Getting To The Point – Digital Payment Platforms For New Economies

Here is my keynote at the recent “Get to the point” payments conference in Auckland, New Zealand.

The subject is very close to my heart: digital financial services platforms that are scalable, secure and affordable for poor people – in one word, inclusive.

What are they, who do they serve, how to deploy them in countries such as Nigeria, Pakistan, India, Bangladesh and Indonesia? What are the barriers to their deployment? Who are the key stakeholders to work with? All these questions, and more, are answered in this 20 minute video. Included is a video clip envisioning a society empowered with digital financial services.

All Hands On Deck For Financial Inclusion!

I was recently in Nigeria, researching the state of financial inclusion in this country. While Nigeria is still in nascent stages of mobile money, I was impressed by the great willingness and energy to adapt and innovate.  There certainly is no lack of interesting ideas, which inspired me to write this post.

I’ll start with some background.

The ultimate goal of the “Financial Services for the Poor” team at the Bill & Melinda Gates Foundation is financial inclusion – enabling everyone on the planet to have access to safe and reliable financial services. It is an ambitious endeavor, considering that in excess of 2.5 billion people on the planet are excluded from such services today. The financial services I’m talking about range from basic account management and payments to insurance, savings and loans.

The excluded people tend to be extremely poor and have thus been overlooked by traditional financial service providers such as banks.  In many African and south-east Asian countries, cash is still king.

The key enabling technology to help achieve the financial inclusion goal is the mobile phone. It is a fact that a very large proportion of the financial excluded population does have access to mobile phones, making it natural to think of “mobile money” as just another use of the mobile phone – like making a call.  The well-known and documented example of mobile money is M-PESA in Kenya.

Established in 2010, bKash is amongst the fastest growing mobile money deployments in the world, serving millions of customers. bKash is a grantee of the Bill & Melinda Gates Foundation.

Another great example is the success of bKash in Bangladesh.   In both cases, these companies have overcome the many hurdles of deploying mobile money and making it a business for them.

Indeed, and this is of great importance, financial inclusion is not a charity affair – it must be a sustainable business. And while these two examples are great, there are many other countries where success is still far off because of the many hurdles in the way.

In this post, I want to focus on one particular hurdle for financial inclusion: access to mobile money. I will use the example of Nigeria I have visited recently and am thus more knowledgeable about the situation there. It is similar to that of many other countries.

In order for mobile money to work, it is necessary for people to have access to locations where cash can be exchanged for electronic or digital value, and vice-versa. In the developed economies, this is of course the domain of bank branches and ATMs. The problem though is that the financially excluded people we are looking to empower live in rural areas far from the cities, where the nearest bank branch or ATM could be hours of days walking or driving away.  The equivalent of a bank branch in a mobile money economy is an “Agent” – typically a small shop owner that provides cash-in/cash-out (CICO) services among other goods,

Here’s Harry (in white T-shirt), a shop owner and a FirstMonie agent that I met while walking the streets of an open-air market in Lagos, Nigeria. FirstMonie is the mobile money company of FirstBank in Nigeria (and a grantee of the Bill & Melinda Gates Foundation)

Here’s Harry (in white T-shirt), a shop owner and a FirstMonie agent that I met while walking the streets of an open-air market in Lagos, Nigeria. FirstMonie is the mobile money company of FirstBank in Nigeria (and a grantee of the Bill & Melinda Gates Foundation)

such as scratch cards for mobile phone airtime. It is estimated that 100,000 of such agents would be necessary in Nigeria to provide a sufficiently dense CICO network covering the entire population.

Now, who can provide mobile money services? In the case of Nigeria, there are 18 companies which have the necessary licenses. These companies are either emanation of banks, or standalone and often startup companies. Currently, telcos are not permitted to provide mobile money services. Each of these providers is seeking to build their own CICO network. The largest agent network is estimated to be 7,000, while the total number of agents across all providers is estimated to be 16,000 – far below the financial inclusion goal of 100,000.  In addition, these networks are more concentrated in large cities, far away from the rural population.

