The following is taken from an actual email conversation between Ignacio Mas and Beth Rhyne.
I hope this message finds you well.
I wanted you to see the paper we just released on the technological underpinnings of mobile financial services. It’s from CFI Fellow Leon Perlman, who investigated the state of the technologies – primarily, mobile data “bearer” technologies, access platforms, and user devices. If you want a short overview, see our blog and infographic.
I was fascinated to learn all about the underpinnings of mobile money, but more important, the paper has urgent messages we want opinion leaders in the financial inclusion sector to hear, which is why I’m specifically reaching out to you. The paper cautions that despite the rapid expansion and projected growth of 3G and 4G networks and smartphone-based apps, the underlying conditions are not being met to enable people in the lower end of the market to benefit from smartphone-based mobile financial services. Perlman says those conditions will remain out of reach for the low end market, especially in rural areas for some years and argues for continued support to feature phone-based systems. He also highlights major security vulnerabilities throughout both the current (feature phone) and evolving (smartphone-based) systems.
Rather than speeding toward a smartphone future, low end customers are still buying feature phones because of their longer battery life, use of 2G connectivity, and low price. This trend suggests that financial inclusion will not be able to flip to rich customer interfaces on smartphone devices any time soon, and MNOs will continue to be key to mobile financial services.
We’d like funders and policy makers to take note and take action.
I hope you enjoy the report and would enjoy talking more about it if you’re interested.
Indeed it´s a nice paper, competently put together.
In terms of how the messages are pitched, I think there is too much emphasis on “cautioning.” I say that not because the issues identified are not right, but rather because few if any of the mobile money systems in existence today are using smartphones in any significant way (Wave in Myanmar is the only possible exception that I know of). So what is the point of cautioning against what is not happening?
I personally would have presented it as: “These are the reasons why the much fantasized world of smartphones is not really happening yet, and these are the things that we need to get right in order to realize the potential of smartphones.”
There is no question in my mind that we want to transition to smartphones, because of the extremely limited user experience (for anything other than a bare payment) and the absolute dependence on telcos that 2G technologies present. But, it´s going to take time, for sure. On the hardware side alone, smartphones now are still too expensive, they are too power hungry, and they break too often, but it´s just a matter of time for these issues to be resolved (as they were for every previous generation of handset) given the global technology development and cost curves that phone technologies ride. On the security side, well, all banks that I know of have a mobile banking app, so that doesn´t seem insurmountable. I am sure that security and especially identity technologies will change a lot, but again, it´s not the financial inclusion players that need to be at the forefront of that, the big banks can lead. So overall there is no reason to think that these issues won´t be solved. At the beginning of any technology there are issues, and it takes time to resolve them, and smartphones are no different.
Perhaps the biggest point that the paper makes for me, one that I agree with entirely but is not often thought in those terms, is that when one is speaking of normal phones and cheap Chinese phones we are talking of entirely different things. The label “smartphone” will soon stop having much of a meaning given the diversity of capabilities that it will encompass.
Again, I really liked the paper, and the conclusions are right, I would have just given them a different spin.
Perhaps you are right about the better spin with regard to the timing of the shift from feature to smart-based mobile financial services. No need to be a Cassandra seeing doom – or more Anglophone – a Chicken Little worrying that the sky is falling.
But one thing the paper brought home for me was the extent to which the mobile financial services future is not in the hands of those who want to provide MFS – so many of the necessary conditions depend on choices made in the telecoms industry by players who aren’t particularly concerned about mobile money. At least until that longed-for smartphone world truly arrives.
Thanks for your thoughts.
You are entirely right about that, Beth,
The mobile financial services future is not under the control of those who want to provide MFS. Same as the future of local transportation business is no longer in the hands of taxi drivers. In the digital world platforms rule, and the smartphone platforms that prevail will determine how we experience a range of services, from communications to payments to taxis.
There´s much to be Cassandra-ish about in our digital future. But devices not getting better is definitely not something we need to worry about.