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In emerging economies, however, mobile phones are nearly ubiquitous. Pre-paid
phones and SIM cards are relatively easy to find. My friend in Nakuru has two
different phones, one of which he uses almost exclusively for Internet access
and to file stories to his employers. A few years backed he penned a story for
me about using mobile devices to conduct international money transfers, and he
was excited about the prospect of having easier ways for his foreign employers
to send payments to him directly. The idea of having easy access to cash through
his phone, without ever having to carry actual cash which is easily stolen and
cannot be traced or secured, is life changing for him as it can be for millions
of people.
Greasing the Gears
Economies are built on transactions.
Buyers and sellers must exchange
currency and goods; it’s a simple
concept. If there’s no or limited
currency floating around, there isn’t a
way to encourage development of
fundamental pillars of modern society
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The idea of having easy access to cash through his phone is life changing for millions of people. |
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In the background, we’re talking about a few technical and business components.
You need a relationship between banks and mobile operators, and possibly a 3rd
party clearinghouse for managing those relationships and transactions. You also
need to manage a real time or near-real time, debit-based cash account
associated with a pre-paid mobile account. Banks have this technology for debit
cards; mobile operators have it for pre-paid accounts. So that already exists.
You need security wrapped around this to verify user identities and transaction
integrity; Did this mobile customer really just buy five pounds of sugar from
this grocer? Is the person who made the purchase the actual owner of the
account? Finally, you need to close the loop and verify to both merchant and
payer that the transaction is complete, the funds are transferred successfully,
and offer to display the remaining balance.
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like supermarkets, movie theaters,
Chinese restaurants, and Wal Mart.
According to the Marion Medical
Mission, just a few hundred dollars can
build a fresh water well that will
change the future of an entire village in
Africa. On that basis, it makes sense to
me that a pre-paid phone with which
one can store a few “dollars” and
conduct day to day transactions can be
just the lubrication an emerging
economy needs to drive a revolution.
There are multiple ways this can work, and various technologies out there for
making it happen, but consider this scenario. My friend in Nakuru has his bank
account in Nairobi and a mobile phone. He calls the bank, verifies his identity,
and has a few Kenyan shillings transferred to the SIM card on his phone, which
now works as a pre-paid debit card. He goes to the grocery store to buy food for
the week for his family and pays by sending a text message with the amount to a
short code. The payment is then verified to the merchant by text and he goes
home to feed his family.
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The transactional pieces here are pretty well explored territory. My assumption
is that the security issues relating to this, while not completely new in the
financial or mobile realms, need not only to be addressed, but to be policed and
kept up with ongoing scams. Security is never a one and done issue. It’s an
ongoing risk that needs to be managed from all vectors and with the cooperation
of all parties. And that’s to say nothing of the legal issues – leave it to
lawyers, judges, and regulators to make something that’s technically
straightforward potentially impractical to deliver.
What about people who don’t have bank accounts? The SIM card can, in a sense,
become a checking account, and they can pre-pay at the same point of sale where
they would top-up their minutes. They can also receive funds by international
money transfer from family and friends abroad who send their wages home – as
millions of Kenyans, and people from other emerging economies living in other
countries for work, do every day.
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