Mfs customer insights v14

1

BANGLADESH: Consumer Insights – Is a transition to mobile wallets underway?

Gregory Chen & Pial Islam

6 February 2014

pi STRATEGY CONSULTING

2pi STRATEGY CONSULTING

Agenda Subhead

Background

Part I: Who are MFS customers?

Part II: What do MFS transactions look like?

Part III: Is there a transition towards wallets?

Part IV: How might regulators and businesses respond?

3

BackgroundMd Farhad Rahman, 2013 CGAP Photo Contest


Context

• Mobile banking in Bangladesh has already become quite a success story since its initiation in 2011. Currently, there are around 13 million registered users being served by about 190,000 agents transacting around BDT 6650 crore per month.

• The regulatory body, Bangladesh Bank, has approved 27 banks to operate as mobile financial service providers in the country. Of which 19 banks have been able to officially launch the service so far.

• In the current market, the top-3 players are: • Brac Bank’s bKash, • DBBL Mobile Banking and • Islami Bank’s mCash

bKash79.7%

DBBL Mobile Bank-

ing19.8%

mCash0.5%

Market Share in terms of Regis-tered Users

Source: Daily Newspaper, Websites.


Context: Usage patterns evolvingBangladesh Bank introduced new guidance promoting wallets use in September 2013

September October November December -

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Wallet to WalletOTC

23%

Person to Person Transfer Volumes (BDT Crore)*

24%26%

27%

* Estimates based on Bangladesh Bank MFS figures. OTC is comprised of all cash-in and cash-out transactions, subtracting any P2P, utility payment, salary disbursement, international remittance. P2P is all P2P (wallet to wallet) reported transactions.


MethodologySubhead

- Defining Research Question- Preparing Questionnaire- Testing Questionnaire- In-depth Interview - Identifying Major Hypothesis- Identifying implications

Sample Size:45

Output: A List of hypothesis

Sample size: 12

Tool: Interview Guide Tools: Yellow Book (a customized financial record tracker), Multiple round In-depth Interviews

Output: Personas + Insights

- Identifying respondents from stage-2 sample (and supplementing if necessary)- Record Financial transactions- Persona Design- Generating insights

Design Field Survey Validation Analysis

-Defining Research Question-Preparing Template for findings-Preparing Questionnaire-Testing Questionnaire-Selecting 3rd party surveyor

-Error Checking-Phone Validation

Sep/ Oct Nov/ Dec Dec / Jan

- Random plus targeted sampling- National level (randomly selected 4 divisions out of 7)- Detailed questionnaire- Interviews and observations at agent points

Stage-2Stage-1

Output: Stage-2 Report (Findings and validated hypothesis)

Stage-3

Sample size: 400 random + 79 targeted

• The entire study comprises of three stages:


MFS in Bangladesh

• Customers seem to have tailored their own ways of usage by leveraging the platform. Most people are transacting through mobile banking agents without using personal wallets which is actually OTC.

• Recent regulatory changes (PSD Circular Letter No. – 01/2013) strongly discourage OTC transactions and encourage wallet usage. According to the regulations:

• No Cash-out or P2P transaction can be done from user’s account before proper verification and approval of her KYC by relevant banks.

• Prior to doing any transaction agent has to be confirmed that the user, he is transacting with, has mobile banking accounts. Bangladesh Bank will closely observe this situation and If discrepancy found with any agent, his agent-ship will be cancelled immediately.

• The maximum amount a user can cash-in or cash-out is BDT 25,000 per day.


Definitions

• Three observed uses of mobile payments:1. Pure OTC

If neither sender nor the receiver has mobile banking account (or wallet), it will be classified as a Pure OTC transaction.

2. Partial OTC If either sender or the receiver has wallet it will be Partial OTC and

3. Pure WalletIf both sender and receiver

have wallet the transaction will be categorized as Pure Wallet.

SENDER

No Account

Account

No Account

RECEIVER

No Account

No Account

Account

AccountAccount

Pure OTC

Partial OTC

Pure Wallet


Sampling

• Sample Size: 480*

401Purposive Sampling Targeted Sampling

79

Randomly found at agent points, Post Office and Courier Service.

From the list provided by bKash and DBBL Mobile Banking and Snowball approach.

