Davos Hot Topic -- Inclusive Growth Through Mobile Banking

A key theme at this World Economic Forum is inclusive growth. What does that really mean, and why is it important? It means that when developing countries and emerging markets experience growth, the poor people in those countries should participate and benefit. For example, India has 300 million people who are participating in the strong growth that is underway. Their incomes are growing; their wealth is increasing; and the environment they live in is improving. But, the lives of the remaining 700 million people in India are basically unchanged. Inclusive growth means the 700 million will also experience the benefits of growth versus being left out.

Most people reading this blog will have trouble visualizing a life without banking. A poor person in India or Africa can live more than eight hours or more from a bank branch, so keeping money in a bank is both inconvenient and impractical. As a result, they pay for everything in cash and are always paid for work or services in cash. This can make paying for essentials inconvenient and expensive. Just paying bills can involve travel and long queue times. If family members live or work in another place, sending or receiving money can be inconvenient and expensive, too. So people who have the greatest need, have the greatest cost.

Today, there are more than five billion mobile phones in the world, but only 1.6 billion bank accounts. This creates an unprecedented opportunity to use mobile access to bridge this gap by providing affordable financial services to people with a mobile phone who are currently underserved by traditional banking. This is my passion, this is my company's mission. Affordable financial services will empower their life and work.

Globally, the number of mobile banking users is expected to surge more than sixteenfold, to 894 million by 2015, according to Berg Insight, an industry research firm based in Stockholm. That's up from 55 million in 2009. So the majority of mobile banking customers in 2015 -- 78 percent, or 697 million people -- are in Asia, Africa, the Middle East and Latin America. Many of those 697 million people will have previously had little or no access to banking. My personal passion is to see these numbers higher in 2015 -- I'd like to see 400 million mobile bank accounts in India alone.

The desire and building blocks are in place. Getting it done will take hard work -- not rocket science, but complex execution is required. Scale will come from investment and collaboration. Those of us who have worked throughout the world on mobile banking have seen firsthand the importance of strong partnerships and other critical success factors.

This year at Davos, I was impressed with the new awareness of the potential power, business opportunity, and social mandate to make banking available to all mobile users. In many sessions the topic was inserted. Sessions focused on mobile financial services, were well-attended and the energy level was high. I'm sure that this interest level will translate into increased market momentum for solutions.

The only discouraging note came from an undercurrent of fragmentation -- too many players thinking they can do this as an independent provider, and not being part of a larger ecosystem. This will hamper growth and stunt value. It won't be visible in the first wave, but the ceiling will exist because fragmentation lowers value and creates market confusion. We saw this when computers were connected in groups, but not in one global network, when bank ATMs only supported one bank and not all banks. Adoption happened, but plateaus happened that could only be addressed by an open interoperable model. Closed, non-interoperable systems mean fewer participants; fewer users; fewer uses; and far less value.

Those who know me know I am a very passionate, optimistic person. So, it's no surprise that I leave Davos more optimistic than when I arrived. The awareness, investment, and momentum of mobile banking is building. The early part of most new implementations will still take longer than we want to scale, but growth after the tipping point will be much faster than expected. This makes the possibility of banking for all a real possibility for the world. Not so hard to believe, since we are so close to achieving universal communication with those 5 billion+ mobile phones.

 

Follow Carol Realini on Twitter: www.twitter.com/carolrealini

Comments

[ndem]

02:09 AM on 02/01/2011

The author's company Obopay is helping those poor immigrant workers to send remittances home to their loved ones money which makes up a large percentage in some cases of a poor country's GDP.

But she should not discourage competition in her own sector as that helps bring down prices and also improvements in technologies and even social business structured equivalents of Obopay are helping the poor avoid having to pass via Mastercard or others to carry out transactions with their mobile phones thus passing on the savings to the poor.

Some of the other players in this sector besides her own company include Tagattitude,which allows the trabsactions to take place without the telecom in the middle becoming so powerful.

Also behind Obopay are investors which are huge Western banks such as France's Societe Generale. I say keep the profits local. Let Obopay etc make money in wealthier countries but help develop social businesses in poor countries with these technologies.

[Carol Realini]

06:37 AM on 02/01/2011

Thank you for your comment. I absolutely agree with encouraging competition and collaboration in this space. Innovation and reach to all those who need it will depend on an open vibrant industry. I also agree that the telecom operators are important to the overall service. They have reach beyond the banks in emerging markets and developing countries.

A paper we published for the Gates Foundation Global Savings Forum talks about the Open Collaborative Model for Mobile Banking and Payments.

Global Savings Forum Presentation on Open Collaborative Model:
http://slidesha.re/d81QMA

White Paper:
http://slidesha.re/8ZZ68h

[ndem]

07:26 AM on 02/01/2011

Thank you for these links. I follow very closely telecom expansion in the developing world and though I like to see benefits to the poor via more access to banking/credit, it also worries me that the majority of the money/control behind some of these lie with those who are not local, nor poor. I congratulate what I understand are your links with Grameen which has the local poor borrowers as its majority shareholders (and women to boot!) not foreign banks.

