opportunities in the ghananian payments market

Moving Money:Opportunities in the Ghanaian Payments

Market

This research was commissioned to Bankable Frontier Associates

April 2012

Objectives of this household study

• Analyze how urban households move money and why• Identify actionable insights for branchless banking

providers

Opportunities in the marketplace

How did we research consumers of payments 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)

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 secondary sources of income by interviewing the primary income earner or other main household budgeter. We created a stylized household cash flow analysis based on this information.

The Demand-Side Story

Chapter 1: Market opportunity overview

Chapter 2: Driving usage: Improving formal payment services

Chapter 3: Driving usage: Converting informal payers

Chapter 4: Why mobile money has not capitalized on its advantages

Chapter 5: Market opportunities: Key segments to target

Chapter 6: Opportunities and challenges

Urban Ghanaians make payments of ₵784m (US$470m) a month

Domesticremittances

Bills payments

Loan payment

s

US$1=₵1.67All figures ₵

The value of the market opportunity is vast

₵250mbusiness

31%

₵26mwater3%

₵78m10%

₵277mfriends and

family34%

₵55melec.7%

₵99mschool fees16%

*Calculation excludes households whose only method is direct face-to-face payments and excludes the ₵111.3m monthly urban housing rental market.

More households pay bills & school fees, but households remit larger amounts to family and for business

USD 1=₵1.67n=1003

2.8m households pay for electricity

1.7m households send avg. ₵173 to family and

friends & 1.2m send avg. ₵230 for business

Households with these primary livelihoods represent a market size of ₵531m (US$318m) per month

Calculation excludes households whose only method is direct face-to-face payments.

Traders make the most payments, but teachers pay more than other business people

All figures ₵

Traders (₵267m)

Teachers (₵92m)

Business people (₵88m)

Farmers (₵84m)

Est. # of urban households sending money…

to these destinations from surveyed areas

1 672,000 ACCRA

2 319,200 KUMASI

3 218,400 CAPE COAST

4 184,800 KOFORIDUA

5 100,800 NSAWAM

Origins surveyed…

where this est. # of urban households are sending money

1 KUMASI 235,200 2 ACCRA 168,000 3 OBUASI 151,200 4 ASHIAMAN 134,400 5 HO 117,600

Origins

Destinations

…when sending money to family and friends

n=526Multiple responses

allowed

More money is sent to Accra than from Accra

Est. # of urban households sending money from elsewhere

to these destinations from surveyed areas

1 520,960 ACCRA

2 355,200 KOFORIDUA

3 236,800 YENDI

4 177,600 GREATER ACC

5 153,920 TAMALE

Origins surveyed…

where est. # of urban households are sending money

1 KUMASI 142,0802 OBUASI 118,4003 ASHIAMAN 118,4004 ACCRA 118,4005 HO 82,880

Origins

Destinations

…but 5 locations are by far the most common destinations

n=375Multiple

responses allowed

The origins of remittances for business are dispersed

At least 48,000 households send money to friends and family within Kumasi

At least 72,000 households send money to friends and family and 64,000 households send money for business purposes within Accra

“Beat the traffic: use mobile money to send your money safely across town”

Households also send money within cities

n=1003

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 27 per ₵payment

• Sends an average of 196 to ₵family & friends or for business, 1 time per month

• Owns a cell phone

In fact, at least one member owns or has access to a cell phone in 96% of urban households

64% of Primary Income Earners (PIEs) have more than one SIM

50% of PIEs spend ₵1-5 on airtime per week

66% of PIEs send airtime to someone else

Does this show that people can also

learn to use mobile money? n=1003

I-banking on data-enabled cell phones for the average urban household may not be too far around the corner

23% of PIEs (736,000) have an email or Facebook account

n=231

63% of these email or Facebook account-holders have completed high school, compared

with 34% of the overall sample

78% of those who have an account are between 18 and 34 years of age

43% of those who have an email or Facebook account say they access it on a cell phone

Cash in – cash out points could be promoted on Facebook

Households save cash in the house

• 80% of urban households have access to at least one bank account

• 43% of households have savings in a commercial or rural bank

Only 15% of all households have access to at least one ATM card that

they use at least once a month

4% of households use an e-Zwich card

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

n=1003

91% of all households set aside savings or liquid assets of some form; 27% make

loan payments

At least 34% of urban households have cash savings at home

76% of all households who make payments have used at least one formal payment method in the past year

1.8m urban households have used a formal method in the past 12 months

n=748

Banks are the preferred payment method


allowed

The use of informal services is less than anticipated

41% of bank users go to GCB only;

31% use other banks only;29% use both

59% of MM user households used MTN, only; 7% have only used Airtel and 10% have used Tigo

Active usage is defined as having used in the last 12

months

Usage of MTN Mobile Money is highest among the three MM schemes


allowed

GCB

BoA

Barcla

ysUBA

Ecobank

Cash 4

Afri

ca

Oth

er bank

transf

erARB

Rural b

ank

Oth

er bank

entities

MTN M

obile M

oney

Airtel M

oney

Tigo C

ash

Post o

ffice

E-Zwich

Bus co

mpanie

s

Bus driv

ers

Tro-tr

o driv

ers

Friends/

clansm

en

Family

Susu

Pay/deliv

er money

direct

ly0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

14%4% 5%

% Aware% Using

Thanks very much for joining us in Ghana; we really appreciated your insights, advice and of course your company.

