What do Tata’s Nano and Mobile Banking Share?
They both re-engineer something used for decades in rich countries , rethinking every assumption to make it affordable for low-income clients. And both may be safer than the alternatives poor people are already using.
Tata announced the Nano last week as an ultra simple but stylish car costing US$2500, closer to affordable for Indian families than any other new car. To slash prices, Tata engineers questioned everything conventional wisdom said is a “must have”: why not one large windshield wiper instead of two? Why does the beam connecting the wheel to the axle need to be made of solid steel? Today’s steel is far stronger than what Henry Ford started with, but no one had changed it yet. Less steel equals saved expense, and a lower cost in the quest for something rabidly cost-conscious consumers will buy in emerging markets like India.
But critics are bashing the Nano already for not getting close to meeting environmental and car safety standards like those in Europe, Japan and North America. Isn’t the Nano safer than the typical sight of an Indian family of 6 on one motorcycle, dodging trucks in traffic? 
The lesson might be instructive for those watching the mobile banking space. Would mobile banking, through a licensed bank or reputable mobile carrier, be safer than the informal mechanisms poor people use now: stuffing cash in the mattress? or saving through poorly regulated cooperatives? sending money through bus drivers and friends, who might not deliver it at all? Research is needed to know.
Like the Nano, mobile phone banking for the unbanking does not get close to the product someone in the UK, US or Japan would accept. There’s no personal relationship with your banker, and few mobile banking pioneersoffer any sort of credit or other products beyond a way to save and send funds.
But like the hollow wheel rod on the Nano, mobile phone banking dramatically slashes costs, for providers that can leverage the phones in people’s pockets and the distribution network of merchants selling airtime to accept deposits and withdrawals. And for customers, who don’t need to put out the cost of traveling to a bank to transact.
Meanwhile, the Reserve Bank of India recently indicated it plans to develop the regulatory framework for mobile banking, though it does have concerns about safety of mobile phone-based channels. Nokia’s new factory in Chennai - the youngest of its 10 manufacturing facilities around the world - churned out 60 million handsets in its first 18 months. Small wonder: India accounted for 31 million, or 1 in every 7 of the 225 million subscribers added around the world in the first half of 2007.
