Will Haiti Forever Change the Way We Use Money?
The recent media interest in the use of mobile phones to make donations to the Haiti appealhas cast light on the potential of mobile technology to transform the way we send and receive money in the future.
Why do we use credit cards, carry a wallet or even write cheques when it is perfectly possible to simple use a mobile phone in place of cash?
This idea has been around for a while now but as yet no one in the developed economies has managed to come up with a concept of mobile money transfer that has captured public confidence.
This is not the case in Africa where almost 11 million people send and receive cash on a regular basis every day. They can also pay bills, receive a salary and save money.
There are a number of reasons for this but perhaps the primary driver is the lack of alternative infrastructure in developing markets. This is true for both communications and banking infrastructures. Fixed line alternatives are often limited which means that mobile technology can be deployed to literally “leapfrog” the existing networks.
The same reasons which prohibit the roll out of the fixed line network could be applied to the banking sector.
The issue is simple.
Many people in emerging economies have little money to save therefore it is not economically viable for banks to provide services to people who do not have enough cash to fund the cost of servicing them. The poor are therefore left to operate on the peripheries of the formal economy.
To address this Vodafone developed a money transfer service called M-PESA which launched in Kenya in partnership with Safaricom three years ago. This has been phenomenally popular, with over USD$350 million now being transferred by mobile every month - a huge amount for one of Africa’s poorer nations. The service is also live in Tanzania with our partner Vodacom and in Afghanistan (branded M-Paisa) using the Roshan network.
There are many benefits of using mobile phones for micro-transactions in a country like Kenya where, in a population of 39 million, only 22% of people have bank accounts but nearly 17 million people have mobile phones. For example M-PESA gives the “unbanked” the confidence that they have transferred funds directly into the hands of their chosen recipient rather than passing money from one person to another or being obliged to pay a premium to send cash via an alternative remittance service. M-PESA, managed from their mobile phone, offers them a cheaper, convenient and safer way to send money to their loved ones.
Research shows that financial services are critical for economic development and inclusive financial services for the unbanked are essential for poverty reduction. Lack of access to banking services is currently forcing many people to rely on a cash-based economy with little security, as well as a more casual and informal labor market. This is also leading to a lower tax base for governments.
So in addition to the donation of much needed funds to development agencies and NGOs, mobile technology can assist in enabling millions of people in some of the world’s most deprived economies to take part and benefit from a more formal economy which will in turn drive economic development.
One last thing - perhaps we could learn from the experiences in Kenya, Tanzania and Afghanistan and think about the potential advantages money transfer via mobile could have in the West?
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Cenk Serdar Mobile Payments Director, VODAFONE GROUP. Cenk joined Vodafone Group, a pioneer in the development of money transfer services via mobile, in May 2009 as Director of Mobile Payments to head up its money transfer team.