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Abstract
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As digital financial markets evolve, new actors will enter the business environment; thus, influencing market competition. What are the potential impacts of such entry and competitive digital transformation on financial inclusion, payment services quality, innovation, transparency, consumer trust, and small businesses in the digital finance marketplace?? To answer these questions, we partner with the largest bank in Ghana (GCB Ltd) to randomize the expansion of their new Mobile Money business (called G-Money) across low-income localities.
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After
How do markets reorganize endogenously when there is exogenous entry of new entrants? When and how does this influence consumer demand and trust? We study this in the context of markets for retail digital financial services (DFS) / mobile money in Ghana. As markets for DFS evolve, new actors will enter the business environment; thus, influencing market competition. How these markets will reorganize themselves under entry and competition is an important and first-order question, yet poorly understood. We ask, specifically — (i) what price and non-price dimensions do retail mobile money businesses compete on (Quality or Transparency or Management)?; (ii) what are the general equilibrium impacts of competition on incumbents and other businesses?; (iii) can retail DFS unlock the potential of existing small business retailers — by adding retail DF as another line of business?; (iv) when and how does the induced competition affect consumer demand and trust in DFS? To answer these questions, we partner with MTN Mobile Money (the largest MNO-led DF provider) and GCB Ltd’s G-Money (the largest Bank-led DF provider) to randomize the expansion of new retail mobile money vendors across low-income localities.
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Trial End Date
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May 31, 2023
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May 31, 2024
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Last Published
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March 16, 2022 01:03 AM
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March 11, 2023 08:34 PM
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Intervention (Public)
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We randomize the expansion of new retail mobile money vendors across low-income localities. Our design creates 3 different exogenous variations at the locality / market-level — all guided by theory and practice — (i) some local markets receive the entry of new retail vendors vs not, (ii) for the entry localities, we vary the intensity of entrants across markets (either +33% vs +100% increase in vendorship relative baseline vendorship), and (iii) from an identified pool of “eligible“ local retail shops, we randomly onboard some as new mobile money vendors vs not.
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Intervention Start Date
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September 15, 2022
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May 31, 2023
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Intervention End Date
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May 31, 2023
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December 31, 2023
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Primary Outcomes (End Points)
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Before
We successfully piloted our experiment (key protocols, instruments, proposed design, recruitment and enrollment processes) in a pilot exercise.
Measurements (vendors): For market vendors, we plan to focus on the impacts of four non-price dimensions of the digital competitive pressure from G-Money’s entry, evaluating:
(i) Quality: incidence of transactional fraud or overcharging consumers at vendor retail points,
(ii) Information: tariff posting or display behavior at vendor points or digital market transparency; and whether vendor attempts to discuss transaction tariffs,
(iii) Services: likelihood of vendors’ declining transactions due to liquidity shortfalls or inability to manage liquidity properly; and length of carrying out transactions or consumer convenience,
(iv) Innovation: bundling M-Money with other non-M-Money services or expansions to other lines of business including total exits; changing vendor locations; hours of operations [self- reported]; vendor accessibility to previously unbanked households. We will evaluate the impacts and various dimensions (i-iv) that businesses compete on. We will adapt Annan (2020, 2021) audit study protocols (and surveys) to measure vendor outcomes objectively (and subjectively respectively).
Measurements (potential customers): For consumers, we plan to examine the impacts on trust outcomes. We will field questions that will provide subjective measures of trust in (i) M-Money providers (MTN vs Vodafone vs AirtelTigo vs G-Money), (ii) market vendors, (iii) carrying out vendor-involved transactions on M-Money (opening accounts; cash-in, cash-out), (iv) consumers’ family and friends, (v) commercial and rural banks (e.g., ADB, GCB, etc.), and (vi) the regulator of financial services in Ghana (Bank of Ghana) if they have heard enough about them to say. This allows us to benchmark consumer trust across M-Money and the other financial alternatives. We will supplement this with objective measures of trust measured from trust games between consumers and their local vendors. In its simple form: this entails a real monetary payoff game between the consumers (i.e., trustors) and one randomly selected (anonymous) local vendor (i.e., trustee). We impose vendor anonymity to mitigate against issues of social and individual preferences. Consumers will be endowed with 50GHS and will decide how much to send to another person (i.e., M-Money vendor). We will triple it, so that the vendor receives three times the amount of money the consumer sent. The vendor will then decide how much he/she wants to send back to the consumer. The total payoffs depend on the choices made between the consumers and vendor. Our objective measure of consumer trust will reflect the amount they sent and expected the vendor to send back to them.
