Adelaide is a young Ghanaian trader specializing in vegetables from neighboring Burkina Faso. As she sets out on her journey from Accra in the south to the dusty northern border to buy tomatoes that she can sell back in the city, she carries the equivalent of $6,500 in cash on her person. The problem, she explains, is that she has to leave so early the banks are not yet open. She is well aware of the risks: 65% of Ghanaians feel that carrying money when travelling has become more risky and Adelaide has heard of other traders being robbed. Like the vast majority of her countrymen, she owns a cell phone and is well aware of mobile money, but she doesn’t use it. Instead her main security precautions are to keep her travel dates secret, never journey during the night and go in a group with other traders.

Mobile money or other branchless banking services could ease the risk on people like Adelaide substantially. Yet despite there being three MNOs, one government institution and one independent branchless banking deployment in the market, with two dozen partner banks, thousands of agents and millions in sunk marketing spend between them since 2009, the total active user base is less than 200,000 and all deployments are struggling for break even. Does this mean branchless banking is not going to work in the Ghanaian market? A recent piece of research CGAP commissioned from Bankable Frontiers Associates suggests that it should, as we will outline in two posts on the subject.

This household level survey was conducted in November 2011 in urban and peri-urban areas of Ghana for a sample of 1,003 respondents. High income neighborhoods were excluded, as the main objective was to learn about the money movements of lower and middle income Ghanaians. It is thus not nationally representative, and particularly the exclusion of rural areas from the sample should be borne in mind when interpreting the data.

Our results indicate that the fundamental market conditions for mobile money services in Ghana are not bad and that there is reason to question some of the negative assertions that are sometimes made. First, “send money home” does appear to be a valid proposition also in Ghana. Faced with the lack of takeup of mobile money transfer services, some observers have questioned whether the domestic remittance product that proved so successful in Kenya might not work in Ghana due to differences in family structures and migration patterns. The survey provides some evidence to the contrary, showing that every month 50% of urban and peri-urban households send money to friends and family, while 35% send money for business purposes. Our very cursory market sizing estimate hints that the combined value of these two domestic remittance markets may approach $4bn yearly, which is clearly a market worth pursuing.

Second, people are more open to electronic receipts than they are given credit for. More than 90% of urban and peri-urban Ghanaians pay bills and school fees, both of which can require substantial time or effort to pay in person and therefore a good potential target for branchless banking products. Most service providers in Ghana however believe that while POS based solutions can be deployed to serve this market, phone based options are not viable since people demand physical receipts for the payments they make. Our survey indicates that there is this strongly held belief may be inaccurate: over 40% of respondents indicate they would find an SMS receipt sufficient for payment of utility bills and school fees.

The study also finds that 96% of respondent households contain at least one cell phone and 64% have SIM cards from multiple networks. Very interestingly, 66% of primary income earners have already used it to send airtime to someone. This is an indication that lack of trust or technological savvy do not pose obstacles as significant as is sometimes assumed. Since the actions of sending airtime and sending electronic money are functionally identical, the leap for these consumers to transition to mobile money wallets should be a small one.

Our data further show that of the 56% of respondents that have used a commercial bank for money transfer and bill payments in the past year, 11% do not actually have any bank account. These consumers of payment services thus constitute a sizeable group of potential converts to mobile money or other branchless banking methods.

Above the line marketing has not translated into high usage of mobile money. Awareness is high but usage is low

Despite these encouraging findings, selling the branchless banking proposition to end users is not necessarily straightforward. The three MNOs offering mobile money products have spent millions on marketing for several years without seeing significant takeup. Our survey confirms that this effort has paid off in one sense, but failed in another. An impressive 90% of urban and peri-urban households across Ghana are now aware of mobile money, with some variation across the three products available. Yet only a modest 17% have actually tried any of the services and user activity rates are in the low single digits for all providers.

If basic market conditions are good and the value proposition corresponds well to customer pain points, as we will argue in the next post, why the great divergence between awareness and uptake? Our research yielded one result that may provide a useful insight for understanding and closing the gap. The vast majority of respondents stated that they are made aware of new payment methods through above the line marketing, notably TV and radio spots. But the methods that they actually use, they learned of either from friends and family (80%) or the person they needed to transact with—virtually no one learned of the method they use from ATL advertising. Our data do not permit a deeper exploration of the reasons underlying this striking pattern, but it seems plausible to surmise that trust plays a significant role here: people are skeptical of advertisement but place faith in the choices of their peers. This hypothesis also resonates well with our results on customer pain points and preferences, which will be explored next week.