Looking at this very fragmented situation, one can easily understand the market dynamic – each mobile money provider is looking to build their own business in this rather fierce competitive environment. But, looking at it from the financial inclusion perspective, it’s very far from success.

One possible trajectory is for one or a few of these players to grow into the next M-PESA or bKash and exponentially grow the agent network on their own. This trajectory could be made more solid if the large telcos in the market are allowed as well to provide mobile money services, possibly then at the expense of the smaller players

Another possible trajectory could come from answering the question: is there value in considering a shared agent network, serving all the players on the market and, at the same time, serving the financial inclusion goal? Coming from a long career at SWIFT – a shared utility in the banking sector – I understand deeply how utilities work and I look very positively at this idea of a shared agent network.

Building a dense, 100,000 strong, CICO agent network in Nigeria is deep, sustained infrastructure work akin to building a physical highway. Each and every agent needs to be –

  • Found, verified and enrolled
  • Equipped with the right tools to provide the service (at minimum a smart phone)
  • Upgraded with premises security
  • Educated to understand how to provide the service
  • Supported by a readily reachable support hotline
  • Supported by a readily available and controlled supply of cash (for cash-out)

There is a lot of merit considering  the agent network to be in the collaborative rather than competitive space. Every mobile money provider needs to have these capabilities, but having them doesn’t, in the medium and long term, offer a true competitive advantage. It may be counter-intuitive, as it is natural in the short-term to think of infrastructure as a key competitive asset and key business enabler. The longer term economics of infrastructure favor sharing because the cost of maintenance and improvement of infrastructures accumulate over time and drag the margins down. This is true in the digital world as it has been true in many large projects in the brick & mortar world (think highways for instance).

I mentioned SWIFT earlier, because it is a good illustration of digital infrastructure. In a different domain and for different capabilities, the banks around the world have followed the same reasoning: why spend time and resources in building, over and over again, something that ultimately will become a commodity (in this case – a secure, reliable, world-wide inter-bank network). SWIFT celebrated their 40th anniversary in 2013, demonstrating how a shared utility can be a strategic tool.

So, a shared agent network could provide, in Nigeria, a strategic resource enabling the industry to save costs by rationalizing infrastructure and allowing each and every player to compete in the value-added services space (to name a few – end user pricing, service levels, additional services such as savings, insurance and loans).

It makes sense. However, it is a novel concept and as such needs much better understanding – questions of governance (who owns the shared network), economic and business models (how to price the shared network services), and reliability and safety of the network are all to be examined. It seems that the industry in Nigeria is willing to go a step further in refining this concept, and I certainly look favorably in participating in these exploratory efforts.

Ultimately, financial inclusion needs to be the business of all the stakeholders in the industry – all hands are needed on deck. And as my colleague Vincent Kiyingi of Pride Microfinance in Uganda says very vocally in this video (see clip from 5min 10 sec): “If cash is king, then the king is dead!”

The “Why”, The “What” And The “Where” Of My Job

Since I took the new job at the Bill & Melinda Gates Foundation, I get many questions from family, friends, ex-colleagues about it – what is it about, what are my responsibilities, how does it fit with other Foundation initiatives, etc.

I’ll get to write about it on this blog shortly – I’m still surfing the information and network waves and it takes a lot of my time. Meanwhile, an interesting thing happened – I was invited to a radio show where I shared verbally many of these answers. So, if you have an hour to spare, you can listen to it here! (suggestion: listen to it while working out)

The show – Breaking Banks on VoiceAmerica – is run by Brett King. Brett asked me to join him and Jennifer Tescher, CEO of the the Center for Financial Services Innovation, to talk about financial inclusion. Jennifer covered the subject from the perspective of “developed” countries, while I covered the situation in my focus countries (Nigeria, India, Pakistan, Bangladesh and Indonesia). It was very enjoyable and informative for me.

