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Observe consumers and build trust

News, 27 October 2016

KIGALI: Observing and reacting to consumers is crucial in building trust in low-income countries, and data can help that process, according to the man behind the innovative M-Pesa mobile payments service.

Speaking at an event in Kigali, reported by How We Made It In Africa, Nick Hughes related how M-Pesa had evolved out of a Vodafone micro-finance loan platform in Kenya. During a pilot of the service, he and his team had noticed people adding more money than needed to pay the treasurer of their group.

"So we scratched our heads and followed the data a bit more and kept watching… The delta between the minimum loan repayment and the amount of money on the wallets was growing and growing and eventually we got into the field and started asking them what was happening."

That was when they discovered that customers had very quickly found the mobile wallet a convenient way to pay friends and family within the test group as well as group treasurers.

"So of course a light went on – we cut out all that complexity in the microfinance loan system and went to market with a send-money-home, person-to-person payment platform… and the rest is history."

The lesson Hughes from this – and which he has applied in his latest business venture – is to "Put something into the market place, watch what your customers do with it, and then change your business model to that".

Four years ago he founded M-KOPA, a consumer finance company selling solar energy systems across East Africa which has followed a similar path – rapidly adapting its business approach having seen how customers wanted to use the service rather than trying to force them into behaving in a certain way.

"We made some mistakes in the early days and it's important to make those mistakes and observe what customers do," said Hughes. "For example, we started trying to charge for usage – hours of usage rather than single units of credit. Of course we switched after experimenting."

He also argued that understanding what such customers want and don't want and delivering on this can build trust.

"Coming up with a scalable model is all about trust from that customer, especially when it comes to low-income people," he said.

"They are very risk adverse … as they have a small amount of money that is disposable to them. So, we have got to build that trust – and data underpins that trust."

Data sourced from How We Made It in Africa; additional content by Warc staff