Institute for money, technology and financial inclusion: doing research on emerging markets in Los Angeles

This is what I like about this industry: finding new entities doing interesting things in the strangest places. Who would have thought that good research on financial inclusion is being conducted in the same city that gave us Hollywood? Enter Prof Bill Maurer and the Institute for Money, Technology and Financial Inclusion (Read here). The institute is housed in the University of California (Irvine) School for Social Sciences. Research conducted by the institute have looked at financial inclusion in countries as diverse as Nigeria, India, Haiti, Kenya, PNG and Afghanistan.

The great thing about the research is that it is done well (with proper surveys and measurements) and with no commercial drivers. (So many research in the industry are funded by companies with a vested interest and expect results to be in support of their commercial focus). It is really worthwhile to visit the site and browse through the wide collection of research. A recent survey on the status of Mobile Money in Nigeria for instance provides such good insight into this large and complex country. (Read here).

I am sure that, in addition to the great research, students and graduates from the institute will make an impact in the development of the industry, as they start to get assimilated into commercial companies. The work of academics like Prof Maurer should be applauded. 

Recent reports again confirm emerging markets leading the mobile banking revolution

When discussed, it is generally agreed that the deployment of mobile banking solutions in emerging markets are leading the industry. Not only have many achieved significant scale and also proven a positive business case, but the features and technology used are also much richer. Yet, many silent observers think that this is only emerging markets, with no smart phones and NFC enabled terminals: what can they really teach us?

That is why, I found it interesting that many articles was published recently, (re)-confirming the leadership of deployments in emerging markets. Some that have caught my eye are the following:

•  Research done some time ago by McKinsey in conjunction with the GSMA and CGAP seems to indicate that the market for mobile financial services in emerging markets can be as big as 1.7 Billion (Read here)
• Research done by TNS indicated that the number of new users of mobile banking soared over 100% in 12 months in many emerging markets, as banks leapfrogged traditional service models and moved directly to mobile. (Read here)
• Bergh Insight, reported that the mobile banking market is set to grow from 133 million in 2011 by an average of 40% each year to reach 709 million in 2015 (Read here)
• Ovum research indicates that mobile banking is central to maintaining growth momentum in emerging markets. Some of their proprietary research seems to also indicate the growth. (Read here)
• Emerging technology news describe the rapid growth achieved by the major SA banks in mobile banking (Read here)
• The governor of the State Bank of Pakistan shares big growth statistics in branchless banking at a recent conference (Read here)
• Pyramid Research provides insight into Mobile payments in emerging markets (Read here)

 One may have to consider what we can really learn from these deployments, also for first world markets. 

Merchants and Agents - not the same at all

The industry of emerging markets are built on the back-bone of traders. It is the informal markets that distribute most goods and create most jobs. Anybody that have traveled in Africa, would be able to vouch for massive markets of informal traders selling everything conceivable. The nature of the commerce happening in emerging markets are also almost always based on cash transactions.

With the growth of mobile money initiatives throughout Africa, some of these traders have been signed up to perform a critical role; to provide cash-in and cash-out services to wallet holders. These traders are referred to as Agents in the new digital money world. They have to be formally registered, trained and must use a mobile phone to perform this function. It is also a requirement that they should have a certain level of literacy as they frequently have to keep book of transactions for audit purposes. Most of the schema's require these Agents to make a "substantial" pre-payment as a kind of float in order to manage cash flow risks.

With the growth of mobile money solutions in emerging markets, some traders are starting to accept electronic payments (in stead of cash). The incident of this is still very small and informal. It is likely that this practice will grow and will also become more formalised. Traders accepting mobile money (digital) payments can be classified as merchants (in a similar way as for Card Association merchants). It is pretty clear that these two roles (merchants and agents) are very different, and while they may be performed by the same trader in some instances, should be dealt with in totally different ways.

Where is Paypal going

Paypal recently announced that one could use a Paypal account to purchase at any Home Depot shop in the US. (Read here). The service require a Paypal App on a smarphone that generates a 2-D barcode that can be read by POS-equipment in the store. While this is a really innovative solution that takes an on-line product and turns it into a product that can be used in the physical world, it is an open question if this will lead to wide adoption for the mass market.

