Ramona Liberoff and Chris Horn

Mobile Identity and Financial
Inclusion at the Bottom of the Pyramid

Movirtu is a for-profit, mobile-network software social enterprise backed by ven-
ture capital. Movirtu provides mobile-identity management software to leading
mobile telecommunications operators. The company’s core geographical focus is
Africa and South Asia. It works with mobile operators and non-governmental
organizations to serve people who live on incomes of $1-$2/day and can’t afford to
purchase or maintain a mobile phone, do not have regular access to electricity, and
appreciate the convenience of being able to log in to any handset. Mobile identity
services are particularly useful for rural poor women.1

Much of Movirtu’s customer base lives on $1-2/day. They cannot afford to purchase or maintain a mobile phone but still need access to phone services. This group, which makes up 30-50 percent of our target markets in Africa and South Asia, currently relies on public or shared phones and pay a premium to use a phone, either as a service fee to a public operator or as a sweetener to an acquain- tance to offset concerns about compromised confidentiality or credit use. Mobile users who use a shared or public phone have no “identity,” so while they are able to make brief calls or send a text message, no one can reach them individually. They cannot enjoy the full benefits of mobile communication, such as banking or personalized content services, which require a user identity. Movirtu’s Cloud Phone allows users to log in and out of any GSM phone con- nected to its operator client(s) who have installed Movirtu’s Cloud Phone technol- ogy. The Cloud Phone service creates a new customer for the mobile operator and gives the user a mobile identity. This is defined as the unique and secure connec- tion between a mobile user and his or her data, including his or her mobile num- ber and call records, and his or her mobile money account and information serv- ices, such as health notifications or agricultural information. Ramona Liberoff, Executive Vice President for Marketing, Strategy, and Planning at Movirtu, is responsible for end-user understanding, working with key NGOs and development implementers, and marketing. Her background is in strategic marketing and planning, working with global clients such as Pepsico, HSBC, and Vodafone. Chris Horn, Chief Technology Officer at Movirtu, has worked with mobile network operators for over 20 years to design, develop, and launch communications services with Ericsson, Mobeon, Comverse, and Sema Group. In 1992, Chris worked on the original team that delivered the world’s first SMS message. © 2012 Ramona Liberoff and Chris Horn innovations / volume 6, number 4 65 Downloaded from http://direct.mit.edu/itgg/article-pdf/6/4/65/704826/inov_a_00101.pdf by guest on 08 September 2023 Ramona Liberoff and Chris Horn Mobile identity historically was tied to the SIM card in a mobile device. The SIM card or mobile device holds critical user information: the mobile number, call history, user information and messages, as well as applications. Where electricity is scarce and phones went uncharged, services were not accessible.2 Phones represent a significant out-of-pocket expense to buy and to maintain and charge. Therefore, despite significant growth rates in mobile penetration, the majority of poor rural users, especially women and youth, remain excluded from the benefits of mobile because they lack a mobile identity. Mobile identity can confer enormous benefits to end users by extending mobile services to those who do not own handsets. One application of mobile identity is mobile payments. Research from the Consultative Group on Access to the Poor (CGAP) estimates that 2.7 billion working-age adults do not have a for- mal-sector savings, transaction, or credit account, and even fewer have formal insurance.3 They often pay a premium for keeping deposits with third parties or to send money. These methods may be common, but they are neither secure nor con- fidential. Given the fast growth of mobile communications and relative ease of access, mobile is positioned as the most likely way to deliver financial inclusion at scale, particularly in poor rural markets in Africa and South Asia. As the focus for finan- cial inclusion shifts from early efforts in microcredit and enterprise toward longer- term practices of saving and investing, mobile phones and networks play a key role. Branchless banking makes sense where transaction costs are high and capital is scarce. CGAP estimates that it is 38 percent cheaper than branch banking in serving the bottom of the pyramid (BoP), and mobile phones are the most cost- effective way to deliver branchless banking. USER VIEWS, BARRIERS, AND DRIVERS Movirtu conducted quantitative research and in-depth group discussions with farmers, entrepreneurs, and young people living on $1-$2/day about mobile serv- ices and user needs, and has discovered a series of barriers for the poor, as well as insights that will help spur the adoption of new services.4 Barrier Number 1: Lack of mobile identity frustrates demand and limits skill acquisition