Key takeaways
- ACCESS: While IME Pay’s cash and mobile wallet services are both used by customers from all demographic groups, women tend to use cash, and men have primarily adopted mobile wallets. The demographic distributions for cash users are also slightly older, less educated, and with lower income than those for mobile wallet users. Based on these findings, UNCDF developed two customer archetypes: Usha, the Cash User, and Rabin, the Mobile Wallet User.
- USAGE: Mobile wallet customers use their remittances for a wider range of purchases than cash users, likely thanks to remittance-linked financial services. Men and women spend their remittances on different types of purchases, likely due to differences in their family structures and division of responsibilities in families. Compared to other countries, a disproportionate number of Nepalese recipients use their remittances to repay debt from migration-related costs.
- RESILIENCE: Although nearly 60 percent of IME Pay customers receive more than US$200 per transaction on average, the company’s daily $200 withdrawal limit means that many recipients cannot use the full value of their remittances immediately. While this may promote savings, it can hinder cash flow and the ability to meet emergency needs.
- FINANCIAL HEALTH: Dimensions of financial health such as financial security, financial resilience, and financial control are slightly higher among mobile wallet users than cash users.
- COMMERCIAL VIABILITY: IME Pay has piloted several new approaches and adaptations based on these research findings to improve customer KYC and user experience. Already, these have increased its mobile wallet customers from 28,939 new sign-ups in January 2022 to 46,625 new sign-ups in August 2022, having raised the share of women customers from 17 to 24 percent.
Introduction
UNCDF’s first article on research insights from its collaboration with IME Pay highlighted Nepal Rastra Bank (NRB) initiatives and new IME Pay remittance service offerings that helped to accelerate remittance inflows to Nepal, supporting migrants’ families during the COVID-19 pandemic and associated lockdowns.
This second article offers a deeper dive into the access to and usage of remittances in Nepal, further exploring how remittances contribute to recipients’ improved financial inclusion and resilience. It draws on 51 million transaction1 records, 993 phone surveys, focus group discussions and in-depth interviews with 24 customers and agents2 to develop customer profiles and archetypes to explore their behaviours and perceptions. It also draws on findings from a human-centred design sprint that IME Pay and UNCDF participated in as part of a Harvard Kennedy School Smart Policy Design and Implementation (HKS SPDI) course on remittances and linked financial services at the Harvard Kennedy School’s Evidence for Policy Design in January 2022. Together, insights from these research and design activities are already informing the development of more gender- and migrant-smart products and services.
Access to digital remittances
IME Pay customers use one of two channels to receive their remittances: cash paid out by an agent, or a digital mobile wallet.
Customer profiles and archetypes
While both cash and mobile wallets are used by all demographic groups, a slightly more number of women use cash, while men have primarily adopted mobile wallets. Overall, the demographic distributions of cash users show that they tend to be slightly older, less educated, and have lower income than mobile wallet users.
The average transaction size is similar for both channels, at around US$160. However, nearly 60 percent of all customers receive an average of more than $200 per transaction, and for those who regularly receive more than this amount, IME Pay’s daily withdrawal limit of NPR25,000 (Nepalese Rupee, or $200) promotes savings but prevents immediate use of the funds, inhibiting recipients’ cash flow and ability to meet emergency needs.
Identifying barriers to the uptake of digital remittances
During the human-centred design sprint, IME Pay and UNCDF identified over 20 barriers inhibiting access to digital remittances, most of which stem from a few root causes. On the customer, or demand side, women generally have limited financial autonomy and inclusion. On the supply side, digital wallet service providers tend to have a limited understanding of their customers—especially women and migrants—and, therefore, design services that are gender-blind and one-size-fits-all. Service providers also have misaligned agent incentive structures that encourage agents to continue cashing-out remittance customers rather than transitioning them to mobile wallets with linked financial services such as savings, insurance, and bill payments. Identifying these barriers was critical and has allowed IME Pay to pilot various solutions enabling IME Pay to act on 13 out of 20 barriers; the remaining barriers require change over time which IME Pay is working towards.
