According to a report published in early September, Facebook is currently considering acquiring mobile money giant M-Pesa that launched in Kenya in 2007. While the news is not yet confirmed, it could be a sound deal for Facebook in terms of their presence in the sphere of online-remittances (what Facebook Messenger and other messengers are trying to develop right now) and projects like Internet.org to provide people from unbanked and emerging markets with access to digital services, which Zuckerberg has promoted a lot in the past.
This is on the heels of Zuckerberg’s recent visit to Nigeria and Kenya. The future will be built in Africa, Zuckerberg said before visiting Kenya, the “world leader” in mobile money on his first visit to sub-Saharan Africa, a surprise trip that has propelled Africa’s entrepreneurial spirit. The mobile payment system is now a part of the culture of the region. Also Kenya has 5.3 million Facebook users, many of whom access the social network via mobile. It echoes similar compliments made by U.S. President Barack Obama, who praised Kenya’s tech entrepreneurs during a trip last July: “This continent needs to be a future hub of global growth, not just African growth”.
Africa’s experience going to Asia now
This optimism for the future of emerging markets isn’t confined to Africa, though. BKash, launched in 2011 as a subsidiary of BRAC Bank, has about 18 million accounts, second in the world only to M-Pesa in Kenya. Even so, the value of mobile money transactions in Bangladesh was 5.6% of GDP, far lower than Kenya’s 55%.
And Mark Zuckerberg is not the only one inspired by the success of such companies as M-Pesa and BKash – World Bank and IFC (International Finance Corporation), the Bill and Melinda Gates Foundation, and Omidyar Network are doing a lot to learn from their own experiences in the field and replicate it in other countries, especially in Asia. India, Indonesia, Vietnam, Myanmar, Cambodia, Laos and many other countries in this region have to jump from the past (cash) to the future (fintech), because they have already skipped the competition for the present (traditional banks with branches, ATMs and banking cards).
Omidyar Network is a self-styled “philanthropic investment firm,” established in 2004 by eBay founder Pierre Omidyar and his wife Pam. Omidyar Network reports it has committed several billion dollars to nonprofit organizations and for-profit companies across multiple investment areas, including financial inclusion. In addition, they advocate that when people take the initiative to make life better for themselves, they can share the benefits with their families, become more active in their communities, and be a more positive force in society.
Add to the list Brookings Institute, which is one of America’s oldest think tanks and provides independent research into social sciences, particularly economics, governance and foreign policy, for the U.S. government, has a dedicated area of research and reporting on financial inclusion and have just produced their 2016 report. On their map you can find that Asian countries still are not so successful.
Bill Gates once mentioned that “in the next 15 years, digital banking will give the poor more control over their assets and help them transform their lives.” By 2030, 2 billion people who don’t have a bank account today will be storing money and making payment with their phones. And by then, mobile money providers will be offering the full range of financial services, from interest-bearing savings accounts to credit to insurance. Traditional banks cannot afford to serve the poor because of their costs. That’s why 2.5 billion adults don’t currently have a bank account.
So why is Asia lagging in this area? First of all – lack of capital and investors who want to invest in “fintech for the unbanked.” Secondly – lack of talent. This question is very closely connected with a third challenge – lack of infrastructure. Availability of BaaS (bank-as-a-service) platforms and open APIs on the market is also one of the biggest stop-factors for unbanked-countries to join the fintech world. And lastly – open-mindedness of regulators. For example, about a year ago India’s telecom regulator had blocked the company’s Free Basics service as part of a ruling that supports net neutrality. The decision follows nearly a year of escalating conflict between Facebook and the country’s net neutrality activists, who argue Free Basics violates neutrality by favoring some services over others. It also undermines founder Mark Zuckerberg’s larger Internet.org efforts to bring the entire world online. These are four lessons which Asia can learn from Africa to succeed in “fintech for unbanked”.
Vladislav Solodkiy is managing partner at Life.SREDA, Singaporean-based fintech VC, and the author of “Money of the Future” semi-annual fintech-report.