We will combine baseline and endline market census, surveys, and audit studies to track the vendor, customer and business outcomes, supplemented with administrative data from GCB Ltd to examine market-wide impacts, including persistence and entry of new vendors.
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After
We successfully piloted our experiment (key protocols, instruments, proposed design, recruitment and enrollment processes) between January - June 2021.
Measurements:
*For (incumbent) market vendors, we plan to measure impacts on:
(i) Misconduct - Quality: prices charged for retail services; overcharging consumers or illegal markups (incidence and severity).
(ii) Transparency: whether price list posted, visible and clear; including whether vendor attempts to inform consumers about transaction tariffs before conducting transaction.
(iii) Reliability - Quality: whether vendor is present/absent at the retail outlet; whether transaction successful; likelihood of vendors’ declining transactions due to liquidity shortfalls or poor liquidity management; both transaction and service times.
(iv) Innovation: bundling M-Money with other non-M-Money services (or expansions to other lines of business); including total exits; changing vendor locations; hours of operations; vendor's accessibility to previously unbanked / unserved households.
(v) Service - Quality: consumers' views and experiences about safety, privacy, invasion, harassment, discrimination, and respect after visiting vendor points.
We will adapt Annan (2020, 2021) audit study protocols (and surveys) to measure vendor outcomes objectively (and subjectively respectively). We will combine the outcomes to derive an index of overall service quality.
*For consumers, we plan to examine the impacts on usage and trust outcomes.
(i) We will field questions that will provide subjective measures of trust in M-Money providers, market vendors, carrying out vendor-involved transactions on M-Money, consumers’ family and friends, commercial and rural banks, and the regulator of financial services in Ghana (Bank of Ghana) if they have heard enough about them to say.
(ii) We will supplement this with objective measures of trust measured from trust games between consumers and their local vendors. In its simple form: this entails a real monetary payoff game between the consumers (i.e., trustors) and one randomly selected (anonymous) local vendor (i.e., trustee). We impose vendor anonymity to mitigate against issues of social and individual preferences. Consumers will be endowed with 50GHS and will decide how much to send to another person (i.e., M-Money vendor). We will triple it, so that the vendor receives three times the amount of money the consumer sent. The vendor will then decide how much he/she wants to send back to the consumer. The total payoffs depend on the choices made between the consumers and vendor. Our objective measure of consumer trust will reflect the amount they sent and expected the vendor to send back to them.
*For (all market participants: vendors, consumers, nearby stores), we plan to measure their beliefs and expectations about potential competition effects if competition is introduced on: (i) misconduct / overcharging, (ii) reliability / illiquidity (transaction declines due to liquidity shortfalls), (iii) transparency / tariff posting behavior of vendors, (iv) location of vendor's retail store, (v) innovation / bundling of M-Money with other non-M-Money services at agent points, (vi) consumer trust, and (vii) consumer experiences and usage.
*We will combine baseline and endline (i) market census, (ii) surveys, and (iv) audit studies to track vendor, customer, and business outcomes (including: revenues, profits, number of customers, business expenses, employment, wagebill, household expenses), supplemented with administrative data (on sales revenue, vendor entry / exit, consumers' usage) from the commercial providers to examine broader impacts, including persistence and entry of new vendors across the localities.
