Developing world rises up: Over the past five years, the number of mobile-phone accounts in developing and poor nations has greatly surpassed the total in the developed nations.
Source: International Telecommunications Union
YellowPepper will charge 49 cents per cash transfer. Even though that’s a 1 percent charge on a transfer of $50, Elkiner says he thinks the price is fair. It’s about a third the cost of traditional money transfers, and he adds, “If no one does this you’ll be stuck in the Stone Age again, taking your donkey and paying your bill, and it’s going to take all day.” In October, YellowPepper received a vote of confidence from the International Finance Corporation, an arm of the World Bank, which invested $3 million in the company.
Entrepreneurs targeting the poor are inspired by the notion of doing well by doing good. The business model was popularized by University of Michigan business professor C. K. Prahalad; his 2005 book The Fortune at the Bottom of the Pyramid surveyed early examples of companies making profits while meeting the basic needs of the world’s four billion “microconsumers,” who get by on less—often far less—than $20 a day.
Until recently, the poor simply weren’t viewed as real consumers. But as Prahalad points out, the rapid adoption of mobile phones has shattered preconceptions about what the poor want, and what they can afford to buy. Now many socially minded entrepreneurs think mobile wallets could become the next poverty-killer app. According to the GSMA, an industry group for the mobile communications business, there are now 79 mobile money systems globally, mostly in Africa and Asia. Two-thirds of them have been launched since 2009.
To date, the most successful example is M-Pesa, which Vodafone launched in Kenya in 2007. A little over three years later, the service has 13.5 million users, who are expected to send 20 percent of the country’s GDP through the system this year. “We proved at Vodafone that if you get the proposition right, the scale-up is massive,” says Nick Hughes, M-Pesa’s inventor. The ability to safely save even small amounts can help the poor build assets. One study of a mobile wallet system in the Philippines found that users stored an average of $31, or about a quarter of their family savings, on their phones.
But Hughes says one major obstacle remains: mobile operators themselves. Busy cutting costs and chasing new voice subscribers (about half of African adults still don’t have a mobile phone), operators still consider mobile money a fringe idea. “The opportunities to reach the poor are still beyond the comfort zone of the big companies,” Hughes says.
That’s why last year he left Vodafone to start a venture fund, Signal Point Partners, whose motto is “Scalable services meeting fundamental needs.” Hughes is now betting his own money (and that of investors) on new businesses like a telephone-based medical-advice service in Bangladesh and a mobile borrowing scheme in Kenya. “We have a technology base that is mobile, low cost, and lets you think about something designed for mass population,” he says. “But it starts with something simple, like sending money or calling a doctor.”