In our 2017 Edition of The State of The Industry report, we highlighted an increase in funds entering and leaving the mobile money system in digital form. The most pronounced change was in bank-to-mobile transactions, from 1 per cent of total transaction values in 2012 to 9.2 per cent in 2017. In another blog post, we noted how bank-to-mobile and mobile-to-bank transfers are enabling merchants and small businesses to interact with the broader financial system and to digitise their respective value chains through supplier and salary payments.
The usual bank-to-mobile transaction happens on a ‘push’ system from the view of the mobile money customer: the customer needs to go to their other financial services provider to ‘push’ money to their mobile money account. They are required to access a bank-operated channel such as the internet, mobile, telephone banking or an ATM to initiate a transfer to their mobile money account. This user experience can be good or bad, but in most cases it is not under the mobile money provider’s control, and could differ depending on the bank used.
Barriers such as a sub-optimal user experience or a lack of familiarity with the transfer process can lead to the de-digitisation of money: the customer may revert to withdrawing cash for making payments, and the recipient may choose to keep cash, or later reconvert it to e-money. This can add extra costs and inefficiencies to the process which cancel out the benefits of digitising money.
If, instead, money can be ‘pulled’ from a bank account, from within the mobile money app or through USSD commands, these barriers would be eliminated. As the experience would then be native within the mobile money interface, it is likely to give more control to the customer, and to lead them to transact greater volumes between the respective financial institutions.
In this context, what is an ‘optimal’ user experience for bank-to-mobile pull transactions, and in which environment would it best work?
To investigate this, we worked with Tigo Honduras who have struck a ‘pull’ agreement with Banpais, a partner bank. The resulting process is two-fold: first, there is a one-time procedure to link the bank account to the mobile money account. Then, the menu will display an option to fund the mobile money account with a ‘pull’ feature, extracting funds from the bank account. There is also the option to ‘push’ funds from the mobile money account to the linked bank account.
To benchmark experiences, we have compared this to four other representative models. Below are our findings:
- In most cases, the linking process for ‘pull’ transactions is indirect – the debit or credit card is used as a proxy for a bank account. This requires customers having those cards, and card processing fees are usually absorbed by wallet providers. Direct account linking is still less established, but can be more inclusive in that it allows cardless bank accounts to be used, which are not uncommon – especially for entry-level accounts. Providers may prefer to offer both options, so that an eligible customer choose based on user experience factors, such as the number of steps required for completing the linking process.
- Ideally, linking the bank account to the mobile money account should be conducted without requiring the customer to register separately on the banking system, and with ‘remote’ confirmations, eliminating the need to go to a bank branch.
- Across implementations, the ‘pull’ process to fund a wallet is largely similar; however, the number and order of the required steps differs. Providers should aim to minimise the number of steps while retaining best practices such as allowing a user to confirm transaction details before completing the transfer, and fee transparency.
- Tiered know-your-customer (KYC) limits that allow progressive higher transaction volumes are important for customers who need to disburse larger sums of payments; for instance, paying salaries for multiple employees.
Technical and user experience considerations:
- Having access to payment rails, such as card schemes or national switches, broadens reach and simplifies integrations. Adopting standard APIs is a best practice for facilitating connections.
- Linking accounts and transferring money need to be real-time transactions to keep consistency with peer-to-peer transfers between accounts using the same mobile money provider.
- Mobile money is driving the digitisation of societies in which it is allowed to flourish, bringing customers a versatile financial tool and access to the wider economy, while increasing profitability for providers. We hope this blog can inspire discussions between product managers, financial entities and regulators to eliminate potential pain points and provide better interactions with the broader financial system.
This blog is based on research by Glenbrook Partners.