Success and Haiti are two words that rarely go together. Haiti is not only the poorest country in Latin America and the Caribbean, but it has been beaten by recent earthquakes and hurricanes that unleashed a humanitarian catastrophe. Mobile penetration is the lowest in the region, between 35 and 40% of a total population of 10 million inhabitants, of which between 85 and 90% are unbanked.
Recently, I began to suspect that maybe there was indeed success in the development of the mobile wallet ecosystem in Haiti. From informal conversations with various people who work there, the feeling emerged, that the mobile wallet had advanced far more than what the various sources suggested. Under this suspicion I attempted to convince the protagonists that if they made public their updated figures it could be good news for Haiti, and of course for themselves.
Yesterday I was finally able to get hold of the figures from their primary sources and it is evident that Haiti is today the most successful mobile wallet ecosystem in Latin America and the Caribbean.
Tcho Tcho Mobile and T-Cash, the two suppliers in the market, share 800,000 subscribers who made almost 10 million transactions during the first year of life of the ecosystem. Just to put the scale of the Haitian case in perspective, Paraguay, considered the leader in South America had only 60,000 active users of mobile wallets by July 2011 according to this GSMA study. In contrast, M-Pesa in Kenya, the most successful case worldwide, has over 14 million users.
The most interesting characteristic of the case of Haiti is the speed with which the mobile wallet has reached the threshold of 10% penetration of the adult population, an indicator of high adoption of the service. The average age of the ecosystems that achieved this scale is 4 years, but in Haiti it happened in only one. The numbers are even more striking when considering the low penetration of mobile phones: mobile wallets reach 1 in 5 devices.
With these figures Haiti earns comfortably a spot among the top 10 world’s most successful mobile wallet ecosystems, and as the number 1 in Latin America and the Caribbean.
Part of the early success of the mobile wallet in Haiti has to do with the scarce supply of financial services. This is compounded by the collapse of the already insufficient infrastructure caused by the earthquake of 2010 and by a government pressed by the humanitarian catastrophe to laissez faire. The earthquake leveled, among other things, one third of the 164 bank branches, which were concentrated by 70% in the capital Port-au-Prince.
Another part of the success story can be explained by an original experiment carried out by international development agencies after the earthquake. The Bill and Melinda Gates Foundation in conjunction with the main international development agency of the United States, USAID, offered a prize of USD 2.5 million for the first launch of a mobile wallet service in the country and 1.5 million the second, with an additional USD 6 million related to growth in transaction volume.
Tcho Tcho Mobile won the prize for first launch and is the leader of the market with over 450,000 subscribers and 6 million transactions by the end of 2011. It is a consortium between Digicel Haiti, the country’s largest mobile network operator with over 60% market share, ScotiaBank and Yellow Pepper. Serge Elkiner, CEO of Yellow Pepper, the technology partner of the group which is also responsible for development of the network of agents, tells me that after a first stage in which focus was placed on achieving a critical mass of subscribers, they are now are bound to reach a steady growth of the transaction volume. In the first months of operations they noted that users require intense stimulation through promotions to become frequent users of the service.
The competitor, T-cash, is a consortium between the carrier Voilà and Unibank, the largest bank in Haiti. The nearly 350,000 users of T-Cash have performed more than 3 million transactions since the launch of the platform in December of 2010. T-Cash has the major network of agents: 1339. The most common transactions in the ecosystem are buying airtime and transfers between peers which, surprisingly or not, are often self-transfers to transport or save money more safely. One of the engines of growth for the volume of transactions has been its use as means of payment for the cash-for-work programs of several development NGOs.
The third success factor is price. Using a mobile wallet in Haiti is very cheap and sometimes free. If we make a comparison with the world leader, M-Pesa, Haitian prices are markedly lower, especially for small transactions (see chart). For a transfer to a non-client of the platform, in order to achieve a cost of 5%, in Haiti it must be equivalent to $ 16.50 international USD (see note to chart) while in the case of M-Pesa it should be equivalent to 30, 50 international USD. The model of T-Cash is the most innovative one with a clear aim to keep prices below 1% for transactions between peers of the service (P2P) at the time it even allows free transactions for smaller amounts. These prices seem suitable to compete with its main rival in an economy with high informality and low income: cash.
Comparison of prices as % of total transaction amount. Transactions’ amounts are expressed in Purchasing Power Parity of international USD. (Note 1)
Prices, scale and speed of adoption suggest that the mobile wallet is going viral in Haiti. The strategies of T-Cash and Tcho Tcho Mobile resemble that of PayPal in its early days: the players are in no hurry to reach the break-even point, but are instead focused on providing the ecosystem with scale. The immediate question is whether these price levels are sustainable. Time will tell what combination of price and scale is adequate to meet the profits that the different partners expect: cash agents, banks and carriers.
The good start to the Haitian mobile wallet is promising on several fronts and a valuable learning experience for the rest of the region. Despite the low penetration of traditional banks, they have been active partners in the device and launch of the ecosystem, a feature not common in other cases of success, such as M-Pesa just to insist with the same example. The alliance between banks and carriers seems to be very efficient, judging by the low prices they can offer their customers. This model responds well to a feature that differentiates Latin America and the Caribbean from Africa, where many seek inspiration for successful models. The mix between the banked and unbanked is divided roughly in halves, what makes deep synergy between carriers and banks inevitable in order to device large-scale services.
However, there are still many puzzles to solve. So far, the experience of the ecosystem shows the difficulty of reaching out to the base of the income pyramid with these services. In addition to economic constraints, there are also steep cultural barriers such as illiteracy, which surpasses 35%. On the other hand, the mobile wallet has yet to prove it can be a relevant source of income to supplement the revenues of mobile network operators, while banks must find the tangible benefits of entering into a business of high volume and low margins which is foreign to them for the moment.
Anyways, the Haitian potential is still immense. The low penetration of mobile services makes it possible to provide the mobile wallet service by default to new customers. International remittances are not yet part of the ecosystem, which represent a huge source of income. Additionally, an ecosystem with two players is the ideal setting to implement interoperability between them without incurring in high costs.
The pioneering success of the mobile wallet puts Haiti again at the vanguard of the region, as in 1791 with the revolution that transformed it into one of the founders of modern democracy. Only time will tell what the real impact of this innovation will be.
Anyways, it is good news from Haiti, which do not abound.
Prices per supplier in Haitian gourdes (IMTFI 2011, p. 5, Note 2)
Comparison of prices as % of total transaction amount. Transactions’ amounts are expressed in Purchasing Power Parity of international USD. (Note 3)
Notes 1 and 3: the transactions’ amount is expressed in international US dollars, which are equivalent to the US dollar’s purchasing power in the US, using the World Bank indicator Power Purchase Parity (PPP), 2010. For example, $5 on the horizontal axis expresses the prices of transactions for amounts that can buy the same quantity of goods or services in Kenya or Haiti than 5 US dollars buy in the US. USD exchange rate used: KES 85, HTG 40. The T-Cash prices do not include 10% tax. The prices of M-Pesa were taken from http://www.safaricom.co.ke/index.php?id=255
Note 2: U.S. dollar (USD) equals 40 Haitian gourdes (HTG) approx. TchoTcho Mobile rates include taxes (10%). The minimum transaction for TchoTcho Mobile is 25 HTG.