This blog post is co-written with Jennifer Frydrych.
Today, MMU is releasing the fourth and final publication in a series of deeper insights into selected topics based on the findings of MMU’s 2013 State of the Industry Report on Mobile Financial Services. This publication, ‘Extending reach: Mobile money in rural areas‘, addresses challenges operators face in reaching rural customers, and highlights some of the tactics that mobile money providers are using to increase adoption in harder-to-reach areas.
In many emerging markets, the majority of the population lives outside urban centres without easy access to infrastructure like banking, transport, electricity, and roads. Rural communities represent a huge potential customer base in communities where mobile money is the only real competitor to cash. Research from other industries, such as the Fast Moving Consumer Goods (FMCG), reveal that rural customers tend to be more brand loyal, however on average require more training and interaction than their urban counter parts.
Despite the potential size and loyalty of the rural market, the expansion of mobile money has thus far tended to be a gradual diffusion of services beyond urban centres, rather than a strategic effort by providers to tailor services to meet the needs of rural customers. Data from the 2013 GSMA Adoption Survey revealed that only 23% of respondents reported knowing what proportion of their customers were residing in rural areas, and a slightly more reassuring 41% of providers knew what percentage of their agents were located in rural areas [1].
As the mobile money providers interviewed in this publication demonstrated, a more strategic approach to reaching these customer segments may help to extend services both in advanced mobile money markets, where growth in saturated urban areas is stagnant, and in markets with limited urban market potential where commercial success is dependent upon expansion into rural areas.
To gain a better understanding of approaches to expansion into harder-to-reach areas, MMU conducted nine interviews with mobile money deployments that have used innovative tactics and made significant strides in developing a targeted rural strategy.
Highlights from the paper:
Extending ‘reach’ may be a better way for the industry to define its strategic challenge
Responses from the MMU 2013 Global Adoption Survey highlighted that there is no standardised definition of ‘rural’, making the size of this market segment challenging to quantify. The majority of operators did not know the urban/rural split of their customers or agents and gave very different explanations when asked to define what they meant by ‘rural’. Variations in geography, terrain and population density across different markets mean that service providers face unique challenges in reaching remote customers, highlighting the need for industry players to study the individual context of their rural market.
Tactics providers are using to overcome key challenges in reaching rural customers
Through interviews with providers about their tactics to reach rural customers, we identified four key challenges that mobile money providers may need to consider when developing a rural strategy:
- Overcoming logistics and delivery challenges – a lack of infrastructure in rural areas creates logistical challenges for agent and cash management.Leveraging local partnerships, flexible agent financing, and smarter transactional data analysis are enabling providers to address these challenges.
- Identifying and communicating a compelling value proposition – understanding the nuances of how rural consumers earn, save, and spend their money can help providers develop a relevant value proposition for rural users, which may well different to that of their urban users.
- Creating a user-friendly service and accessible interface – as rural customers tend to have lower financial and technical literacy levels, the service will require a user-friendly interface to enable access. While technologies such as IVR can be useful for reaching illiterate users, greater investment in customer education and increased “touch-points” are also proving successful as a means of on-boarding customers in rural areas.
- Finding solutions to the lack of formal identification documents – the absence of compulsory population registration and identification is a common barrier to wide scale adoption of mobile financial services, but it is even more prevalent in rural areas. In most markets, regulation plays an important role; solutions such as tiered KYC and adjusting acceptable KYC documentation can help providers facilitate customer adoption and increase financial inclusion in rural areas.
As with the other publications in this series, this paper is not intended to be best practice guidelines, and MMU does not advocate any of the tactics featured here as proven strategies for success. Rather, these unique, market-specific approaches are examples intended to inspire mobile money managers seeking to learn from the experiences of their peers.
We also encourage you to share with us any tactics that has proven effective in scaling mobile money in rural regions of your market. Please share in the comments section below, or send us an email to mmu@gsma.com.
[1] Claire Pénicaud and Arunjay Katakam (2014), “State of the Industry 2013: Mobile Financial Services for the Unbanked”