> Posted by Susy Cheston
This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to Sonja E. Kelly, Fellow, Center for Financial Inclusion at Accion.
The television comedy survived only a few months in the sixties, but it had a catchy theme song: “It’s about time, it’s about space, about two men in the strangest place.” In the show, a couple of astronauts travelled at the speed of light and accidentally went back in time instead of space. Talk about disruptive technology! The two men ended up in prehistoric times trying to make sense of life with a cave community, with predictably inane results.
The theme song came to me as I was thinking about the ways both technology and new approaches to product design are blurring the lines between time and space. It’s a neat concept to say that financial services move resources across time (credit and savings) or across space (payments). But just as those astronauts thought they were traveling in space and ended up traveling in time, technology is disrupting financial services, stripping financial services down to their basic elements and allowing those elements to be re-combined in new ways. The quartet of products we can rattle off in our sleep—credit, savings, insurance, payments—no longer have sharp boundaries as technology gives us new ways to store value and as financial services enter new markets. Susan Johnson’s recent research in Kenya showed that we sometimes don’t even know what we’re talking about when we use the words savings and payments. In Kenya, a so-called savings account turned out to serve as merely a payment device for payroll transfers. And she points out the ways experts are grappling with language as financial services encounter mobile phones, e.g. “savings” defined as “keeping money in the phone for at least 24 hours.” (Hey, I can save lots of money by that definition!)
Into this mix comes innovation. Grameen Foundation did market research to design an insurance product to help poor farmers in Uganda manage risk, and learned that the product that best met farmer needs was a commitment savings product instead. They are partnering with CGAP and MTN to move mobile phone banking beyond the payments space. Jipange KuSave (JKS) is a mobile phone service that brings a new approach to liquidity and savings in Kenya, building on SafeSave’s P9 savings and loan product in Bangladesh with mobile-enabled technology that folds savings and credit into a single tool. Ignacio Mas has proposed a new use of cell phones that goes beyond simple payments and prepay products to allow clients to manage future and past income. He envisions people sending money over time to others (delayed payments) as well as a wonderfully named Me2Me product that enables users to “send” money over time to themselves. In a context in which planning for the future is very challenging, his vision to expand “PayNow” to “PayPlan” is especially compelling.
As we continue to address barriers of access, relevance and usability, what other new combinations might emerge? And how might the design of financial services be informed by concepts of time—what is my “future,” and how do I plan for it?
After a few months, the network executives of the studio producing “It’s About Time” realized that no one was watching, other than my sister Jenny, so they switched the premise from two astronauts trapped in prehistoric times, and instead brought cave people to modern-day New York. Which was funnier, people bringing technology into a setting that hadn’t experienced it before, or prehistoric people reacting to the strange culture of modern times? Apparently neither, as the show folded in less than a year. Let’s hope the translation of new products and technology for financial services has a more successful run!
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Video Credit: theophrastos56
Have You Read?
Mobile Money as a (Payment) Planning Tool
Mobile Money Transfer – What Does it Mean for Financial Inclusion?
There’s an App for That: The Potential and Pitfalls of Mobile Phone Banking
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July 13, 2012 at 11:19 am
John Gitau
Susy,
I now understand why Monique Cohen described one of your postings as provocative. This one is, indeed, provoking thought. The financial inclusion discussion is nose up toward leveraging mobile transfer platforms for inclusive branchless financial services. Ignacio Mas and Grameen are pioneering in this effort with beautiful products with success indicatives. Fair enough and encouraging so far.
Mobile transfer on its own is a leap in inclusiveness even before being loaded with concrete financial products. And we shouldn’t be in such a big rush to do so. We may end up overloading the platform or confusing the intended consumers of the products. I want to give an example of levels in business in practical life and pick a parallel in inclusiveness.
Business is a primary platform. Its purpose is to make profit for the owner by providing goods and services to consumers. Business has always been around in its primary form. Like business, mobile transfer is a money access and transfer platform. That is already an end.
Owners of businesses do leverage their businesses by converting them into investment vehicles that others can buy into and get returns. The equity investors get additional value from the investment by trading their shares in a secondary market for capital gains. Though linked to the original company, shares traded in securities markets have a life of their own, sometimes detached from the main company performance ( they are even known as scripts). In comparison, if an insurance product is sold through the mobile money platform, that is leveraging the platform. We call the trading of shares the secondary level of business. Those who get into shares trading are expected to be risk takers and are at a different level of understanding the businesses whose shares they trade in and the art of trading. Likewise, buying an insurance product through the mobile money platform is a secondary level operation and more complex than the ordinary money transfer.
At even a higher level, a shares owner can use the shares as security for a loan from the bank. This is leveraging a security. At this level, the shares not only continue to earn dividends but unlock value that can be used to acquire more value. This is called the exotic leveraging of security. The level of knowledge and sophistication expected of a player at this level is high. If you expect a basic user of mobile money to use the money transfer platform for insurance, savings, debt management, what you are basically doing is introducing sophistication to a basic person and at this point, Peter’s Principle starts applying, that is promoting people to their incompetence. Indeed, as a platform becomes loaded with sophisticated products targeting the poor with basic literacy, then it will be so confusing to them, financial education availability not withstanding as that is another complex area.
Debt management, even at university level is hardly understood. The tools recommended for debt management are still esoteric. Insurance, even to the educated is a difficult field. Indeed, Acturial Science is one of the toughest area of study with the complexity of risk probability measurements. Now, do we want to sell insurance through the phone while even face to face is hard work already? Add to that the abbreviated names that come with the new products targeting the poor that are difficult to decipher all lining up to enter the platform. And we want the poor to partake of these products through the new soft system of mobile money platform? Why wouldn’t we first focus on having the majority of the poor in the world adopt it and use it frequently until they are comfortable?
If we think that by sophisticating the mobile transfer with new products is the way forward, what we may experience are fewer uptakes as few people are sophisticated.
Are we shoving a fire hose into the poors’ mouths and as if the water is not enough, injecting nuts, crisps, doughnuts, bread crumbs into the hose’s inlet? ( Sonja, I learned the expression from you!)
Let us not forget that products designers get excited with their products and assume that the end users understands them the way they do. Let us be careful. We know how long banks have operated in this world, yet so many people remain un-banked. Reason? Perhaps the same mistakes that mobile transfer systems are about to make rushing products into the mobile money transfer platform for the purpose of urgent inclusiveness. And even, unlike in the banks where players have common products, the financial inclusion field has so many players with so many offerings most at higher levels of sophistication.