Mobile-phone use is growing in the developing world, leapfrogging other communication technologies.
Dancing with Gorillas
Of course, mChek is not the first company with visions of using cell phones to bring banking to the world’s poor. Ignacio Mas of the Consultative Group to Assist the Poor (CGAP), a microfinance think tank funded by 34 development organizations and housed at the World Bank, traces the trend to 2001 in the Philippines, where a telecom company, Smart Communications, partnered with banks to provide financial services. The concept spread; by 2005 the South African startup Wizzit had launched a banking and payment platform for mobile phones. And in 2007 Kenya’s leading telecom, Safaricom, launched the money transfer service M-Pesa.
Yet these efforts to graft developed-world banking onto developing-world mobile networks are not commensurate with the swelling popularity of the mobile phone itself. The larger story is one of pilot projects that petered out amid difficulties including cumbersome national regulations, unfriendly user interfaces, and an inability to make the right partnerships. “The reality of the field today is that the promise–which a lot of people understand is huge–is more in the conceptual stage,” says Michael Chu. “The banking industry is very suspicious of the cell-phone industry, because they suspect that cell phones will make them obsolete. The cell-phone companies think the banks are like dinosaurs.” But these players have to work together seamlessly for cell-phone-based banking to work.
Both mChek’s technology and its business model are geared to avoiding such pitfalls, some observers say. The company got its start in 2006, when Draper Fisher Jurvetson spun it out from A Little World–a Mumbai company developing smart cards that the Indian government sought to use as national ID cards–and gave it $4 million in funding. From the beginning, mChek has emphasized security and usability. The software itself runs on any phone (even the years-old used phones sold at many storefronts), and the transactions use simple text messages that work on any network. Moreover, with two forms of encryption plus the usual PIN protection, the system is considered as secure as any card-swiping device in any retail outlet: mChek says it is the only mobile payment platform to have won certification from Visa. And the company isn’t locked into an exclusive partnership with any one bank or mobile carrier, so it’s flexible and able to grow. “What’s great about what they are doing is that they are working with all of the [mobile carriers] and banks,” says Crystal Hutter, a manager of investments at Omidyar Network, the philanthropic investment firm established by eBay founder Pierre Omidyar, which is active in microfinance. “They are not locking themselves into one operator or one bank. Having the ability to work interoperably is huge.”
Serious growth became more likely in August, when Airtel decided to incorporate the mChek platform directly into the SIM card–the device inside a mobile phone that identifies the user and phone number–on all four million phones it ships monthly to new customers. This means phone owners won’t have to seek out and download mChek’s software. Airtel is marketing the feature heavily as a way to pay phone bills, in part because it pays mChek less for each transaction than it pays the 800,000 retailers who now accept cash payments (mostly prepaid top-ups) on its behalf. For mChek, then, the task now is to forge more such partnerships and navigate a shifting regulatory environment. Draper Fisher Jurvetson’s Jolly says that mChek’s achievements thus far are unique in India. “I often talk about [mChek] as a company that is dancing with gorillas or behemoths,” says Jolly. “You have the banking sector on one side and the [telecom companies] on the other side, and then you’ve got the MasterCard and Visa folks, and finally the regulatory oversight bodies like the RBI. Trying to corral all of them, for a startup, is next to impossible. What mChek has been able to accomplish in India has never been done before.”