While Millennials in Europe and the US embrace the concept of tap-and-pay with their smartphones, residents of remote villages in sub-Saharan Africa are doing pretty much the same thing with their mobile phones–making purchases, paying bills, and in some instances, mobile banking services such as getting loans.
Developing nations have struggled to find the balance in bringing financial services to the unbanked; those who live in rural, undeveloped areas of emerging nations and have no access to traditional banking. The needs of these communities does not scale with the expense of a branch office and a staff running it; many individuals in these areas live on around $2.50 US per day. With such modest incomes the purchasing power of these individuals is limited, but within their micro economies there is room for making payments for power, insurance, and small purchases. The conventional wisdom is that in providing these small-scale transactions for minimal cost and with minimal investment, these emerging economies will eventually be able to support entrepreneurship and some economic development.
Mobile giant M-Pesa boasts of over 12 million customers in Kenya, where joint ventures providing access to solar power and clean water are building blocks to a more industrial society. But only 1% of poor Kenyan households use mobile banking, which suggests there is some work to be done fine-tuning the processes. Functional literacy is a problem in many African nations, and that illiteracy creates a distrust towards most institutions and a reluctance to engage in any formal relationship with a bank. And technology relies on the dependability of the cell signal and the battery life; those are problems that go hand in hand in rural areas of undeveloped countries. Adding to that, many of these villages are so remote that the only way to the outside world is via their cellphone–but Coda Payments in Southeast Asia offers users the ability to not only send money and pay bills locally, but shop with e-tailers like Amazon.
All in all, the mobile banking model is the most cost effective and easily implemented way to bring a more structured financial ecosystem to these underdeveloped areas. Governments and entrepreneurs alike are confident that with some tweaking, the opportunities in these markets far exceed the nominal investment and education needed to bring more consumers into the mobile fold.