Abstract
Digital financial products like mobile money are becoming ubiquitous in developing countries. Due to low access to financial services and high access to mobile phones, offering of financial services via mobile phones is heralded as an important tool that can revolutionize financial services adoption and usage in developing countries thereby fostering rapid financial inclusion. However, despite becoming rampant in many developing countries, the role of mobile money in revolutionizing formal financial account access and usage has so far been modest. One reason for this is that marginal costs of the services, such as transaction cost, remain high; in fact, in some cases, the cost are even higher than what commercial banks asked for similar services. Thus, such high cost can limit the attractiveness of digital products like mobile money. Therefore, in this project, we study whether subsidizing cash out fees could stimulate more adoption and usage of mobile services. In other words, we study the responsiveness of usage of mobile money services to changes in price of cash-out fees. To this effect, we use a randomized field experiment where we randomly vary the cost of cash-out charges among some randomly selected clients of a private mobile money service provider in Gambia called Qodoo. The clients are randomly assigned to one of three different withdrawals fees discount: 0%, 15% and 30%. We then study how the adoption of the new offer and usage of their mobile money accounts varies across different withdrawal or cash-out fees subsidies. Thus, by experimentally varying one element of transaction fee (cash-out fees) we can determine how this is relevant for usage rates.