However, it is important to take cognisance of the following very important implications:

• It is now possible for non-traditional brands to enter the payment domain and go after the more profitable niche markets. Many other players have successfully done this in the past (consider Starbucks), using strategies that build on a wider eco-system than just providing a dependable payment experinece.
• The need for super-security mechanisms are not that critical. With niche solutions, relatively small balances and small take-up, it is just not worth the effort to break the security to steal money. It will be different when the service get to scale and really attracts large amounts.
• Consumers (as is the case with almost everything today), will be confronted with so many choices to pay that it will be difficult to decide what to select and how to manage these diverse options. It will be interesting to observe how the mass consumers react with a prolifiration of payment choices.

The underbanked market in the US may just go Boom!

I have now been writing this blog for the past six years and it is getting more difficult to write about things that I have never written about. I have previously written about the unbanked communities in the US(Read here and here), but I think is important to take another stab at it.

This was triggered by an article based on the Visa announcement of Visa Mobile Prepaid (VMP), aimed at banking the unbanked. (Read here). The author (Bryan Yurcan) makes the point that the US has an estimated 40 million un- (or under-) banked market. This makes it one of the bigger markets in the world for these types of products. While the new Visa product is relevant, it is currently not targeted at this market. This is why many other solutions are made available to this market to serve their needs, ranging from cheque-cashing services to new mobile payment solutions.

One such a service, referenced in this article is the new Boom services recently launched by m-Via. (Read here). The service is a mobile based payment solution focussed on the underbanked market with a lot of emphasis on remitting money offshore, especially to Mexico. If it was not for the ssss, m-Via could have been confused with the new Visa product.

A look at the spectacular growth in Pakistan's branchless banking industry

I have written a lot about the mobile banking revolution in Pakistan on this blog (Read here and here for some samples). It is possibly because we have done such a lot of work in this country and also because the country and its people are so close to my heart. But in fairness, one must also look at the emmense progress just on the merits of it. Pakistan is the only country with a population of more than a hundred million that have embraced branchless banking (from regulators, to banks and mobile operators) and have made a success of it.

The StateState Bank of Pakistan (SBP) recently signed a MOU with the Pakistan Tellecomunication Authority (PTA) - making it one of the first instances where the two relevant regulatory bodies governing mobile banking have formally joined forces to grow the market (Read here). During the signing ceremony, the governor of the SBPquoted some impressive statistics in terms of agent penetration and volume of transactions. At the same time the The World Economic Forum global report on Mobile Financial Services praised Pakistan for the fast growth in branchless banking in the country (Read here). The report described Pakistan as "a breeding ground of innovation for branchless banking" involving a wide range of players collaborating in this new eco-system, including MNOs, technology companies and even courier businesses.

 It therefore does not come as any surprise that one of the biggest investors in the country, the Abu Dhabi Group (ADG) recently announced that they would launch an independent mobile financial services company. (Read here). It seems that the plan is to bring branchless banking products to the market through two of its investment companies: Bank Alfalah (a leading bank) and Warid (one of the bigger operators in the country).

Mobile World Congress is bigger than ever

There was something nostalgic about this year's mobile world congress. This was the last year for this key event in the mobile calendar to be held at these premises on Plaza Espanja. Next year the event is planned in a brand new location, but still in Barcelona. as a matter of fact Barcelona started marketing the brand "mobile capital" this year.

And everything was bigger this year: more people, more exhibitors, more flash and bling, more claims, more press releases and more new products. There is nothing like this in the world of business. Any-one attending the congress has been blown away when they experience the sheer size and scale of the event. After four days of intensity, it is almost an anti-climax to take the taxi to the airport.

The key impressions of this year's event was the contrast beween the significant and the insignificant. Many announcements were over the top significant; ranging from new phones to ground-breaking technology. From statements by Google to collaborations between the world's biggest corporations. But, this year again, the spirit and possibility of mobile was actually captured in the insignificant. I was touched by so many small entrepreneurs with great ideas and products. The initiatives of the industry to grow the contribution of women and make innovation in emerging markets more important are the examples that makes this industry special.