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Experimental Design (Public)
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Before
Through our partnership, G-Money will be implemented in eastern Ghana (for 100+ select experimental low-income localities) based on our research design: 34 localities (~1/3rd) will randomly receive “no-entry” of G-Money (control program), while the remaining 66 localities (~2/3rd) will receive entry of G-Money (treatment program). For the 66 treated localities, we will randomly vary the density of entering vendorships (i.e., new vendors who are not presently doing M-Money business but are local microentrepreneurs) from 1 to 3: 33 localities will receive 1 additional vendor each (treatment I) and the remaining 33 localities will receive 3 additional vendors each (treatment II). We refer to existing vendors as “incumbents” (averaging at 3 vendors per locality; see Annan 2021 and our pilot). We shall focus the main experiment on localities with incumbents, which represent about 95% of localities. The design yields a total of 132 new entrant vendors, representing 69% combined increase in mean vendorship in treated markets or localities. Treatment I represents 33% increase, while treatment II represents 100% increase in vendorship. We will use this to trace out impacts of the various exogenous vendor entry levels. In a locality, we will enroll only a random subset of eligible and existing microenterprises as new G-Money entrants. Thus, overall, we create three
experimental variations: (i) only a random subset of the localities receive entry, so we can compare impacts of entered versus not; (ii) we vary the density of entry (1 vendor each=33% increase in vendorship versus 3 vendors each=100% increase in vendorship), so we can trace out the equilibrium impacts of competition; and (iiii) we enroll only a random subset of eligible microenterprises, so we can compare business impacts on enrolled enterprises versus not enrolled (all eligible).
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After
Design: ~1/3rd of localities will randomly receive “no-entry” of new entrant vendors (Control program), while the remaining ~2/3rd of localities will receive entry of new entrant vendors (Treatment program). For the treatment localities, we will randomly vary the density of entering vendorships (i.e., new vendors who are not presently doing M-Money business but are local microentrepreneurs) from 1 to 3: half will receive 1 additional vendor each (Treatment I) and the other half will receive 3 additional vendors each (Treatment II). We refer to existing vendors as “incumbents” (averaging at 3-4 vendors per locality). Treatment I represents 33% increase, while Treatment II represents 100% increase in vendorship. We will use this to trace out impacts of the various exogenous vendor entry levels. In a locality, we will enroll only a random subset of eligible and existing microenterprises as new entrant vendors. Thus, overall, we create three experimental variations: (i) only a random subset of localities receive entry, so we can compare impacts of entered versus not; (ii) we vary the density of entry (1 vendor each=33% increase in vendorship versus 3 vendors each=100% increase in vendorship relative baseline vendorship), so we can trace out the equilibrium impacts of competition; and (iiii) we enroll only a random subset of eligible microenterprises, so we can compare business impacts on enrolled enterprises versus not enrolled.
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Randomization Unit
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Before
At the locality-level, stratified by districts
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At the locality-level, and stratified by (i) population of locality (demand side) and (ii) number of incumbent vendors in locality (supply side).
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Planned Number of Clusters
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Number of localities (markets): 100
Number of districts (i.e., a larger administrative unit containing multiple localities): 10
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Number of localities (markets): 150
Number of districts (larger administrative units containing multiple localities): 13
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Planned Number of Observations
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Before
Number of households (customers): 100 localities x random 50 per locality = 5,000
Number of “incumbent” vendors (agents and merchants): 100 localities x roughly 3 per locality (using estimates in Annan 2020) = 300
Number of “entrant” vendors (agents and merchants): 150 new vendors, representing about 67% increase in vendorship in the treated markets (or localities)
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After
Number of “incumbent” retail vendors: 150 localities x roughly 3 per locality (using estimates in Annan 2020/2021) = 450;
Number of “entrant” vendors: ~132 new entrant vendors, representing +69% combined increase in mean vendorship in treated markets;
Number of customers / households: 150 localities x roughly 30 per locality = 4,500
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Sample size (or number of clusters) by treatment arms
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Before
34 localities (control program)
66 localities (treatment programs) -- varying the intensity of entering vendorships across localities
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50 localities (Control program),
50 localities +1 vendor each per locality (Treatment I),
50 localities +3 vendors each per locality (Treatment II)
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Additional Keyword(s)
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Before
Mobile Money, Competition, Consumer Protection, Supply-side Interventions, Microenterprises
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Mobile Money, Competition, Service Quality, Consumer Protection, Supply-side Interventions, Microenterprises
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