Earlier this month GOGLA jointly hosted an event in Mumbai focused on developing the pay-as-you-go solar (PAYG) market in India. Jointly organized by GOGLA, IFC’s Lighting Asia / India program and GSMA, the meeting brought together players from around the world within the PAYG space. These included PAYG and distribution companies, mobile wallet companies, and digital finance solutions (or DFS) providers. Participants shared experiences from the PAYG solar energy markets in other countries and discussed the challenges and opportunities in developing a PAYG market in India.
Around the world there are a number of very diverse PAYG business models currently being used, with no ‘one definition’ for what works best. In essence, PAYG allows customers to pay for products or energy services in very small increments. Many of the different business models in the PAYG space were represented around the room and were discussed and compared, including: rental, ‘lease-to-own’ (when a customer pays small amounts depending on his or her budget up until the point at which he or she has bought the product outright and owns the system fully), upfront sales with financing partners and direct cash sales.
What is the current landscape for PAYG in India?
India is a cash-based economy and, unlike the African market, mobile money is not yet widely used. There is huge potential for a PAYG market in India and this approach has several key benefits: it increases the affordability for the customer, it provides companies with a direct link to their customers, and allows up-selling and cross-selling of various products to the same customer to help them climb the energy staircase. PAYG also provides some degree of insurance to the customer against faulty products.
Despite the clear benefits, the PAYG market in India and across South and South-East Asia is in its infancy compared to other markets, and faces several challenges and risks. These were discussed during the day with the key issues being identified as:
Being capital intensive
Subject to policy fluctuations
Subject to complicated on-the-ground operationalization
The market is certainly a complex one, and specifically the question around why there has been a slow uptake in PAYG solar in South and South-East Asia was discussed amongst individuals from a number of different organizations. Kerosene subsidy programs have a major impact on the market, and efficient alternate channels were also cited as having some influence.
Mobile money is one of the key components to unlocking PAYG, but the ecosystem of mobile money is very different in Asia than it is in East Africa. For example, M-Pesa is used widely across Kenya and Tanzania but is not yet used in any significant volume in India. Instead, a number of key mobile operators in India (Airtel, Idea, Vodafone and Jio) are starting to roll out payment banks. The environment is a different one in India too as not only is there low-level usage of mobile money, but there is also very little awareness of it.
What has worked elsewhere?
The latter part of the day’s discussions focused on successful global experiences of PAYG, with a number of stakeholders sharing their learnings, including Greenlight Planet, BBOXX, M-Kopa and Eco Energy. While there is a general optimistic approach, there was also consensus that business needs to be done in a constructive way. Many companies, for example, have been experimenting with multiple operation models. And with so many influencing factors determining which business model works best, it seems that an open approach, (rather than a ‘one size fits all’) is the most viable. Factors such as the proximity to the grid were discussed. For example, a customer is less likely to pay or invest if they can see light or an electricity pole near their home.
Scaling up PAYG market in India
There were many contributing factors discussed during the afternoon session but some of the key points included consumer level awareness; there needs to be a push to increase awareness of the services and of digital literacy. Also, from the service providers side improving last mile distribution will be a key factor in scaling PAYG, and finding ways of collecting payment efficiently and effectively. From an infrastructure perspective, there is still poor network connectivity in rural areas for mobile phones.
While the challenges are great, the opportunities are vast – from joint opportunities for digital finance services and solar companies, to joint expansion programs to cover common geographies, leveraging bank business correspondent networks and distributor entrepreneur networks. There is also scope for marketing which is mutually supportive, for collaboration in increasing consumer education and improving customer services by players in the same space.
While the lack of mobile money in India has been a big challenge in adoption of PAYG, companies are nonetheless accelerating the growth of networks and cash-in cash-out points.
The payment landscape in India is changing very fast and therefore there needs to be continued work on awareness and communications around payment collection methods, as well as awareness of the customer of what options are available to him or her.