Usage of digital remittances
How remittance recipients spend their funds
While most IME Pay customers use their remittances to cover regular household expenses, they also use the funds for a wide variety of other purposes. Around half of the customers use their remittances for children’s education, health expenses, debt repayments, utility payments, and some form of productive investment such as agricultural equipment and inputs, starting a business, or buying land, a house or livestock. Less common uses include financial services such as savings, health insurance, and—very rarely—pensions.
Overall, four in five recipients use their remittances for at least two distinct purposes, and 20 percent use them for more than three. Mobile wallet users tend to spend their remittances on a wider range of use cases than cash users, likely because the wallets are linked with bill and tuition payments, mobile airtime top-ups, and other financial services.
As such, remittances, especially those sent and received through digital channels, contribute to several of the Sustainable Development Goals (SDGs), including no poverty (SDG 1), access to health (SDG 3), education (SDG 4), financial inclusion and inclusive growth (SDG 8) and, through utility bill payments, access to water and sanitation (SDG 6) and energy (SDG 7).
While cash and mobile wallet customers use their remittances for similar purposes, 34 percent of the surveyed wallet users reported savings compared to only 25 percent of cash users. Insurance and pension payments are not popular amongst remittance recipients, both cash and digital. Comparatively, more cash than mobile wallet users reported investing in agriculture, likely because more cash users are farmers living in rural areas.
Women recipients are more likely to use their remittances for their children’s education and to pay back debts, while men tend to use their transfers to start or invest in a business. These trends may be due to differences in the family structures of women and men remittance recipients: women tend to be married to men who have migrated abroad and now send funds to support the couple’s children and repay their migration-related loans, while men who receive remittances are often young, unmarried and receive transfers from their brothers, uncles and other relatives.
Interestingly, compared to remittance recipients in other countries such as Bangladesh, a disproportionate number of Nepalese recipients use their remittances to repay debt. The qualitative interviews revealed that loans are often taken to finance intermediary job placement agencies, which are more prevalent in Nepal than in other countries.
“After paying for our household expenses, children’s educations fees and bills, I pay a portion towards the loan that we took for my husband to migrate to the UAE.” – Usha
Adoption of other financial services
Since joining IME Pay, 25 percent of customers (28 percent of men and 15 percent of women) also use other financial services. This is higher for mobile wallet users (33 percent) than cash users (18 percent), suggesting that mobile wallet adoption facilitates the uptake of other—especially linked—digital financial services.
Indeed, as shown below, more wallet customers use savings accounts, insurance, current accounts, credit cards, and pension funds than cash customers. Interestingly, a similar proportion of both groups have bank or microfinance loans.
“It is easy to link the mobile wallet to my bank and savings accounts—and transferring my money with the mobile app is cheaper than going to the agent. Still, it is not easy to take out a bank loan. For my business, I had to get a loan from a cooperative and friends.” – Rabin
Financial resilience
Drawing on UNCDF’s framework for financial health,3 the customer survey and interviews explored remittance recipients’ financial security, financial resilience, financial control, and financial freedom.4
Most IME Pay users view themselves as financially secure and able to manage their day-to-day financial commitments. This is slightly higher among mobile wallet users than cash users: 77 percent of mobile wallet users reported having money left from their remittances at the end of the month compared to 67 percent of those using cash. Financial management and security may be easier for mobile wallet users because they have a digital footprint of their transactions.
Financial resilience, or the ability to handle financial emergencies, is also generally high across all IME Pay remittance recipients. Again, it is slightly higher for mobile wallet users, 87 percent of whom reported that they could come up with emergency funds in the next 30 days if needed, compared to 78 percent of cash users.
“My life has changed since I started receiving remittances. I am happy when I receive the money, and paying school fees is easier these days. It feels good to manage my money and my confidence has increased. Still, there are times when no money is left at the end of the month. Luckily, I have not experienced any emergencies, but if I do, I will borrow the necessary funds from my sisters or other relatives.” – Usha
Regardless of the channel, funds are transferred by a third-party service, outside of customers’ direct control. Overall, 42 percent of IME Pay users feel stressed when receiving remittances, whereas more mobile wallet users feel a sense of financial control, compared to cash users. Sufficient information sharing, onboarding assistance and training can enhance users’ confidence and security, reducing the stress they feel about the remittance process. Indeed, 60 percent of wallet users and 45 percent of cash users indicated that their stress has gone down since starting to use IME Pay.
