Transactions Without Borders: The March of Mobile Money
The term “unbanked” does not always equate to “unbankable.” In fact, it’s often simply a case of banks being unreachable.
I just finished The March of Mobile Money by Sam Pitroda and Mehul Desai, who introduce the concept of the digital wallet and how telecom-enabled commerce is and will continue to break down financial walls, changing the very concept of money in the process.
Pitroda’s name of course is synonymous with India’s ICT revolution. A portion of what Pitroda is propagating is already is being implemented in many regions, including in Kenya with the great success of M PESA (provided by Safaricom). Pitroda however, explains how this is just the tip of the iceberg. The real power of the mobile wallet will come into play when Near Field Communications are used for day-to-day transactions.
Throughout the book, Pitroda emphasizes that for this idea to take shape the three supply-side stakeholders: telecom companies, banks and merchants (retailers), all have to work together. They will need to agree upon how to share customer acquisition as well as cost savings as the technology achieves scale.
Such a model could very well be the answer to financial inclusivity. The key concerns of course would again be security, digitization of all the previous receipts and data. Needless to say, for the mobile wallet to gain widespread acceptance it has to emulate the traditional wallet in ensuring ease of transition.
This can have a huge impact on the banking sector. Currently banks use the help of Business Correspondents (BC) to extend their services (a facility NBFC-MFI are trying to get involved with) to those in hinterlands. The BCs are mostly comprised of retired bankers, teachers and professors. With mobile money coming into the picture, banks initiating tie-ups with major telecoms will penetrate deeper into the pyramid and increase their reach by millions. Banks in India look at mobile devices as a principle way to acquire new customers, whereas in the West, mobiles often are looked upon as just another marketing channel.
The important issue here is the need to open a bank account in the first place. Pitroda feels that financial and social inclusions at the BoP will have to be initiated by the merchants/service providers. They will have to identify the appropriate services or applications, post which banks can provide the necessary financial accounts and services to help facilitate cash-in and cash-put for such services, thereby leveraging the infrastructure of telecos for distribution.
From the retailers’ perspective this is a huge leap to understand consumer-spending patterns. Enterprises can use this to personalize products and services for customers, to generate usage patterns. The digital receipts generated by the mobile transactions can also be used for better planning of household/enterprise expenditures.
The gamut of services that the mobile wallet would encompass would include banking, bill payment, money transfer, insurance, P2P payment, microcredit and finance, NFC/Proximity, prepaid top-up, ticketing, coupon and loyalty, advertising, shopping and gift cards.
The book concludes with a five-step program to wealth creation with mobile money being the major facilitator:
- Information and Communication Infrastructure
- Knowledge-based initiatives
- Right to Information/Education
- Delivery of public service/goods
- Entrepreneurship and Employment
Pitroda also is quick to note that over time, as the platform evolves, the services could move beyond financials and expand to health, education, governance.
I suggest you give this book a read to get a peek into the future of commerce.