Friday, March 27, 2009

The Macro-economics of Mobile banking

It is well-documented that the introduction of the mobile phone created extensive shifts in the make-up of the macro-economic spending profiles. For instance in markets where mobile phones took off, beer sales and even clothes sales went down. This means that people actually diverted money from drinking to pay for communications.

If we assume that mobile banking initiatives will ultimately lead to huge financial success, we should be able to identify those sectors that would "loose-out" and which less money will be spent on. In other words, from which sector will money be reverted to pay for mobile banking? I would like to venture the following:
  • Businesses that work with cash (printers of cash, cash distributors, etc.)
  • Transport companies as people would not have to make trips that they otherwise would have had to do
  • Expenses related to distribution (distribution of airtime, postal services etc.)
  • Money remittance companies with big margins
  • Banks (when they charge big fees)
It may be worthwhile to give this more thought, as this would be an indication what industry players may be apposed to mobile banking.


Will Finley said...

I'm not sure if this is one of your posts that should be taken seriously. To say that the uptake of mobile phones caused the drop in beer and clothes sales is like saying the iPhone caused the recession.

Hannes@Home said...

Will, I am dead serious. If I had more time, I would have done more research to give you more references. In a recent study by AC Nielsen on disposable income and spending patterns in South Africa from 1996 till 2004, this change was clearly identified. For instance expenses on communication grow from 3.4% to 17.2%, while drinks slowed down from 23.7% to 12.9%

BigChief said...

This is serious alright. In my country Nigeria there was a study by a business school for one of the GSM Operators that discovered that Coca Cola was losing money because people were now spending more money on airtime and less on soft drinks. Coca Cola dominates the soft drink market in Nigeria and they were losing "share of pocket" to airtime. Coca cola then did something smart, they started advertising on airtime scratch cards!!

I think that with Mobile banking that win-win scenario is harder and businesses that profit from cash based transactions will suffer and in some cases ultimately die off. This is not however going to be an easy battle and previously as a Change Management consultant I always reminded my clients of this quote from Machiavelli's "The Prince" :

"It must be considered that there is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to initiate a new order of things. For the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order, this lukewarmness arising partly from fear of their adversaries, who have the laws in their favour; and partly from the incredulity of mankind, who do not truly believe in anything new until they have had actual experience of it. Thus it arises that on every opportunity for attacking the reformer, his opponents do so with the zeal of partisans, the others only defend him half-heartedly, so that between them he runs great danger."

Mobile Banking in a place like Nigeria with a cash based economy will be disruptive and the banks will be the first adversaries and I think to succeed one must first win this battle without a fight according to Sun Tzu