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.