Listening at the show again, I realized I describe the “Why”, the “What” and the “Where” of my job. So there it is for you!

(Hint to Brett – next time we can talk about the “How” and the “When” 🙂 )

Brett is an innovator, author (best-selling book “Bank 2.0” and the just published follow-up “Bank 3.0”), banker (but not your traditional kind, he’s the founder of MovenBank) and speaker whom I met while working at SWIFT. He was often a partner in Innotribe events and projects.  He’s like a missile, disrupting the traditional and established banking. He’s very knowledgeable and connected. He writes superbly. He doesn’t hesitate to share and advise (he was one of two people who convinced me to write my book, and helped me find an editor). And he’s fun!  I hold Brett in great esteem.

On to preparing some great projects for 2014. More on that soon.

Baggage of Understanding: Women’s Groups in India Managing Money And Health Care

(cross posted from my blog at

I’m back from a field trip in India (Delhi and two cities in the Uttar Pradesh state – Agra and Mathura). I’ve visited the slums and I come back with a baggage of understanding, compassion and hope. Despite the poverty and the difficulties of living in the slums, I have seen extraordinary courage in people. In some cases I have seen smiles, showing how resilient and resourceful the people in these slums can be. I understand better how the Bill & Melinda Gates Foundation helps and how I can contribute to that endeavour with my “Financial Services for the Poor” job.

I have been several times to India in my previous careers, visiting the large financial or technology centres such as Mumbai, Chennai and Bangalore. While I did see of course poverty in these previous trips, it was always from a distance, from the air-conditioned cars and vans.  So, this trip, align with several of my colleagues, was about getting closer and understanding better the people in the slums we at the Foundation are helping. Seeing for my self, not by watching movies (I did love the “Slumdog Millionaire” movie though)

The first experience on the ground is getting the sense of abstract numbers. Uttar Pradesh (UP), just one of the 35 states and territories in India, has a population of 200 million on a surface of about 240,000 sq kilometres. In other words,  UP has about five times the population of California on 60% of the area. UP has three times the population of France on half the area. Bihar, the other most populous state of India, has two times the population of France on 20% of the area.

You can see and feel this reality very fast. The best illustration is the crazy traffic in the cities. And, on the outskirts of the cities, the slums. The population migration trend in India is very much like in most other countries – people tend to move to the big cities. Delhi and its surroundings is a city of 22 million people  (more than the population of Belgium and Portugal together; three times the population of the state of Washington).

The slums are (sometimes vast) cities within the city. They are not necessarily characterised by poverty. There are many poor people in the slums, but what really defines the slums is that they grew out of nothing to accommodate all the people and migrants, and thus everything is haphazardly cobbled together, from water to electricity to other basic services. And, most noticeably, the open sewers as there is no other evacuation of the used waters. The issues of poverty, health, hygiene, infant mortality are huge.

The Foundation has a number of programs and initiatives to help the poor in the slums of Bihar and UP.

An NGO worker explains family planning techniques to rickshaw pullers (at their tea break, in a street in Agra)

One of these, and the focus of my field trip, is about family planning – empowering families to decide when to have children. Taken for granted in many countries, it is essentially unknown in the slums. There are many reasons for that, going from the lack of education to deep cultural roots.  As a result, it is very common to see families with numerous children, 3 to 8 or more. With very few means to support these children for basic food and health food, not mentioning education later.

The Foundation supports UHI (Urban Health Initiative) in India and other countries to co-ordinate the access to the poor in the urban slums. UHI reach out themselves in some cities, and co-ordinate with a number of other NGOs in larger cities with many slums. They educate the families about the tools available for family planning (such as contraception) and direct them to appropriate private and government providers of health services.

It is an enormous communication campaign – everything is used, from state wide TV and radio information, all the way to street level information.  And it is very important that the information be clear, concise, understandable even by people who can’t read well.

The patience, perseverance and passion of UHI and the NGOs on the ground is an amazing thing to see and experience.

