Platforms, Not Products, Are the Way to Bring Financial Services to the Poor
Monday, February 9, 2015
In recent years, the banking and finance industries have not done a lot to earn the trust of consumers in the West. But in poor countries, basic financial services can be transformative.
Even in today’s wired world, many people still stash cash under the mattress, where inflation erodes it away. When they want to send money, they have to find a way to physically transport it. Loans are doled out in bundles or envelopes from moneylenders, at exorbitant rates. Emergencies or unforeseen circumstances can drive a family into penury.
Mobile money from one provider can rarely be transferred to another network, let alone to another country in a different currency. The financial services these people need may come via mobile banking, as Bill and Melinda Gates wrote recently in their annual letter. Basic banking services—from simple payments and transfers to insurance, savings, and loans—are now possible on the simplest of mobile phones, as Quartz has reported.
But most of these systems are hobbled by a lack of interoperability. Mobile money from one provider can rarely be transferred to another network, let alone to another country in a different currency.
A new wave of financial services are focusing on overcoming these obstacles. They are setting themselves up as platforms, rather than individual products.
The perils of a paperless society
For many in the West, the idea that tech companies and financial firms are mining their internet activity to create an online “identity” for profit is seen as an invasion of privacy (paywall). It is a different story on the other side of the planet, argues Joyce Kim, who runs Stellar, a non-profit financial platform. “What we’re hearing from folks in the developing world is that identity is a privilege,” she says.