Despite all the talk about the mobile revolution and its potential impact on transactions and banking, the only truly blockbuster success I’m aware of is Kenya’s M-Pesa. Much has been written about this service so I won’t blow this column repeating what’s out there. The latest numbers merit mention: 60 percent of the country’s adults use it and almost 50 percent of Kenya’s GDP flows through this channel that didn’t even exist just two World Cup tournaments ago. Incredible. (Here’s a recent but not terribly insightful Economist story on payments industry disruption, including some M-Pesa numbers.)
Surely this mega-miracle will travel beyond one country’s borders, right? Small pockets of success have been documented elsewhere—no question. And there are plenty of examples of individual gains for households and businesses in countries where mobile money programs exist but have not yet scaled.
Yet many evangelists in this field make it sound like mobile money’s impact on the masses is a foregone conclusion, with language suggestive of a rising tide that lifts all boats. The fact that this lifting remains theoretical gets treated as a kind of parenthetical; a glitch that will be ironed out in the next few weeks. I sometimes wonder if the countless five-star conferences about mobile tech and its potential have thus far proved more lucrative than the mobile money businesses themselves, while doing little to bolster the prosperity of anyone not in attendance at said conference.
This is as good a time as any to mention that I’ve consumed my fair share of this particular flavor of technophile Kool-Aid. I won’t apologize for optimism, but reality checks are invaluable. Thankfully we now have HBO’s “Silicon Valley,” which masterfully skewers the change-the-world hyperbole and should be close at hand at any tech event lauding the next great game-changer.
None of this is to suggest that the gold fueling the current gold rush isn’t there. An estimated 2 to 2.5 billion adults in the world don’t have bank accounts. The possibility of reaching them—of pulling them into the formal economy—is tantalizing for business and could be immeasurably useful in the battle against poverty. But every passing year without another mega-success like M-Pesa lends a little more support to the idea that Kenya is an outlier.
I hope not. That is partly why I try to read, or at least skim, announcements and unsolicited email sent by entrepreneurs introducing mobile money startups. The latest one to worm its way into my inbox is called Juntos. At such an early stage, it’s impossible to know if the company has substantive inner workings or just a glossy exterior. But a couple of ideas in the write-up I received are worth attention.
Instead of only targeting people who have never held money in a bank, the company is aiming for customers who may have had or still have bank accounts, but for whatever reason have let those accounts sit dormant. Dormancy is bad for everyone. On the market side, it could asphyxiate the revenue potential that banks, telcos, and others see in the huge pool of customers at the bottom of the pyramid. On the economic development side, newly opened accounts create the false impression that families are progressing toward more financial stability (by saving money someplace other than under a mattress), when in fact they’re just as vulnerable as they were before opening the account, for the uncomplicated reason that they don’t use it.
Addressing the dormancy problem is distinct from, and far more difficult than, delivering banking tools by way of mobile devices. So on top of the engineering and regulatory challenges of a mobile banking rollout, Juntos plans to dramatically alter human behavior. Good luck. Then again, it may not be so preposterous. Apple, M-Pesa, Uber, Airbnb—great products can effect this kind of profound change. But it’s a massive gambit.
Another interesting point of discussion: Juntos wants to transform any mobile phone into a bank teller (not at all new), and a financial advisor (new, or new-ish, unless consumers just ignore this digital advisor, much like they do human advisors). In a 3-month pilot project recently carried out in Columbia with 40,000 clients, the partner bank measured a 32 percent increase in so-called active client rates, and a 50 percent uptick in account balances as compared with a control group. Those are some compelling numbers, and I’m curious to see if they turn out to be a fluke, or whether the company is truly on to something with this advising function.
Many thousands of miles from Columbia, in the Philippines, the international aid group Mercy Corps is trying to meld disaster relief and financial inclusion in post-super-typhoon Haiyan. With help from acclaimed design firm Ideo, the project goal is to deploy mobile not merely as a means to get funds to people, but to the empower them to build more long-term financial resilience. You would be hard pressed to find a place more in need of mobile-based payment and banking services than the Philippines, a country of roughly 7,000 islands. Learn more about this cool project here.
And definitely leave comments for me if you want to suggest programs for me to learn about. Perhaps the technology to dethrone M-Pesa as the preeminent mobile money super-story is already out there somewhere, poised to go big.