Pure OTCPartial OTC Pure Wallet

Post Office

Courier Service

Pure Wallet

*Considering the tolerable error level (5%) where

• N is the total mobile financial service user which is 10,000,000 all over Bangladesh • n = required sample size • p is a certain proportion in universe. p=0.02 and q is (1-p) • z is the confidence level (for 95%, z = 1.96) • e is the tolerable error of estimates (which is at around 5%, as the lower error level provides better

representations)


Sampling (contd.)

• The survey covered four randomly selected divisions of the country (out of seven) which are:

– Dhaka, – Chittagong, – Barisal and– Rangpur.

• Equal split of urban, semi-urban and rural was kept to the extent possible.


Sampling (contd.)

• The survey was conducted during November and December 2013. The surveyors were undergrad students who participated in multiple briefing sessions before going to field.

• Interview guide comprised of 60 close-ended questions and each interview lasted for more than 30 minutes. Separate Cue Cards have been used to test numeracy and English proficiency level of the beneficiaries before recording it.

• Respondents in Purposive Sampling were randomly selected and interviewed at different agent points.

• Respondents in Targeted sampling were selected from active wallet users list provided by bKash and DBBL Mobile banking. They were communicated over phone and later, interviewed face to face at their convenience. Rest of the sample were found through snowball approach starting from the list.

• Before going to the analysis table, data was back-checked rigorously. For any slightest discrepancy the entire data set of the specific respondent was eliminated. Eventually, the field survey extended to a second phase to get the sizable sample size which was also followed by similar validation phase.


Demographic Highlight

48%

20%

32%

Urban-Rural Split

Urban Semi-Urban Rural

81%

19%

Gender Split

Male Female

47%53%

Sender-Receiver Split (Overall)

Sender Receiver

39%61%

Sender-Receiver Split (Rural)People in rural areas are mostly

receivers.

Sender Receiver

Illiter

ate

Up to c

lass 5

Up to c

lass 8

Up to S

SC

Up to H

SC

Vocati

onal/

Diplom

a

Bache

lors

Master

s or a

bove

4%9%

12%

20%

29%

4%

15%

7%

Education Split

15 to 25 years 26 to 35 years Above 35 years

53%

37%

11%

Age Group


Demographic Highlight (contd.)

Student

Servic

e holder

Small tra

der

House

wife

Shopk

eeper

s

Petty t

rade

r

Labo

rer

Driver

/CNG D

river

Unemploy

ed

Self-e

mploye

d

Farm

er

32%27%

11% 9% 6% 5% 3% 3% 2% 1% 1%

Profession Split

Monthly Income Monthly Expense

8007

6458

Average Income and Expenses (Reported)

Am

ount

in B

DT

Monthly Expense

42%

11%

12%

5%

12%

7%

11%Food

Clothing

Education

Medicine

Rent

Utilities

Others

National Average

Poverty Line


Demographic Highlight (contd.)

9%

91%

Outstanding Loan

Have Outstanding LoanDon't have Outstanding Loan

(Average amount of loan outstanding is BDT 91,768)

35%

65%

Do you have Bank account?

Yes No

30%

12%

58%

Which bank?

DBBL Islami Others

15GMB Akash, 2011 CGAP Photo Contest

Part I: Who are MFS customers?


Who?Subhead

• Pure Wallet Users have higher individual income compared to others. Whereas, Pure OTC have the least.

Courier (n=20)

Post Office (n=20)

Pure OTC (n=208)

Partial OTC (n=143)

Pure Wallet (n=89)

Sample (n=480)

9650

8475

7093

8381

10642

8007

Average Monthly Income

Am

ount

in B

DT

National Average

Poverty Line


Who? (contd.)

• Mobile banking users are slightly younger group of people.

Courier Service (n=20)

PO (n=20) Pure OTC (n=208)

Partial OTC (n=143)

Pure Wallet (n=89)

Total Sample (n=480)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

15 to 25 years 26 to 31 years Above 35 years


Who? (Contd.)

• Majority (90%) uses feature phones with color display. • Prevalence of Smart phone in this group is around 6%. • Average price: Smart phone 16421, Monochrome 1345, Feature

Phone With Color Display 3770.

