As 1.7 billion adults worldwide are still unbanked, new business models such as “Pay-as-you-go” (Paygo) have emerged, providing new ways to drive financial inclusion through innovative technology, to help underserved communities build credit history and increase their access to essential consumer goods.
There is no doubt that the Paygo applied to the solar industry has proven to be successful in delivering affordable and clean energy to the Bottom-of-the-Pyramid (BoP), however, there are several common misconceptions about what the Paygo model and its technology requirements really are.
Myth #1: Paygo only functionality is to do remote monitoring and control of devices.
Truth: One main misconception on the characteristics of the Paygo model is the belief that Paygo consists only in the capability of doing “remote control” - being able to switch on/off the product according to payments done by the end-user. For example, when a customer fails to make a payment to the company financing his SHS, the lights, in this case, could be remotely turned off. Although the provider’s ability to remotely lock or unlock their asset is an essential part of Paygo operations, it would be too simplistic to say that this is the only added value that Paygo brings to last-mile distributors. Paygo is a digital finance technology (FinTech) that allows end-users to purchase essential services through a pre-paid model (under installments), instead of having to pay the loan upfront. Paygo business models enable the “nano finance” of services in cases where traditional banking and even microfinance is difficult to implement. The number and value of the installments depend on the end-users situation and on the type of product/service offered.
Example: Paygo technologies can really boost access to clean cooking fuel, by overcoming the affordability barriers that customers often face switching from solid fuels to cleaner-burning fuels such as liquified petroleum gas (LPG) or ethanol. Even if clean cooking offers many benefits notably from a health and environmental perspective, purchasing a cookstove upfront is nearly impossible for many people at the BoP. The Paygo approach is making clean cooking affordable, allowing customers to pay an ongoing fee service in addition to a first down payment and cost of fuel. Customers can adjust the size of the payment made every month, according to the variations in their incomes. Through this, customers are over time building formal financial records that will allow them to purchase bigger products in the future.
Innovative companies, such as PayGas, are allowing local entrepreneurs to provide gas-a-service to their communities, reducing health issues, and boosting their economy.
Our Solution: PaygOps Loan Management features can help distributors manage important information about their customers' cookstoves' loans, such as the contract history - including main loan data and operational metrics - the loan repayment progression, cash, and mobile payment collection, as well as customer discounts.
Furthermore, PaygOps enable distributors to sell gas in small quantities and charge them according to the consumption.
Myth #2: Only Solar Energy providers can distribute products under a Paygo model.
Truth: Paygo is often associated with the Solar Energy Sector as it has allowed Solar Home Systems (SHS) distributors to rapidly increase their sales. According to the latest Off-grid Solar Market Trends Report by GOGLA (2020), SHS Paygo sales increased 38% from H1 2018 to H1 2019, and 73% of the sales of lanterns, SHS and multi-light systems come from Paygo vs. 27% that comes from cash sales.
Even though Paygo became popular and widely used by SHS distributors, the Paygo industry is continuously growing, thus unlocking new life-changing products and reaching larger markets, more and more consumers will gain access to affordable products and services that will improve their lives. Many industries beyond solar such as Agriculture, Clean Cooking, or even Water Access are creating opportunities for underserved communities and thanks to existing Paygo Operation Management Platforms such as PaygOps, distributors across all industries could really see revenue opportunities for the scale of their operations.
Example: A way to break the circle of poverty and empower local communities is through facilitating access to revenue-generating assets, such as irrigation systems. Paygo Solar Water Pumps allow smallholders to benefit from the use of clean technology while generating revenues, reducing the fuel costs associated with diesel pumps, and too inefficient irrigation practices (such as rainfall). Distributors offering Paygo water pumps can mitigate operational and credit risks by gathering detailed information about the customer and adapting the payment plans according to the type of use of the pump, the types of crops, crop cycles, and harvest seasons.
Our Solution: PaygOps Customizable Features allows maximum flexibility to adapt Lead Forms, Client Profile Data and After-Sales Intervention topics, to the local context and specific operational needs. For example, distributors selling irrigation systems can gather information (type of crops, harvest cycles) that allows them to adapt the repayment plan according to the farmers’ revenues; and customize the SMS content to improve the communication with their customers (inform about next payments, warn about delayed payments, inform about the volume of water irrigated, etc.).
Intervention forms are completely customizable by management depending on the specific needs of the company and these will automatically upload into the agent's phone through PaygOps Mobile App.
Myth #3: Paygo only works with electronic devices that are remotely controlled.
Truth: Paygo is a digital tool that allows distributors to reach a customer base much larger than the current one as it eliminates the upfront costs and allows users to pay various installments to own an asset; or according to consumption. In this sense, Paygo is not a feature, but a financial tool that helps distributors to monitor payments and offer automated after-sales service, when selling products that can be remotely controlled or not (products that are not electronic can also be sold under a PAYGO model).
Example: Even though water filters costs are less expensive compared to other devices (the price range is $15USD - $40USD), people living in extreme poverty or in isolated areas may find it difficult to pay for them at once. Paygo allows individuals and communities to purchase water filters under a few installments during some weeks. In addition, distributors of water filters face high risks if customers stop paying, as unlike solar home systems and other devices, it is usually difficult to reclaim water filters and even less recycling so they can be re-sold. By operating under a Paygo model, Water Filters distributors could gain more control over their operations, resulting in being able to better engage with their customers and provide better after-sales services, while lowering the risks of nonpayment.
Our Solution: Paygops Mobile App enables distributors to focus on the quality of sales and customer engagement. The offline functionality enables agents on the field to report in real-time any issues related to the device, or clients’ payments, thus providing better customer support and overall sales growth. In addition, thanks to PaygOps Inventory management feature, distributors can regain control over their assets and better manage stock movements.
Moreover, PaygOps has developed the Open Paygo Token, an open-source technology that enables distributors entering the PAYGO market, to make their devices (e.g water ATMs) PAYGO-compatible.
About Solaris Offgrid:
Solaris Offgrid supports solar energy distributors to build strong customer traction and greater relations with investors through flexible and inclusive Paygo solutions, designed for last-mile operations. Adopting a bottom up approach in the design of its solutions and creating synergies with a strong network of partners to solve last-mile challenges, the company has already deployed Paygo solutions in nearly 20 countries through PaygOps, Solaris Offgrid in-house software solution built “In the Field, for the Field” and its product design services. Leading reference in the off-grid solar market, PaygOps, is engineered to deliver modular and interoperable solutions to address off-grid energy access challenges and distribution complexity. For more information on PaygOps, please contact [email protected].