Blog: Older Technology Seeds Future Mobile Payments
The developed world, especially here in the United States, has a very specific idea of what mobile means, and mobile payments in particular. There are certain technologies that spring to mind as acceptably cutting edge and worth attention, such as apps, QR codes, Square, Apple Passbook and Google Wallet. These technologies are now and ahead of the curve, and the other mobile technologies are largely looked down on as passé and old news.
One such technology in the latter category would be SMS—simple message service—or its more common name, text messages. No one in the developed world marvels at the wizardry of a text message. To most of us, a text message is as reliable and uninteresting as a light bulb or your car starting in the morning. Few hot startups focus on SMS (a notable exception being Twilio), but even in that case, SMS is part of a broader communications platform strategy.
This psychology of an in group and an out group between generations of technology was around before the first Mac. Technology is relentless in its focus on the new, and technology marketing always casts the new thing—Google Wallet, for example—as life-changing and positive, while the old thing—plastic payment cards—are just landfill from a less enlightened time.
Smart technology executives can tune out this noise though and often create truly important services using technologies the developed world ignores as commonplace. One such example is using SMS to serve the unbanked in the developing world. Companies like M-PESA, founded in 2007, are using SMS as the complete interface for underserved customers that have never had a checking account, never used an app and may or may not have reliable electricity.
In a world where clean water is at a premium, text messages are the first technology that is cheap, easy and ubiquitous enough to allow transactions across vast distances with little infrastructure. While a first generation urban dweller texting much-needed cash to his family on a distant tract of farmland might not be as sexy as Square’s integration with Starbucks, these are critical mobile transactions for this group of users.
But what happens as this generation of text bankers starts to integrate with the touch screen and app world we already take for granted? With services for the unbanked connecting millions of people that have never used credit cards, bank accounts or computers to the financial world, entirely new models may be created. What services can be offered to these users—many of whom have discretionary income for the first time?
One such example, though admittedly one full of political, tax and shipping issues beyond the scope of this mobile payments discussion, is the business of coffee, the second most traded commodity on Earth behind oil. Currently, the general term “Fair Trade” at your local Starbucks is the closest any of us get to a transaction with an actual grower of coffee beans. Fair Trade labeling promises that the farmers will, through a network of exporters, importers and middlemen, receive reasonable compensation for their products.
This enormous agricultural product could be disrupted far beyond Fair Trade if the commerce of the first world was integrated with the mobile financial services of the developing world. An online or app-based order for coffee beans could be sent through an M-Pesa (or similar) network to an unbanked group of farmers. Direct purchase of coffee from a third world farmer that receives an order, and payment, by SMS sounds as far-fetched now as the concept of running an “eBay business” did in 1996. But when our mobile world meets the developing world’s mobile-based financial networks, interesting new opportunities will be created on both sides of the equation.
By Joseph DeSetto, Paybefore’s emerging payments blogger