Mobile money’s innovation crisis

by Guest Blogger : Wednesday, August 11, 2010

Where is the innovation in mobile money?

Where is the innovation in mobile money?

Dr. Bill Maurer is Professor of Anthropology and Law at the University of California, Irvine,  and the Director of the Institute for Money, Technology and Financial Inclusion. Dr. Olga Morawczynski has spent the last five years studying mobile money applications. She has undertaken research in numerous countries including Kenya, Tanzania, Uganda and India. Currently, Olga is with the Grameen Foundation (AppLab) in Uganda. She is developing and testing applications to increase the adoption and usage of mobile money products amongst the poorest segment of the population.

Back in March, Mark Pickens wrote an interesting blog about innovation in the mobile money space. His main argument after attending the Mobile World Congress in Barcelona—not much has changed in the industry. The majority of mobile network operators (MNOs) are introducing clones of M-PESA and not too many of them have gone beyond payments. After attending the recent Mobile Money Summit in Rio, we can confirm that Mark is right. There are plenty of new players in the industry, but what is really new aside from the recent launch of M-KESHO? More interestingly, why are we not seeing more innovation in this space?

Our position is that if MNOs focused less on creating the right “ecosystem” (the buzzword of the moment, Jan Chipchase reminds us) and more on thinking about and piloting new products, things would be very different. There may also be one partnership in particular that could be hampering innovation—that with the banks. Historically, these two players have taken very different strategies for new product development, especially in resource poor countries. People are quick to fault the regulators for stifling innovation. But the regulator is really a scapegoat when the traditional partners in the ecosystem engage in anti-competitive practices.

MNOs and device manufactures have been excellent at innovation and product design. Oftentimes taking the lead from poor customers, they are quick to spot new trends and to harness them into new products and services. They quickly realized that if their products were to be scalable the pricing structure would have to be suited to the erratic income inflows of this segment. So they introduced pay as-you-go services, which allowed individuals to top-up when they had cash but did not exclude them from the mobile system when they didn’t. This is quite different to the minimum balance and monthly fees required by banks. And it was the MNOs who rocked the financial landscape by bringing mobile money to the village and the slums—locations which few banks have dared to enter. Given these very different focuses and ways of doing things, it is no wonder that MNOs have become less innovative as they expand their network of financial institution partnerships.

So what can be done then to really spur new product ideas in this space? Unless banks and financial institutions are ready to start thinking more creatively – and we do not doubt that some are – we have to look for ways to allow innovation to come from the rest of the ecosystem: from customers at the bottom who set devices and services to new and unexpected purposes; from creative new entrants who go it alone before seeking partnerships; from operators concerned less with the leverage potential from banking the unbanked and more with people’s everyday livelihoods, real needs, and creative interventions.

-Bill Maurer and Olga Morawczynski

TAGS: Access To Finance, Innovation, M-PESA, Mobile Banking

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  1. August 11th, 2010 at 1:43 pm, Anon ()

    Hi Bill and Olga,

    Thank you for your thoughts. I have to agree with you. I also was at GSMA and can say that not much sparked my interest. This is a huge problem in the industry. But is it too late for innovation? It seems like much of the excitement is going away…

  • August 11th, 2010 at 2:28 pm, Arif Ahmed ()

    “…quick to fault the regulators for stifling innovation. But the regulator is really a scapegoat …”

    That is so true.
    Without regulations, where is the fun in innovation. Innovation is needed to deal with regulatory challenges. Why does one need to invent a better mousetrap if there aren’t any mice?

  • August 11th, 2010 at 5:14 pm, Tweets that mention Mobile money’s innovation crisis -- Topsy.com ()

    [...] This post was mentioned on Twitter by matthew bishop, Mifos Initiative, VanStokkom, Grameen Foundation, Edward Galvin and others. Edward Galvin said: Is there an innovation crisis in mobile money for the unbanked? http://shar.es/003kl [...]

  • August 11th, 2010 at 6:33 pm, John ()

    You mention that if mobile money issuers focussed more on new products rather than getting the ecosystem right, things would be different. What new products do you propose?

  • August 11th, 2010 at 9:58 pm, otoburb ()

    Perhaps one method of financial backing would be to try to adapt or introduce local-area mobile-banking hawala communities. From what I understand, hawala networks are typically used to transfer money across larger distances.

