Are Banks the Bad Guys in the Mobile Money Innovation Debate?
Bill Maurer and Olga Morawczynski’s blog post from a few weeks ago discussed a topic that seems to be on everyone’s mind: innovation in mobile money…or the lack thereof. This has generated a lot of comments and even follow-up blog posts, like one by Bill Barhydt from m-Via. Bill and Olga made some good points about the nimbleness that MNOs and other players have to exercise in order to stay competitive and generate innovation. However, I’m not so convinced that there is a lack of innovation in mobile money because MNOs are partnering with banks. I’d say that there is at least as much of a lack of innovation in mobile money because MNOs are simply trying to copy M-PESA. The link-up between Tameer and Telenor (a bank and an MNO) in Pakistan has received big acclaim for innovation. It’s easy to blame the regulators, as Bill and Olga say, but it’s also quite easy to blame the banks.
Discussing this with my CGAP colleagues has been helpful in thinking through these issues. Defining exactly what we mean by “innovation” would probably reveal that it means different things to different people. The initial innovation of branchless banking focused on the channel that was used to “bank the unbanked,” namely the mobile phone. Sending money around or paying bills wasn’t anything new, but the way that you could send money around and pay bills was. It seems that people are getting bored with this channel idea as calls for innovation now focus on the product offering itself. This is where innovation becomes all the more difficult since offering a sophisticated financial service over the mobile phone entails more than just moving money around. Can microinsurance or microcredit be offered in an environment where personal interaction is no longer needed? This is one question that those hoping to be innovative in the branchless banking product design space are trying to answer.
Some may define innovation in terms of the players that are involved. One could argue that the product offering of easypaisa by Tameer and Telenor is not as interesting as the partnership itself that was formed between these two large companies to offer the product.
Maybe the next wave of innovation will still be related to the channel, but just a different channel. Is the hype around mobile technology really panning out? I would argue that mobile phones still provide incredible leveraging power to most providers, but perhaps there are advantages that card-based systems can provide that mobile phones can’t. Perhaps internet capability or near-field communication on the mobile phone will make the same mobile channel even more powerful. Or perhaps there’s a channel out there that we don’t even know about yet.
I think Bill and Olga are right when they say that many of our ideas around innovation are likely to come from the customers themselves as we begin to understand their demands and the ways they use products and services. But the thing about innovation is that it surprises us all. The microfinance industry has been redefining itself over the past 40 years. We’re just at the beginning of the branchless banking industry, and only time will tell where innovation takes us.
- Sarah Rotman
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Mobile Life Insurance: Innovations From Pakistan
The commercial viability of businesses that provide life insurance to the poor is difficult to predict. The strong penetration of mobile phones in Pakistan provides a cost-effective method of acquiring customers that holds promise for the industry.
Comments
Interesting points, Sarah.
Interesting points, Sarah. Both this article and the one by Olga and Bill, which I read with interest seem to be pointing fingers.
As I understand it MPesa was an accident. And, in the aftermath of its success has left banks and central banks reeling as they seek to accommodate three new factors in their lives. Firstly inadequate legislation, secondly the loss of huge market opportunity to a group of non-banking competitors and thirdly an inability to clearly define mobile banking with the consequent internal political discord.
Unbanked potential customers are unbanked because they have no money and live too far from a branch. That I think is a definition everyone is clear about. It also makes those customers fair game for any organisation that wants to serve them…
The confusion comes when you try to compare the mobile banking for customers with bank accounts and mobile banking of the top-up account nature as offered by Mpesa. For many they are all lumped into one.
This is further exacerbated by the noise created by wealthy MNO’s each scrambling for the market share to support their investments in infrastructure. Meanwhile many of them do not even share calls between networks, which must be a hugely limiting factor in their long term development.
I would seek some clarity. How we can expect this sort of competition and confusion to innovate, I do not understand.
I think there needs to be some very clear thinking about the standards and strategies for mobile banking and financial inclusion generally.
The closest I have come to seeing anything that resembles a cohesive strategy is that offered by the Rainbow Interchange Group (www.sendmorehome.com) and while they are still at the starting gate their system, apparently five years in development, supports banking, micro-finance and mobile operators and most importantly puts the customer at the heart of their programme.
There needs to be a much more collaborative approach to financial inclusion. It is not just a market, it is the lives of fellow human beings, as those of us who are horrified by the floods and disasters around the world recognise. The number of cookie jars washed away in Pakistan is beyond number and the longer it takes us in the wealthy developed world to fight over marketshare with no clear strategy the more people will die in poverty, wherever they live in the world.
No punches pulled here, but I think you can see the direction the industry needs to take.
Mobile’s utility (as channel)
Mobile’s utility (as channel) will continue to evolve and it will continue to embedded itself in daily life, just as internet. Real innovation in this space lies not in technology but in regulatory environments, at least in the immediate run, and that is the key to commercialization of mobile as channel (at least for the unbanked). Many parts of microfinance value chain can be automated leveraging mobile technology (and this too may be restricted to distribution, advisory services), but it may not be possible to de-humanize microfinance services,particularly in markets that are not mature (in terms of products, service adoption and legal structures – unfortunately most microfinance target markets may not qualify). Albeit, considering the pace of evolution, Id be surprised if mobile microfinance does not open new ways to increase outreach at lower costs and enable the sector to leapfrog into a new era of growth. Just need to forge the right partnerships, uninhibited.
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