Digital is transforming remittances, enabling people to move their money around quickly, inexpensively and more conveniently. As we celebrate the International Day of Family Remittances, commemorating the significant contributions migrants make to their families back home and to the broader economy, an important question to ask is: How effective has this digital remittance transformation been in driving inclusive financial access and ecosystem growth?
One market where this question is most relevant is Jordan. Home to more than 600,000 Syrian refugees, Jordan hosts the second highest ratio of refugees in the world - 89 refugees per 1,000 inhabitants. A significant proportion of these refugees are women and children, with more than 80 percent living below the poverty line. This often means they are excluded from the formal financial system. Yet, a key area of opportunity is that most of these refugees use mobile phones. In fact, about 10 to 20 percent of their aid received is spent on connectivity such as airtime and data.
So to increase financial inclusion among Syrian refugees in Jordan, GIZ teamed up with Dinarak, a licensed payment service provider in Jordan, to explore digital solutions for increasing access and usage of remittances and financial services. This Dig#ttances project rolled out in 2015 and as it came to an end in early 2019, Amarante Consulting was brought in to perform a final evaluation of this public-private partnership. In our assessment, we emphasized learnings and challenges with mobile wallet uptake among the target population of Syrian refugees, women and unbanked Jordanians.
Our findings shed light on the question we asked above: how effective has digital been in promoting access to remittances and financial services and driving ecosystem growth? Here we share with you some of our answers:
Registrations have been successful, but usage is low: As of October 2018, of the total 8,000 Syrian refugees registered for mobile wallets with payment service providers in Jordan, Dinarak alone accounted for 5,000 registrations. Although this share is impressive, the number pales in comparison with the total population of over 600,000 Syrian refugees in Jordan. To add to that, usage is very low. Amarante’s investigation revealed that low funds and lack of trust in the digital ecosystem play a major role in this low usage. Also, refugees do not directly receive humanitarian aid onto their wallets, creating a “negative nudge” away from usage. This brings us to our next point.
Fewer wallet use cases limit uptake: The humanitarian industry is currently rather disconnected from payment service providers, meaning refugees have to take an extra step to deposit humanitarian cash transfers into their wallets, creating a first barrier to adoption. The integration of humanitarian cash transfers and digital transactional accounts is needed to help address this. If refugees received aid into their wallets, this would set off a series of use cases that could drive enhanced financial usage and growth of the digital financial services ecosystem. Other use cases such as direct deposit of salaries into wallets and multiple digital user experiences such as tap-and-pay can also help galvanize the uptake of digital financial services.
Expansive agent networks still rule the roost: Even though digital has made significant headway in the remittances space globally, in most markets it still relies on agents to deliver services at the last mile. Jordan is no exception. A strong agent network is a prerequisite to expanding access to financial services. Besides, in predominantly cash-led and communal societies such as Jordan, customers value the human interaction very highly and there is a certain market learning curve which is best serviced by the “phygital” (a combination of physical and digital) before going full digital. Realizing this, Dinarak with GIZ’s support invested in 217 agents in 421 locations across Jordan.
However, agent incentivization and branding is very important. Despite these efforts by Dinarak in increasing number of agents, wallet customers interviewed in Irbid, for example, preferred to travel to Dinarak’s shop in the city center mall to carry out transactions instead of going to their nearest agent, raising questions about customer preference, trust and legacy. On the supply-side, agents will need the right incentive structures to be sufficiently motivated to drive financial usage and they also need to be well branded with clear and attractive signage to make them easily visible to current and future users.
In conclusion, Jordan offers myriad opportunities for an inclusive digital ecosystem to develop and mature. However, payment service providers like Dinarak cannot work in isolation. A continued joint effort is needed by the Central Bank of Jordan, the private sector and development partners to:
Facilitate joint digital and financial literacy efforts to raise awareness and comfort levels among refugees, women and unbanked populations to go from cash to digital.
Widen the range of wallet use cases starting with targeting direct incoming funds into the wallet, thereby expanding end-customer choices. The current dominant use case of bill payments cannot address a gamut of financial needs among the unbanked. More thoughtfully designed use cases will be needed to provide the necessary impetus to drive increased usage.
Increase synergies between humanitarian and digital realms in order to engage Syrian refugees and women.
Create the right incentive structures for agents to be more involved in propelling financial usage. Innovative models such as partnerships with MFIs that can finance agents and cashbacks or discounts to agents could help create the initial momentum.
Increase interoperability among wallet providers so that users and bulk disbursement providers (like humanitarian organizations) can transact easily across wallets offered by multiple payment service providers.
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