Neat story, Jenn. Makes a lot of sense. I wonder, though, if this ease of doing business might not lead at some point to over-spending. It took consumers a long time to realize credit cards create debt. But if the people using this system have a history of being economically challenged, they probably have better spending habits that their Western counterparts.
Yeah Jennifer, interesting things have been happening in the last few years in Kenya, Nairobi is fronting for software technology. Similar development on the ascendance in Ghana, where many tech firms are focusing in software development - with more attentions channeling towards software enterpreneurship ( mobile applications).
Wale Bakare - Agreed. Nairobi seems to have "tech hub" potential, based on some conversations I heard recently. Of course, there are still lots of issues to deal with (saftey and corruption immediately come to mind), but it will be an interesting place to watch. And, yes, on Ghana - that's another place on my radar screen.
This is true but it might also create a kid in the candy store mindset. You're disciplined but want to just 'try things out'. Then that could lead to a slippery slope. I can only imagine that us Western counterparts weren't always this irresponsible financially. It had to start somewhere...
@pocharle: What you have said is applicable to the developed economies. Where people have the buying power to try new things and then can adjust to its financial implications.
What I think is that consumers in the developing countries are already finding it extremely difficult make ends meet. Hence, they know exactly what to buy and in what quantities. Unfortunately, they follow a strict buying schedule unlike our buying habits.
I agree with you on the fact that it posess a threat to the consumers. But then again my experience of mobile payments in developing countries says that these people will perform only the necessary transactions like say buying grocery etc.
syedzunair i agree with you in reference to the 2nd paragraph of your comment. There is absolute difference in buying culture of developing and developed nations. Are we beginning to see paradigm shift in they way westerners and developing economies consuming technologies?
Are we beginning to see paradigm shift in they way westerners and developing economies consuming technologies?
I am not sure about the paradigm shift Wale. But I am certain that necessity is the mother of invention. In the developing countries people often have to adopt to technology/innovation to cater their needs for example banking in this case.
Since, they do not have a lot options they tend to adopt to the ones' that are available.
The aggressive adoption of technologies ( mobile payment, e-payment, cashless transactions) in Africa for instance is gearing towards financial sectors. This due to failure of governments in providing ICT infrastructure which could aid delivery of technologies like ADSL, fiber and other. Those pose far great challenge which, now open door for quick adoption of an alternative schemes like Wimax, Satellite, 3G/4G.
I think, there are encouraging developments from Africa, though.
"This due to failure of governments in providing ICT infrastructure which could aid delivery of technologies like ADSL, fiber and other"
@Wales: I agree with you on this. In countries with weak ICT infrastructure, mobile is doing the job that internet is supossed to do. This is not just restricted to financial transactions. Even education and healthcare services through mobile phones is becoming pretty common in these countries.
Even though the investments like mobile and talktime are inevitable, it is very important to understand the benefits of this kind of technology. There are endless possibilitis of business transactions with this mobile money transfers.
I completely agree with you. I was simply trying to point out the barriers to adoption for people in low income regions. There have been many initiatives to still lower those economic barriers but it is still a factor.
Jenn, Developing economies use technology in ways that are often quite unusual to the Western observer. They've had to develop alternatives to systems that aren't serving them. Wireless communications caught established landline phone providers by surprise and liberated the citizens in countries like Kenya. Today, you can go out in places like Kenya and get a mobile phone within a few minutes whereas in the past it could take years to get a landline.
They use mobile money because the banking system too is stuck in the past. In most places in Africa, banks haven't learned the customer is king. Now they will.
Either the banking system in the developing countries is stuck in the past or is not present in the rural areas. Therefore, a suitable alternate was required for the masses. I think mobile payments got adopted early because even in the rural areas the cellphone penetration is exceedingly high.
Banks cannot sustain the infrastructure and the running costs associated with opening branches in rural areas. Hence, another common thing you will see in the developing countries is mobile banking units. It could be just a grocery store but on the back end it functions like a bank.
syedzunair, @Bolaji - The banking situation and money-transfer situations in the developing world always fascinates me, regardless of whether it's in Africa, Asia or Latin America. It's amazing to me that I still have to beg Western colleagues not to write/send/rely on checks, an arachic system dating back to, what, the late 19th Century? Good grief. I know it's complicated to change, but the slowness at adapting is equaly frustrating.