Movirtu’s quantitative research findings show that a rural woman in Tanzania has to walk 52 minutes to access the most commonly used phone, both because of the sparse population and because borrowing a phone is a major favor. When researchers asked users what their experience of borrowing a mobile phone is like, many stories were of pent-up demand. The borrowers were anxious about asking a favor of the lender and felt obliged to pay more than the amount of phone cred- it they used, resulting in a borrower’s premium of up to 50 percent. The borrow- ers often had little privacy because the owner of the phone would be anxious about how much credit was being used and the privacy of data on the phone. This con- 66 innovations / Inclusive Finance Downloaded from http://direct.mit.edu/itgg/article-pdf/6/4/65/704826/inov_a_00101.pdf by guest on 08 September 2023 Mobile Identity and Financial Inclusion at the Bottom of the Pyramid strained the likelihood that the borrower would do anything but make the most basic quick calls or text messages. Because borrowers did not have the leisure to experiment or explore the phone’s capability, they had little faith in their ability to use advanced services, whether mobile money or the Internet. In Tanzania, women and farmers told researchers that mobile money current- ly was not “suitable” for them, due to a lack of knowledge, fear of theft, and fear of deleting data.5 Barrier Number 2: Mobile competes with existing social groups, which have other benefits beyond the financial In the book Portfolios of the Poor, Daryl Collins investigated the financial activities of people living on $1-$2/day in Bangladesh.6 Although none of her research par- ticipants had access to formal financial tools such as a bank account or credit card, they were actually very active financially. They juggled debt, savings, insurance, and other financial instruments in a complex network every day in order to meet ordinary and extraordinary costs on fluctuating incomes. While many of Movirtu’s BoP users do not have bank accounts or even mobile phones, they all belong to social groups for informal financial services and sup- port. These groups are called many different things in different countries, but behave similarly. In Tanzania and Senegal, “merry go rounds” are key financial institutions used to fund emergency situations or big events, with repayment and contribution based on solidarity. Merry go rounds are also called “games,” indicat- ing that there is an enjoyable component of chance to them where users might get a nice surprise. These social activities reinforce the sense of community solidarity, control, and existing social ties. In Senegal, women farmers describe group meetings as an important social occasion for women to drink tea, exchange information, and pay in their group contributions. If several women found they had a similar issue, they might team up to seek help from experts or outsiders, a more socially acceptable solution than going alone to strangers. The young people interviewed by Movirtu’s researchers were aware of and open to mobile money and discussed its advantages, such as avoiding queues and travel time and easier record-keeping, although they still described mobile bank- ing as expensive. Mobile money may not yet have the trust or familiarity that exist- ing groups convey, despite certain functional advantages. The real competitor to mobile money is the wide variety of groups, which are trusted, familiar, and enjoy- able. Barrier Number 3: The affordability and suitability of owning a mobile device, especially for women Very few women in the Movirtu BoP research groups owned phones. This gender gap in phone ownership has been quantified by the GSMA in its foundational MWomen study, which indicates that men in Africa and South Asia are up to three innovations / volume 6, number 4 67 Downloaded from http://direct.mit.edu/itgg/article-pdf/6/4/65/704826/inov_a_00101.pdf by guest on 08 September 2023 Ramona Liberoff and Chris Horn times more likely to own a phone, creating a gender gap of 300 million women worldwide. Put another way, the research found that three-quarters of women with household incomes below US$75/month do not own a phone.7

Women are less likely than men to want to own a phone, for a range of reasons.
They have other priorities for the money, like children’s education, concerns about
husbands’ or friends’ jealousy, and a sense of caution about generating large phone
bills without being able to pay for them. In some areas of the world, such as Orissa,
India, religious or state authorities have decreed that girls should not own phones
before marriage.8

Non-affluent women usually have to borrow someone else’s phone. Although
a few women mentioned using a relative’s mobile bank account, it was an excep-
tion rather than routine behavior. Therefore, if the gateway to mobile banking is
owning a mobile, these women will continue to be left out. Movirtu’s research
shows that other barriers to purchasing a mobile phone include concerns about
affordability, for the purchase and maintenance of a handset as well as charges for
minutes.

