Over the last few years Mobile Money has been promoted as the poster child for disruption in Africa. The Technology That Will Change Everything. Raise people out of poverty. Empower women. Unleash the entrepreneur. Solve the problems in the health systems. Build Capacity.
(I am sparing you the photo of poor-looking person with cellphone buying stuff in a shack).
Hopes and expectations continue to grow and there are big bets being made on Mobile Money as the fast lane to [Development objective of choice].
I get it, I support it and I truly hope this will happen.
Except I don’t think it really will. Not for the poorest and the lowest market segments out there. Not unless we move beyond Mobile Money As We Know It (MMAWKI).
Before I get mobbed on Twitter, let me explain.
I love mobile money. I really do. In all its forms: mobile cash, wallets. I also have all the apps. MMAWKI provides some awesome benefits, mostly around safety and ease of transfer, both of which are very significant.
Legit Game-changers, no questions.
But down towards the bottom of the pyramid, in the lowest market segments, MMAWKI does nothing to solve some fundamental problems. Which is why I think it has not exploded everywhere like all of us were expecting.
The fact is that the overwhelming majority of retail transactions in Sub-Saharan Africa continue to happen in traditional and informal economies. These transactions are cash-based. And cash is damn scarce. This is the most fundamental factor here – mobile or coin, cash is scarce.
And in spite of all its legit super-powers (safety, ease of transfer), mobile money has a few characteristics that reinforce, rather than solve this scarcity. For starters, transactions carry a fee. This is fine when you send money to a relative far away but quite annoying when you purchase a cup of cooking oil three times a day (high frequency transactions are the norm here, right?).
But also, shops-cum-agents hate to redeem money. (These are regular shops that act as “branches” for the mobile money operator). That’s because handing money to someone who collects a deposit means taking real money out of the till and NOT replacing it with anything, really. That means less money to purchase stock, which means less business: a few days or weeks will pass before that money is replenished by the mobile money operator. And these delays harm the cash-flow.
Here is how we can move beyond Mobile Money as we know it
First of all we need to make mobile money less dependent on banking infrastructure (banks, ATMs, internet). This one is a no-brainer. Then we need to make mobile money free and instant – just like the real thing.
But there is more.
What if we would allow people to earn money through behavior? This means integrating a loyalty-scheme logic into a mobile money system. This means we could allow people to earn “points” through impact behavior (vaccinating children, visiting clinic, sending children to school, attending agriculture training, getting insurance etc). Then these “points” can be traded for impact products at the local shop.
How much is it worth to a donor that a child gets vaccinated? A Girl goes to school? Channeling donor funds into allowing the earning of points for exercising healthy behavior and then allowing the redemption of those points for products creates very powerful triggers, both behavioral and economic.
And it addresses the fundamental problem of Cash Scarcity as points earned convert into net value injected into these most fragile of economies.
And there is more still. Up the value chain, shops and other businesses can transact virtually, which means that impact commodities (and services) become a net addition to their cash-only business. This last part is critical: by allowing them to virtualize transactions that involve impact commodities, we offer a real possibility to NOT compete for shopkeepers’ cash with Coke, beer etc – a competition impact commodities will always lose.
(newsflash: for the perspective of a cash-strapped business EVERYTHING competes with coke & beer).
Base of Pyramid shops run cash-only businesses. They will always invest in stock that gives them the highest turn-over. Mobile money does not change this fundamental reality. We need a system that would allow her to continue investing her limited cash (be it coin or paper or mobile) in high turn-over stocks, but over and above she can purchase impact commodities (slower moving, lower turn-around) – that is a net addition to her business bandwidth so to say. A net gain.
In modern economies we take some things for granted: credit cards, once-a-month billing, overdrafts. Pay-me-Later schemes. We need similar concepts there, but specifically designed and built for the realities of these markets.
This does not mean there is no place for MMAWKI. To the contrary – Mobile money will continue to grow in scope, scale, impact and significance. And so it should. But in order to really make it relevant to the lowest market segments – where money is really, really scarce – we need to go beyond MMAWKI.