Text M for Money

The Economist has a great article on mobile payments in its July 29th issue covering the use of SMS based mobile payments provided by Safaircom in Kenya. It covers much of the rationale I illuminated in my "Bottom of the Pyramid" post of June 9th. This was followed on July 4th with Vodafone's release of a new white paper entitled: "The Transformation Potential of M-Transactions." Down load it here.

The Economist article specifically focuses on the African market which is an untapped opportunity for the global mobile segment, not just the locals, which is why Vodafone is becoming so active in this space, including through their recent aquisition of Essar in India.

The Vodafone report asserts that a new regulatory framework is required to jumpstart the mobile and financial services industry towards offering access to financial services in developing countries, recently referrred to as the commercial opportunity at the "Bottom of the Pyramid." At 52 pages it isn't blog length, but it outlines the lack of access to banking services, and that financail services are becoming critical for economic development and broad based financial services for the developing world. Interestingly it cites the same Safaricom program in Africa--where in Kenya there are 400 bank branches, 600 ATMs, and 10 million mobile phones--which I cited in my "Bottom of the Pyramid" post.

Key suggested action points the paper suggests to ignite wildfire growth beyond current conditions include a complete change from the current struture of retail banking:

Review of Deposit Taking: Current regulation of deposit taking is shaped around the needs of banks and present mobile systems are limited in the size of transactions they can undertake. Deposit taking regularion needs to allow new entry on a larger scale by M-transactions operators

Access to Clearing & Billing Systems: As new entrants, m-transaction operators must be able to access the clearing systems of both banks and mobile operators.

Adaptation of 'Know your Customer' and Anti-money laundering provisions: Personal Insight on consumer behaviour and status and anti money laundering rules need to be adapted to conditions in developing markets where formal documentation and access to photocopiers is limited. The customer data held by mobile network operators could, with appropriate safeguards, offer an alternaitve to existing forms of regulation.

Interoperability of M-Transaction systems: Interoperability of M-Transaction schemes must be implemented to enable operators to benefit from network effects but ensure that the intensity of compeitition in new markests and innovation is not chilled.

The report asserts that the development of m-transactions is "expected to introduce significant improvements in financial services, such as easier and cheaper international payments especially for remittances home, or reduced risk in domestic paymenst by near real-time transfers."