I am pleasantly surprise that such a service started in Kenya first than it has started in India. Airtel, one of the largest mobile service provider in India, is offering such a service in India. I am not sure how successful they have been as i think they have started this service only recently (if i go by the ad campaign they are running). The success may or maynot be as huge as that of Kenya due to different geographic, economic and political situation but one thing is sure that the mobile phone is not for talking and sending messages anymore.
@Himanshugupta: Mobile money transfer is also catching up in Pakistan like other developing countries. Currently a company called EasyPaisa is offering it which is a collaboration between a leading telecom service provider and a bank. So far the service has targeted the rural population working in the cities who have to send funds back home. But their usage and success is limited so far.
@Jennifer...as i have not used the airtel money till now, most of the information that i have collected is through website. The concept is quite similar to having debit card or internet banking account. Though if require cash then you need to first transfer money to bank a/c and then go to nearby ATM. But otherwise it seems as convienient as other bank a/c. The only downfall seems to be a bit higher tranaction cost. More info on: http://airtelmoney.in/wps/wcm/connect/airtelmoney/airtelmoney/home/faqs/faq
As I understand the mobile money transfers are like debit cards. The money can be trasnferred if there is a balance in the account. So there is no question of ovespending at any point in time and then get indebted by the high interest cost such as what the credit card companies charge.
I think this is an innovative way to handle cashless transactions at the retail level. For countries where roadside mugging for a few Pesas is a common thing , such new mode of carrying cash is welcome.
In India recently a mobile company has started such service , but it has to catch up the imagination of the people but slowly and surely it will - such systems are very useful for small road side vendors who cannot afford to have the costly link ups with payment gateways and such things.
Mobile money transfers are easy for both the buyer and seller and they can happen on the roadside -that is very important advantage.
I agree with you on this. Mobile payments usually function like debit card transactions and that ensures consumers cannot overspend in anyway.
However, a recent change I have seen here is that. Cellphone companies are offering their post paid consumers the facility to pay their utility bills through their cellphones. Once the utility bills are paid their amount is reflected in the montly cellphone bill. In this case, there might be a possibility of overspending if the cellphone companies keep a deposit that is less than the combined cost of the consumer bills.
You are right in that respect that if a mobile payment is allowed on a postpaid connection then it basically becomes a credit and if there is not sufficient security deposit to cover it then it amounts to overspending.
@prabhakar_deosthali - This is my understanding of how it works as well. It's based on account balances or added money and isn't at all a credit card. Two things you mentioned were also top of mind for people I spoke with - being able to conduct business at the roadside and no longer having to carry cash. Like most developing countries, Kenyan roads are still tough to travel on (one of my colleagues got three flat tires in the same day), so being able to get everything handled quickly off the main highway is critical. Also, because of safety issues, not having cash handy, makes people less of a target for robberies.
Mobile money is the next logical step, and a great value-added proposition for mobile devices. Any kind of banking transaction though has the potential for fraud and unauthorized access. With worldwide mafias becoming more tech-savvy, more information is forthcoming on how transactions would be safeguarded.
@Stoc.. i agree that making mobile money transaction a safe should be on a high priority for banks and mobile network provider if they want to ride on this wave. Make use of the mobile money transaction can be as friendly as using credit card or debit card. Using mobile money as a debit we need not to have machines to swipe the card for payment and can be used with wider retail network.
@Nemos - Will keep you posted about my upcoming travels =). There is a possibility I may be in sub-Saharan Africa again in the not too distant future.
You're right in talking about cell phone penetration... I don't know exactly what it is for Kenya, but I know in Ghana, in West Africa, that number is already above 80%. Mobile phones, more than laptops or other computing devices, has revoluntionized developing countries and is empowering people to start moving out of extreme poverty.
Jennifer, your article clearly highlights the benefits of Mobile money transfer in this part of Africa. It shows that the success lies in the necessity. Faced with limited access to the internet, but greater control and access to mobile phones, has enabled this cash flow technology revolution works. It has liberated the services users. It's fantastic.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.