“The power of mobile money” – new report from The Economist hints of development revolution

October 8, 2009 at 9:34 pm | Posted in Uncategorized | Leave a comment
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In 1791, Thomas Edison started a project– to build a worldwide network for people talk to each other.  And according to experts interviewed last week’s report in The Economist, we can expect to see this project finished in our lifetime—100 per cent global teledensity is expected within the next ten years.  Of course, 100 per cent does not mean absolutely everyone, since some people own several headsets and sim cards, but it comes pretty darn close.

These days it seems everyone has a story about how a cell phone has changed a person living in poverty’s life, but the in-depth research of exactly how mobile telecommunications is spurring economic growth is still being written. That’s why this special report is so exciting; it compares telecom across emerging markets, stringing both anecdotes and research together, and pulling out the trends.

Some of the facts:

  • 3 out of the 4 billion mobile phones worldwide are being used by people in the developing countries.
  • Studies show that adding ten phones per 100 people in a typical developing country boosts income per person by 8-10 percent.
  • India leads the way with adding 128 million new subscribers in the last year, 89 million were added in China and 96 million across Africa.  Indonesia, Vietnam and Brazil are not far behind.
  • Despite average customer spending $6.50 per month and .02cent calls, Indian operators still have a 40% profit margin, similar to Western operators.

While the article touches on nearly every region in the world, M-Pesa in Kenya has had the most success with using mobile phones for banking.  Here’s how it works: once a user is signed up using a mobile phone and an ID card, he or she pays cash to a vendor who then credits it to the phone account and gives the consumer a special code.  The code can be used to withdraw cash later or passed along to someone else. Around $2 million is transferred through the system every day, with an average transaction of $20.

There are many benefits to mobile banking–  no more carrying cash on long trips, keeping wealth in only livestock or jewelry, or risking losing the stash kept under the bed to a natural disaster.   Adoption of mobile banking in Kenya was aided by an unexpected cause, the 2008 post-election violence.  People that trapped in their homes in the slums during the violence used the system to send and receive money.  Some banks also lost the public’s trust because they were seen as taking sides in the ethnic conflict.

Many are studying M-Pesa in Kenya– so far there is no other country with such high rates of mobile banking adoption.  It seems only a matter of time before others reproduce the model; in many places the power of mobile brands are much stronger than that of the banks.

There’s much more to say – and hopefully more reports from The Economist to come —  but you should read the article for yourself!

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