Recently, I had the opportunity to speak at Columbia Business School’s Institute for Tele-Information (CITI) on the topic “Mobile Money: The Catalyst to Jumpstart Emerging Markets.” In preparation for this topic, I posed the question “How do you think mobile money will impact the economies of emerging markets?” to the LinkedIn Group: Mobile Payments Series – mPay Connect where industry experts and economists were able to weigh in on their thoughts… a special “thank you” to those who contributed to this thinking and an invitation to others to be part of helping to drive this market forward by contributing their thoughts to this group.
As a consultant to businesses around the world, seeking to launch mobile money systems and as a former macro-economics major from Harvard, I wanted to bridge the economic theory with the reality of what is happening at the ground level in the emerging markets I have visited. My conclusion: Mobile Money will be a catalyst to jumpstart these markets because it draws on the forces inherent to mobile money itself, namely:
1. it is a new industry that is bringing investment/innovation into these emerging markets;
2. it is both a foundational infrastructure itself to enable other new industries to receive payments as well as a service that requires additional building blocks to work. These building blocks, in turn, support new industries (such as identity management for marketing or credit);
3. it leverages another infrastructure, namely mobile, which is the most ubiquitous data transmission device in the history of mankind (and penetrates to people far out of reach of banks);
4. it addresses taking cash in the informal financial sector and formalizing it into capital deposits which can spur further economic activity (such as investments); and, finally,
5. it relies on electronic transmission, which eliminates the friction and costs associated with cash (namely cost of physically moving cash from one place to the next and the lost productivity in failing to transact as needed due to this time issue.)
Iqbal Quadir, the founder of GrameenPhone in Bangladesh, states that “connectivity is productivity” whereby a study has shown that in emerging markets mobile connectivity profoundly impacts GDP (a 10% rise in mobile subscribers will raise GDP between .6% and 1.2%.) Mobile money exacerbates this phenomenon because it is the enabler of business. If mobile connectivity is the “how” to link data for commerce and business, mobile money is the “why”… so that we can earn an income. Together, the data transmissions to spur economic activity and the mobile money payments services are already unleashing a new wave of entrepreneurism in these emerging markets in an unprecedented manner with new industries leapfrogging those in developed markets (mobile money leapfrogs traditional banking similar to the way mobile leapfrogged fixed telephony and off-grid clean energy is leapfrogging grid fossil fuels.)
Of course the reality of this situation is still less optimistic than it may appear. Kenya is the mobile money success example that all other countries strive to replicate, but none have done so to that degree yet. Without the infrastructure of roads and postal services, for instance, it’s difficult for the Masai to sell/mail their wares on eBay-like global marketplaces. Similarly, regulatory constraints may limit what can be done in many markets. Successfully launching mobile money systems is no small feat… one which requires a deep level of understanding of what it means to combine and execute mobile, payments, and emerging technology operationally and in a manner that will be adopted by a new customer base. Finally, the fragmented nature of these new mobile money systems, mainly due to mobile network operators who choose to roll out closed systems, will continue to limit the usefulness of the payments systems due to lack of interoperability domestically and internationally.
Similar to the hype I witnessed in Silicon Valley in the late ‘90s during the dot com boom, so too is there a high degree of hype in this industry, this time in a much more global arena. Make no mistake, as was seen in the dot com aftermath in the early 2000’s, there will be many failures and consolidations in mobile money, but the few who do survive will drive the industry forward. It has been said that people overestimate the impact of a new industry/technology in the 5-year time horizon, but underestimate its impact over a decade. Although the short term mobile money (r)evolution will continue to face the challenges listed above, I am optimistic that, with the focus the world is seeing in the mobile money industry, over the next decade we will see the profound impacts this industry, infrastructure, and enabler will have on those markets most in need of the economic ignition.
Menekse Gencer founded mPay Connect, a consulting service for clients seeking to launch mobile payments. Her consulting service advises banks, mobile network operators, and third parties on go-to-market-strategy, product design, and business development. Her market expertise extends from North America to emerging markets such as Bangladesh and sub-Saharan Africa. Prior to founding mPay Connect, Menekse led PayPal Mobile’s Business Development efforts in North America for two years during which time she closed PayPal’s first mobile network operator deal to launch PayPal Send Money on Sprint’s mobile wallet.
Menekse has an MBA from Wharton and a BA in Economics from Harvard University and was previously featured on the cover of Fortune Small Business Magazine for her innovative startup in emerging technology. She is the founder of the Mobile Payments Series(TM) initiative which hosts panel discussions and networking events for professionals in the mobile money industry and has over 345 members in her LinkedIn Group: Mobile Payments Series – mPay Connect. She has lectured on mobile money at events for Harvard Business School, Wharton MBA, and Columbia Business School. She will be a participant at the upcoming World Economic Forum in Africa around the topic of mobile finance and economic development and is a guest speaker at mobile money conferences in Africa, South Asia, and The Middle East. She is a board advisor to several startups in this space.