Total Sample (n=480)0%

10%20%30%40%50%60%70%80%90%

100%

Smart PhoneFeature Phone with Monochrome DisplayFeature Phone with color display

16421

13453770

Average Price of the handset (Reported)

Am

ount

in B

DT


Who? (Contd.)

• About 50% respondents have multiple SIMs. However, the percentage is less than 40% for pure OTC users.

• Pure OTC users have 2 handsets in household. Whereas, the number is 3 for Pure Wallet users.



Partial OTC (n=143)

Pure Wallet (n=89)


0%10%20%30%40%50%60%70%80%90%

100%

One Two Three More than three


Who? (Contd.)

• Pure Wallet users have had more schooling comparing to other groups of mobile banking users.



Partial OTC (n=143)

Pure Wallet (n=89)


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Upto Grade-10 More than Grade-10


Who? (Contd.)

• Pure Wallet Users can read in English better than others.



Partial OTC (n=143)

Pure Wallet (n=89)


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

22

Part II: What do MFS transactions look like?

Mohammad Moniruzzaman, 2009 CGAP Photo Contest


Transactions

• Average Ticket Size of the mobile banking transactions is BDT 3,370 which is much lower than other platforms.

• Ticket size of courier service transactions are five times than mobile banking. 16775

5045 3369.35227272727

3088.57291666667

Am

ount

in B

DT


Transactions (contd.)

• Majority of the users prefer using only one mode to transfer money.

• However, certain segments of transactions (Partial OTC, Post Office, Courier) show a higher inclination towards multiple modes.

1%

24%

75%

Use Three modes Use Two modesUse single mode

Courie

r Serv

ice (n

=20)

PO (n=2

0)

Pure O

TC (n=2

08)

Partial

OTC (n

=143

)

Pure W

allet

(n=89

)

Total S

ample

(n=4

80)

0%

20%

40%

60%

80%

100%

Use 3 Modes Use 2 Modes Use Single Mode


Transactions (contd.)

• More than 10% Pure OTC users also use other platforms to transfer money. Of them, a large portion (53%) prefer to use courier service.

• More than 30% Partial OTC users also use other platforms to transfer money. Of them, a significant portion (60%) do pure OTC.

29%

18%

54%

Pure OTC users who prefer multiple modes of transfer(n=27)

Partial OTC Pure Wallet PO Courier Service

59%16%

12%

12%

Partial OTC users who prefer multiple modes of transfer (n=49)

Pure OTC Pure Wallet PO Courier Service


Users of different modes have different types of transaction needs

• Total amount of transactions in the last three months done by a user was through Partial OTC .

• Whereas, the number is the least for Pure Wallet transaction.

Pure OTC (n=208) Partial OTC (n=143) Pure Wallet (n=89)

9500

17273

8807

Ave

rage

Am

ount

Tra

nsfe

rred

in

last

thre

e m

onth

s


Overall picture of wallet uptake

• 37% users have mobile banking account or wallet.

• 18% are doing pure wallet transactions. Therefore, OTC in the market is 82%.

Use Wallet (n=89)

Have Wallets (n=179)

Sample Size (n=480)

This slide is problematic!


Why They Don’t Open Wallets?

• Around 63% respondents don’t have wallet. They said they never felt the need of having one.

• A few (9%) said the process of opening a wallet is time consuming.

I don't require it It seems complex to me

Does not know how to open an account

Its time consuming0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


Trust Issues

• People trust Pure Wallet most which follows by Pure OTC.

Pure Wallet Pure OTC Partial OTC Post Office Courier Service

0%

10%

20%

30%

40%

50%

60%


Consumer Protection

• Pure OTC users said they paid extra charges. • Even, pure wallet users said they sometimes have to pay extra charge.

Lost Fund for Technical Errors

Lost fund for fraud trick or misappropriatioin

Paid extra charges Had money sent but not delivered

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pure OTC Partial OTC Pure Wallet Post Office Courier Service


Transfer between Economic Household Members is Significant

• Nearly 85% transactions are made between the members of same economic household.