Across India, Tanzania, and Senegal, Movirtu’s users expressed that they were
consistently becoming worse off from an economic point of view, due to declining
income and escalating costs of inputs and staples. Virtually all respondents spoke
at length about how higher costs have hurt them, without bringing any more
money to farmers or small traders directly: the surplus income was siphoned off
by brokers or middlemen with better access to markets and information. Mobile
phone expenses were viewed with some concern—although the mobile was con-
sidered beneficial, spending was thought to be unpredictable. Fear of theft, partic-
ularly of a more expensive phone, was particularly common among women.

While the cost of handsets is falling and headlines tout the benefit of “cheap”
smart phones, the poor believe a cheap handset is cheap for a reason—most likely
that it is unreliable or likely to fail. Also, even a “cheap” handset is still $20 for a basic handset or $75 for a smartphone at best: when the poor are spending 80 per-
cent of their income per day on food, this does not leave much room for saving for
high-ticket items.

As the cost of the most basic needs, including food, continue to increase or be
volatile, rural residents are challenged by both increases and uncertainty about
their incomes from agriculture or small-scale trading, thereby putting disposable
income at risk and encouraging potential buyers to make purchases conservative-
ly.

Barrier Number 4: Skills and confidence of “advanced” phone use

The level of skill and confidence relating to technology is extremely varied among
those at the bottom of the pyramid. Adults over 30, women in particular, report
having little skill in the use of mobile devices, and of technology more generally.

During the in-depth qualitative work conducted in August 2011 in Tanzania,
India, and Senegal, Movirtu’s researchers heard from users that they use basic

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Mobile Identity and Financial Inclusion at the Bottom of the Pyramid

phones for basic purposes, that is, calling and the occasional SMS. Only our youth
respondents displayed any knowledge of or enthusiasm for advanced services such
as the Internet.

Researchers were told that smart phones and the Internet were for “others”—
that is, the young and the educated. Because technology use today is often mediat-
ed by enthusiastic young family members, youth can and should play a role in
building both the skills and confidence of their parents, especially their mothers.
Moreover, mobile service providers need to work with users where they are today,
and capability and skill-building must be part of expanding the number of mobile
users.

As a female Indian entrepreneur told Movirtu researchers, “I feel, let the chil-
dren go with the technology development, so they can come up.” Another added,
“We are very backward. Let our kids understand and come forward, we will hap-
pily welcome this.”9

To sum up, while mobile payment or banking solutions have a great deal to
offer the poor, there are hurdles to be overcome for mass adoption: the affordabil-
ity of handsets, the importance of mobile identity, and the cultural and gender bar-
riers to “advanced” use of a mobile phone.

THE VIEW FROM THE TELECOMMUNICATIONS NETWORK OPERATOR:
PROS AND CONS OF VARIOUS TECHNICAL SOLUTIONS

The overall business-to-business challenges to setting up a mobile banking infra-
structure are significant. These include the right way(s) to brand and market
financial services, the right means of structuring teams or sales channels, how to
build successful bank-mobile partnerships, and questions relating to agent net-
works and liquidity. These are all valid concerns that must be faced if mobile bank-
ing is to mature as an industry. The telecommunications industry also faces certain
dilemmas in the provision of mobile banking services, including technology issues,
and all possible decisions have pros and cons. One fundamental choice is whether
to offer SIM-card-based applications or network-based solutions.

SIM-card-based solutions are generally linked to a phone, so they are person-
al from the start. Operators typically have chosen to provide applications on the
SIM card. SIM toolkit applications integrate closely with phone features and
appear to the user to be part of the phone’s functionality.

