very large amounts 22% of GCB users do not have a bank account n=748
    22. 22. Security drives usage of all methods Over 60% choose formal methods because they are secure Why did your household choose the method(s) you use? Multiple responses allowed
    23. 23. People say they are worried about carrying cash 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 n=1003…and 8% of users of informal methods and 5% of those who pay person- to-person have experienced money lost or stolen
    24. 24. Consumers tell stories about the risks of carrying cash Adelaide travels to purchase tomatoes inCharity lost her mother in bus accident Burkina Faso, carrying as much as ₵11,000along the Kumasi-Accra road and, to because banks are not open early enoughcompound the loss, Charity received her to withdraw the money. She has heard of other groups who have been robbed. Hermother’s body without the ₵18,000 she group is careful: “We do not travelwas carrying. during the night and we keep theNow she travels with a check and day we will travel a secret ascashes it as soon as GCB opens. much as possible.” BB would make life a lot easier for these women
    25. 25. Security is necessary but not sufficient Why did your household choose the method(s) you use? Users find mobile money to be as secure as banks Multiple responses allowedTrust to send large amounts is also a significant decision point
    26. 26. The paradox: users trust mobile money, but non-users do not The other banks also have a problem with lack of trust Reasons for not choosing the method in question Households who do not use MM cite lack of trust as the #2 reason Multiple responses allowed
    27. 27. Households also dismiss methods, notably other banks andMM, that are inconvenient for the sender and recipient Reasons for not choosing the method in question 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
    28. 28. Banks suffer from the perception of high costsNon-users aware of other banks say these formal services are expensive Reasons for not choosing the method in question What does this mean for mobile money? Multiple responses allowed
    29. 29. 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
    30. 30. And no one likes payment systems unavailable Problems that users have with formal methods they use Agent training and selection issues? Providers with problems withconvenience & accessibility & an unreliable system will behard-pressed toexpand market share.
    31. 31. The Demand-Side StoryChapter 1: Market opportunity overviewChapter 2: Driving usage: Improving formal payment servicesChapter 3: Driving usage: Converting informal payersChapter 4: Why mobile money has not capitalized on itsadvantagesChapter 5: Market opportunities: Key segments to targetChapter 6: Opportunities and challenges
    32. 32. Households use family, friends and drivers to send moneyto family and friends, but not often for business purposes …and they prefer to pay their bills and school fees directly n=383 Multiple responses allowed
    33. 33. Nevertheless, 65% of those who use informal methodsalso use formal methods, primarily banks This segment may be converted to branchless banking n=383
    34. 34. Informal payers choose family and friends:They are low cost and secure for sending small amounts Why did your household choose the method(s) you use? “Low transaction fees” appears to be the primary reason households using informal methods choose those over formal methods. Mobile money can compete. n=383
    35. 35. Mobile money users say it is secure and haslow 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
    36. 36. Informal payers perceive banks to be inconvenientand costly Why don’t you use this method? n=383 Multiple responses allowed BB providers may capitalize on this opportunity by realizing their potential convenience advantage
    37. 37. Converting informal users to mobile money is a strategic marketing challenge Drivers and susus are vulnerable informal providers in the payments market A direct messaging campaign targeted at users of drivers and susus and those that have stopped using them may be effective Also, 26% of The top 3 reasons why households using households stopped using the bus companies havemethods are that the money was had problems with lost, they did not feel safe hidden fees using it or the money arrived too late or was delayed.
    38. 38. Summary: Capitalizing on the opportunities ofbranchless banking Opportunities ChallengesUsers feel as secure In contrast, non-users ofabout mobile money as mobile money are skepticalthey do about banks and do not trust itGCB benefits from Mobile money and otheraccessibility, and bodes banks suffer from perceivedwell for BB providers that inconvenience andcan achieve high inaccessibilityaccessibilityNon-users perceive banks But users of family and– even GCB – to have friends say this method ishigher transaction fees cheaper than mobile moneythan mobile money
    39. 39. The Demand-Side StoryChapter 1: Market opportunity overviewChapter 2: Driving usage: Improving formal payment servicesChapter 3: Driving usage: Converting informalChapter 4: Why mobile money has not capitalized on itsadvantagesChapter 5: Market opportunities: Key segments to targetChapter 6: Opportunities and challenges
    40. 40. Above the line marketing has not translatedinto high usage of mobile money 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 n=748 Multiple responses allowed
    41. 41. And even having registered accountholders has not translated into usage Mobile money Banks n=673 n=729 19% of households aware of at least 1 MM MM scheme are 53% of households aware Usersregistered and using of moving money through 19% banks have access to an at least 1 MMscheme in the last 12 Bank account and have used a months Reg. non- Users bank in the last 12 months users 53% 19% Neither Dormant registered accounts nor users 29% 62% Non- users 18%
    42. 42. Above the line advertising is effective at raisingawareness of payment services… How would your household likely hear about a new payment service or branch opening? Multiple responses allowed
    43. 43. …but below the line marketing would be more effectiveat driving usage Family and friends tell households which method to use How did your household learn about this method that you use? Multiple responses allowed
    44. 44. Incentivize security-conscious, price sensitiveGhanaians to use mobile money Putting social networks to work and marketing via word of mouth Link specials on airtime for getting family to use mobile money: if you can send airtime, you Community can use mobile money demonstrations in and buy discounted markets and public airtime at the same time places to promote trust87% of households said in branchless bankingthey use methods that and learn how to use itthey learned about from to pay bills, store valuefriends and family and send money
    45. 45. MNOs may counter low trust by stressing the similaritybetween MM and airtime transfers in their marketing 66% of households have sent 96% of household airtime to someone else members own or have access to a cell phone“Did you know that ifyou had bought the “Did you know it’s thisairtime you just sent via easy to actually sendMM you’d have been money as well?”able to send X% morefor free?” n=1003 Can MNOs message airtime senders about mobile money at the time of transaction?
