NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, December 21, 2016

Digital money can be traced when payments are made, providing transparency and trust in transactions. It can be managed by more than one party at a time (such as a mobile operator and a user), it can’t be easily stolen when it’s stored or transferred, and it can “travel” any distance in seconds.

Suppose you want to transfer money urgently to a loved one. Would you give it to the first bus driver passing by to take it to them? You may be surprised to know that about half a trillion US dollars is estimated to be transferred annually through informal channels of that sort, known as hawala transfers.

Consider the fact that 19 African countries have more mobile money accounts than bank accounts, or that globally, in 37 countries there are ten times more mobile money agent locations than there are bank branches. As you read this, telecommunications infrastructure is getting better and faster, and it is estimated that in five or six years 75% of the African population will own a smartphone.

Thus, by offering mobile money services, mobile operators are addressing such enormous pain points that the opportunity to provide a profitable service of social value is equally big. As it happens, by doing so they are encroaching into what would normally be the banking domain.