But the most inspiring for me was to meet the women self-help groups. Encouraged and supported by UHI and the NGOs, courageous woman get together to help each other in many domains – going from protection from domestic violence, advising and supporting, domestic tasks. They also manage an elaborate system of saving money in the group, in order to be able to provide loans to the women in need (such as for mariages, deaths, schooling).  This last activity of course has triggered my attention, as this is what my job at the foundation is all about – empowering the poor, and these self-help groups, with access to safe and reliable ways to manage their money.

A colourful and passionate group!

These women are extraordinary.  An example of courage, as getting together was not something seen as positive by their husbands and in fact the ancestral culture. They are enthusiastic, passionate, resilient, full of initiative. And, despite everything around them, they smile. They tell me there is hope. They give sense to the Foundation’s efforts.

I will remember them forever.

If Cash Is King, Then The King Is Dead!

These are the words of Vincent Kiyingi of Pride Microfinance in Uganda.

Vincent is featured in a short movie produced by Ericsson, titled “On The Money”. I have the privilege to be a contributor to the movie too. You can watch it on YouTube.

The movie shows deep disruptions to the real world brought by the parallel, networked digital world. It talks about different ways the technology is changing us – digital money (rather than cash), crowd sourcing as a way of investing (rather than the traditional exchanges), online value and trust and reputation (based on social network connections rather than real world credit ratings).

(the rest of this post can be read on my @gatesfoundation Impatient Optimist blog)

The Future Of Doing Good In Banking, Inspired by Muhammad Yunus

This post is about the “Banks for a Better World” Innotribe incubator project. Innotribe have showcased it at the “Future of doing good” session at Innotribe@Sibos 2012 in Osaka, where we had the privilege of having Prof. Yunus on the panel. The event was exciting in itself, but what is even more exciting is that there is a traction to continue the project and concrete ideas about how to do so.

Banks for a better world represents a new trend in Innotribe topics, very much away from fin-tech. In essence, it is about:

  • Bridging traditional and social finance, a kind of “fair trade” but for financial products and services.
  • Connecting the unbanked – the people who are not part of the financial system because they don’t have any bank relationship or account. In many developing countries, the unbanked form the majority of the people.
  • Establishing a community, or movement, to influence the governments and global companies for more transparency in the way they invest.

“Bypass to social impact” (by Mariela Atanassova) – bridging systems

The project is run in partnership with Ashoka (, a global organisation supporting what they call “social entrepreneurs” – people focused on driving social change by using entrepreneurial principles.

Through our contacts with Ashoka and other inputs from the Innotribe network, it became apparent that:

  • There is a major gap between the domain of traditional finance, very well known in the developed countries by everyone, and social finance – very much unknown in developing countries with notable exceptions such as Grameen bank and their micro-credits.
  • There is a lack of adequate financial instruments to support small SMEs and social enterprise. This was equally valid, to my surprise, in developed countries as well as in developing ones.
  • There is a major issue of financial inclusion, illustrated by the situation in India where pretty much the entire population has, or has access to, a mobile phone, but only a third of the eligible population has a bank account. The so-called “unbanked” are thus isolated from traditional financial instruments, giving rise to many initiatives and instruments to serve that market with more or less good intentions.
  • Bridges between the social and traditional finance can only be established through a collaborative efforts, as any single bank wouldn’t have the power to resolve all these problems on their own.

The Banks for a Better World project, under the leadership of Martine De Weirdt in the Innotribe team, explored in the past year several angles on how to tackle these issues, and also tested the appetite of the financial community to act.

Where does it stand?

The idea is to create sustainable products, services, companies that solve problems related to “social” finance by bridging it to “traditional” finance.  I want to emphasise this – it is neither about Corporate Social Responsibility (CSR) nor charity.

The person who explains this most eloquently is Prof. Muhammad Yunus.

