In the last few months, there has been speculation that Facebook is interested in acquiring M-Pesa, which is a mobile money solution owned by Safaricom and Vodafone. Regardless of whether there is any truth to the speculation or not, there are clear synergies between M-Pesa and the online-remittance service that Facebook is invested in. Gates and Zuckerberg have both shown interest in investment software for the unbanked.
Zuckerberg recently visited Nigeria and Kenya. Of course, Kenya is already famed for being the global leader in mobile money payments. Zuckerberg said, “It’s inspiring to see how engineers here are using mobile money to build businesses and help their community.”
Bill Gates also have an active interest in fintech for the poor; “In the next 15 years, digital banking will give the poor more control over their assets and help them transform their lives.” Currently approximately 2.5 billion adults do not have a bank account, which is an astounding number. However, traditional banks can’t afford to serve the poor because their costs of doing business exceed the value of the deposits the poor would make. This is problematic for the unbanked as the level of their income does not negate the basic need to make transactions, and solely relying on cash is far from ideal. The M-Pesa solution in Kenya offered the unbanked a way to make safe and secure commercial transactions without the need for a bank account. Therefore the focus for the unbanked is no longer on finding a way to give them a traditional bank account, but to offer accessible technology solutions to meet the same need.
Bill Gates was quotes as saying, “In the next 15 years, digital banking will give the poor more control over their assets and help them transform their lives.” This is an interesting thought and one that made me wonder, is this as a result of the solutions becoming cost effective for the customer base, or because large organisations such as Facebook and Microsoft make charitable efforts.
The Deputy Director of Financial Services for the Poor at the Gates Foundation urged those in attendance at the SIBOS (Swift International Banking Operations Seminar) to make an effort to utilise the digital economy to serve the unbanked. The success story for M-Pesa proves that when a solution aimed at the poor is designed efficiently it can be a profitable revenue stream.
The Foundation itself goes as far as offering innovative thought leadership, with The Gates Level One Project detailing a framework to build interconnected digital systems that have the bandwidth to reach the poor and bring them into the global financial ecosystem. The strategy is to give the poor access to the first step on the ladder, because without it they will never have an opportunity to take the rest of the steps to the top. M-Pesa is a brilliant example of this, as it started out focussed on sending and receiving of money. Over time, this service became hugely popular and also profitable for Safaricom. Now embedded, further features have been launched including the ability for Kenyans to trade government bonds from their mobile phones.
In summary, the unbanked remains one of the last untapped global demographics for businesses to target. The unbanked pose a challenge because of their low income, but the high volume means that if a business can gain volume of custom, they can be profitable even if income per customer is very low. The likes of the Gates Foundation seem committed to assist businesses to tap into this demographic which will offer the unbanked the first step onto the financial ladder.