    46. 46. And there may be groups interested specifically in branchless banking Almost 50% of all 45% go get more households think that cash when carrying receiving a SMS is adequate ₵10 or less proof of payment for utility and school fee payments 23% of households use ATMs: Likes: ATMs are always open At least 34% ofDislikes: ATMs can’t take savings deposits households have cash and systems unavailable n=1003 savings at home
    47. 47. The Demand-Side StoryChapter 1: Market opportunity overviewChapter 2: Driving usage: Improving formal payment servicesChapter 3: Driving usage: Converting informalChapter 4: Why mobile money has not capitalized on itsadvantagesChapter 5: Market opportunities: Key segments to targetChapter 6: Opportunities and challenges
    48. 48. Market opportunity #1: Households do “send moneyhome” 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 66% of these PIEs have but live in Ashiaman or Accrafamily in other urban areas
    49. 49. Send money home faster, cheaper and safer Almost all this remittance is for family obligations – use this in BTL marketing n=526 Multipleresponses allowed 69% of households send money to family and friends for one purpose
    50. 50. Households send money to family andfriends at least once a month Seasonal and for school fees Regular and frequent n=526 Emphasize the convenience of regularly sending money from wherever you are in a trusted manner
    51. 51. MM is secure for sending large amounts regularly to the ones you love58% are sending these large amounts to Accra at least once per month 62% This finding may be important if the regulator contemplates tiered KYC n=201
    52. 52. Market opportunity #2: 40% of all monthly remittances forbusiness purposes are made by traders, teachers or farmersAll households send a total of ₵250m monthly for business purposes Total of ₵111m (US$66.5m) per month by these 3 occupations The average household with these occupations sends ₵230 for business each month
    53. 53. Customer opportunity example: trader- households are a key segment 44% of trader-households use GCB Income ranges of 39% use other banks Trader-households trader-households 17% use mobile money Cite slow serviceand lack of security 86% of trader-households have a bank 32% account as top reasons why ₵251+ they do NOT use GCB 10%This is an opportunity ₵201250 - to attract traders to mobile money 28% ₵151200 - 53% (528) of households reported having no second 12% ₵101150 - source of income, but 22% (219) of those households that do are trading 17% ₵76100 - Traders want to do business, even when the banks are closed
    54. 54. 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?
    55. 55. Bills payments opportunity: The vast majority of urbanhouseholds regularly pay bills and school fees 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 n=748 Multiple responses allowed
    56. 56. The vast majority of urban households pay large,regular amounts for school fees three times a year Amount paid in school fees is 77% per txn greater than the amount paid for electricity ₵35 ₵136 ₵78 USD 1=₵1.67 n=1003
    57. 57. Plus, 40% of households sending money to family andfriends do so for education 44% of these households send money several times a year……and 40% of these households sendmoney at least once a month Remind households to securely pay school fees AND send money to other family members for education
    58. 58. Of those households who send money for education… Families help each other out to pay school fees 81% of these households have Children in children in the the household, send 18% of these household money for education households and pay school feessend money for 1% education and 81pay school fees %but do not have Pay Send children in the school money for 18% household fees education
    59. 59. The Demand-Side StoryChapter 1: Market opportunity overviewChapter 2: Driving usage: Improving formal payment servicesChapter 3: Driving usage: Converting informalChapter 4: Why mobile money has not capitalized on itsadvantagesChapter 5: Market opportunities: Key segments to targetChapter 6: Opportunities and challenges
    60. 60. Findings are opportunities –and challenges1. 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 dominant3. ATL raises awareness, but people say they use what their family and friends use4. 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.
    61. 61. …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?
    62. 62. 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
    63. 63. 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
    64. 64. Capture a greater share of the payments market bygetting BTL messaging right to overcome paradoxes Advertise straight price comparisons Promote locations of top agents on with other providers and demonstrate internet and SMS for staff, agents and how to use it users to access information Use more BTL to incentivize users to Send SMS when customers send airtime sign up family & friends and then to someone else and promote MM incentivize again when they use it 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 Tigo Cash Agent kiosk at borrowers Agbogbloshie market, Accra
    65. 65. Advancing financial access for the world’s poor www.cgap.org www.microfinancegateway.org