Active usage is defined as having used in the last 12

months

The income bands and usage tendencies of urban households

n=1003

28%

8% ₵201-250

33% ₵151-200

13% ₵101-150

18% ₵76-10043% use GCB43% use other banks17% use MM

49% GCB41% other banks14% MM

44% use GCB35% use other banks17% use MM

52% GCB38% other banks21% MM

44% use GCB39% use other banks17% use MM

GCB is the predominant method across all income segments

₵251+

Households prefer using banks to send almost any amount size

n=748

…but especially when sending large and very large amounts

22% of GCB users do not have a bank

account

Security drives usage of all methods

Multiple responses

allowed

Over 60% choose formal methods because they are secureWhy did your household choose the method(s) you use?

People say they are worried about carrying cash

n=1003

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

…and 8% of users of informal methods and 5% of those who pay person-to-person have experienced money lost or stolen

Consumers tell stories about the risks of carrying cash

Charity lost her mother in bus accident along the Kumasi-Accra road and, to compound the loss, Charity received her mother’s body without the ₵18,000 she was carrying. Now she travels with a check and cashes it as soon as GCB opens.

Lost her mother

and her cash Carries thousands

of ₵ from Accra to

Burkina Faso

Adelaide travels to purchase tomatoes in Burkina Faso, carrying as much as ₵11,000 because banks are not open early enough to withdraw the money. She has heard of other groups who have been

robbed. Her group is careful: “We do not travel during the night and we keep the day we will travel a secret as much as possible.”

BB would make life a lot easier for these women

Security is necessary but not sufficient

Multiple responses allowed

Trust to send large amounts is also a significant decision point

Why did your household choose the method(s) you use?

Users find mobile money to be as secure as banks

The paradox: users trust mobile money, but non-users do not

The other banks also have a problem with lack of trust


Households who do not use MM cite lack of trust

as the #2 reason

Reasons for not choosing the method in question

Households also dismiss methods, notably other banks and MM, that are inconvenient for the sender and recipient

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.



Banks suffer from the perception of high costs

Non-users aware of other banks say these formal services are expensive

What does this mean for mobile money?



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

And no one likes payment systems unavailable

Problems that users have with formal methods they use

Agent training and selection

issues?

Providers with problems with convenience & accessibility & an unreliable system will be

hard-pressed to expand market

share.

Households use family, friends and drivers to send money to family and friends, but not often for business purposes

n=383Multiple

responses allowed

…and they prefer to pay their bills and school fees directly

Nevertheless, 65% of those who use informal methods also use formal methods, primarily banks

This segment may be converted to branchless banking

n=383

Informal payers choose family and friends: They are low cost and secure for sending small amounts

“Low transaction fees” appears to be the primary reason households using informal

methods choose those over formal methods. Mobile money can compete.

Why did your household choose the method(s) you use?

n=383

Mobile money users say it is secure and has low 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

Informal payers perceive banks to be inconvenient and costly

BB providers may capitalize on this opportunity by realizing their potential convenience advantage

n=383Multiple

responses allowed

Why don’t you use this method?

Converting informal users to mobile money is a strategic marketing challenge

Drivers and susus are vulnerable informal providers in the payments market

The top 3 reasons why households stopped using the

methods are that the money was lost, they did not feel safe

using it or the money arrived too late or was delayed.

A direct messaging campaign targeted at users of drivers and susus and those that have stopped using

them may be effective

Also, 26% of households using

bus companies have had problems with

hidden fees

Summary: Capitalizing on the opportunities of branchless banking

Users feel as secure about mobile money as they do about banks

In contrast, non-users of mobile money are skeptical and do not trust it

Mobile money and other banks suffer from perceived inconvenience and inaccessibility

Non-users perceive banks – even GCB – to have higher transaction fees than mobile money

GCB benefits from accessibility, and bodes well for BB providers that can achieve high accessibility

But users of family and friends say this method is cheaper than mobile money

Opportunities Challenges




Chapter 3: Driving usage: Converting informal




Above the line marketing has not translated into high usage of mobile money


allowed

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

And even having registered accountholders has not translated into usage

19% of households aware of at least 1 MM scheme are

registered and using at least 1 MM

scheme in the last 12 months

53% of households aware of moving money through banks have access to an account and have used a bank in the last 12 months

MM Users19%

Reg. non-users19%

Neither registered nor users

62%

Bank Users53%

Dormant accounts

29%

Non-users18%

Mobile moneyn=673

Banksn=729

Above the line advertising is effective at raising awareness of payment services…


How would your household likely hear about a new payment service or branch opening?