Courie

r (n=2

0)

PO (n=2

0)

Pure O

TC (n=2

08)

Partial

OTC (n

=143

)

Pure W

allet

(n=89

)

Sample

(n=4

80)

0%20%40%60%80%

100%120% 100%

75%86% 81% 90% 84%

Percentage of Transaction between the same Economic Household

32

Part III: Is there a transition to wallets underway?

Bir Azam, 2013 CGAP Photo Contest


Transition to Pure Wallet

More than 3 months before

0 to 3 Months before Current

Pure OTC

Partial OTC

Pure Wallet

Courier

PO

89

6048

11 14

11 8

7

12 7

32

5

2

21

Not fully done yet.


Wallet vs. Non Wallet

• ?? (Still a good portion who have wallets are not doing pure wallet transaction)

63%

2%

16%

19%

1%

Pure OTC Partial OTC Pure Wallet Courier

Don’t have wallet

Have wallet


Wallet vs. Non Wallet

• Average individual income per month of wallet owners seems to be higher than those who don’t have wallets.

• Higher income groups are more inclined to open wallets.

Have Wallets Don't habe wallets Total Sample

9077

73718007

Average Monthly Income

Am

ount

in B

DT Average National

Income (BDT)

Poverty Line


Wallet vs. Non Wallet (contd.)

• 35% of the sample have formal bank accounts. This percentage is much higher (45%) for wallet owners and lower (29%) for the rest .

• People who already have formal bank accounts are more inclined to have a mobile banking wallet.

Have Wallet Don't have wallet0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Have Bank Accounts

Have Bank Accounts



• Whereas, a large portion (70%) of wallet owners have completed formal schooling at least up to HSC (Grade 12) or more.

• Wallet uptake comes with higher education and related awareness.

Have Wallet Don't have Wallet0%

10%

20%

30%

40%

50%

60%

70%

80%

Education Level at least Grade-12



• A slightly better percentage (56%) of the youngest age group has been observed in wallet owners.

• Are the young people more inclined to have wallets?

56%36%

8%

15 to 25 years 26 to 35 years More than 35 years


Doing Pure OTC is instant, cost effective and easy

• More than 90% respondents prefer pure OTC because it is instant. More than 60% said it is easy and cost effective.

• Pure Wallet users also believe their transaction happens instantly. However, a good portion thinks it is trustworthy.

Instant transfer

Trustworthy

Cost effectiveEasy procedure

High availiblility of agents

0%20%40%60%80%100%

Reasons of current Pure OTC transfer (n = 208)

It is instant

It is cost effective

It’s trustworthyEasy procedure

Saving facility

0%

50%

100%


Agents influence wallet uptake

• Agents have significant impact on opening new wallets.

• 40% of the respondents agreed that the agent influenced them to open an mobile banking account

• 48% of the respondents disagreed that agents discouraged them to open a mobile banking account.

11%

29%

39%

15%

6%

Agents influenced me in opening in Mobile banking account

Strongly Agree

Agree

Neither Agree nor Disagree

Disagree

Strongly Disagree

8%

7%

37%23%

25%

Agents discouraged me to open a mobile banking account

Strongly Agree

Agree

Neither Agree nor Disagree

Disagree

Strongly Disagree

41

Part IV: How might regulators and businesses respond?

Sumon Yusuf, 2013 CGAP Photo Contest


Content Slide HeaderSubhead

Content• Content

• Content

43

Bar Chart

Category 1 Category 2 Category 3 Category 40

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2

3

4

5

6

Series 1 Series 2 Series 3

Text

Subhead

44

Bar Chart

Category 1

Category 2

Category 3

Category 4

0 1 2 3 4 5 6


Text

Subhead

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Line Chart

Category 1 Category 2 Category 3 Category 40

1

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TableSubhead

X X X

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47

Review Slide

• Content

• Content

• Content

48

Text

Picture SlideSubhead

Forhad Kamaly, 2013 CGAP Photo Contest

49

Text


Mohammad Moniruzzaman, 2009 CGAP Photo Contest

50

Text


KM Asad, 2013 CGAP Photo Contest

Advancing financial inclusion to improve the lives of the poor

www.cgap.org

http://www.themastercardfoundation.com/

Mfs customer insights v14

Documents

defining research

dbbl mobile

mobile banking

formal bank

mobile banking

pure otc users

pure wallet

prefer multiple