SIM-card-based solutions have been very successful in expanding the utility of
a mobile phone and allowing mobile network operators to deliver significant value
to users. As services expand to new markets, upgrade cycles speed up as applica-
tions continue to improve, distribution and maintenance become more complex
and expensive to manage, raising a question about the viability of universal finan-
cial inclusion from the operator’s point of view.

An example of distribution complexity involves the more expensive, higher
memory capacity SIM cards often used for financial services. Because most rural
users have very basic phones that after contain antiquated SIM cards, the most

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Ramona Liberoff and Chris Horn

foolproof way of distributing new services is via a new SIM card. This places the
burden on the user to replace the SIM card in the handset, and on the operator to
pay for logistics and carriage costs. Movirtu has found that distribution costs of
up to US $7 per SIM card are not unusual.

Because mobile is a highly dynamic and rapidly evolving market, operators
and partners need to react to changing demand and emerging segments in a cost-
effective way. An example of this is the need to upgrade applications frequently and
continue to increase their utility. Assuming the SIM card in the user’s phone is
capable, operators can and prefer to use “over the air” update processes, because
they control them. Over the air platforms are an inefficient and network-intensive
way of making frequent changes and are not wholly reliable: time critical updates
are not well suited to this method.

There are user issues for SIM cards as well. While SIM cards are easily portable,
unless they are in a phone, it is difficult for users to keep them safe. During a study
conducted recently in East Africa, Movirtu researchers asked SIM-card-only users
about their experience with SIM-card ownership. Seventy percent of the respon-
dents from a base of more than 300 users said their SIM card had been lost, dam-
aged, or stolen in the course of a calendar year. Many of those most in need of
financial services are itinerant or casual laborers who work in dusty or wet condi-
tions, or farmers. SIM cards have been dropped into a ditch, eaten by a farm ani-
mal, and stepped on by an unwitting child. SIM cards are often lost, damaged, or
stolen, and are therefore a poor investment for both operator and customer alike.
In an environment where the SIM card is holding significant value, such as the
insurance on a smallholder farm, there are many risks in trusting the application
to a thumbnail-size piece of cardboard and metal. Also, the replacement cycle for
lost SIM cards can be as long as 8-12 weeks, due to infrastructure, distribution, and
inconsistent supply.

BEYOND THE SIM CARD: THE NETWORK AS DISTRIBUTOR

Moving beyond the SIM card, which requires physical distribution, networks
themselves can be used as a distribution channel to all who are connected to it,
making it possible for far greater increments of inclusion to happen very quickly.
In the United States and Western Europe, the “app” revolution, combined with
smart phones and the availability of tablets, is transforming both consumption
and the creation of content, resulting in a proliferation of useful and enjoyable
services. The ubiquity and affordability of the Internet in developed markets
makes it possible to put the burden of discovery and managemenft squarely on the
end user.

In Africa there is very low Internet penetration. Moreover, providing applica-
tions on a mobile network is different from doing so over the Internet. For one
thing, although the Internet is accessed primarily through mobile phones, mobile
Internet is not a useful avenue for financial inclusion. The proportion of the pop-
ulation that has smartphones in Africa and India, while increasing rapidly, is still

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Mobile Identity and Financial Inclusion at the Bottom of the Pyramid

at best at or below 10 percent, and the higher penetration rate occurs in markets
like South Africa, which have higher incomes and a greater number of urban users
who have better infrastructure. Many markets have patchy GPRS (data) coverage,
so certain applications will not work everywhere.10

A universally accessible network technology exists, called USSD (Unstructured
Supplementary Service Data). USSD-based solutions, where the operator is able to
provide applications directly over the mobile network to the end user in real time,
is already used in many mobile banking and service deployments in Africa. USSD
allows the operator to retain control over the application and keep cost and com-
plexity to a minimum. USSD is supported on all mobile phones, even very low-end
models, which enables an operator to make a service available to all users from day
one. Furthermore, the capacity of the existing SIM card is irrelevant, as the net-
work is doing the work, not the SIM card or the phone. The costs of providing
services through USSD are very low, as any changes to the service are made avail-
able immediately rather than having to upgrade over the air.

