Despite the excitement about moving mobile financial services (MFS) to a richer smartphone-based environment, we still have a long way to go before many customers at the base of the pyramid can reap the full benefits of these technologies. CFI Fellow Leon Perlman diligently identified many of the key obstacles for more inclusive MFS, including the lack of infrastructure to support the higher-speed mobile connectivity critical for MFS transactions; the plethora of substandard and/or cost-prohibitive smartphones in developing countries; and pervasive security vulnerabilities that threaten MFS transactions, to name a few.
There are some bright spots in Leon’s report, however, and we think it’s important to acknowledge them.
Per GSMA’s 2017 State of the Industry Report on Mobile Money, MFS are now available in two thirds of low- and middle-income countries, and in Sub-Saharan Africa, the number of mobile money accounts has already far surpassed the total number of traditional bank accounts, according to the African Development Bank. We’ve already featured a number of mobile money success stories on this blog, including M-PESA, Easypaisa, bKash, and EcoCash. However, Leon highlights several innovations and trends that promise to increase access to and quality of MFS for customers at the base of the pyramid. Specifically, this includes (but is not limited to):
Thin SIMs. Thin SIMs, also known as sticky SIMs or SIM overlay technology, are super thin SIM cards that sit on top of an existing SIM card and allow users to switch between mobile networks. With thin SIMs, users can choose which network they use, which spurs competition on price and quality. Thin SIMs have already been deployed throughout Kenya (by Equity Bank), Singapore (by telco M1 and others), India (by YES Bank), and China (by Shanghai F-Road Commercial Services, Wujin Rural Commercial Bank, and Quanzhou City Commercial Bank).
- System-on-a-chip (SOC) technology. SOC technology incorporates a number of mobile phone components—the central processing unit (CPU), memory, the graphic processing unit, power management circuits, wireless radios, and even more—onto a single silicon chip. This not only saves physical space, but also battery life—it takes less power to run a SOC than all the individual components it replaces—and battery life is crucial for conducting lengthy transactions on MFS apps.
- The expiration of patents for legacy mobile phone brands. Patents, even for the most basic mobile phone technologies, have been estimated to add a minimum of 5 percent to total smartphone costs. The expiration of these patents reduces costs and allows newer manufacturers to add “smarter” features to feature phones, such as Bluetooth, HTML browsers, GPS, social networking app integration, and cameras.
- The emergence of new competitor brands. Newer brands from Chinese and Indian phone manufacturers have gained a significant market share in many emerging markets at the expense of mainstream incumbents. These brands offer high-end features at affordable prices that are attractive to many consumers. Overall quality may not equal top brands, but it is continually improving.
Hybrid smart feature phones. Smart-ish feature phones represent a middle ground between a feature phone and a smartphone, and have become popular in emerging markets because they are inexpensive. They typically have small non-touch low-resolution displays, small memory capacity, a keypad, ability to operate at 3G/4G connectivity, and support for the latest Android operating systems.
- The global switch from analog to digital broadcast television (also known as digital migration). The transition from analog to digital broadcast television will free up much-needed spectra at the 700 MHz and 800 MHz frequency bands that can be reallocated to improve mobile broadband coverage crucial for MFS transactions in both rural and densely populated areas. These frequency ranges can provide greater coverage per mobile base station, and at lower capital cost, since fewer base stations are needed to provide lower frequency spectra relative to the current 900/1800/2100 MHz frequency ranges. Regulation can be implemented to ensure that mobile network providers provide a minimum of reliable 3G coverage—which is often not a given in developing countries—as part of their universal service obligations.
- The development of iris scanners for biometric verification and authentication. Iris scanning, via the front-facing camera of a mobile device or a tablet, is much more accurate than a fingerprint, because the iris has over 200 unique points of comparison, relative to just 40 unique points of comparison for a finger. This technology has the potential for explosive growth in India, where the Unique Identification Authority of India (UIDAI) has already collected the biometric data of over 1 billion of its citizens as part of its Aadhaar scheme. The UIDAI has had conversations with device manufacturers and operative system providers on how to embed iris scanning technology onto devices for the Aadhaar platform. Of course, with such sensitive data, companies, governments, and individuals alike will need to safeguard and responsibly use this information.
Dig deeper into all of these promising developments for inclusive MFS in Leon Perlman’s report, Technology Inequality: Opportunities and Challenges for Mobile Financial Services.