[ThatsTheTheWayItIs]

03:45 PM on 01/31/2011

Financialization has destroyed the US economy. Why do you want to do it to these people?
The Indian economy is growing at over 6% annually, inflation is the real fear. Why overamp it?

[Carol Realini]

06:46 AM on 02/01/2011

I'll leave it to the economist to comment on the Indian economy rate of growth. Mobile banking allows everyone to participate. It democratizes banking.

[ndem]

07:42 AM on 01/31/2011

AFRICA: France Plays Suspicious Role in Countries in Crisis

By Julio Godoy
Inter Press Service
Jan 27, 2011

PARIS, Jan 27, 2011 (IPS) – The three African states in which political crises have recently erupted – Côte d’Ivoire, Niger and Tunisia – all feature a strong French economic presence as well as close military and political ties to the former European colonial power, with France at times playing a protective role towards elites accused of abuses.:

In Tunisia, where a popular revolt earlier in January ousted kleptocratic dictator Zine El Abidine Ben Ali from power, some 1,250 French enterprises constitute the core of the country’s economy.

These enterprises cover practically all economic sectors, from the textile and apparel industry to microelectronics, automobiles, aeronautics, and services. According to official figures, French investments in Tunisia amounted to 140 billion euro in 2009, making France the Maghreb country’s primary economic partner.

Many of these French enterprises enjoy close links to Ben Ali’s family. For instance, 49 percent of the telecommunications operator Orange Tunisie belongs to the former French state monopolist France Telecom. The other 51 percent belongs to Investec, the investment company owned by Marwan Mabrouk, Ben Ali’s son-in-law, who has been accused of corruption.

[Vivian Norris de Montaigu]

06:07 AM on 01/31/2011

Another thing to remember is that major international players in the Telecom business divy up routing of calls...for example, Telecom Italia in Brazil will rout calls to poorer smaller countries elsewhere say to Africa from Latin America. This means wealthier countries' telecoms benefit (and can shut off and/or filter, glean economic and political info etc) from other poorer countries communications all while making huge profits off of them. There is a political element to this as we are now seeing in Egypt where mobile and internet have been cut off.
We need to make sure there is not a replication of economic colonization via telecoms/mobile banking in the years ahead. Keep it local! Bottom up ownership of telecoms!

[dadw5boys]

05:14 AM on 01/31/2011

Yet people do not realize that when they pay those high fees for a Digital 2 way radio (cell phone) the Oil Companies are thinking " that cell phone will not carry you to work, heat your homes, bring a Ambulance or Fire Department when you need it", or supply your Military with fuel, or make plastics you depend on.

It take oil and if you can pay $100 a month for a Cell Phone you can pay DEARLY for Oil Products!!!

Consumers need to wake up and become Frugal because the SIGNALS you are sending Business with the prices your willing to pay makes a HUGE DIFFERENCE in how All Americans are effected by the Economic Changes.

[HamletsMill]

05:01 AM on 01/31/2011

Why not combine MOBILE BANKING with the BANK OF NORTH DAKOTA STATE BANK idea in these nations so they do NOT go down the road we in the United States have gone to oligarchy TBTF financial destruction?

Web of Debt - Ellen Brown - 1 of 5
http://www­.youtube.c­om/watch?v­=QU0XiklHP­Mc

http://www­.youtube.c­om/watch?v­=2qxa8RnTu­eg

Ellen Brown - Cali Bank Video Presentati­on_Part 1.00.avi
http://www­.youtube.c­om/watch?v­=2atnm1oTj­J8

Ellen Brown - Cali Bank Video Presentati­on_Part 2.00.avi
http://www­.youtube.c­om/watch?v­=B7oTt9kqo­es&NR=1

Ellen Brown - Cali Bank Video Presentati­on_Part 3.00.avi
http://www­.youtube.c­om/watch?v­=-oESVmJqD­QU

Ellen Brown - Cali Bank Video Presentati­on_Part 4.00.avi
http://www­.youtube.c­om/watch?v­=fR9YH-RPG­SE&NR=1

Ellen Brown - Cali Bank Video Presentati­on_Part 5.00.avi
http://www­.youtube.c­om/watch?v­=yp19_QGsD­FE

[Vivian Norris de Montaigu]

04:31 AM on 01/31/2011

This topic is also very important as Western telecoms such as Orange are buying up and building local emerging market and poor country (Africa where they were kicked out of 5 countries) telecom infrastructure...as mobile will be banking and already is in places like Kenya and soon Bangladesh (see the great work of the poor women who built Grameen Phone and made it the most important telecom in Bangladesh only to have TeleNor take the profits/control of the company away)--this is one danger that the wealthiest countries in the world will via telecoms control the wealth of the poorest countries in the world! Telecoms are also the future of content distribution and everyone knows the first thing you do in war is control the enemy's communications. We must tread very carefully and help make sure that this is a bottom up not top down approach to building mobile banking.

[HamletsMill]

04:41 AM on 01/31/2011

This is a very important emerging topic worldwide. Thank you for this well said comment. F&F.