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The state of Digital Financial Services (DFS) in Zambia

Source: UNCDF
Source: UNCDF

The Helix Institute of Digital Finance carried out a survey based on over 1,200 digital financial services (DFS) agent interviews conducted between July and August 2015 under their ANA (Agent Networks Accelerator) programme, funded by the UNCDF MM4P (Mobile Money For the Poor) and it highlights findings on the DFS agent landscape in Zambia covering agent profitability, transaction volumes, liquidity management and other important strategic considerations. The findings were presented in partnership with the Financial Sector Deepening Zambia (FSDZ) programme and the MasterCard Foundation this week.

It was discovered that Zambian DFS agents have the same volume of transactions as other countries in East Africa like Tanzania and Uganda, have the least operational costs but are unfortunately making the least revenue. This has been attributed to the fact that Zambians are making low value transactions which in turn bring in very small commissions for the agents.

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Source: UNCDF

The agents have complained that DFS providers do not really educate their consumers on how these DFS work, or do not have refresher training for their agents to make sure they are giving out the correct information or advising customers on what other ways they could take advantage of these services.

There is also the issue of exclusivity of agents, they provide DFS services of only one provider, when they could provide others as well. The reason behind these is that more than 80% of these agents are directly employed by the provider itself, and  can not work for another one. If providers could share their agent networks, they could all still make revenue and in turn increase the income made by agents.

An issue with DFS services not being utilized fully is that the may be too far from the consumer. Transfers may be made via mobile services but access to actual cash may take a while or distance to obtain especially for people in rural areas. Providers need to come up with ways in which consumers can use this money in its electronic form for more payments rather than just remittances, airtime or paying for utilities. To do this they can partner with banks that may be present in the area to provide cash-in cash-out capabilities with mobile operators too, and in future also offer sophisticated services like credit and deposits. It was found that the Zambian market’s focus has been on payments, mainly person to person payments, bill payments or bulk payments, with less attention to agents registering customers or opening accounts.

Zoona has the largest share at 33%, with MTN and Airtel following at 27%. Banks also have a small share but are larger in rural areas as they have a mandate to offer DFS across the country.

Barriers to doing more business

  1. As most agents are employed by the operators themselves they depend on the provider’s float management. Operators can use this opportunity to provide credit to agents and build loyalty.
  2. Agents feel the competition amongst each other as there will be more than one agent of the same operator present in a small vicinity.
  3.  Providers are not aggressively marketing the use of DFS services to increase customer awareness. A third of the operators surveyed revealed that not manu of their customers know how to use the services and opt for assisted payments through them rather than do it on their own using their devices. They also seem not bothered to learn and depend on the agent to do his/her job.

There’s clearly a lot to be done in pushing for more DFS usage in Zambia but it starts with the providers educating more and partnering with other provides to enable cross-platform transactions. This is possibly one way to increase revenue for themselves and for their agents as well.

This will ultimately lead to more financial inclusion of the largely unbanked population in Zambia.

You can see the full Helix report on ANA in Zambia for 2015 here.