On April 9, 2010, the New York Times published an article entitled, “The Triumph of the Ordinary Cellphone” where the editor posed the following questions: “What if, globally speaking, the iPad is not the next big thing? What if the next big thing is small, cheap and not American?” In this article, he suggests that the United States may be missing the mark when it comes to mobile payments. A consultant to mobile money initiatives globally, I agree with the assessment and explain why.
I have been focused on the mobile money/banking space since 2005 and ran PayPal Mobile’s Business Development efforts for North America for two years (2007-2008) prior to starting my own consultancy mPay Connect (www.mpayconnect.com.) During my time at PayPal, I learned about Kenya’s mPesa system and visited East Africa where it became quite clear to me that there was an enormous chasm between Silicon Valley/US and the rest of the world/emerging markets when it came to mobile money.
As an employee of PayPal at the time, what I came to realize was that PayPal has all the right infrastructure, number of accounts (80+ million) and knowhow for successful money movement. Taking that infrastructure and using the mobile channel is quite natural. We launched many innovative mobile technologies to leverage the PayPal system. In fact, the most recent PayPal iPhone Bump is getting much recognition for its innovation. Here’s the issue: Banked customers with high PC penetration rates don’t need mobile payments for most of their payments activities. Let’s compare the $1.5 billion volume that PayPal estimates this year to get through the mobile channel with the $300+ million/month that Safaricom’s mPesa was enjoying in Kenya last year where the average GDP is $550 per year. Let’s face it, mobile payments won’t change the lives of people who are fortunate enough to live in a highly sophisticated market with financial services infrastructure where they have bank accounts and 5.4 cards in their wallets already, but it will have a profound impact for the rest of the world.
Mobile payments are valuable when it comes to cash replacement. That’s where the mobile phone becomes extremely important… formalizing the informal economic sector (unbanked) by providing accounts for the first time and enabling financial services to those out of reach of banks.
I recently returned from some work in Bangladesh where this was apparent. With unbanked statistics at 85%+, providing access to money services conveniently through the phone is critical. Anyone who has seen the world economic pyramid understands that Bangladesh is not an anomaly.
In Silicon Valley, we focus on the next cool technology which advances us forward, but when it comes to mobile money in the US (for banked customers), what problem are we really solving? If the Silicon Valley continues to focus on the US market with banked customers for mobile money, it most definitely will lose out on this market as wealthy investors from oil countries invest their money into startups in South Asia, the Middle East, and Africa. In the U.S., it’s great that we are innovators for the high end devices… iPhone, iPad, etc. When it comes to mobile money, however, we need to stop thinking like Silicon Valley “techies” and shoving technology into a market while searching for a need. Rather, let’s begin to understand what mobile money means abroad, focus on markets where there’s a demand, and meet that demand with a technology (even if it’s low-tech!) to solve the users’ needs.
Menekse Gencer founded mPay Connect, a consulting service for clients seeking to launch mobile payments. Prior to mPay Connect, Ms. Gencer led PayPal Mobile’s Business Development efforts in North America. She 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. Ms. Gencer is the founder of the Mobile Payments Series(TM) for professionals in the mobile money industry. She has lectured and moderated mobile money panels associated with Harvard Business School, Wharton MBA, and Columbia University. She will participate in the World Economic Forum on Mobile Finance, Economic Development. Ms. Gencer is a speaker at Money Mobile Transfer conferences abroad and a board advisor to several startups in the mobile money industry.