Fourth Industrial Revolution

The future of digital finance lies in our mobile phones

Dana Byerlee, 33, of Santa Monica, buys bitcoins at one of Southern California's first two bitcoin-to-cash ATMs which began operating today, in Locali Conscious Convenience store in Venice, Los Angeles, California, June 21, 2014.

Image: REUTERS/Lucy Nicholson

John Giusti
Chief Regulatory Officer, GSMA
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When Safaricom first launched its M-Pesa services in Kenya in 2007, no one could have predicted the transformative impact that mobile money services would have on the lives of people living in emerging markets. Today there are 263 mobile money services available across 93 countries, and nearly 300 million people are now registered to a mobile money account. By disrupting the “bricks and mortar” financial services that was inaccessible to so many, millions of people now have a pathway to financial inclusion.

So what led to this surge in digital financial services? The biggest single contributor has been the spread and accessibility of mobile phones. With over 3 billion people connected to mobile services today, and another 2 billion expected to be connected by 2020, more people in emerging markets can now easily connect to mobile financial services quickly and – most importantly – securely.

Mobile money services have introduced a low-margin, high-volume business model that, through a mass market approach, can expand access to financial services to the unbanked.

The consumer’s experience, transformed

Cash is still the dominant payment approach in emerging markets. This presents many challenges. In particular, distributing physical cash, such as salary payments or government disbursements is expensive and insecure. A robust mobile money ecosystem allows customers to make and receive payments more safely, conveniently, transparently and affordably.

The enabling power of the mobile phone boom has been immediate as mobile phones have put financial services within reach of everyone. A farmer in a rural community can make payments to suppliers without having to travel miles. An urban entrepreneur can better achieve scale in her business through quick and secure mobile payments. A mother can conveniently pay her children’s school fees.

To expand the range of transactions available to consumers, we are seeing mobile money providers collaborate with the broader ecosystem and embrace interoperability, allowing users to seamlessly transact with customers of other mobile money schemes. In Tanzania, one of the most successful mobile money markets, interoperability has significantly increased the potential market for mobile transactions by expanding the number of mobile money senders and receivers served. In Cote d’Ivoire, a partnership between mobile operators and the government for digitization of person-to-government (P2G) payments has led to 94% of annual registration school fees being paid via mobile money.

A robust digital financial ecosystem

Mobile will underpin many of the solutions needed to address the world’s most pressing development challenges, captured in the UN’s Sustainable Development Goals. The leaders from the government, business and technology sectors gathering at the World Economic Forum meetings in Davos should consider the reach of mobile phones when trying to identify sustainable solutions to these challenges, including expanded financial inclusion through mobile money services.

Technology has always dictated how consumers live, communicate, shop, and, of course, bank. Today, we see that advances in mobile connectivity have driven successful mobile money service deployments in many emerging markets. However, there are many more people to reach. We all have a role to play. As mobile operators continue to invest in their networks and services, governments should ensure that their policy landscape allows for financial services innovation to foster great inclusion. Continued investment from both the private sector and the philanthropic community will be required to drive the innovation and collaboration needed to expand the reach and strengthen the customer experience of the digital financial ecosystem through mobile.

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Related topics:
Fourth Industrial RevolutionForum InstitutionalFinancial and Monetary Systems
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