The Ends Justify the Menial

Among the world's most influential foundations (Gates, Rockefeller, Grameen, etc.), there's little doubt that digital financial services are a benefit to the world's poor. Local and national banks, which were stunningly slow to see the opportunity advocated by MFIs and mobile money services like M-Pesa, are now getting with the program. Government reaction ranges from actively supportive to behavior that would make an ostrich blush. But what do poor people think about digital financial services? As the MasterCard Foundation recently stated, they're "trapped in a cash economy," but are they even aware that digital alternatives are possible?

Well, sending a few mBucks back to the family in the village is certainly cheaper and less risky than taking a long bus ride with a pocket full of cash. And small-scale efforts to, for instance, deliver training per diems or pay school fees through mobile money have been well received by consumers and their institutional partners. Many such initiatives are part of a concerted effort to build a digital financial services (DFS) ecosystem that supports a wide variety of transfer, payment, savings, and insurance programs. In their 2015 annual letter, Bill and Melinda Gates made it clear they would be among the drivers of this effort. And when organizations with the power to move the needle as much as the Gates Foundation begin talking about creating an ecosystem, it doesn't take a bloodhound smell an opportunity.

A robust DFS ecosystem in Africa, Asia, and Latin America would serve three billion people who, for a variety of reasons, have been largely ignored by formal financial service providers like banks and insurance companies. People at the bottom of the pyramid are eager to smooth out the shocks of inflation, currency devaluation, political turmoil, crop-killing droughts, or monthly bus rides to the village. A healthy, comprehensive DFS ecosystem would serve this purpose, but creating it will require a lot of heavy lifting. Some members of the value chain can be relied on to pursue a profitable new market. Back-end networking and data firms, credit and payment companies, aggregators, and programmers will be on board. But the big players - government agencies, formal financial institutions, mobile operators - may need more convincing that an inclusive DFS ecosystem is in their best interest. The development community can influence this process through advocacy and by supporting research, innovation, and scale. This is not a trivial commitment. It means a whole lot of hot taxi rides, endless meetings, menial data collection, aggravating partnerships, roadblocks and course reversals, trial and error, followed by trial and success. In short, it will require all the sustained, determined effort that gets people into development work to begin with, because the result will be helpful to millions and millions of people.

Money Changers

What are the basic tools in your personal financial toolbox? Cash, of course. A debit card tied to a checking account. Credit cards. A savings account. And then there are a whole bunch of comparatively passive tools designed to stave off disaster - health and life insurance, retirement account, mortgage, stocks, and bonds.

Now imagine you were born and raised in rural Tanzania, or Thailand, or Brazil, and you have none of the pre-conceived notions about those financial tools. There are no banks in the village, and even if there were, you're not sure the bank can be trusted. No one owns a credit card, or insurance, or stocks or bonds. You're paid in cash for the work you do. Your daughter convinced you to sign up for mobile money when she moved to the capital to work, and it was the easiest way to send money home. Then, it seems overnight, you could use your mobile wallet to buy food, or pay for a taxi. Now you have a better phone, and your daughter says you can use it to find information about the weather or yesterday's game, open a savings account, buy insurance, apply for a small loan, and pay bills.

The fact is, the concept of money is undergoing a fundamental transformation, and different players are stepping in to offer financial services where there were none before. (Think M-Pesa and its imitators, Google Wallet, and Facebook's quiet, impending launch of mobile money in Ireland.) New financial services by any company will have to gain the trust of wary consumers and navigate a tricky set of regulatory and business-model obstacles. Still, the relatively open regulatory environment, the greenfield technology and banking landscape, and a clear willingness by consumers to adopt technologies that improve their lives make developing countries fertile ground for the introduction of new financial services. Emerging markets are already out in front of a brave new financial world, and villagers in Tanzania, Thailand, and Brazil are starting to look at our paper checks and credit cards with a mix of confusion and humor.

Expecting the unexpected: technology in emerging markets

Vital Wave Consulting’s CEO, Brooke Partridge discussed the market dynamics across the developing world and how they shape the unprecedented innovation and impact of technology use in these emerging markets at a PARC Forum event on July 23rd in Palo Alto.

Mobile, particularly mobile services (mServices) were a lively topic of discussion. mServices includes things like:

• mobile money (i.e., immigrants and migrant workers sending money back to their families)
• mhealth (i.e., using SMS messages to remind people with TB to take their medicine or people with diabetes to do a glucose test)
• mAdvocacy (i.e., Greenpeace Argentina has used SMS messages to ask people to call their legislators to lobby for policy action, to immediately alert people about urgent environmental issues)

There are literally hundreds of mServices projects being pilot tested across the globe, but even some of the most visible (i.e., M-PESA in Kenya) have not achieved scale. Some of the obstacles are regulatory (particularly with regards to cross-border transmissions), financial (solidifying the business case) and some are in the nature of the projects themselves. Many of the projects were set up just as that – projects – and were not structured to become viable, scalable businesses. Management teams, business models and the service itself often all need to be transformed in order to bring solutions to scale and that is not trivial undertaking. Time is also required and many of these are very new initiatives.

Would be interesting to return to the PARC Forum in July of 2010 and repeat this conversation – hopefully there will be many examples of successfully scaled mServices at that time.