We all use money everyday.  Cash, checks, credit, debit… mobile?  Outside of the U.S. people are making payments on their mobile phones daily.  What you wouldn’t guess is how ingenious they are at inventing new ways of using money.  What do the innovative uses of money mean for banks, regulators, and nations?  Does mobile money restructure the role of money in society altogether?

Bill Maurer, from University of California-Irvine’s Institute for Money, Technology, and Financial Inclusion, spoke at a USAID sponsored Microlinks event yesterday, July 25, 2011.  I attended the event and was intrigued by Maurer’s anthropological approach to mobile money, a subject dominated by economists.  Maurer emphasized the cultural complexities of money in all its forms, and then spoke especially about mobile money.

To summarize, Maurer first explained that money is perceived differently in different cultures of the world.  In Nigeria, family members engage in money spraying, tossing money at brides during the wedding dance.  In East Asia, mothers send their children on long trips with money inside of small hand sown pockets, believing that the money will protect them, and that they can use it to get settled once they arrive.

The various uses of mobile money are equally diverse.  For one, those who make mobile money transfers using SMS technology skip traditional banks altogether, as their telecommunication service providers act also as banks.  Second, what about people who own multiple mobile phones or SIM cards in order to maintain different accounts?  Some hide certain accounts from others; others separate the accounts for organization.  Third, there are some cross-border money transfers.  Often, if the service provider is the same, then the transfer may be made.  Fourth, there is a possibility of mobile money remittances, as Ericsson launched two weeks ago?  Still others trade their money from one currency to another to another, eventually “getting to the dollar,” and ensuring the value of their money.  All of these actions change relationships between banks, individuals, government regulators, and telecommunication service providers.

In a way, the elimination of banks from money transfers makes it appear that transfers should be a “public good,” freely and widely available.  The policy implications for regulators, then, are immense.  Who can take a cut of transaction costs?  What rules should be in place about currency transfers?  How are regulatory agencies from different nations going to communicate with each other?  These questions, with a host of others, set the stage for mobile money’s impact on the global economy.

Though I was thoroughly engaged by Maurer’s presentation, I could not help but wonder what the policy implications were.  When Maurer responded to one attendee request for a summary of the lessons learned about mobile money, he originally responded, “I have shied away from the lessons learned because I am open as to what they may be.”  Thankfully, though, he followed up this response with three key regulatory innovations that he recommended for policymakers: proportionate due diligence, non-bank e-money issuance, and non-bank deposit taking.

USAID and other international organizations, then, should be careful in their rollout of mobile money projects.  Though over 80% of the world has access to a mobile phone, the impacts of mobile money programs are far-reaching—they affect the financial, political, and social sectors, either for the better or the worse.  If nothing else, the anthropological research by Maurer shows the complexities of mobile money.  Before a list of best practices and lessons learned can be compiled, policymakers should tread carefully, but they should still step forward.  As evidence and data is gathered through experiments, best practices can be ascertained.  Once best practices are identified, then USAID and other aid organizations should scale mobile-based development projects.

 

A research group led by scientists in Brazil has developed software that tracks outbreaks of dengue fever using the social media outlet twitter. This software was created thanks to coordination between two Brazilian National Institutes of Science and Technology, led by Wagner Meira, a computer scientist at the Federal University of Minas Gerais.

The software is designed to detect the word “dengue” in tweets and information about the sender’s location. The software analyzes the sentence structure and wording to determine if tweets are appropriate for dengue surveillance. Tweets that are deemed spurious or unrelated to dengue fever are filtered out.

During the testing phase, the researchers examined 2,447 tweets about dengue fever sent through the social networking portal between January and May 2009. They found a strong correlation between personal experience tweets about dengue and official data on outbreaks from the Brazilian Ministry of Health.

The research team now plans to analyze 181,845 tweets sent between December 2010 and April 2011, but are waiting for the ministry’s 2011 data before they do so. They also plan to incorporate other key words, mostly symptoms of dengue fever, into their detection scheme to gather more tweets.

This is the first time social media has been used for dengue fever surveillance, but it is not the first time social media has been used for real-time epidemic surveillance. Twitter was used to follow the 2009 swine flu pandemic. Furthermore, it is the first attempt to gather information on people tweeting about their personal experience of a disease.

