I think that the best way to kickstart a working micropayment infrastructure may lie with mobile phone operators – the billing and tracking infrastructure is in place, and they don’t have the baggage that the credit card issuers do.
Here’s an interesting piece about such a scheme in Kenya.
The ping of a text message has never sounded so sweet. In what is being touted as a world first, Kenya’s biggest mobile operator is allowing subscribers to send cash to other phone users by SMS.
Known as M-Pesa, or mobile money, the service is expected to revolutionise banking in a country where more than 80% of people are excluded from the formal financial sector.
Apart from transferring cash – a service much in demand among urban Kenyans supporting relatives in rural areas – customers of the Safaricom network will be able to keep up to 50,000 shillings (£370) in a “virtual account” on their handsets.
- Mary Meeker’s 2014 Internet Trends report - May 28, 2014
- Andreessen-Horowitz raises $1.5B for its new fund - February 1, 2012
- WestBridge launches India “evergreen” fund - November 15, 2011
Stuff like schoolteacher salaries, weekly/daily wages for farm labour etc. can be distributed through mobile payments. This shouldn’t be mobile to mobile – the idea is that a bank transfer is effected through a mobile phone and status messages are sent to all.
One advantage is the lower security need (people are killed every year transporting cash to pay wages) and second, the ability to track and deploy it from any location (farm managers can distribute salaries even if they have gone to the city for instance).
If this gets micro-transactional (i.e. buying soap through a mobile transfer) it would be entirely by accident but I think the transaction charges are going to kill you. I do not believe the idea of “money in your mobile” is ever going to succeed – money has to always remain in a bank account. But considering that a huge number of rural transactions happen on credit this could be a way to ensure credit can be paid off without a visit to a faraway ATM or branch.
Loans may also work, say Overdrafts of Rs. 10,000 or so, on demand.
The pessimistic or maybe its realistic view is that there are many vested interests that do not want the “aam aadmi” to benefit. In some ways these are the new zamindars.
Technology offers the opportunity to cut costs and make small transactions profitable but it also could eliminate “zamindars”.
These vested interested and a plethora of regulations make the challenge difficult but that has not stopped entrepreneurs before.
One of the biggest beneficiaries could be the Pensions / Social Development programs / Microfinance arms of the Govt., if it can allow and integrate M-transfer as preferred route for last mile delivery together with other existing channels. That’s one BIG opportunity in terms of transaction fee for Banks and text traffic revenues for telcos.
Now that only 15 cents to the $ reaches the end user, could help weed out middlemen and that’s a big `put down’ for vested interests to encourage its adoption 🙂
Skype + PayPal may launch a service within a month. http://news.yahoo.com/s/nm/20070320/tc_nm/skype_paypal_dc
@Alok: Yes, the money transfer between individuals is the interesting application to me (hence the title of the post! 🙂 – the mobile operators take the friction out of the system by enabling this. It is going to be interesting to watch how this plays out, because a working micropayment infrastructure is going to have a disproportionately large ripple effect.