However, USSD requires careful analysis of user interface and design, which is
time-consuming and requires specialist skills. If done well, USSD can offer the first
step to providing integrated services to the end user on the same menu and in a
familiar format. Users do not need a new discovery process or awareness campaign
for each new application: instead, the application appears as another menu item.

UNITING NETWORKS AND DEVICES FOR USERS BENEFIT

It may not need to be as stark a choice as offering a network-based or a SIM-card-
based solution. Increasingly, the mechanics of upgrade and distribution can be
managed behind the scenes with improvements and evolution in the SIM-card
toolkit as more sophisticated SIM cards and handsets become more widely avail-
able. Phone ownership by an individual will also not be required in the future, as
it should be possible to provide an application for several independent users on
one device without requiring extra SIM cards. It will also be possible to log in to
different applications on the same handset without needing a smartphone. Once
some of these technical challenges will have been solved, operators and application
providers can return to addressing the challenges from the users’ point of view.

FINANCIAL INCLUSION THROUGH MOBILE: THE FUTURE

Mobile banking is a clear avenue for improving financial inclusion in an environ-
ment where infrastructure is challenged.

SIM-card-based finance solutions are widely deployed, have been very success-
ful in growing financial inclusion, and are a valuable operator offering. For those
remaining without handsets, SIM cards and mobile identity solutions can help to
close the distribution gap.

In order to maximize financial inclusion while minimizing operator cost and

end-user complexity, we provide some suggestions:

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Ramona Liberoff and Chris Horn

• Invest in developing the skills and confidence in mobile use, particularly

among women. Youth, who currently often mediate technology access, can also
be strong advocates for change.

• Consider using a device-independent option like mobile identity in order to

include those who do not own or cannot afford a handset: it cuts out the SIM
card distribution cost

• Think of ways to make the financial services experience more social, and expect
that people will return to groups for the support they offer as much as for the
financial services component. The mobile service does not replace the social
role of the group, but it can support it.

• Consider how to make mobile money and banking easy for the end user, deliv-
ered in a familiar format without the need to either learn another application
or carry around a SIM card specifically for financial use.

Mobile money and banking solutions need to be marketed, segmented, sup-
ported by education, culturally appropriate, innovatively efficient, and combine
the available potential of the network and the device. Only then will we start to
unlock the potential of the currently unbanked and excluded.

1. Movirtu’s proprietary research among people at the bottom of the pyramid in India and Africa
discovered that the concept of a mobile identity is preferable for women in particular, because it
avoids both the physical risk of having a mobile phone stolen and the social risk of transgressing
gender norms, which assume that women should not have access to technology

2. Movirtu’s research shows that actual or potential theft of a phone is a major concern for people.
See this recent story, in which SIM cards were stolen from traffic lights in South Africa, with seri-
ous financial consequences. Available at http://www.bbc.co.uk/news/world-africa-12135841.

3. CGAP Annual Report 2010. Available at http://www.cgap.org/p/site/c/financialindicators/.
4. All of our BoP research findings and material are freely available under Creative Commons. For
a link to resources, please see www.movirtu.com/life-at-the-bop-study. All quantitative informa-
tion is from proprietary research conducted by Taylor Nelson Sofres in the context of commercial
implementations of Movirtu’s technology.

5. Tanzania Women’s’ group, outside Dar es Salaam, August 2011.
6. Daryl Collins, Jonathan Morduch, Stuart Rutherford and Orlanda Ruthven, Portfolios of the Poor,

Princeton, NJ: Princeton University Press, 2009.

7. GSMA MWomen study 2010. Available at http://www.mwomen.org/Research/women-mobile-a-

global-opportunity_1.

8. Times of India, June 19, 2011. Available at http://articles.timesofindia.indiatimes.com/2011-06-

19/india/29676266_1_mobile-phones-bans-unmarried-girls.

9. Movirtu group research, Coimbatore, August 2011.
10. See Balancing Act Africa for data on smartphone and Internet penetration in Africa. Available at
http://www.balancingact-africa.com/reports/telecoms-and-interne/mobile-apps-for-afri1.

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