By Alix Murphy, Senior Mobile Analyst, WorldRemit
The Payments Innovation Jury Report has revealed that CEOs and founders of 40 of the sector’s most prominent firms think Africa and Asia houses the FinTech capitals of the world.
Unlike a lot of the hype around FinTech which focuses solely on the US and Europe, the Payments Innovation Jury truly speaks for the whole world, with jurors coming from 23 countries across six continents.
In the report, Asia and Africa are recognised as the biggest hotbeds for digital payments, leading the way in particular in Mobile Money, with North America and Europe lagging far behind. The lesson for entrepreneurs in the west is that there are untapped opportunities for FinTech innovations that serve the whole world rather than just developed markets.
In the west, there are far too many FinTech products that just do not solve a real problem. Do we really need more retail loyalty apps? More ways to make point-of-sale payments?
In emerging economies, the very lack of banking and payments infrastructure, while presenting challenges, breeds an environment of enormous potential for technology-driven financial solutions.
Mobile Money services like bKash in Bangladesh, EcoCash in Zimbabwe or SMART Money in the Philippines have enjoyed tremendous consumer uptake because they enable users who don’t have a bank account, or any way of making payments beyond using cash, to make these transactions from their mobile phone.
Mobile Money services allow users to store and send money and make payments digitally on their phones. A lot of people in tech circles in the west have heard of Safaricom’s M-PESA in Kenya, but there are actually more than 260 Mobile Money services around the world.
There are now 103 million active users worldwide, up from 60 million in 2013, according to the GSMA. About 26 million of these users are in South and East Asia and the Pacific (not including China).
Mobile Money has already played a key role in financial inclusion in emerging economies, particularly in countries like Bangladesh, where 22 percent of the adult population uses it. The World Bank estimates that there are currently two billion ‘unbanked’ people (i.e. without bank accounts) worldwide, predominantly in developing economies.
However one billion of those unbanked people have a mobile phone. Mobile Money therefore promotes financial inclusion by allowing these unbanked people to access formal financial services.
For the very first time people can send and receive money over distances, have a secure place to store savings and access further financial services such as loans, deposits and insurance.
In Pakistan, telco operator, Telenor has partnered with a local insurance company to offer customers of its Easypaisa Mobile Money service life insurance coverage of up to $9,000, based on a minimum account balance of just $20. That is life-changing innovation that empowers entire economies.
Most Mobile Money services currently work on basic USSD and SMS technology. However, smartphone adoption in emerging economies is exploding. Cheap smartphones by manufacturers such as Xiaomi or Karbonn are flooding into many countries, most under $100 and many under $50.
For the majority of the world’s population, their mobile phone will be their main way of connecting to the internet, not fixed-line broadband. In the Philippines, unbanked users have already been shopping online for years at retailers like Lazada, which lets them pay for thousands of goods using SMART Money. As Mobile Money moves from USSD/SMS to smartphone apps, users will enjoy richer functionality and an even wider range of services.
Perhaps this is why the Jury feels that payments innovations that tap into these trends are a good bet for both investors and entrepreneurs. For example, several FinTech firms, including WorldRemit, have emerged in the remittance space to challenge incumbents like Western Union and MoneyGram.
For WorldRemit, by allowing migrant workers to send funds directly to the Mobile Money accounts of their friends and family abroad, the Company can fulfil an important socioeconomic need while also tapping into an obvious business opportunity.
For too long hundreds of millions of people in emerging economies have suffered from woefully inadequate financial services. They have either lacked access to services entirely or have suffered from the high fees imposed by international giants such as the big money transfers operators or card schemes.
With more and more people in these countries getting their hands on phones - and increasingly, low-cost smartphones – FinTech can provide a way to genuinely improve people’s lives. It’s time to look beyond North America and Europe and see how FinTech can work for the bottom two-thirds of our planet.