    I’m thinking that perhaps the network of trust via a network of local hawala brokers could be applied to customers at the bottom. I wonder whether banks and governments would feel threatened by an active formation of a hawala network, and whether such a network could be implemented in a small area as part of an official organization, rather than the traditional, loose network of individuals.

    If formal hawala-type organizations were formed, perhaps MNOs wouldn’t have to tie themselves to future financial partnerships with less flexible traditional banking institutions, thus allowing everybody to walk away with their needs met.

  • August 12th, 2010 at 1:20 am, gmeltdown ()

    Consider that even the much touted M-KESHO was not really something new. M-PESA had been in partnership with several other Kenyan Banks for linkages between bank accounts and M-PESA accounts for a while. Equity Bank’s M-KESHO product was really a re-branded, well marketed packaging of an existing service. Other brands with similar packaging include Family Banks ‘PesaPap’, KCB Bank’s ‘bankika’ and others

    I also think there appears to be an innovation crisis because people haven’t really understood that products like M-PESA were more of ecological innovations than technological innovations.

  • August 12th, 2010 at 2:34 am, Mike Allen ()

    If can’t see innovation in this space than it looks like you are not looking carefully enough.

  • August 12th, 2010 at 3:23 am, Peter Goldfinch ()

    After attending Rio, my colleague and I had a similar view. The issue perhaps is that payment and financial services are very basic with little space for real innovation. I also feel those of us from developing economies attempt to impose our solutions without consideration for the social conditions of the recipient country. Also we need to recognize that the innovative services need to be built on a solid infrastructure of core services. If these are not present then Mobile Money is being delivered in a vacuum, unsupported. Therefore, its potential to develop and grow is limited.

  • August 12th, 2010 at 4:51 am, Adriaan Brink ()

    We are about to launch a truly innovative offering in the mobiule payments space. It takes elements that are found in MPesa and combines them with other widely deployed technologies to create a truly innovative and exciting mobile payments system. We are currently in negotiations with a number of financial partners prior to rolling out in a number of countries. Interested parties can email me at adriaan at icoins.com and I will forward announcements when we are ready to make them.

  • August 12th, 2010 at 6:46 am, Michael Joyce ()

    I agree that innovation will come from the ground up- once a MMT system is operational, it becomes time to open it up for other applications to use it as an infrastructure. PayPal has released (or is releasing) APIs that will allow other application to link to it, and I can imaging many ways that similar approaches might apply to MMT services.
    I’ve heard of waterpumps being hooked into M-Pesa so that villagers can pay the company who installed it- imagine how much easier this could become if there were cheap, easy and live links to allow micro-payments for the micro-level services that the unbanked need.

  • August 12th, 2010 at 3:51 pm, Kate Lauer ()

    It would be interesting to read more details about the anticompetitive practices that the authors have observed. Are there unreasonable barriers to entry? Are there examples of dominant firm abuses?

    Or is it assumed that there is a lack of competition because there is a lack of innovation?

  • August 13th, 2010 at 12:10 am, Aston ()

    Is m-Kesho really a new product or just an extension of the ecosystem?

  • August 14th, 2010 at 2:13 pm, Mobile Banking in Microfinance – Countries, Services, Risks and the Future « Microfinance Hub ()

    [...] though mobile money was off to a good start, some leaders feel there is a lack on innovation in the sector. However, the advent of mobile banking isn’t limited to microfinance anymore. Grameen [...]

  • August 14th, 2010 at 2:15 pm, Fehmeen | Microfinance Hub ()

    There may be an innovation lag in the mainstream mobile money sector, but there is certainly plenty of innovation in the development of mobile phone applications for the poor, as Applab indicates (the collaboration between Google and Grameen Foundation, so far only tested in Uganda).

  • August 16th, 2010 at 12:15 am, Aston ()

    Yes Faheem, I agree with you. And maybe the new partnerships are an innovation in itself…

  • August 25th, 2010 at 12:02 am, Do banks block mobile money innovation in Africa? | memeburn ()

    [...] recent blog posting by Dr. Bill Maurer on the CGAP website spoke about mobile money’s innovation crisis. The author claims that nothing new has happened in [...]

  • August 31st, 2010 at 3:44 pm, Are banks the bad guys in the mobile money innovation debate? : Microfinance Africa ()

    [...] Maurer and Olga Morawczynski’s blog post from a few weeks ago discussed a topic that seems to be on everyone’s mind: innovation in mobile money…or the lack [...]

