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Even in underserved markets, local insight matters
When a business technology innovation changes the way of doing things, it captures the imagination of Fintech investors everywhere. M-Pesa, for example, the mobile phone money transfer system that was developed and is widely used in Kenya and East Africa had people terribly excited a few years ago.
On paper, M-Pesa looked like something that could be replicated all over the developing world. After all, a lot of people who need financial services don’t have them. Nigeria, for instance, has 170 million people, and nearly all of them have cell phones but only 33% have a bank account. So why not just cut-and-paste the M-Pesa app for all developing markets?
It’s rarely that easy, because cultures and customer needs differ from market to market. Vodacom tried to transplant M-Pesa to South Africa but it didn’t work out very well. The reason: customer needs and culture were misunderstood. In Kenya and East Africa, many people work in the city, but also maintain a dual home base in the rural towns; thus, investing both in the city and rural town is a cultural norm. As a result, they have a constant need to send money to these places where they hope to retire and where some of their family live. For them, M-Pesa offered a great low-cost channel to get their money out to their rural home towns. In South Africa, on the other hand, there is access to financial services – for example, ATMs – across the country, making it easy to transfer money. Furthermore, we don’t have the deeply imbedded two-home culture of East Africa. For us, M-Pesa was an ingenious application, but it didn’t solve a problem.
In this respect, financial technology innovation in a developing market is no different than in a mature market: You can’t really talk about disrupting the market without starting from understanding who the customer is and how you get access to that customer. It’s the same with any industry, whether you are talking about finance or consumer products or even agriculture: If you start with the technology, you’ll probably fail. If you start with the customer, you’re much more likely to succeed.
For example, if you were to develop a financial services product in South Africa, a logical place to start would be with the stokvel, South Africa’s traditional saving circle.
A stokvel is a group of people who come together to pool resources to work towards a goal, such as paying school fees, building a home, or taking a holiday. Everyone in the group needs to share and contribute, so there’s a bit of peer pressure and healthy encouragement. Stokvels range in size from a few members to thousands. And while they are social groups who meet regularly to eat, drink and connect, they operate in a formal savings and investment culture, with constitutions, membership rules, and investment guidelines. Meetings are fun, but money matters are taken very seriously.
Interestingly, the conventional wisdom used to be that stokvels would become a thing of the past as banking technology improved, but it hasn’t worked out that way. In the one I belong to, we don’t even collect the money anymore – we handle all the cash by electronic transfers – yet we still get together. Even today, one in two black South Africans belongs to a stokvel, and now our Millennials are joining too! The banks completely underestimated the value of the social component, both as an end in itself and as a motivator to keep working toward your goal.
In fact, I think stokvels are informing a lot of banking innovations now here in South Africa. If you look at the savings products or the online budget programs out in the market today, the ones that work well have integrated some lessons from the structure of the stokvel.
Paying attention to the culture can also give you ideas for new products you can take outside your home market. For instance, at my firm, we’ve designed a crowd-sourced innovation platform, the Innovation Café, which was inspired by the way Africans traditionally discussed issues around the fireside before taking them to their community elders for their judgment.
Like the fireside, the Innovation Café is a flexible platform that gives every single person who participates the opportunity to come up with ideas, get feedback on them, and eventually, after the ideas are improved and rated highly by the café’s participants, take them to the company’s executive team. The essence of the idea was to take power away from a central point and give it to every single person in the organization. It’s all about maximizing the social equity of the individual, and it’s a powerful concept whether you’re talking about five employees, 50,000 employees, or a country.
Ultimately, if you want to succeed in Africa (or anywhere), you need to listen closely to your customers, to your prospects, and all your stakeholders. But that said, I do have one caveat – women, don’t listen too hard to yourself! We all have a voice in our heads that turns up once in a while saying, you can’t do this, or you can’t do that. Sometimes I still hear it when I walk into boardrooms. That’s the one voice you should try to ignore. I stand strong today only because I have refused to let that voice in my head take away my strength.
In the end, I believe, the one ingredient that is necessary to succeed is the courage to believe that you can. Once you have that, you can get everything else. You can have the courage to say I don’t know and ask for help. You can have the courage to get on a plane and try to win a new market for your company. You can have the courage to say, I have failed or I made a mistake. Sometimes – and often this is the most difficult thing of all – you can have the courage to say, I succeeded.
Thinking that all developing markets are alike is a fallacy. Even in financial services, products need to be tailored for local tastes.
The desire for social connection is powerful, as are its effects. Product designers are better off working with it rather than against it.
Don’t look at local cultures as an obstacle to adoption of your product. See them as opportunities for new features.
Women often undercut themselves. Try to ignore your feelings of self-doubt.