Google also introduced Google Dengue Trends last month, which records spikes in web searches for dengue fever. Therefore, using social media for surveillance is not a new practice, and nor is tracking dengue using technology. However, Meira’s method is an innovative and efficient way to track dengue fever.

Dengue fever, which can cause hemorrhagic deaths, plagues Brazil ever year. Moreover, every year it emerges in different locations than before. Most Brazilians know how to control and even eradicate the disease, but the majority of citizens don’t take any precautions against it.

On top of that, outbreak notifications take several weeks to process and analyze which impedes officials from assisting citizens. Using Twitter messages could mean a much faster response, says Meira. “It isn’t predicting the future but the present,” he says. “This means we aren’t weeks behind like we used to be.”

This month, Mexican president Felipe Calderón, honored his recent Federal Anti-Corruption Initiative by arresting hundreds of federal detectives, prosecutors, and others, from the Mexico’s Attorney General office.

The recent expulsions are part of a broad effort across Mexico to clean up the corrupt police forces historically associated with organized crime, especially the drug cartels responsible for 40,000 deaths since Calderón came to power in 2006.

For the Mexican citizens, though, information on the detention of these authorities is inaccessible, stagnant, and corrupt practices go unprosecuted.

New anti-corruption mapping systems and platforms, however, can make these processes more transparent, and encourage citizen contribution, while holding dishonest authorities more accountable.

Last Tuesday, Mexican Attorney General Marisela Morales said that the agency was currently firing 424 officials, a majority of which failed to pass lie-detector tests, amongst other indicators aiming to oust corrupt authorities.

“We are strengthening our vigilance to make sure that our own officials abide by the law,” Ms. Morales said, according to the Wall Street Journal. This is the second substantial group of lay-offs for federal officers indicted in unlawful practices—last summer 10% of the entire federal police force was fired.

The office intends to administer the lie detector tests to all local, state and federal police this year, while aggregating the results and putting them in a national database, in an effort to ensure fired policemen will not be rehired.

The recent measure coincides with Calderón’s Anti-Corruption law, approved last year by the Mexican Senate, created to diminish corrupt the police practices closely linked with the drug cartels.

Nevertheless, not evident within the current arrests is how the general public will be able to access this national database, and contribute to it on events they see everyday.

Particularly when the 2010 UN e-government survey found that Mexico had the most advanced e-services development in Latin America and Mexico’s IT spending is forecast to grow at a compound annual growth rate (CAGR) of 10% over 2011- 2015.

Advanced within their connectivity and citizen participatory programs, Mexico should have this national database shared in an open source software system, similar to that of the Kenya’s Open Data Initiative.

Mexican residents should be able to view, and add their own instances of bribery and corruption to the database to lend their perspective on the, “bad cop vs. good cop,” boundary marks—helping to differentiate those people who supposedly protect them.

This website could also include an interactive Ushahidi map to illustrate towns where officers were arrested, and reporting features similar to Ipaidabribe.com.

These participatory mapping and reporting websites would allow Mexican citizens to demonstrate where corruption affects their everyday life the most, and where in public services corruption runs rampant.

Hopefully an engaging approach will help to prosecute abusers, rather than merely detaining them.

 

 

 

Zelalem Dagne had spent the past twenty-five years in the United States, but the thought of returning to Ethiopia continually intrigued him.  Eventually, with some prodding from friends and co-workers, he returned.  What he saw surprised him; the country was ripe for development and for new businesses, Dagne explains.  Despite his initial urge to “do everything,” he focused on one problem in Ethiopia—delays in product transportation—and started a new business.

Dagne applied for and received a matching grant from USAID and Western Union’s African Diaspora Marketplace, allowing him to officially start Global Technology & Investment PLC.  His company provides affordable GPS trackers to businesses that transport their goods in Ethiopia.  The GPS trackers are attached to trucks, allowing business owners to monitor the efficiency of their truck drivers and the ensure prompt deliver of goods.  Additionally, drivers can monitor traffic with the devices, allowing them to avoid traffic jams, check-in consistently with headquarters, and report back when goods are delivered.  Dagne’s Fleet Management System is planned to be used in over 60,000 trucks.

In addition to strengthening business productivity in Ethiopia, Dagne’s company facilitates more national trade and makes Ethiopian businesses more attractive to foreign investors and international businesses.  His company, then, contributes to Ethiopian development, allowing Dagne to give back to his home country through his business practices.

