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Mobile money - a helping hand for the poor?

Ring around the Western Union

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The incentive for the mobile phone networks to offer money transfer is very different to that of the banks. Banks are in it purely for the money. Networks want the money but they'll compromise on fat profits for loyalty. The cost of customer acquisition in the mobile industry is high, and so is churn. Typically it's 20 per cent per year. People stick with their bank for life. You are statistically more likely to get divorced than change bank. If banking loyalty can rub off on mobile phone networks it will make them happy. People who receive payments by M-Pesa are very likely to sign up for the service, and spend more on using their phones, perhaps because it is easier to top up and perhaps because by joining the world of the banked they earn more and can afford to use their phones more. Happier, wealthier, more loyal customers are just what a mobile phone network wants.

The banks, and I include Western Union in this, might be exploiting the poor, but it is the regulators who are allowing, no, encouraging it to happen. They want anti-money laundering regulations designed for the first world applied to the third world. Try opening a bank account and you'll have to take along your passport, driving licence and a utility bill. Subsistence farmers and transient factory workers don't have these things. So they are denied the right to receive money electronically from relatives in the West without having to walk for hours to an agent of Western Union. People who are working 14 hour days just to earn enough to eat.

The rules were designed for credit cards. A mobile phone payment system provides accountability. If the money is sent to a phone you know not just who received it but which cells they hang out around and who they call. If you suspect someone of being a terrorist you can get a legal intercept and listen to his or her phone calls. Indeed, joined-up enforcement and regulation should love the idea that the people they are after would want to carry around an electronic device that gives away where they are, who they are talking to and what they are saying. But the rules are designed to keep the banks in check, and the banks prosper by being skilled at working within the rules. There is no moving goalpost of technology, as there is in the phone industry, and when one comes along it turns out that the regulators are hellbent on an own-goal.

Of course the big success, M-Pesa, has bloomed in a place where there is little regulation and almost no banks.

Rod wasn't too interested in mobile money for poor people. He was after technology solutions and complained that most of the conference in Egypt was devoted to "people at the bottom of the Pyramid". He didn't get the joke, but maybe he'll laugh when he sees me wearing the gold eyeshadow.

Catherine Keynes is a electronic engineer turned consultant who works for IT and telecoms companies. This is a longer version of an article first posted at her blog, Cat Keynes.

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