Prof. Yunus relaxing near the Innotribe tent at Innotribe@Sibos 2012

Martine first met Yunus at the World Economic Forum in Davos 2012, where Innotribe was hosting a private session on the Banks for a Better World subject. He was interested by the Innotribe approach of a collaborative innovation, and eventually agreed to join the Banks for a Better World session at Innotribe@Sibos 2012 and also deliver a speech for the Sibos closing plenary. He says that “charity money never comes back” – giving money doesn’t guarantee a sustainable improvement of the persons or entities receiving that money. He told me about a recent trip to Haiti, where he observed that despite massive amounts of donations and charity given since the catastrophic earthquake, the situation on the ground has improved only marginally. His solution is the “social entreprise” – an entreprise like any other, except that the dividends are re-invested into the company. So, the mission of such social entreprises are to solve problems, and not to make money. This makes a big difference, and he has more than 60 social entreprises behind him to prove the point – most notably the Grameen Bank and Grameen Danone Foods. The focus is on long term sustainability – the initial money is invested into the entreprise not as charity, but as a means to get the social entreprise off the ground and hopefully able to sustain itself.

Based on all of this, the following idea emerged at Innotribe@Sibos 2012: Banks for a Better World becomes a collaborative project whose goal is to create a number of social entreprises focused on bridging the traditional and social finance worlds. The project would be co-ordinated by Innotribe, as follows naturally from the collaborative innovation mission it has. The following ingredients are needed – funding, agenda setting, idea generation and, finally, creation of the social entreprises.

The banking community would provide the funding, based on a voluntary basis (banks willing to participate) or a community-wide mechanism. Two ideas have been mentioned for the latter, involving SWIFT –

  • Rounding the value of the payment instructions transmitted on the SWIFT network to the upper currency unit, and making the difference available to Banks for a Better World (e.g. an amount of 143,36 EUR is rounded to 144 EUR and 0,64 EUR is kept)
  • Making the SWIFT refund available for Banks for a Better World. SWIFT being a co-operative society (thus not for profit), SWIFT refunds its member banks each year with any surplus income made that year.

The agenda setting for Banks for a Better World – in other words, the focus of innovation – of course will depend on the way it is funded. However, it will be important to have Enablers, people with experience on the ground such as Prof. Yunus, to drive the agenda as well.

Next is actual idea generation – spot the social entrepreneurs or startups who have ideas relevant to the above agenda, engage and encourage them to step forward and enable them to create solutions and social entreprises. This sounds easy at first, but it is not – from Innotribe’s experience in the startup challenge, it does require an extensive network and work to produce quality ideas. In fact, inspired by the startup challenge, and in collaboration with Ashoka, the Banks for a Better World session gave five social startups the opportunity to pitch their ideas to Prof. Yunus and the other panelists.  These ideas were in the following domains:

  • Providing young people in developing countries with financial education and bank accounts – tomorrow’s future customers
  • Developing mobile banking to reach the word’s unbanked communities
  • Building partnerships between specialist community lenders and mainstream banks to improve access to finance
  • Providing working capital funding to high growth SMEs and social impact organizations
  • Issuing municipal impact bonds to finance high impact social projects

Another interesting idea came from Julius Akinyemi, a panelist in the same session. Julius is the initiator of a project called Unleashing the Wealth of Nations and a resident entrepreneur at the MIT Media Lab in Cambridge, Massachusetts. Akinyemi is proposing leveraging new technology – such as the Digital Asset Grid –  to create a local and nationwide “eRegistry” of all assets such as land, real property, farms and even cows and goats, that could be converted into a globally-understood and accepted common currency.

Finally, when the ideas are on the table, it is necessary to empower and enable the ideas owners to progress these ideas by creating a social entreprise focused on the subject. We can all draw heavily on Prof. Yunus extensive experience and advice in this domain.

I’m curious about where this goes, and very much looking forward to it. For sure the Innotribe team and I were tremendously encouraged by Prof. Yunus’ incredible faith and drive.