Mobile money is complicated

Even with the rise of so many digital banking solutions, many designed specifically for unbanked rural communities, there’s no one-size-fits-all solution because every market has its constraints and challenges. But complexity aside, payments are a fundamental driver for project profitability and scalability. As a result, we built an entire payments service that is remarkably flexible – supporting multiple offerings from the tariff structure down to the underlying technological architecture.

Okra field staff teaching a local maintenance agent how to manage mobile payments

How do we bill for energy?

As we began working with different partners in different markets, it seemed like everyone needed to use a different billing structure. Some wanted houses to pay per kWh because it might be simpler to understand, and some preferred to set a daily or monthly flat-rate to make revenues more predictable. Some wanted postpaid to match grid electricity billing, and others wanted prepaid to ensure accountability by disabling systems without credit. Some wanted to enforce a limit and shut off homes that exceed and others wanted to let homes consume as much as possible.

From the technology side, we often push to simplify and remove options for customization especially during MVP stages of product development, but in this case, we decided it would be better to support mix-and-matching these parameters to allow for experimentation on the business model. And now that pilots have been rolled out using every permutation possible, we’ve been able to better understand the strengths and weaknesses of each approach.

Different appraoches, different pros & cons

Ultimately, our experiences with each of these models has led us to believe prepaid and flat-rate form the best model in terms of balancing complexity with risk protection. We encourage new customers towards it, but also appreciate that providing this matrix of options has been an important strength and opens new opportunities for us and our partners.

How do we collect cash?

Considering that Okra’s first markets have all been in SE Asia, where mobile banking penetration is far behind that of many regions in Africa, it wasn’t realistic to expect every household would have a smartphone where they could manage converting cash to digital currency and paying directly for Okra energy. But it also wasn’t realistic to expect our utility partners to go out to remote communities and collect cash, since they’d likely end up spending more in collecting cash than the cash they would be collecting. And as an additional layer of complexity, even though our platform manages each transaction record and household balance, the cash isn’t ours. The cash needs to make its way to the grid owner, investor or energy cooperative, depending on the deal structure and local regulation.

After much back and forth with all the stakeholders, we came away with 2 main payment structures that could support the context of current and future markets while also being automatable and scalable.

Option 1: Households make direct payments

Option 2: Households pay cash collection agents

Option 1 is what most people think of when talking about “mobile money” where the household manages their own digital wallet, the grid owner is registered as a business on the mobile money platform, and we use an API integration with the local provider to receive and validate the energy top-ups. But like I mentioned before, in communities where households don’t have smartphones, literacy is low, or digital currency is unfamiliar, this model doesn’t work.

Option 2, our primary model so far, employs an agent to gather cash, log payments via our mobile app, and then pass the cash back to the grid owners, either via a mobile money partner or via direct cash deposit, whenever they are back in the main town.

Initially, we thought the hardest part about setting up mobile payments would be allocating the software resource to integrate with multiple APIs. But in reality, the hardest part was facilitating the flow of cash to meet the requirements of all stakeholders. Households need to get electricity without delay while local energy cooperatives need to receive physical cash and grid investors need guaranteed deposits in their accounts, all with limited technology access.

Compared to direct business-to-consumer mobile money integrations, our model isn’t the most conventional and has more steps, but it’s easy to get up and running quickly and has helped us adapt to regulatory needs in each new market.

How do we increase revenues over time?

At Okra, we’re not just passionate about energy access for sake of energy itself; we’re driven by the opportunities energy can enable. To unlock these opportunities, people need means to consume electricity in meaningful ways. Without household appliances that save time and labor and generate income or without access to education and information, no one can “climb the energy ladder,” stifling the impact of energy access and inhibiting the profitability and growth of the grids from a business perspective. A study from CrossBoundary Innovation Lab in Kenya revealed that appliances could be the key to making the mini-grid model work, after several sites in Nigeria showed > 75% of a grid’s consumption came from productive users, despite them only making up 7% of the total households. Our internal modeling led us to the same conclusions, and after piloting several projects that were closely linked with appliance rollout, we went one step further- appliance bundling through our payments service.

There is a natural opportunity to link energy and appliance payments, tying accountability of paying off the appliance to keeping the electricity on in the household. To leverage this opportunity and simplify operations for our partners, we added appliance leasing into our payments service such that daily lease payments would automatically get deducted along with energy bills until an appliance is fully paid off. Now, our energy partners have the chance to easily add more appliances to their repertoire, both increasing opportunities for communities as well as ensuring their own financial success.

Screenshot from the Harvest platform: appliance repayment tracking for a single household

Our first appliance-driven pilot launched with a handful of fridges and freezers being leased, and we quickly saw that these ~10% of households were generating > 40% of the grid’s revenues, not including revenue on the appliances themselves. The range of appliances has only grown since now ranging from cricket incubators to rice cookers to washing machines and more. Look out for upcoming case studies that dig deeper into the role appliances play in our projects!

How do we monitor success over time?

We didn’t initially set out to build such a feature rich payments service. It is primarily backend logic, out of sight even to most of our team, but behind the scenes it plays a crucial role in keeping projects running smoothly. Our payments service communicates closely with the Okra Pods to make sure everyone’s system is enabled or disabled according to their available credit. It handles sending SMS alerts to households both to confirm successful top-ups, as well as to warn when balances or usage limits are being exceeded. It runs protection algorithms to ensure households only get billed when the quality of service meets specific standards. And it captures important financial metrics to help our partners monitor and track down unexpected losses.

Screenshot from the Harvest platform: Month-by-month revenue tracking for a single village

Because ultimately, it’s our job to not only make it possible to run profitable grids with our technology, but also to diagnose and correct if things go wrong. This revenue chart and more can be found on our grid management platform, Harvest, helping to provide a high-level overview of network performances. And we have our payments service to thank for this data.

Our payments service is just one of several crucial components within our technology stack and hopefully it has been interesting for you to learn a bit more about what we mean when we say “we support mobile payments!” As always, we welcome your thoughts and feedback, and thanks for your support. Power to the people!