Determinants of Customer Payment Behaviours

Wards and Offices

Research Fellows, Aaron Krolikowski and Robert Hope of The Skoll Centre’s Small Grants Research Programme, have contributed to The Smith’s School of Enterprise and the Environment Water Programme by leading a focused research topic on determinants of customer payment behaviours.

Aaron Krolikowski writes for the Skoll Centre Blog, an introduction to the research paper.

Wards and Offices

Fig 1: Wards and Offices

Water customers in urban Africa often struggle to pay their monthly bills, so much so that an estimated 500m USD is lost annually to nonpayment. Due to an inability to pay or a reaction to unsatisfactory service provision, these losses contribute to critical gaps in financing and further reduce service reliability. Skoll Centre-funded research has found that the expansion of mobile money and other electronic payment options across East Africa may partially address this long-standing problem.

Pay Points

Fig 2: Pay Points

Using a unique dataset containing over 500,000 water payment transaction records from Dar es Salaam (Tanzania), researchers from the Water Programme at Oxford’s Smith School for Enterprise and Environment found that mobile payment systems are positively influencing customer payment behaviours. Water customers that integrated mobile payment systems into their payment practices paid water bills more frequently and made greater contributions to overall utility revenue when compared with those who only paid water bills at utility offices.

Mobile Money

Fig 3: Mobile Money

Dar es Salaam’s water utility was the first in sub-Saharan Africa to offer customers mobile payment options. In 2009, a new business facilitated the integration of the utility’s billing system with mobile payment channels like M-PESA and Airtel Money. Focused on mobile payment aggregation, Selcom Wireless helped the water utility 1) expand physical payment locations beyond 14 brick-and-mortar payment offices to encompass over 2,000 wireless pay points scattered throughout the city at pharmacies, kiosks, and grocery stores; and 2) to enable bill payment from anywhere and at any time using mobile money.

Improvements to payment behaviour were most evident when customers used both water offices and mobile-enabled options. Distance matters as well; customers living far from water offices were more likely to use mobile money and pay points. For water utilities, or any public service provider, mobile payment options can support improvements in financial stability while simultaneously extending the reach of service delivery.

Payment Options

Fig 4: Payment Options

Diversification of the payment landscape enables the creation of new models of service provision and increases customer choice in where, how, and how much they pay. As populations around the world become more familiar with electronic payment options and other mobile-based innovations, new opportunities continue to emerge in the water sector. One example is from Nairobi (Kenya), where the city’s water and sewerage company partnered with social enterprise Wonderkid to provide SMS-based meter-reading (Jisomee Mita) and complaint lines (Maji Voice). Another initiative from Bengaluru (India) is NextDrop, which works with utility staff to alert customers to water provision schedules. Mobile innovations like these bring water utilities closer to customers, help to increase operational efficiencies, and improve revenue collection; all of these are necessary if universal and equitable access to water services will be achieved by 2030 (Sustainable Development Goal 6.1).

Read or download the report here.