What worked (and what broke): Outcomes of the prepayment pilot

This is the final article of a series about a prepayment product that IDEO and Mercy Corps Ventures’ FinX initiative have been building over the last few months in conjunction with Sokowatch, an informal retailer logistics platform. We launched a prepayment product that enabled Sokowatch’s micro-retailers (‘merchants’) in Rwanda to make prepayments into Sokocash (similar to a pre-loaded gift card with a 1% or 2% ‘bonus’), offset by a DeFi corporate treasury staked in Anchor protocol. They could redeem their Sokocash for products on the Sokowatch platform to sell to customers.

As we rolled out operations, dug deeper into the technology and financial viability of this product, and explored what would take to scale, we kept coming back to a core theme: Trust. Trust is essential to the success of any new financial product–and that trust is built through human-to-human connection as much as it is through product design. Below, we’ll talk through what we learned about building trust at each stage of delivering the product.

Recruitment

On boarding required a human touch, and leveraging trusted channels was key!

At first, we imagined…

Recruiting via SMS could be an efficient, fast, and reliable channel, leveraging retailers’ trust of Sokowatch.

We learned…

A combination of texts, calls, and in-person visits were a more effective way to build trust. For retailers, Delivery Agents are the face of Sokowatch and leveraging those personal relationships had a stronger effect than just relying on retailers’ trust of the brand.

What it Means:

• Simply having Delivery Agents mention the new service, or having our program associates name-drop Delivery Agents’ names, had a huge impact–since we were building upon existing relationships.
• It takes time to build trust in a service. Some retailers came back to us after initially declining to join the pilot, and some retailers took weeks or months between signing up and their first prepayments.

Consider:

✅ Calls, SMS Texts, in-person: What combination of messaging will work?

✅ How will you identify and leverage trusted touchpoints?

✅ What is the right amount of nudging? When do you give up on a lead?

Photo Credit: Sokowatch

Prepay

Safer cash storage is a much larger priority for retailers than we had expected — and the prepayment experience is a key moment to build trust.

At first, we imagined…

For retailers worried about keeping their cash safe, storing it in mobile money would be the obvious solution.

Retailers would benchmark their experience against mobile money, so mimicking a mobile money interaction would make our service feel intuitive.

We learned…

Safer cash storage was a stronger need than we had expected: mobile money does not feel safe enough because it is still liquid and can be stolen. A number of retailers have been robbed, even from mobile money accounts, so they are actively seeking alternative avenues to store cash that cannot be stolen.

Prepayment is a key moment of trust, and multiple confirmations (with a personal touch) are an opportunity to build that trust.

What it Means:

• After prepaying their money to Sokowatch’s account, retailers would still call to give our team a heads-up (even though they received a mobile money confirmation).
• Once they had seen it work, retailers trusted the product and wanted to use it more; 91% of retailers who tried prepaying once continued to use it, prepaying an average of 6.8 times over the course of the pilot. Many retailers maxed out the prepayment limit on their accounts (US$500) and a few requested us to raise the limit; the average balance was $350 for accounts with non-zero balances.

Consider:

✅ Can you create more intuitive interactions by mimicking experiences that users (in this case, retailers) know well?

✅ What are users’ experiences and fears around storing cash?

✅ How can you build trust with users? What are small, low-effort interactions that build trust? What could erode trust?

Withdrawal

We were trying to mimic a savings product, when what retailers really wanted from this service was a loyalty program.

At first, we imagined…

The biggest determinants of success would be those of a basic savings product: how smoothly retailers could move money in and out of the system, and the bonus they earned.

We learned…

As we took feedback from retailers, we realized that they were asking for aspects of a loyalty program: faster delivery, reserved stock to avoid stock-outs, and protection from price fluctuations by locking prices at the time of order.

For them, these benefits would make them feel like valued customers even more than a monetary bonus did.

What it Means

We judged the prepayment program compared to a savings product. But customers saw it differently:

• prepaying signaled commitment and required loyalty (they couldn’t spend the money elsewhere)
• in return retailers wanted a loyalty program that rewarded them with extra-efficient services.

Consider

✅ How do users decide how much to prepay? What factors inform their decision?

✅ How does your perception of the product align with the user’ perception? What doesn’t align?

✅ Are there different levels of service you might offer in exchange for customer loyalty or prepayment?

Retain

Once retailers start using the product, it resonates. They’re flexible and loyal as long as they get smooth service or clear communication when something goes wrong.

