NB Financial Health

Saturday
March 21
2015

James Militzer

Weekly Roundup – 6 Mobile Finance Innovations (That Have Nothing to Do With Apple): While the U.S. obsesses over the latest gadget, mobile finance accelerates around the world

Lately, the digital payments conversation in the U.S. seems to revolve around whatever Apple is doing. But six months after Apple Pay was launched on the latest iPhone, 85 percent of America’s iPhone 6 owners haven’t bothered to try it, according to a recent survey. Meanwhile, while Apple strives to solve a problem U.S. consumers don’t really have, mobile finance innovation is exploding around the world. Here are six intriguing recent developments in countries from China to Kenya – and as a bonus, none of them cost $17,000.

Bitcoin + M-Pesa = Cheaper Remittances in Kenya

In Kenya, an Australia-based bitcoin exchange called Igot recently acquired the local company TagPesa, intending to target the country’s remittance market. It has also been granted access to M-Pesa’s mobile money service, letting users deposit and cash out bitcoin remittances directly from their M-Pesa accounts. According to Igot’s CEO, the company aims to connect the over 2.5 million-strong Kenyan diaspora with their families back home, saving them from costly foreign remittance costs through its 1% flat transaction fee. Igot’s service is available in about 40 countries, with Kenya being the first in Africa. It joins the Nairobi-based startup Bitpesa, which takes a similar approach and is reportedly growing fast.

A Bitcoin Mobile Wallet in India

Meanwhile, in India, tech firm Zebpay recently announced the launch of a bitcoin mobile wallet, an Android app that will help users buy, sell and transact in the popular digital currency. Though the Reserve Bank of India has warned against dealing in virtual currencies due to security and money-laundering risks, and the fact that they are not backed by any assets or monetary authorities, Zebpay’s founder, Sandeep Goenka, seems unconcerned. He says the company will soon announce 15 merchants in India who will accept payment in bitcoins.

Facebook Gets into Payments – Sort of

Bitcoin isn’t the only tech solution targeting cheaper remittances. Last week, Facebook announced a new feature in its messaging app that will allow users to send and receive money between friends. Users just need to link a Visa or MasterCard debit card issued by a U.S. bank to their account, then tap a button to send cash to their contacts – for zero fees. The feature will be rolling out over the coming months in America. It’s not clear when or if it will be offered in other countries, and Facebook has denied that it’s trying to build a payments business. But the company has been working to get regulatory approval for the service in the European Union, and the remittance market in developing countries is a fat target. Watch this space.

Finally, A Decent Reason to Take a Selfie

Security is a major challenge for all mobile payments providers. For instance, the “Touch ID” fingerprint sensor that Apple Pay uses to authenticate transactions is one its prime selling points – and biggest “wow” factors. But Alibaba upped the ante this week, when the Chinese e-commerce giant’s CEO Jack Ma unveiled its new “Smile to Pay” technology during an exhibition on Alipay, the company’s mobile payments service. The facial recognition tool validates mobile payments by matching a “selfie” photo taken by the user at the point of purchase to their stored profile photo. Ma said the functionality will be rolled out in China first, with other countries to follow. With Alipay already handling over 80 million transactions a day from its 300 million registered users, the service is likely to get a thorough vetting – if it proves secure and convenient, the world may have finally found a non-irritating use for selfies.

A Tempting Incentive to Go Mobile

Another Chinese company also made an intriguing mobile money-related announcement this week. Xiamomi, the world’s third largest smartphone maker, revealed on Tuesday that it will be offering its customers in China an interest rate of over 3 percent on money they transfer from their bank accounts to their mobile wallets. The company is partnering with a number of financial institutions to provide the money-market-like fund — which it describes as a service to its customers rather than an attempt to get into the banking business. It joins existing products from Tencent and Alibaba, including the latter’s Yu’e Bao account, which has become China’s biggest money-market fund and the fastest-growing mutual fund of all time by tapping Alipay’s nearly 200 million active users. Accounts like Yu’e Bao provide a mobile-friendly bank alternative with no minimum deposit or transaction fees, along with attractive interest rates and instant liquidity. And though critics have raised concerns about the risks of these products – Yu’e Bao has no capital requirements or deposit insurance, for instance – the Chinese government has been reluctant to crack down. So don’t be surprised if other players enter the fray.

New Competition in an “Old” Mobile Money Market

M-Shwari, a mobile banking product run as a joint partnership between the Commercial Bank of Africa and Safaricom, signed up its 10 millionth customer earlier this month – just days before a new competitor entered the field. Safaricom’s new partner, the Kenya Commercial Bank, hopes to tap some of this demand with a similar feature phone-based product called the KCB-M-Pesa Account. Along with a savings account, KCB will reportedly offer loans from Kshs 50 (around USD $0.54) to Kshs 1 million (almost USD $11,000), with payment terms of between one and six months at interest rates that start at 2 percent. The deal gives KCB access to M-Pesa’s roughly 13 million active customers in Kenya, and allows Safaricom to encroach further into the territory of the country’s traditional banks. It’s not clear what this new partnership will mean for M-Shwari – or for M-Pesa’s bank competitors – but we’ll be following the developments closely as a new front opens in Africa’s mobile finance wars.

Incidentally, check back with NextBillion on Monday to read about the results of a thorough research project on M-Shwari.

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James Militzer is the editor of NextBillion Financial Innovation.

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banking, bitcoin, financial inclusion, financial services, microfinance, mobile banking, mobile finance, mobile money, remittances