Download Diaries Data Can Identify Market Opportunities

Microfinance Opportunities
Diaries Data Can Identify Market Opportunities
The Financial Diaries methodology for collecting transactional data is a powerful tool for describing the
financial behaviors of low-income people and for informing the operations of financial service providers. The
methodology enables practitioners to link consumer financial behavior to product development. This link
facilitates a better understanding of appropriate design, delivery and marketing of financial products and services
to those at the base of the pyramid. Using the exceptionally high volume of transactional records gained from a
Diaries study, financial and e-money providers can see a clear picture of how consumers – their clients and
potential clients – are using cash and financial products in their everyday lives.
What Are The Financial Diaries?
MFO’s Financial Diaries tool is a transactional data-gathering methodology with two key dimensions that
distinguish it from other data-gathering methodologies:
1. It gathers data on economic transactions performed by individuals;
2. It gathers these data on more than one occasion in high-frequency sequences of surveys – in our case,
every week over a series of many months.
Building on the pioneering work of Stuart Rutherford, Microfinance Opportunities’ innovations in the use of this
methodology make it ideally suited for evaluation, consumer research, and product development. MFO’s Diaries
track not only the value of financial transactions, but also the type of transaction (e.g., cash, e-money), the use of
formal and informal financial products, the gender of and relationship between transacting participants, and the
location where their transactions took place. With this comprehensive collection of temporal, spatial and network
data, financial service providers can gain a deep understanding of the ways in which consumers use money,
interact with financial service providers and transact within their networks of relations.
The use of aggregate analysis of these unique data enables us to move beyond stories of individual Diaries
respondents to identify more general patterns of behavior. We are able to identify the extent to which the
respondents in our Diaries move through physical space and the types of people with which they are interacting.
This is especially important for mobile money providers who are interested in identifying market opportunities for
moving money cheaply across space through pre-existing social networks.
What Have We Learned?
MFO’s use of the Financial Diaries methodology has created powerful data sets with enormous utility for new
product development. By identifying patterns of consumer behavior, Diaries data can reveal underserved market
segments, consumer behaviors that have not yet been matched to financial products, and current products and
features that are underutilized.
For example, during an eight-month Diaries study of users of the M-PESA product in Kenya, MFO was able to
identify four key market segments based on a distance/purpose framework (see figure below). Analysis of MPESA transactions among Diaries participants demonstrated that the mobile money product was dominating the
long-distance/household segment, which is consistent with M-PESA’s “send money home” marketing strategy.
Long-distance e-money transactions (over 20km) between family members followed the expected pattern of
mostly traveling from urban to rural areas and from husband to wife, and may have helped users overcome a lack
of trust in the product – a simple phone call can confirm whether or not the intended recipient received the
remittance in full.
Cash In, Cash Out Kenya: The Role of M-PESA in the Lives of Low Income People. Microfinance Opportunities. Stuart, Guy and Monique Cohen.
2011. <http://www.microfinanceopportunities.org/docs/cash_in_cash_out_kenya.pdf>
Cash In, Cash Out: Financial Transactions and Access to Finance in Malawi. Microfinance Opportunities. Stuart, Guy, Michael Ferguson and
Monique Cohen. 2011. <http://microfinanceopportunities.org/docs/Malawi_Financial_Diaries_Report_2011.pdf>
As this example reveals, when financial service
providers analyze Diaries data with a focus on
transactional pathways, they can discover both
important opportunities for and constraints to
growth.
How Have Financial Service Providers
Used Transactional Data?
Another key utilization of the powerful
transactional data collected via Financial Diaries
is conducting impact assessments. A Diaries
study designed to include both recipients and
non-recipients of a new financial product allows
us to compare the effect of product innovations
on the behavior and well-being of those using
them, in comparison to non-users.
For example, MFO recently conducted a 17-month Financial Diaries study with Opportunity International Bank
of Malawi (OIBM) to assess the impact of OIBM’s mobile banking van on consumers in rural Malawi. The
findings allowed OIBM to progress into two critical areas:
1) Shift the strategic thinking in how OIBM looks at the market. Instead of asking: For what
purposes do people need financial services?, the transactional data allowed OIBM to move past
these initial questions toward answering the ones that can help them secure a larger market
share, like: How can we intermediate in order to support people’s financial behaviors?
2) Change in product line. OIBM used the transactional data from the Diaries to adapt their
products to better suit the needs of their clients. For example, after learning about
shortcomings in their Christmas savings product, OIBM expanded it to include not only the
formally employed, but farmers and the self-employed as well.
In order to grow and thrive in a competitive marketplace, financial service providers must be able to
view the financial landscape through the eyes of the consumers they wish to attract. It is clear that
Financial Diaries are an indispensible tool for understanding the financial behavior of consumers and
the environment in which they make their financial decisions. The uniquely rich data sets produced
by a Diaries study offer both financial institutions and mobile money providers the crucial insights
they need to develop appropriate products and services for those at the base of the pyramid.
For more information, please contact:
Microfinance Opportunities
1701 K St NW
Suite 650
Washington, DC 20006
t: 202.721.0050
e: [email protected]
www.microfinanceopportunities.org
© Microfinance Opportunities 2011