Innovation in Digital & Financial Inclusion - Some Factors to Consider
This blog was originally published in March 2015.
An MMU some years ago (Mobile Money for the Unbanked) report stated that 2.5 billion people in developing countries still lack access to formal financial services. These include payments, transfers, insurance, credit and savings. From, this and many other statistics on financial inclusion, it is clear that there is definitely a market opportunity for mobile money solutions and a corresponding potential in their disruptive tendencies.
For mobile money solutions to be truly disruptive, the condition of digital inclusivity must be met. Google and Facebook are pushing for the needed change in the way the unreached communities are being included in the digital context. Hence, there seems to be a good chance for new/existing mobile money providers to leverage on the new wave of digital inclusivity in emerging & developing markets.
But for the proliferation of their solutions to succeed, mobile money providers - startups and large corporates - have to keep certain factors in mind. Some of these include:
Margins: The disruption theory emphasises that one of the dimensions of new-market disruptions is the impact on business models for existing companies. Mobile money solution providers operating in uncharted waters will have to be prepared for significantly lower gross margins when compared to their usual incremental/sustaining innovations.
Customer Experience: It is a well known fact that one of the biggest factors for the success of mobile money solutions is that of a unique customer experience. Looking at history and even emerging trends, a major interaction that potential customers will have with the online/digital space are the social media and collaboration apps and sites (facebook, whatsapp etc) who are big on user experience. Hence if we can benchmark this as a basis for adoption and scalability, a major factor for the mobile money solution provider is delivering a unique and friendly customer experience.
Envelopment threat: For startups in particular, there is a threat of being enveloped by platform providers. While this may not be a bad thing in itself, it should be noted that dominance of a startup in a sector such as mobile money solutions in new markets where other providers and MNOs are driving digital inclusivity is not guaranteed except there are some superb functionality in terms of customer experience, scalability and accessibility.
These are thoughts on some key factors to note when looking deeper into the growth of mobile money solutions. In addition to this is the fact that traditional banks that want to stick to their conventional models should start getting worried about the proliferation of mobile money which will be further enhanced by the digital inclusivity that platform giants are gunning for.