Spotlight on the Active User Rate: What Deployments are Seeing and How They’re Responding

The mobile industry is a bit obsessed with metrics. We’ve got one for every phase of the customer lifecycle, from cost of acquisition (COA) to average revenue per user (ARPU) to cost of retention (COR) to name just a few. It seems, though, that from our endless selection of acronyms, we still spend almost all of our time talking about two in particular when it comes to mobile money: ARPU and churn. Not to say that’s a bad thing – it’s important that emerging industries have a clear view of the opportunity that rationalizes their investment and effort. But given that so much is being said about these two metrics, today I want to talk about the other important metric that operators need to think about: the active user rate.

The active user rate plays an important role in a mobile operator’s business model – if it’s unexpectedly low, it impacts cost of acquisition as well as the value a deployment can provide to its agents. Recently, we had conversations with five different deployments who shared their active user rates with the GSMA. To protect confidentiality, I won’t reveal which deployments – or even which markets – the numbers come from. Still, the figures should spark some discussion (and hopefully creative solutions) from the community.

Of the five deployments, one had an active rate of 60%, and the other four were all below 30%, with the lowest of the bunch coming in at 10%. Clearly, there’s room for improvement across the board. But to begin thinking about how we can improve the active user rates in any market, we first need to understand why they’re low in the first place. There’s an endless list of possible reasons – and please add your ideas below – but I’d like to start the conversation by presenting two that I think are particularly prevalent.

“Some of our agents do registration, and others do cash in/out”

A number of deployments around the world have created agent networks with two categories of agents: one to register customers, and another to facilitate cash in/out. In some cases, this structure has contributed to low active user rates for a few reasons. First, by creating a category of agents whose sole responsibility (and source of income) is to register new customers, it can be difficult to prevent them from selling a bit too eagerly to prospects with no actual demand in an effort to earn a commission. In this case, it’s less about a customer registering, and more about a customer being registered. Second, customers who register at dedicated ‘registration agents’ face an immediate barrier to use: finding an agent. Today in Nairobi this is easy – but in most early stage deployments, it can be a difficult task. And third, because registration agents typically earn most of their commission from the act of registering a customer, it’s difficult to persuade them to invest time in education.

“It’s our strategy: Phase One is acquisition, Phase Two is activation”

Another reason for low active rates is the philosophy that mobile money should be rolled out in two distinct phases. Disciples of this philosophy use phase one to register as many customers as possible and then later, in phase two, think about finding ways to get them transacting. If the active user rate equation has a denominator (number of registered users) and a numerator (number of active users), then this philosophy calls for a focus on the denominator in phase-one, and then a shift to focus on the numerator in phase-two.

We’re seeing this strategy play out in many African markets where operators are in the midst of implementing prepaid SIM registration. Operators are leveraging the unique touch-point with customers that SIM registration provides as an opportunity to promote mobile money. Of course, just because an operator activates an e-wallet for a customer who has gone through KYC, it does not necessarily mean that customer will ultimately be an active user. But, critically, it does give the operator an improved likelihood of success by eliminating the registration barrier and enabling the delivery of promotions. Still, the ultimate success of this strategy will hinge on phase two: giving customers a compelling reason to start transacting – and making sure that the ecosystem needed to facilitate transactions is still intact.

But why does the active user rate matter so much in the first place? People are always curious to hear the figure, but how exactly will a low active rate impact the rollout of a deployment? Well, it depends on who within a mobile operator you ask.

If you’re asking the head of distribution, he might say something like this: “I don’t care how many customers you register because only a fraction of them end up giving me what I need – transactions that will generate income for my agents. If customers don’t start transacting, my agents will lose interest and we’ll have no distribution network.” It’s clear then that the head of distribution cares more about active users than registered users.

If you’re asking the head of finance, she might say “in your business case you estimated the lifetime value of a customer to be X, which justified a cost of acquisition of Y. However, with so few customers transacting, the average lifetime value is too low to justify our COA.”

The trick, then, is to first have realistic estimates not just of registered users but of the number of active users, and to constantly be thinking of ways to drive usage. And simple things can make a big difference. An Asian deployment facing a low active rate partially due to having multiple categories of agents found that simple follow-up calls to educate customers got them transacting. An African deployment facing the same challenge found that encouraging their registration agents to perform activations in front of cash in/out agents helped to improve the active rate by clarifying to customers how they can start transacting. And in many deployments, operators have already begun stipulating that registration commissions will be paid in multiple tranches – some amount for registration, and the rest held for when a customer completes a certain number of transactions.

Safaricom and other veterans can look back at their historical figures and say that none of this should be surprising. The active user rate is something that requires attention, but can be addressed as a deployment matures. To help advance the thinking, please feel free to share your ideas below on ways that deployments at various stages of maturity can improve their active rates.

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