What Keeps People from Paying with Their Phones?

Michiel Wolvers and Daniel Waldron

Ever since M-Pesa caught the world’s attention in 2007, East Africa has been ground central for companies offering services that can be paid for using mobile money to the bottom of the pyramid. Pay-as-you-go (PAYGo) solar providers have reached upwards of 800,000 households in Kenya, Tanzania, and Uganda — markets where customers are able to repay the loans for their solar devices through mobile money. But what happens when PAYGo products are introduced into markets where few people are used to making payments on feature phones (in other words, almost everywhere else)? CGAP explored this question by partnering with PEG Africa, a PAYGo solar company operating in West Africa, and Tigo Ghana, the country’s second largest mobile network operator.

Mobile money in Ghana

Mobile money in Ghana has taken off only in the past few years. Until 2015, it was technically illegal for a nonbank to own an e-money platform, which left mobile money in the hands of banks that were uninterested in, or ill-suited for, the costly task of building up national agent networks. Once mobile network operators were permitted to offer mobile money services, they applied a strategy to reach scale quickly by deploying agents and paid minimal attention to educating customers about how to use their services. This helped create an over-the-counter market where agents effectively operate customer’s mobile wallets for them. And although over-the-counter service may lead to or complement mobile wallet use, it has notable drawbacks for some advanced services.

Mobile money payments, the foundation of PEG’s business model, are one of these services. As in the M-Kopa Kenyan model, PEG finances the sale of a solar home system, allowing users to pay for the system over a 12-month period. Loan repayments are tied to use, so if a user runs out of prepaid days, the unit shuts off until he or she makes another payment. Ideally, customers pay early and often, their devices are never shut off for failure to pay, and they finish repaying on or ahead of schedule. Mobile payments are the key to making this happen, as they are the quickest and cheapest mode of payment.

Yet in 2016, only 24 percent of PEG’s payments arrived via customers’ own mobile wallets. About 76 percent of payments were made by customers through someone else’s mobile wallet — typically, over the counter with mobile money agents or PEG field staff. Relying on someone else’s mobile wallet creates delays, higher costs and inconvenience for the customer. This results in less light for customers, longer paybacks for PEG, and decreased mobile wallet use.

Insights for increasing mobile money payments

Together with PEG, CGAP set out to come up with generalizable strategies to increase mobile payments among customers. The project began with a three-month research period, followed by a five-month pilot phase. Three main learnings came out of the initial research:

  • PEG’s customer base is used to passive payment methods. The Ghanaian payments sector has been designed for user convenience, and services providers are often actively involved in the payments process. This is not only the case for over-the-counter mobile money, but also for informal payments schemes. A well-documented Ghanaian example is the susu, a savings scheme whereby a collector visits customers everyday to collect deposits. Another example is the informal “lottery,” in which participants buy lotto tickets for cash when a seller visits them. A final example is utilities that send payments collectors to users’ homes. When passive payments are common, requiring customers to be actively engaged in the payments process disrupts the status quo.


  • PEG customers are skeptical of using mobile money for anything beyond person-to-person transfers. One of the inherent disadvantages of an over-the-counter mobile money market is that, by relying on mobile money agents and other providers to make payments, customers never become familiar with mobile money technology. This, in turn, creates opportunity for fraud. In fact, 80 percent of customers interviewed for this research reported having to pay additional charges on top of operator fees when paying via a mobile money agent, making them mistrustful and averse to using mobile money. Most customers, whether paying on their own or with the help of an agent, said that they call PEG every time they make a payment to confirm it has been received. This creates unnecessary call volume, and breaking this cycle is critical for PEG to create a sustainable business model.


  • Mobile money agents are not a reliable payments channel. Relying on mobile money agents presents some issues. First, agents do not always have sufficient e-money to exchange for cash, which forces customers to search for agents with liquidity. Second, while agents earn a higher commission on mobile money payments than they do for cash-in/cash-out transactions, mobile payments are more time-consuming because they often present complications that need to be resolved by the agent. For instance, rejected payments sent from an agent’s mobile money account are returned to the agent (not the customer), so customers hold agents responsible for resolving failed payments. Because of these complications, some agents choose not to let customers make payments over the counter. One agent even began to show customers how to make payments from their own phones after cash-in, forfeiting the commission but saving time.


What’s next?

While PEG initially considered over-the-counter payment through agents a viable payments channel for customers unable to navigate the phone menu, the field evidence shows that agents are costly, sporadically available, and often charge added fees. This research provides the rationale for piloting alternative payments methods to reduce the barriers for self-payment.

In a follow-up blog post, CGAP explores the innovative methods used by PEG to make mobile payments more acceptable (and more commonly used) by rural customers in Ghana. The results are exciting and show that even in countries where mobile money is unfamiliar (70 percent of PEG’s customers had never used mobile money prior to PEG), the PAYGo business model can still grow sustainably.