A bank in your pocket, Haitian style

Ten per cent of Haitians have bank accounts, but eighty per cent have mobile phones. Enter a new mobile banking system

Mobile phones can do such impressive things these days that the ability to talk to another person seems almost secondary. Voice calls? Please. That’s so 1870s. Nowadays, you can text, check email, surf the Internet, upload and share photographs, actively engage on social networking and blogging sites, download music, or Google places, people, and information. You can even send and receive money.

Kenya’s M-Pesa (the “M” stands for mobile; pesa is the Swahili word for money) pioneered the concept, and with more than fourteen million users, it is the most widely used phone-based money-transfer system in the developing world. In the Caribbean, the mobile-phone-as-debit-card idea was launched in Haiti in November 2010, ten months after the earthquake that devastated Port-au-Prince and its environs. It may have seemed an awkward time to introduce a service like this, but Digicel and Scotiabank — who partnered with Latin America’s leading mobile financial network, Yellow Pepper, on the TchoTcho Mobile project — tried to meet a need, to give the country “a little something-something,” which is what tcho tcho means in Haitian Kreyol.

This new ability to conduct basic banking transactions (deposits, withdrawals, transfers) with something many people already had — a mobile phone — helped Haitians get up and running again. And this time, money was talking. The simple convenience of being able to send money domestically to other mobile phone users was liberating, particularly as it erased the need for traditional bank accounts. Or, indeed, traditional banks.

Only about ten per cent of Haitians have bank accounts, but eighty per cent have mobile phones. Many bank branches were damaged by the earthquake. A few collapsed. Combined with the dramatic increase in cash-for-work programmes run by NGOs, this put enormous pressure on an already strapped banking system. The introduction of mobile money services channelled people away from long lines and error-prone cash payrolls, and allowed them to be paid quickly — in seconds, really — by directing the payment straight to their phones.

How does TchoTcho work? Once you sign on for the service, which you can access from any Digicel mobile phone, you go to a TchoTcho agent and make a cash deposit. The agent types a command from his phone to send the equivalent amount of electronic money to your account. To transfer that money to someone else, just type *202# on your handset, and hit send. A menu appears with choices such as “transfer” or “balance.” You enter the amount, the phone number of the recipient, and your PIN. Once the transfer is complete, both you and the person to whom you’ve sent the money get a text that confirms the transaction.

After the launch of TchoTcho, the number of financial points-of-service in the country practically doubled. Patrons of community shops, for instance, could now pay for purchases simply by transferring money from their mobiles straight to the business owner’s phone. In a cash-reliant economy, this was a giant step forward. Cheques are in limited circulation, and only accepted if you’re trusted by the addressee, while credit card use is restricted to a few hundred formal businesses. And there was another benefit to the mobile wallet peculiar to Haiti: in a country still recovering not only from the earthquake but from the massive cholera epidemic that followed (as a result of infected United Nations peacekeeping forces tainting the country’s water supply), it was safer not to have to handle money that may have changed hands over and over again.

Haiti, the poorest country in the Caribbean, has been plagued over the years by all manner of unrest. The 1791 Haitian Revolution courageously brought issues of race and rights into focus, but by the time the situation degenerated into civil war eight years later, internal political struggles paved the way for foreign economic interests to thrive. This has, in a sense, become Haiti’s recurring history: dictatorships, coups d’etat, and foreign intervention. Unsurprisingly, in the aftermath of the 2010 earthquake, international development agencies have played a major, and not always uncontroversial, role in relief projects.

Before the earthquake, the USAID programme HiFive (which stands for Haiti Integrated Finance for Value Chains and Enterprises) was already working on a national mobile payment project. Post-disaster, the Bill and Melinda Gates Foundation — the Microsoft founder’s philanthropic organisation that supports worthwhile initiatives in everything from education to world health — got involved. The Gates Foundation offered a US$2.5 million incentive for the first mobile banking service to come on stream in Haiti. Operators had to invest first, though, and reach specific targets before accessing the money. TchoTcho made the grade, and still maintains its hold as the market leader, with nine hundred agents serving more than five hundred thousand registered customers. (The second prize, worth US$1.5 million, was clinched by T-Cash, an alliance between the telephone company Voilà and Unibank, Haiti’s largest financial institution. T-Cash was retired after Digicel acquired Voilà in March 2012.)

The initiative represented the biggest concentration of mobile money use in the NGO and post-disaster context worldwide — at least according to research conducted last year by the strategic advisory firm Dalberg. HiFive played a managerial role, says its senior technology adviser Stéphane Bruno, who is also a member of the Haitian presidential commission on information and communication technologies. Grants to different companies helped strengthen agent networks, develop business intelligence software, and introduce mobile applications for customer subscriptions to help replace paper-based registrations (such as national ID cards). Bruno is understandably proud of the innovations that followed: the introduction of mobile vouchers and Android applications which register clients and process vouchers on top of core mobile services, which were all developed by Haitian IT company Transversal.

The mobile financial system also has the capacity to do much more, crossing boundaries both real and virtual. In Haiti, many rural communities are still relatively inaccessible. The barrage of storms and ensuing floods that the country battles during each hurricane season further isolates some villages. But with mobile money, residents don’t feel as cut off; they can still pay for necessities and have them supplied by nearby stores. Users can send cash across the city or across the country, a transformative tool — one that will be even more heavily used once an international remittance facility comes on stream, perhaps as early as this year.

Interestingly, Bruno says, illiteracy has not been an obstacle to widespread use of the system. “People gained a functional understanding of how it works, and although literacy rates are low, most Haitians have basic arithmetic skills that allow them to conduct business informally.” The biggest challenge, he explains, has been conceptual — “to trust a device in keeping and using one’s money, instead of the hard cash people are used to” — but with more than eight million transactions conducted as of September 2012 (TchoTcho and T-Cash combined, with eighty per cent being person-to-person transfers), it appears to have been a surmountable one.

But Bruno doesn’t consider TchoTcho sustainable — at least, not yet. “So far, NGO programmes with payments to beneficiaries have been the main contributor to the number of transactions,” he explains. “As NGO programmes fade out, the use of mobile money will decrease. Digicel is now gearing up to bring the services to businesses, to the informal markets, and to stimulate a more organic use of the services.”

After which, Bruno hopes, the full potential of the system will be seen. “It addresses specific pain points in the Haitian economy. Paper money in Haiti has to be replaced every three months, and it costs about seven cents to print each [banknote]. There is always [the] problem of giving exact change back, and there are security concerns. The system has the capacity to make transactions more efficient, less costly, more secure.” Even the government intends to use mobile payments to facilitate transactions between the public service and the citizenry. “The government of Haiti already uses TchoTcho Mobile to implement social safety nets for the most vulnerable,” Bruno says. “Mothers receive payments on their phone if they keep their children in school, students receive study allocations.” He adds, optimistically, “We have just scratched the possibilities of this system so far.”