Dagne spoke ten days ago at a USAID-sponsored Microlinks seminar.  Leaders of the African Diaspora Marketplace accompanied Dagne; representatives from USAID and Western Union also spoke on the program.  The marketplace funded 14 projects last year, 5 of which are in the ICT sector.  This year, in phase 2 of the marketplace program, there is a particular focus on ICT businesses.

Logically, immigrants and refugees would be ideal entrepreneurs in their own nations.  They understand the business practices and technological developments present in the United States, and understand the needs of a particular country in the developing world.  Their experience in both nations gives them unique vision.  They see the differences between the places and what holes in one area can be filled by a solution from another country.

Additionally, ICT projects are particularly powerful in developing countries.  The United States invests more than any other nation in research and development of ICTs.  And as demonstrated by the rapid expansion of the mobile phone around the globe, “appropriate technologies” are quickly adopted by the developing world.  Though the likelihood of the African Diaspora Marketplace funding the next mobile phone is highly unlikely, it is probable that the entrepreneurs funded by the marketplace will bring technologies already common in the United States, and integrate them into societies in their home countries.

 

The following is a guest post we’re pleased to share by Salah Goss and Clara Veniard from the FSP program at the Bill & Melinda Gates Foundation

We often hear that M-PESA was able to scale quickly because it targeted an unmet need: urban to rural remittances.  Safaricom based the initial launch of the M-PESA service on the ‘send money home’ proposition because a large proportion of split families in Kenya needed a way to send money to relatives in rural areas but had few ideal options to do so.

 

In many markets, however, such a clear unmet need does not exist.

 

The Philippines is a prime example of this. Even though mobile money providers have been in the market for over ten years, they have struggled to gain market share in the face of well known and well established payment providers.  Knowledge and usage of mobile money services are low with less than 4% of users of all payment service providers reporting usage of mobile money services and awareness of four mobile money products ranging between 28% and 46%, even though more than 70% of users have access to a cell phone

 

Our study focuses on the demand side of domestic payment services: bill payments and money transfers

In 2010, the Bill & Melinda Gates Foundation launched a study with Bankable Frontier Associates to understand the demand for domestic payment services in the Philippines and to identify potential opportunities and unmet needs for mobile money providers to target.  The study found the Philippines is an active and mature payment market, with a myriad of payment providers, including payment centers, banks and pawn shops to choose from. Only 28% of respondents reporting they make no payments and most Filipinos are aware of and using multiple service providers.

 

In our study, we focused on three primary types of domestic remote transactions mobile money has the potential to target: bill payment, money transfers, and loan payments.  Bill payments are most common and are used by 55% of the population.  They are followed by transfers (used by 33% of the population), and loan payments (used by 16% of the population).  We did not explore access to financial services, although 29% of respondents claim to be saving at home or in banks, or other potential drivers of mobile money that have had success in other countries, such as public transportation and online purchases.

 

In this paper we use the results from the study to explore five alternative and almost equally used channels for bill payments or money transfers. Pawnshops are the preferred channel for money transfers, with 29% of Filipinos citing the leading pawnshops (M Lhuillier and LBC) as the main payment service provider in the last twelve months.  Payment centers are used to pay bills by 21% of Filipinos while bank transfers are the prefer method for 17% of Filipinos for both money transfers and bill payment. Informal transfer options are the primary method for money transfers and bill payment for 15% of Filipinos.  Alternatively, 13% of Filipinos pay their bills directly or are direct payers.

 

Existing payment channels are good but far from perfect

In order for mobile money to take off in competitive markets like the Philippines, providers will not only need to identify a high potential target opportunity, but also ensure their ability to effectively serve the market’s needs relative to the competition.  We have identified user pain points in the following areas when paying a bill or conducting a money transfer: speed of delivery, trust and reliability, price, and customer service.  Consumers in the Philippines have access to a number of channels that may provide either speed, trust or good customer service but none of them is ideal, leaving room for a service that gives customers more of what they value.

 

For bill payments, customers can pay in a bank or payment center.  Both options have their short comings: although banks are trusted (especially with large amounts), they suffer from long queues, unfriendly and limited staff.  Payment centers are cheap and closer to home than a biller’s office, but also suffer from long queues and delays to credit customer payments at the biller.  In addition, neither banks nor payment centers are widely accessible, especially in rural areas.  In fact, 32% of users reported they would be willing to pay PhP 50 (US$1.50) for bill payment services that do not require them to leave their home.

