Sunday, July 23, 2017

What does a shampoo sachet have to do with developing market fintech?

It is an intriguing question, however there is far more in common with the humble shampoo sachet and developing market fintech than you would expect. I have recently returned from a few days in the field in Northern Shan State in Myanmar, and as always I am impressed by the business savvy of our mobile money agents, who are selling everything from shampoo sachets, noodles, soft drinks and water to money transfer services. For many of them, it is as natural to sell a money transfer product as it is to sell shampoo, and there is a very good reason for that.

Both products have been designed to meet the need of the specific consumer, whilst they are packaged in a way that makes it easy for the retailer to sell.


For many years major corporates assumed that they could not effectively reach the poor with the products and services, primarily as the cost structures they employed would make them an unprofitable segment. In addition they also assumed that the poor could not afford, nor would they want products and services available in developed markets.

Academics CK Prahalad and Stuart L. Hart challenged these assumptions in their 2002 article “The Fortune at the Bottom of the Pyramid”, which was followed by a book of the same name in 2006. Their hypothesis was that the poor had significant untapped purchasing power and that companies that challenged cost structures and go to market strategies could meet this demand in a profitable way. Many companies took up this challenge, and new segments have developed across multiple industries.

FMCG companies like Proctor & Gamble and Unilever realized that they could make the same sort of products accessible to developed market consumers provided they redesigned the packaging and distribution strategy. For example, a one-liter bottle of shampoo was completely inadequate for the developing market customer, for one very specific reason. In purchasing a liter of shampoo, this customer was purchasing a store of inventory of approximately 950 milliliters. In holding onto the unused shampoo there was a significant opportunity cost for that consumer, as their need was only to wash their hair on that day. The capital employed in purchasing the liter bottle could be better utilized in other activities that added economic value to the customer, rather than being tied up in an investment that lasted perhaps two to three months.

Throughout developing countries today, you will see small grocery shops with hanging rows of shampoo sachets. These sachets allow consumers to purchase 50 milliliters of shampoo at a price that factors in the increased cost of packaging and distribution, but allows the consumer to keep the capital they would otherwise need to employ on the larger bottle. This trend has been repeated with everything from biscuits to toothpaste. Of course, this trend hasn’t been without issue, as there is now a growing sustainability issue with this sort of packaging as there is little economic incentive for collection in these communities (as opposed to other materials which may be recycled for profit). However, it is without doubt that developing market consumers have received the benefit of access to developing market products and services that they otherwise would not of received, and this has largely benefited these communities.

So how does the emergence of the shampoo sachet mirror what is happening in developing market fintech, particularly in Myanmar.

In developing markets access to financial services has generally been limited to the wealthy. The emergence of microfinance and mobile money has led to improvements in financial access, however approximately two billion people globally are still without a bank account. The lack of a bank account increases opportunity cost for these consumers at every step. Whether it is difficulty in getting access to credit, or an inability to safely save money, being unbanked is expensive, and life can be very difficult. Even in the United States, being unbanked can be very expensive, as product based fees and interest costs on payday loans far eclipse standard banking products.

For the unbanked in Myanmar, sending money is not an easy process, however many must send money regularly to support family members in different parts of the country. The unbanked tend to use buses or friends and family to take money home, or they will use bank branches. There is an opportunity cost for the consumer at every step of the transaction. Firstly, there is the time taken to travel to the bus stop or bank branch. Secondly, there is the time at the bank branch to fill out forms, and the wait to be served. Banks are only open from 9am to 3pm Monday to Friday; so many consumers have the opportunity cost of leaving work, and therefore income in order to be able to transfer money. Lastly, there is the time taken for the recipient to either wait for the bus to arrive, or to travel to the bank branch (generally in larger towns and cities only), to receive their money. The opportunity cost to send money in Myanmar is significant, and it is the unbanked customer who pays the cost in time and lost income.

With the development of mobile money in Myanmar, unbanked customers no longer have to pay this opportunity cost. Wave Money, the first provider in the country, now has over 10,000 agents in every part of the country, including remote locations in Kachin, Rakhine and Chin State. Wave Money shops are located next to factories, universities and markets, and they are generally open from very early in the morning to late in the evening, seven days a week. We talk regularly to customers who tell us that previously they would need to miss a day of work, just to be able to send money home to family. The Wave Money service now allows these customers to send money in minutes, and literally have family members receive it instantly. The time and capital previously employed in sending money can now be better utilized in other activities that add economic value to that customer.

In order to remove the opportunity cost from this service, we have focused on a number of design factors. Firstly, we ensure that our distribution network is as broad as possible. We now have nearly ten times the number of agents as bank branches in Myanmar, making it very easy for a sender and receiver to access the service, at almost any time of the day or week. Secondly, we have made the transaction easy for the consumer and the agent, with all information entered on the mobile phone and transaction records sent electronically by SMS. Lastly, the transaction is instant, which provides confidence to sender and receiver and builds trust in the service. In addition we provide customers with access to a call center that is open 24 hours of every day so that they can query transactions if needed.


As we have designed our mobile money service, we have been inspired by other industries that have developed products that both meet consumer need, whilst at the same time remove opportunity cost from the alternatives in the market. We firmly believe that this enhanced customer experience will change the way people transfer money in Myanmar, and we are already pleased to see that shift occurring.

- Brad Jones

Brad Jones is the CEO of Wave Money in Myanmar. He has worked in mobile money for most of the last decade, in markets such as Cambodia, the Philippines, Indonesia and China. Follow him on Twitter at @bradjoz.