  • August 31st, 2010 at 4:36 pm, Microfinance Nigeria » Are banks the bad guys in the mobile money innovation debate? ()

    [...] Maurer and Olga Morawczynski’s blog post from a few weeks ago discussed a topic that seems to be on everyone’s mind: innovation in mobile money…or the lack [...]

  • September 2nd, 2010 at 8:04 am, Keith Jefferis ()

    I don’t think the problem is lack of innovation in terms of products and services. The problem is that innovations have not spread far and fast enough – in Africa for instance the M-Pesa phenomenon is really limited to Kenya, certainly if we are talking about scale. While there are many reasons for this, the intransigency and inconsistency of regulators is one, especially when this serves to hand the initiative to banks, who have not demonstrated a record of innovation in mobile money/banking. To the extent that innovation is lacking, it is regulatory innovation that is the main problem, which would reduce dependence upon the banks.

  • September 3rd, 2010 at 2:52 pm, Building a platform for innovation ()

    [...] in the m-banking and financial inclusion fields, Olga Morawczynski and Bill Maurer, jointly wrote a CGAP blog post a few weeks back. They follow up a great blog post by Mark Pickens, and they conclude that there is [...]

  • September 8th, 2010 at 6:40 am, David Cracknell, MicroSave ()

    Sev eral years ago writing “Electronic Banking for the Poor – Potential, Panacea and Pitfalls”, I identified four dimensions of electronic banking for the poor, these are as follows.

    i. The customer value proposition – what is the compelling factor that moves users from a product which is essential free to use “cash”, to a product which is both more expensive, and more difficult to understand – i.e. in this case m-banking

    ii. Multiple business cases – a mobile banking product requires multiple commercial partnerships. The mobile network operator, agents, financial institutions, systems providers and integrators, security specialists. Ensuring that each partner benefits financially from the solution, especially when the likely performance of the solution is uncertain, is particularly challenging.

    iii. Retail environment – mobile banking relies upon agents to provide points of access. These agents should be used to handling large volumes of cash, which they are willing to convert into electronic money. Formal financial institutions, and retail chains, further offer the potential for significant economies of scale and scope in the management of relationships.

    iv. Regulatory environment – what is the attitude of regulators towards, the evolving area of electronic payments? Will the regulator be conservative and wish to preserve the current system within the bounds of conventional banking, and current mechanisms for managing risk within the financial system? Alternately, will the regulator be transformational, and try to create a system, with appropriate but different mechanisms for managing risk, which has the potential to bank the unbanked.

    In the case of Kenya all of these factors came together, and more supportive factors as well.

    Moving forward to foster linkages between M-PESA and the Banks has taken encouragement from Agent Banking Guidelines (available from www – which allow banks to use agents and thereby obtain some of the advantages that M-PESA enjoys through Safaricom Agents. These guidelines have only been in operation for a few months.

    I suspect now that we have agent guidelines that we will see further innovations over time.

    David

  • September 8th, 2010 at 6:42 am, David Cracknell, MicroSave ()

    Kenya’s agent banking guidelines are available on the following link.

    http://www.centralbank.go.ke/downloads/bsd/GUIDELINE%20ON%20AGENT%20BANKING-CBK%20PG%2015.pdf

    David

  • September 8th, 2010 at 9:45 am, John McKechnie ()

    Innovation is like a flower. Plant it, watch it grow, nurture it. If we rely upon industry to innovate, we shall never get there. The existing infrastructure is designed to maximise profit for the manufacturer and the network.
    How to develop a new Bank where today there is none. The mobile phone and satellite exist. Link the two using a low cost combination of a lean tablet as the kiosk with a usable interconnect for the consumer. Secure link via kiosk to Bank. Personal interconnect with updates and re-sync. No network costs to consumer or Bank, apart from a link with a satellite PC download site, which may already exist. Practical implementation and maintenance of two-way micro finance, and incidentally move into distance education and healthcare as soon as feasible. Relationship at individual consumer level. Technology exists and needs to proof of concept.

    Small micro design development lab in Cornwall UK.
    MiCode Labs.
    The only EU area which still benefits from EU finance for convergence support.

  • November 6th, 2010 at 9:30 am, Reboot ()

    [...] the first to bemoan mobile banking’s lack of innovation. Mark Pickens and Sarah Rotman at CGAP, Bill Maurer at the Institute for Money, Technology and Financial Inclusion, Olga Morawczynski at Grameen [...]

  • June 7th, 2011 at 9:08 am, Matt Fisher ()

    Have we seen any innovation yet or are we still waiting?

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