At the end of every interview for The Flip, I ask the interviewee a broad question, like what lessons they’ve learned over the course of their career. MicroEnsure’s Richard Leftley had this to say,
We figured that if we just put our product onto the digital platforms – if we just put insurance onto mobile – that suddenly people would wake up and want to buy insurance… And I think the key thing there is that if no one wants to buy your product, just because it’s now digital doesn’t actually make any difference… digital won’t fix it if it’s wrong.
MicroEnsure is a microinsurer with over 60 million customers, that distributes its products via third party partnerships like telcos, microfinance institutions or ride-hailing apps. A key insight that has led to their success is the importance of having an incredibly simple digital customer journey – in their case it means partnering with those who have a payment mechanism baked in so that, in the case of a telco, for example, payments can be deducted directly from the customer’s airtime balance.
As you can imagine, MicroEnsure’s growth has been greatly aided by a fundamental shift in technology – the proliferation of mobile phones in their customers’ markets in Africa and South Asia. But the growth didn’t happen all at once, and it was not directly a function of increased mobile penetration.
First, they leveraged partner data to tie insurance to life events – “would you like me to continue paying your child’s school fees?”, for example. And then, it was only after they chose to remove three basic questions during the application process – name, age and next of kin – that they experienced a tremendous increase in customer purchases. In fact, after removing these three questions, they signed up 20 million customers in 140 days.
MicroEnsure has built a product, and a business, that has found success selling microinsurance to previously uninsured customers.
Meanwhile, in our new, COVID-19 induced normal, the punditry has a lot to say about how our behaviors will change. Will companies more readily allow their employees to work from home? Will business travelers cut down their business travel? Is now the time for increased ubiquity and proliferation of digital financial services outside of East Africa? Will we see prolonged adoption of ecommerce, too?
Or, do old habits die hard?
What causes behavior change?
Stanford University’s BJ Fogg’s eponymous Fogg Behavior Model explores how behavior change happens. In short, “three elements must converge at the same moment for a behavior to occur: Motivation, Ability, and a Prompt. When a behavior does not occur, at least one of those three elements is missing.”
Even if something is really easy to do and/or an individual has a high motivation, said individual must also be prompted at the right time to achieve a certain behavior. A prompt is merely someone or something telling you to “do this now”. But if we prompt someone while their motivation and/or ability is low, behavior change will not occur. Sufficient motivation and the ability to perform a behavior are prerequisite for a prompt to work.
When we get popups or unwarranted notifications from a company asking us to perform a desired behavior, although it may be easy to do, if our motivation is low we’ll consider that prompt spammy. And on the other hand, how many times have we abandoned completing an online purchase, despite our high motivation, because completing the purchasing process was too difficult?
We can view this model in action through the lens of MicroEnsure – as Richard Leftley learned throughout his career – just because you digitize a product doesn’t mean that there will all of the sudden be increased demand.
They had an extremely simple, digital customer journey with payments automatically deducted from mobile wallets – high on the Ability axis. Their products addressed and assuaged fears their customers had, like who would pay their children’s school fees in the event of an accident – high on the Motivation axis. And finally, their outbound sales process, leveraging data from their distribution partners, was the Prompt at the right time. It was only when these three things converged that their customers signed up.
COVID-19 induced behavior change
The safest take on COVID-19, to me, is that the pandemic will accelerate trends that were already happening (as opposed to giving birth to entirely new behaviors). In his model, BJ Fogg accounts for “motivation waves” – when our motivation is high, we have a temporary opportunity to do hard things.
So we may have high motivation to do certain behaviors right now, but as the behavior model demonstrates, that alone is not enough to change our behavior. In other words, behavior change cannot and will not be impacted by COVID-19 alone.
COVID-19 is also impacting the ability axis – our ability to do many “normal” activities, as a result of social distancing and the economic consequences of our lockdowns, has decreased. Yet at the same time, our ability to do new things, such as work from home, has all at once moved in the opposite direction.
While it’s likely that any significant behavior change we’ve seen thus far is ephemeral, there is reason to believe that select behaviors will endure. It raises the question – what COVID-19 induced behavior changes will stick? And how or why will they stick?
While I personally find it fruitless to make predictions about how the world will change, we can instead leverage the Fogg Behavior Model as a framework to assess how or why future, long term behavior change may occur.
While there are forces beyond our control, how behavior changes can and will also depend on what, and how we build.
An example: mobile money utilization
Of all the behaviors that may change from COVID-19, I’m especially interested in its impact on mobile money utilization and digital financial services adoption.
Indeed, during this social distancing era, the motivation to use mobile money has never been higher.
At the outbreak of COVID-19, governments appealed to telcos in an effort to compel increased cashless transactions. In Kenya, Safaricom waived fees for all P2P M-Pesa transactions up to Ksh1,000 ($10), and increased the daily transaction limit for SMEs from KSh70,000 ($700) to KSh150,000 ($1,500).
While a welcome short-term measure, what effect, if any, will there be on mobile money utilization once the fees are put back in place?
In Nigeria, we’ve seen the fickle nature of price-sensitive consumers who will readily adopt a fintech product upon the introduction of loss-leading customer acquisition strategies, but who are willing to switch when those perks go away or when fees are increased. Switching costs are not as high as actual costs in these instances.
In general, we’re seeing an accelerated shift in mobile money utilization, per the GSMA – “the ratio of digital to cash-based transactions has increased by nearly 50 percent since 2017”, and the “total value in circulation (P2P and merchant payments) reached $22 billion in December 2019, more than doubling over the past two years and significantly surpassing the total value of outgoing transactions ($18 billion)”. So, more money in and less money out.
But in the short term, this trend is reversing. According to research from Caribou Digital and MicroSave Consulting, we’ve seen “an initial cash-out spike evolving into a pattern of reduced overall transaction volume but increases in transaction size, with the net effect of a halving of average wallet balances since the crisis started.”
There are a number of second order effects. Reduced frequency has negatively affected agent’s commissions, while at the same time increased cash-out has caused liquidity balancing difficulties for agents, as well.
So while certain directives may positively affect the motivation axis for mobile money utilization, they are seen to simultaneously affect the ability axis negatively.
And despite a desire to increase mobile money utilization, its use cases decrease as less remittances are being sent, and economic slowdowns have adverse effects on individuals’ incomes, as well.
Beyond these short term effects, many of the questions that exist in exploring what is required for increased ubiquity of digital financial services still remain, in spite of COVID-19.
I had a recent conversation with Hover’s Wiza Jalakasi (whose essay “The Fight for Mobile Money 2.0” is mandatory reading for all interested in this subject matter), and I asked what it will take for greater utilization of digital financial services. Wiza’s take is that the two most important elements that need to be improved upon are identity and credit –
We need to build more sophisticated use cases for the existing mobile financial services that are there. Airtime is extremely commoditized… financial services don’t operate in isolation. One of the big dependencies is identity. And identity is closely linked to credit… these things are siloed so it’s very difficult for innovators to build a new type of service that only relies on the payment rails without having an identity later or some sort of credit layer. When we solve those two we’ll start to see very novel, context-specific fintech-style applications coming out for the continent, and that’s where the long term value is.
Irrespective of COVID-19, there is still a lot of infrastructure to be built to positively impact both the motivation and ability axes of the behavior change model.