Mobile as an enabling technology has the potential to play a more significant role in economic empowerment in Third World economies than First World, Graham McKay, CIO at JSE-listed Trusted Transactions company, Prism Holdings said today (20 April) at the SIM 2005 conference in Amsterdam, the Netherlands.
McKay is the only speaker from Africa invited to address delegates at the 10th anniversary of the largest SIM event in the world: SIM 2005 has been billed as the single most comprehensive `must attend` event for anyone interested in SIM card technology.
He told the conference that not withstanding the cost premium associated with mobile technology, this technology is set to empower populations that today are unbanked, live in remote rural areas with no physical addresses and largely lack a formal identification document. These individuals are thus excluded from a First World-type formal economy.
And, he said, Third World mobile operators` investment in prepaid as well as brand market value has substantially prepared them to offer a trusted mobile banking and payments service to local communities.
"The key challenge for Third World banking and payments is to enable a convenient, reliable and trusted electronic source of funds. However, converting the Third World physical cash environment to an electronic cash infrastructure will take years to enable without utilising mobile infrastructure, mobile brand trust and the emerging mobile entrepreneurs," he said.
He pointed out that mobile was widely accepted - and trusted - in Third World countries. According to a report commissioned by Vodafone and the Centre of Economic Policy Research, more than 85% of small black businesses surveyed in SA rely solely on mobile phones for telecommunications. In Tanzania, 97% of people surveyed could access a mobile phone while only 27% had access to a fixed-line phone.
"In the Third World, mobile has the potential to leapfrog established First World retail payment technologies, especially consumer-to-business and consumer-to-consumer because cost model barriers so prevalent in the First World simply do not apply," he added.
In the First World, where the majority of the population is urban and banked; and retail banking and payment is ubiquitous and convenient, the challenge for mobile banking and or payment solutions is to persuade consumers that the technology offers benefits they cannot achieve with conventional banking and payment methods.
In the Third World banking and payments arena, there are no alternatives. Cash dominates.
Importantly, the concept of prepaid is as well understood in the Third World as in the First World. But while physical fixed denomination PIN vouchers (scratch cards) and electronic virtual voucher equivalents dominate in the First World, emerging Third World markets are evolving to "PINless" distribution. The reason for this is that "PINless" distribution allows for flexibility and the ability to "dispense" variable, just-in-time values of the commodity being purchased - airtime in the case of mobile.
"This is critical in addressing the day to day subsistence economies of Third World life. For example, with many Africans living on less than $1 per day, conventional - physical or virtual - airtime vouchers can cost a week`s income. Subscriber to subscriber transfer of airtime led by a whole new breed of mobile entrepreneurs is also possible in poorer communities via efficient peer-to-peer virtual distribution," he explained.
However, McKay continued, this trend is having unexpected spin-offs beyond enabling individuals to telecommunicate: it is establishing electronic banking/payment habits such as:
* Providing cash in exchange for airtime value (deposit).
* Stores value in electronic format (trust).
* Electronically verifying current stored value (balance).
* Spending value in electronic/virtual form (purchase).
* Transferring value between parties in electronic form (transfer).
"This marks a fundamental shift in the Third World consumer mindset. If a business or consumer can simply, conveniently and easily exchange physical cash for electronic cash (deposit); exchange electronic cash for physical cash (withdraw) and transfer electronic cash to a business or consumer (pay), then a Third World business or consumer can do something they can`t do today, just as they could not telecommunicate five years ago.
"Systems and technologies which enable Third World mobile entrepreneurs to perform these transactions will significantly enable Third World retail banking and payments within the next five years," he concluded.
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JSE-listed Prism Holdings Limited is a leader in the field of secure electronic transaction technologies and services. The group has a strong presence in SA and an established and expanding footprint across Africa and South-East Asia. Prism`s head office is located in Johannesburg and has a regional office in Kuala Lumpur, Malaysia.
Prism has a proven track record in the delivery of trusted transaction technologies and end-to-end solutions for the retail, utilities, banking, cellular and petroleum industries. The group has developed and implemented innovative transaction and payment-centric intellectual property that bridges the following technologies:
* Chip cards including SIM cards, financial smart cards and prepaid telephone cards.
* Point-of-sale frameworks, applications and devices.
* OEM transaction modules including PINpads, card readers and outside payment terminals.
* Transaction security modules and servers and trusted centre solutions.
* In-store and forecourt payment servers, wireless application messaging gateways and value-added-services gateways.
* End-to-end secure electronic payment architectures for wired and wireless networks.
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