…but below the line marketing would be more effective at driving usage


How did your household learn about this method that you use?

Family and friends tell households which method to use

Incentivize security-conscious, price sensitive Ghanaians to use mobile money

87% of households said they use methods that they learned about from friends and family

Community demonstrations in markets and public places to promote trust in branchless banking and learn how to use it to pay bills, store value and send money

Link specials on airtime for getting family to use mobile money: if you can send airtime, you can use mobile money and buy discounted airtime at the same time

Putting social networks to work and marketing via word of mouth

MNOs may counter low trust by stressing the similarity between MM and airtime transfers in their marketing

n=1003

66% of households have sent airtime to someone else96% of household

members own or have access to a cell phone

Can MNOs message airtime senders about mobile money at the time of transaction?

“Did you know it’s this easy to actually send money as well?”

“Did you know that if you had bought the airtime you just sent via MM you’d have been able to send X% more for free?”

And there may be groups interested specifically in branchless banking

n=1003

23% of households use ATMs:Likes: ATMs are always open

Dislikes: ATMs can’t take savings deposits and systems unavailable

45% go get more cash when carrying

₵10 or less

Almost 50% of all households think that

receiving a SMS is adequate proof of payment for utility and school fee payments

At least 34% of households have cash savings at home

Market opportunity #1: Households do “send money home” 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

but live in Ashiaman or Accra66% of these PIEs have family in other urban areas

Send money home faster, cheaper and safer

n=526Multiple

responses allowed

Almost all this remittance is for family obligations – use this in

BTL marketing

69% of households send money to family and friends for one purpose

Households send money to family and friends at least once a month

Emphasize the convenience of regularly sending money from wherever you are in a trusted manner

Seasonal and for school fees

Regular and frequent

n=526

MM is secure for sending large amounts regularly to the ones you love

58% are sending these large amounts to Accra at least once per month

n=201

This finding may be important if the regulator contemplates tiered KYC

62%

Market opportunity #2: 40% of all monthly remittances for business purposes are made by traders, teachers or farmers

The average household with these

occupations sends ₵230 for business each month

All households send a total of ₵250m monthly for business purposes

Total of ₵111m (US$66.5m) per month by these 3 occupations

Customer opportunity example: trader-households are a key segment

Trader-householdsCite slow service

and lack of security as top reasons why they do NOT use

GCBThis is an opportunity

to attract traders to mobile money

44% of trader-households use GCB39% use other banks

17% use mobile money86% of trader-households have a bank

account32% ₵251+

10% ₵201-250

28% ₵151-200

12% ₵101-150

17% ₵76-100

Income ranges of trader-households

Traders want to do business, even when the banks are closed

53% (528) of households reported having no second source of income, but22% (219) of those households that do are trading

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?

Bills payments opportunity: The vast majority of urban households regularly pay bills and school fees

n=748Multiple

responses allowed

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

The vast majority of urban households pay large, regular amounts for school fees three times a year

USD 1=₵1.67n=1003

Amount paid in school fees is 77% per txn greater than the amount paid for electricity

₵78

₵35

₵136

Plus, 40% of households sending money to family and friends do so for education

44% of these households send money several times a year…

…and 40% of these households send

money at least once a month

Remind households to securely pay school fees AND send money to other family members for education

Of those households who send money for education…

Children in the

household

Send money for education

Pay school fees

81%

18%

81% of these households have

children in the household, send

money for education and pay school fees

Families help each other out to pay school fees

1%

18% of these households

send money for education and

pay school fees but do not have children in the

household

Findings are opportunities –and challenges

1. 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 dominant

3. ATL raises awareness, but people say they use what their family and friends use

4. 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.

…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?

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

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

Capture a greater share of the payments market by getting BTL messaging right to overcome paradoxes

Tigo Cash Agent kiosk at Agbogbloshie market, Accra

Advertise straight price comparisons with other providers and demonstrate

how to use it

Promote locations of top agents on internet and SMS for staff, agents and

users to access information

Use more BTL to incentivize users to sign up family & friends and then incentivize again when they use it

Send SMS when customers send airtime to someone else and promote MM

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 borrowers

Advancing financial access for the world’s poor

www.cgap.org

www.microfinancegateway.org

http://www.themastercardfoundation.com/

opportunities in the ghananian payments market

Technology