“Receiving remittances has helped me a lot. I have seen an improvement, and life is now easier. In Nepal, it is difficult to survive—and to do business—without remittances.” – Rabin
Achievements
Pay has already begun taking action as a result of these research findings with the UNCDF. For instance, in May 2022, IME ran marketing campaigns targeting both existing cash customers and agents to promote mobile wallet uptake. The campaigns have increased the mobile wallet customers from 28,939 new sign-ups in January 2022 to 46,625 new sign-ups in August 2022, having raised the share of women customers from 17 to 24 percent.
Eliminating access barriers thanks to a better understanding of customers’ preferences
As the team has gotten to know IME Pay’s customers better through this research collaboration, they have been able to hone in on and target barriers that inhibit digital uptake based on customer demand, particularly among women. For example, the initial Know Your Customer (KYC) digital wallet onboarding process required agents to take customers’ photos, which they often did with their personal phones. Many women felt uncomfortable with this, refused to have their pictures taken by the agents, and were thus prevented from using the mobile wallet. To make women feel more comfortable, IME Pay is currently piloting an adapted KYC process that requires agents to use a secured company camera rather than agents’ personal phones.
Secondly, IME Pay has updated the mobile application to support the Nepali language, making the user experience simpler and more accessible to a broader set of customers—as identified in the first article. The Nepali language was launched in the last week of January 2023 after end-to-end testing.
Boosting access by revising the agent network incentive structure
In response to the barriers identified in the human-centred design sprint, the IME Pay and UNCDF team piloted a revised agent incentivization scheme. In May 2022, IME Pay introduced a sign-up bonus (a one-time, flat fee paid to agents each time they onboard a new customer to the digital wallet) and auto-margin (another flat fee that agents receive each time one of the customers they onboarded makes a mobile wallet transaction). The scheme also integrates a financial literacy component, with the agents being trained to inform customers about the mobile wallet’s services and benefits, improve customers’ financial awareness, and guide them through the onboarding process.
This arrangement aligns more closely with the corporate strategy of digitization, offers agents the opportunity to earn additional income by encouraging their customers to digitize, empowers agents to be advocates and educators of digital financial services, and enables customers—especially women—to feel more comfortable.
Modernizing the agent network to offer linked and other services
IME Pay has piloted new approaches to adapt its legacy agent network—in which local shopkeepers earn solely from remittances—to a modern merchant network that introduces merchant wholesalers that will help agents expand their offerings to include other services such as airline ticketing, insurance, payments, etc. This has involved onboarding new merchant-led agents, especially women-led groups, who can help onboard previously excluded customers and advocate for their financial inclusion.
Results
Together, these activities have increased the total number of mobile wallet customers from 28,939 new sign-ups in January 2022 to 46,625 new sign-ups in August 2022, raising the share of women customers from 17 to 24 percent.
Next steps
This research has led to the development of several next steps for adapting IME Pay’s services to be more gender-smart and migrant-centric. Firstly, the team plans to improve women’s awareness of the IME Pay digital wallet by identifying and engaging with women-led committees and associations and to boost financial and digital literacy by offering training to women on the IME Pay mobile wallet application.
Secondly, IME Pay has implemented the Nepali language for its application and will be monitoring how it has improved uptake and user experience. IME Pay also expects to add more remittance-linked financial products, such as savings accounts, credit and insurance to the wallet.
Together, these initiatives will improve migrants’ access to and usage of remittances and other financial services, boosting the financial health and resilience of IME Pay customers like Usha and Rabin.
References
1 The data has been collected from IME MIS systems from 2018 to 2022.
2 Both the survey and interview participants were selected using a stratified approach to ensure that the samples were gender-balanced and represented both digital and cash receipts sent from the main remittance-sending countries of the United Kingdom, Malaysia, Saudi Arabia, and the United Arab Emirates.
3 Jaspreet Singh, Ahmed Dermish, Anne Duijnhouwer and Audrey Misquith, “Delivering financial health globally: A collection of approaches, insights and recommendations”, White Paper (UNCDF-Centre for Financial Health & MetLife Foundation, 2021).
4 For an international perspective on the customer survey results for financial health, see How Do Digital Remittances Contribute to Women’s Financial Health? where the findings from