 

For money transfers, customers have the option of using banks,” big brand” money transfer services, pawnshops or informal channels.  Pawnshops are the most popular given their ubiquity, trusted brand and speed (if picked up at the pawnshop) but the most popular pawnshops, M Lhuillier and Cebuana, are not completely customer friendly.  M Lhuillier has long queues, strict verification and unsafe locations and Cebuana has high fees.  The larger transfer companies like Western Union and LBC have high attrition rates due to high fees and other problems.  LBC, for example, offers door-to-door service, but it can be slow and their customers complain that their neighbors know when money is delivered.  Consumers also complain about the stigma of entering pawnshops.  Banks offer security, privacy and trust for larger transfers, but are not always accessible.

 

Although alternative channels are not perfect, mobile payment providers find it difficult to convince consumers to try a mobile payment service as evidenced by low usage figures (4%) compared to other payment options.  According to our study, users of one type of payment providers tend to be sticky.  Our survey conducted among users of payment services found that fewer than 10% of one-time users have stopped using a service.  They also tend to think their payment service is the best, providing high scores on trust, convenience, speed, security, fees and customer service.  Users say they would utilize a new payment service in addition to their current service, rather than in lieu of it.

 

Some segments are still not served by formal providers

Mobile payment providers also have an opportunity to target market segments not served by formal providers such as personal direct payers and users of informal service providers.

 

33% of the population still pays for their bills and loans directly at the biller’s office, and do not use other intermediaries such as banks or payment centers.  The vast majority of personal direct payers (75%) indicate that they trust only themselves to deliver payments, although 57% agreed that paying bills would be easier to do via a third party.  Perhaps by tackling the issue of trust, mobile money operators can convince these potential customers, who tend to be male, to try their services for the convenience they can offer.

 

Users of informal service providers may also be a potential market niche.  25% of all users use informal service providers on a regular basis for smaller, regular transactions.  These users tend to be rural and poor women who generally make bill and loan payments intra-island.  In fact, these users in rural areas rarely pay bills or loans through formal service providers, and when they do, they use the leading pawnshop.  Although informal options are low cost, they suffer from delays, the sender has no automated confirmation of when the money arrives, funds can be stolen, and unanticipated costs may arise (such as tips or paying for food or petrol of the deliverer). Similar to a country that does not have many formal payment options, such as Kenya pre-MPESA, providing an alternative to the existing options can meet a need that resonate strongly.

 

Lower value transfers are an untapped opportunity

Mobile payment providers may also have an opportunity to facilitate lower value transfers between family and friends that occur informally and that higher cost channels (including pawnshops) cannot profitably serve.  Our study found that 52% of Filipinos receive money from friends and family (either as a loan or a remittance) in the event that they need to make a purchase or pay a bill but do not have enough money.  The rest seek money from alternative sources: 15% will do something to earn the money themselves, 12% will wait for their salary and 10% will go to an ATM to withdraw cash. Filipinos also regularly send or receive money, for emergencies, daily household expenses, education, bill payment, or business expenses.  Sweeping these low value transactions through mobile money services would mean a significant increase in their volume of transactions as well as customers. In addition, 33% of all users said if they could make cross payments between mobile money schemes, then they might find this persuasive enough to try them.

 

Next steps for mobile money providers

During the last ten years, mobile money providers in the Philippines have struggled to gain traction in the market.  They compete against an active payment market with numerous strong alternative channels for bill payments and money transfers.   However, these alternatives are far from ideal, according to customers themselves, and niches exist in the payments market that have not been targeted.

 

Mobile money providers have an opportunity to attract customers away from existing payment options, persuade customers to use their services in addition to their current payment provider or to target segments that are not currently served by formal payment providers, such as personal direct payers and users of informal service providers.  In addition, they may have an opportunity to capture lower value transfers..  The challenge faced by mobile money will be to encourage customers to try their service and to convince them through early trials of the superior value of the service.  The extent to which they will succeed in doing so will depend on the investment mobile operators are willing to make in strategic marketing, getting their fee structures right and creative partnerships with banks and others that may add value to the customer experience.

 

You can download the full report from the BFA website.