May 2017 Public version Field Studies

The cosTs of collecTing cash This report examines the added value of mobile money for a Solar PAYG business model. Through the learnings of Solaris Tanzania (branch of Solaris Offgrid), it explores the operational limitations of working under cash payments (versus mobile money) and shares a few tips on how to restrict its usage.

Solaris Offgrid

Who we are

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Solaris Offgrid designs and manufactures integrated solutions to foster affordable and sustainable energy access in off-grid areas. We have been dedicating incredible efforts in R&D since 2014, and successfully experimented it with our last mile operator Solaris Tanzania. With Solaris Offgrid we scale up the impact by sharing this unique integrated solution to our local partners across developing countries.

We run our own field operations in the north of Tanzania

And share the recipe of success to our ambitious partners

POWERING V I L L A G E S Solaris Offgrid and Solaris Tanzania are trading brands of Eternum LTD

E M P O W E R I N G entrepreneurs

Solaris Offgrid

OuTlines

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The cosTs of collecTing cash

This report explores the findings of Solaris Tanzania. It looks at how our customers have shifted towards making cash payments, and explores the motivations behind this. It then notes the impact of this for the business and discusses a few ways to reverse this shift.

Contents • • • • • • • •

Pages 1-3: Introduction slides Page 4: Executive summary Page 5: Methodology Page 6-7: A shift to cash Page 8: Measuring the impact Pages 9-13: Understanding why Page 14: Finding a solution Pages 15-17: Concluding slides

ExecuTive summary

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What we believe are the main take-aways of this study: • When offered the choice between paying through mobile money or cash, many customers opt for the latter. Whilst this is appealing for customers, the costs involved in collecting cash make it unsustainable for the business to scale up. • The reasons that these customers choose cash are: • Convenience; • Problems with mobile money; • Unable to read; • Afraid to make activation mistakes. • Calling customers to remind them to pay will be more effective than visiting them.

4

MeThodology

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This Field Study explores the shifting patterns of payments between cash and mobile money. To do so, it looks at the payment data of Solaris Tanzania for the year of 2016 – a total of nearly 7000 payments from about 800 customers. When exploring the details of this shift, we ran a survey of customers who were regularly paying cash. We spoke to 30 customers who had used cash for their previous three payments.

5

A shifT to cash

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Solaris Tanzania offers mobile money payments, a quick and simple way for a customer to activate. Alongside this, we have also allowed onsite cash payments when enquired. The reason for doing so is that we realised that often our aftersales representative team would visit a customer to remind them to pay, and that customer would have the cash to pay directly there and then. When reviewing our payments for the year 2016, we realised that the number of cash payments had increased dramatically:

Evolution of Cash payments from January to December 2016:

x4

What had begun as way to provide extra convenience for a few customers was quickly growing into a major method of payment, with customers waiting for aftersales representatives to visit before paying. The next step was to look at the impact this has on the business. 6

Solaris Offgrid

A shifT To Cash

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Collecting cash payments, when first introduced, allowed us to combine a visit with a payment. However as customers began to wait for a visit to pay in cash, we were faced with a x7 increase in the number of payment reminder visits, illustrated below: Payment Reminder Visits Per Customer Index 7 6 5 4 3 2 1

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

As visits for other reasons (such as technical support or help with activation) remained steady over the same time, this was causing us to make an increasing number of visits to each customer. The impact of this is examined on the next slide. 7

Measuring The Impact

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To see the economic impact of visiting a customer to collect cash we carried out a simple cost calculation – looking at the cost to visit and the average amount paid. We realised that for an average payment collected in cash, 80% of the value was invested in the collection process… When we consider that a mobile money payment has negligible costs, shifting to more visits is clearly unsustainable. To understand and overcome this issue, we needed to explore the reasons that people were paying in cash.

8

Solaris Offgrid

UndersTanding why

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We identified customers who were paying cash regularly, and surveyed them to understand why they were doing so: Main principal reasons for paying cash 60% 50% 40% 30% 20% 10% 0%

Convenience

Problems using mobile money

Cannot read

Afraid to make activation mistakes

This shows that the majority of customers who pay cash do so for the simple reason that they like the convenience. The next few slides examine each of these reasons in detail.

UndersTanding why

“I like the convenience”

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#1

The majority of customers fall into this category. They are probably comfortable paying with mobile money, but typically deal mostly in cash, and so they enjoy the convenience of just handing cash to an aftersales representative when they come to make a visit.

UndersTanding why

“I have problems using the mobile money service”

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#2

This category includes those who: • Don’t have a mobile money agent in their village; • Have lost their phone; • Or are not comfortable with the process of using mobile money to pay.

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UndersTanding why

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“I cannot read”

#3

Typically older customers, this group feel unable to send money and activate as they cannot read. They therefore use the cash payment as a chance to have the aftersales rep assist with activation as well.

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UndersTanding why

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“I am afraid to make activation mistakes”

#4

Similar to the third category, these customers are not comfortable with the process and so they prefer to have the aftersales representative physically with them to support when they activate.

Solaris Offgrid

Finding the solution

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To tackle these issues, we decided to make more calls and fewer visits to remind customers to pay and to limit abilities to pay per cash to an aftersales agent. First, we looked at how effective both channels are (success is seen as the client activating within 2 days of the interaction):

Visits Conversion rate

Calls

CONFIDENTIAL

Visits were seen to be more effective than calls. However we noted that the aftersales technicians were not the best people to be making these calls, so we decided to train a focused customer services rep to make calls with a clear process to follow. We therefore shifted our reminders from visits to calls. By doing so, we were able to reduce the total number of visits we made in a month by 66%.

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Conclusion

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•

When given the choice, many customers will move towards making cash payments. Their motivation can be summarized in the following: 1. Convenience 2. Problems with mobile money 3. Unable to read 4. Afraid to make activation mistake

•

Visiting customers to collect cash turns to encourage them to adopt such mean of payment, very costly for the last mile operator.

•

Restricting cash payment and carrying payment reminder mostly through phone calls are necessary step toward an efficient scale up approach. Author: D.Henry

Solaris Offgrid

Our integrated solution

The 4 crucial components of a sustainable & profitable business model

HARD

W A R E

SOFT

W A R E

EMPOWER M E N T

FINANCE P U S H

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T h e

3

m a i n

m o d e l s

o f

T E C H N O L O G Y I N T E G R A T I O N INTO

Y O U R

A P P R O A C H

SMART & MODULAR charging controller including PAYG technologies

CUTTING EDGE CRM enhancing customers and resources performance monitoring

STRATEGIC & TECH expertise in running a Solaris business is shared from day one

MA T C H F U N D I N G can be provided to cover post pilot capital expenditure effort

FULL HOME SYSTEM Be exclusively dedicated to this range of technical solution and replicate our successful Tanzanian model, partially or totally

WITH APPLIANCES

Our solution will allow you to extend your range of products from entry level powercapacitiestoaTV-friendlysize in order to follow your customers’ needs

WITH MINI-GRID Our solution will give you a flexible and cost efficient way to extend the reach of your grid to un-served customers while relying on a CRM to manage them all

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www.solarisoffgrid.com www.facebook.com/solarisoffgrid @solarisoffgrid [email protected]