At first, we imagined…

Retention would be passive, rather than active. Thinking of this product like a savings account, we’d imagined it would be a “set it and forget it” option where retailers could park their money. Once they understood the product and saw the value, we assumed they’d continue to use it unless they faced major problems.

We learned…

Unexpectedly, one of the things retailers valued most was having an advocate (our pilot associates on the ground) who deeply cared about tracking their orders and troubleshooting when something went wrong. This was a strong driver of retention even when we faced technical challenges — our retailers were realistic and forgiving as long as we kept up communications.

What it Means

• Retailers who tried the product clearly did see the benefits and continued to use it. Although we experimented with communicating the product in a few different ways, we found that retailers often had to go through the process of prepayment and withdrawal before they really understood it. Once they tried it, 91% of them continued to use the product.
• While we aimed to build a great service, we learned the importance of customer service–within the core operations of the business–to support uptake and loyalty to new programs. Equipping our Community Support Associates with the ability to support retailers when things inevitably went wrong–e.g.with a discretionary budget to compensate for lost profits during tech or service glitches could have supported a smoother rollout — both from our side and the ​​retailers’ side.

Consider

✅ How do users get an ally? How can you make customer service feel authentic, friendly, and trusting? How will this change at scale?

✅ How are you empowering the team on the ground to make users feel valued, and/or to “make it right” when something has gone wrong in the customer experience?

Earn

As retailers prepaid, we were curious about how DeFi might empower disproportionate rewards — ones that went beyond what Sokowatch might be able to offer from core business operations. We prepaid treasury capital into Terra stablecoins, and staked those in the Anchor protocol. Those earnings offered us the chance to offset the cost of delivering financial rewards to retailers.

At first, we imagined…

Retailers might be able to make direct prepayments into a high yield savings account, earning a stable return over time. Sokowatch would manage those accounts for retailers, creating more streamlined interactions into DeFi experiences for un- or underbanked people.

We learned…

Regulation and the risks of capital preservation meant that we disconnected our crypto treasury from the centralized retailer accounts holding rewards.

Through a grant from Terra, we staked 50K UST in Anchor protocol, which earned $2,246 over our trial period. This more than covered our rewards cost for retailer participation, which cost $989. But the experience left us still curious whether a more direct connection into a high yield savings account would have increased retailer participation.

What it Means

• Retailers didn’t see our product as a savings account, but rather a reward account — and that meant their expectations for what was delivered went beyond economic interest.
• We more than offset the cost of the rewards to pay out retailers with a relatively small treasury (at least, in the crypto world!), that required limited management from Sokowatch’s end — highlighting the opportunity of crypto treasuries to enable organizations serving low-income users with thin margins to offer disproportionate value via participating in DeFi ecosystems.
• Capital preservation for retailer savings is critical, and right now, crypto-yielding accounts may present a level of risk organizations are nervous to take on. DeFi accounts don’t have the backing of institutions, and are at risk due to smart contract exploits, yield volatility, etc. While new solutions are being prototyped all the time, from decentralized insurance to smart contract audits, there’s still much to be explored to de-risk offering digital savings to unbanked people.

Consider

✅ What current DeFi solutions are being extended to banked users (like high yield savings accounts) that you could leverage and extend to end customers who might be unbanked? What would need to be true for your organization to serve as that bridge?

✅ Where do DeFi solutions become visible to the end customer? What are the benefits and disadvantages of giving users direct access to DeFi tools? What new risks does that introduce?

✅ Where might a DeFi treasury offer disproportionate earnings that could be shared back with customers? Are there easy ways to automate that or to enable new incentives, even if the company holds treasury earnings?

When we started out, we thought that people would trust a service that felt as professional and automated as possible. To our surprise, it was the human touch points that were valued most by the retailers, and what kept their loyalty over time. Some of these touch points included leveraging the friendships that retailers already had with sales agents, or a personal SMS when someone prepaid to reinforce a sense of trust. It also opened up new possibilities in operations and logistics: we realized that ensuring retailers felt like highly-valued customers was just as important as providing a financial bonus, and that having a ‘friend at Sokowatch’ to call when something went wrong went a long way in making them flexible and forgiving with the new product. A lot of these aspects are relatively inexpensive to deliver compared to the cost of incentives, and just as compelling to retailers.

This post was written in conjunction with Eva Hoffmann and Becca Carroll.