Thought experiment: what would it be like not to have a bank account and live by cash for one month. But yet, applies to maybe five billion people — and this prevents them from being economic citizens. Estimated R12 billion under mattresses at any given time, in South Africa.
First speaker Brian Richardson, CEO of Wizzit, new model bank. Looks really awesome! Use around 2000 people on the ground rather than fancy branch offices, so aimed at the unbanked. Pay-as-you-go fees, no minimum balances. Backed by International Finance Corporation (IFC).
Next speaker: Alex Comninos from ICT Africa, The EDGE institute, looking at using data from a recent survey. Titled, “From unbanked to m-banked.” Major reason people cite for not having an account: actually not expense, but, “I don’t have a regular income.” Education failure? Current m-banking is mainly supplementary to existing banking accounts, and for larger transactions.
Airtime as currency models:
1) Airtime / cash equivalence: regulation a problem, eg., have to pay VAT on airtime purchases!
2) Treat airtime as cash: requires everyone accepting airtime as a cash substitute. (Or storekeepers sell phone use to “convert” airtime to cash).
3) Airtime can be converted back to cash: good for transactions, eg., remittances.
Lots of data available — we saw some briefly! Mostly airtime is NOT a currency yet. Zero transaction costs are vital — cash is cheap for people (though not, of course, for banks).
Next: Tonny Omwansa, lecturer in Kenya and a researcher. Starts again with idea that most transactions use cash. But 93% of people in Kenya know about cash transfer services, eg., M-PESA, plus others like Western Union. People exchanging airtime between cell networks to deal with M-PESA being only for Safaricom provider. Most businesses using M-PESA also have bank accounts — it’s a more useable system! M-PESA usage stats: peaks at end of months, and at times that school fees are due.
Some applications: mukuru.com (?), mamamikes.com — buy things remotely for people.
Lastly, Jonathan Donner, Microsoft Research India. Concerned with UI issues for users, especially illiterate ones. Many differences in different markets in how people use things and regulatory frameworks, but universally we need to look at links between design, adoption, and impact. Design approach needs to take into account existing systems for transferring value, as well as socially-embed transactions (giving to family vs. lending to friends). Determines size and frequency of transactions, handset usage patterns, etc. Are we replacing a wallet or a bus driver that takes cash to our friend far away?
These usage patterns determine what metrics we should use for impact. Ended with four “types” of transaction:
- P2P transfers (remittances, transfers)
- Payments (utility bills)
- Disbursements (payroll, pensions)
- Aggregations (fundraising, shared lending)
All of these will have VERY different impacts when moved to m-banking.
Panel discussion time: Kenya is regulated such that receiving money doesn’t require a banking license, which allows things like M-PESA more easily (they also don’t offer interest). This is very rare. Regulation, however, is also necessary.
Zero transaction costs plus no interest — is it a valid model to make money only on the rolling balances held? Brian mentions how for cellphone operators and other businesses, merely the reduction in customer churn makes the rest of their business more profitable.
“Bank” may not be the best model — pawn shops and bus drivers carrying cash around for people may be better models (even if it is a bank behind it).
Brian suggested that the best model is to focus on domestic transfers first, for regulatory reasons — which is counter to usual model of international remittances. Similar problem when looking at interoperability between different systems, even domestically. Money quote: “Mustn’t underestimate the difficulty of the cash-in cash-out question.” Domestic vs. international: international regulation forces local changes in systems for compliance, but nothing is entirely local anymore. Suggestion on interoperability: look at the early history of how this develop in banking long ago.
Effects on society of adding m-banking: Look first for amplification of existing dynamics, then change. Possible changes: women have more control; negative is makes people stay on phone, and spend too much if it’s easy; psychological empowerment.
Some suggestions on what the future will hold: operators, banks will understand families more; expanding applications to support personal finance as well as banking. There are many huge organisations with vested interest, so only collaborative models will work.