When the Gates foundation decides to attack a problem, you know it’s a serious problem with significant impact and they are going to commit some serious resources. They are currently predicting an unparalleled improvement in the lives of the poorest and one of the key enablers of that is mobile banking . While we still carry cash/credit cards, Africa, Asia and others have already been using mobile banking. Apple pay was recently introduced in the advanced countries and continues to struggle while 2/3 of Kenya is already using mobile banking – a phenomenon called “leapfrogging” -large parts of the world will never know credit cards or physical banks and are going directly to mobile banking.
Safaricom (the leading telecom in Kenya) derives 18% of their revenue from banking (more than SMS/data combined) thus developing a new business model for telecoms. They have human ATMs (81,000) or agents who act as local “banks”(what the Knights Templars used to do)–thus leading to more ATMs/capita there than in the US!! This also makes banking available where there is no electricity yet and phones are solar powered.
According to the Gates foundation, 2 billion people will have access to banking services which will fundamentally change their lives. While only 10% of Tanzania have bank accounts, 67% have mobile phones resulting in the “leapfrog” effect. While this clearly has an impact on the cost of banking services and access to micro loans and employment for the human ATMs, it also fundamentally changes social behaviors. Savings may have been an alien concept when your wealth was stored in goods (cattle) or currency was hidden under the mattress but not anymore. This allows them to deal with normal life downturns (bad crops), health emergencies, education etc. on their own with their savings and stay away from the predatory money lenders or indentured servitude to pay off loans. Generations of a family have suffered because of loans that keep increasing the principal as bad crops continue.
Bill Gates also theorizes that a number of innovations coming from these 3rd world initiatives will actually “trickle up” to consumers in the advanced countries and may threaten the banking industry at some time. This will also open up these geographies as potential markets because there is a reliable payment system in place.
This is but another lesson that innovation provides little value unless it’s adopted. And while the phones being used in these countries are very basic with b/w screens etc., their huge adoption rate makes the realized value of the innovation humongous. The lower adoption rate in the advanced countries makes the realized value significantly less. Looking for innovation in all the expected places(advanced countries) may actually make us miss a lot of innovation taking place in the 3rd world.