Mobile Money – It’s not about Technology
The virtualisation of money has been slow in the western world. We surround ourselves with high tech and spend half a day bending over our smartphones living a virtual life but when it comes to paying, waving around banknotes and platinum American express Card is a status symbol we barely seem able to let go of.
Things are changing. Mobile Technologies and Ecosystems are the catalyst for the accelerated pace at which payment in the physical world is becoming more digital. According to Juniper Research, the mobile transaction volume was 2.5 Trillion USD in 2014 and is expected to grow to 4.7 Trillion USD in 2019. With ubiquitous mobile technology being an enabler, what is driving the adoption is mostly user driven innovation creating new value streams and increasing convenience.
Regional Differences - Mobile-first regions leading the way
In “Mobile-First” regions, money is being digitalized at an accelerated pace. In Kenya where Safaricom is operating the mobile payment service M-PESA . 59% of Kenya’s adult population is estimated to be a regular user of the M-PESA service. Mobile Banking has been a large contributor to an increase in access to formal financial services from 26.4% of adults in 2006 to 66,7% in 2013 creating a solid base for economic development within the country. Similarly, in the Indian market, services like Paytm, Instamojo, and Citrus Pay are forcing the traditional banking sector to align their strategy to embrace the opportunity offered by mobile payments.
Incumbents – High disruption potential in financial sector
The financial sector scores very high when it comes to the classical drivers for disruption: (1) broken trust, (2) unnecessary complexity, (3) redundant intermediaries (people and fees), (4) limited Access (credit rating). However, in the western world, disruptive approaches have been taking place only at the edge such as crowdfunding and peer to peer lending as a means to raise money. As long as financial institutions are the primary contact for customer service, there is no compelling event to change.
The Atom Bank in UK is the first fully mobile bank that has the mission to re-invent the customer experience by offering an app-only as interface to the customer and leveraging technology to transform service processes from ground up without adding unnecessary complexity and fees.
It is unlikely that disruptive innovation within financial institutions will come from within. In the best case, they are fast adaptors such as in the case of the Bank of Americas “Mobile Pay on Demand” solution in response to Square or Citibanks own cryptocurrency Citicoin in response to the success of Bitcoin and other Cryptocurrencies. Ultimately, the increased adoption rate of digital currencies will have to be driven by consumer driven innovations.
Consumer Driven Innovation
Ubiquitous Mobile Computing power inspires consumer driven innovation, adding value to the use and the acceptance of digital currencies over physically exchanging currencies.
Increasing Convenience can offer a strong incentive for using digital currencies, simplifying payment, saving time and improving overall customer experience by using mobile technology and digital currencies. Flypay, a payment application that runs on your smartphone, allows (in compatible restaurants) paying and splitting the bill, adding a tip and leave the restaurant without without having to hand over credit cards to a waiter or even asking for the bill.
The creation of New Value Streams is a strong driver for digital currencies adoption in mobile applications: by combining real-time, location relevant information available on smartphones with digital currency and social networks, new value streams can be generated. Value streams can be of financial nature such as the revenue opportunity offered by Haystack which, in car congested cities, allows selling your parking spot to other drivers in real time. It saves time, reduces traffic in cities and improves the experience of navigating around in the car. Also Acorns offers a value to its user by offering a good return on investing the penny change that, in a world of physical currencies, has a very low utilisation rate sitting in pockets and wallets. New Value streams can also be non-financial: Venmo (PayPall), making peer to peer payment social by allowing users to publish on social media the payments they make. The latter opens the door to the digital value of non-tangibles such as reputation as a real digital currency.
Blurring Lines between Data and Money
Embracing Digital Currencies is just the beginning of the journey, in a digital world, new digital currencies will emerge to be a real barter for obtaining access to physical goods and services.
Alpha Bank (RUS) has launched a wearable that, when the activity data supports an over average fitness level, gives access to transferring money to an account with a very high interest rate, not available to any of the other customers within the bank. Thus, Alpha Bank becomes a pioneer in establishing a 1 to 1 relationship between data and real monetary value.
In a digital world, we can assign value to virtual goods and as long as there is a broad acceptance of this value allocation, new digital currencies can emerge. For example, crypto-currencies such as Bitcoin are a digital invention with a virtual value but the broad acceptance of Bitcoin has produced several real life millionaires.
Already, Digital / Physical vault services (e.g. Bitreserve) are emerging, offering Bitcoin owners a service to store the value of their bitcoins as real physical currency and convert into Bitcoins again when required.
Going beyond cryptocurrencies, Data on Social Reputation aggregated from e.g. the postings of your transactions on Venmo or derived from your AirBnB Ratings might one day lead to playing an important factor in getting a lower interest rate on your mortgage or even help when applying for a new job.
Brave new world of Digital Currencies
In the emerging market of digital currencies, ubiquitous mobile computing power is a catalyst for consumer driven innovation. By increasing convenience as well as generating new value streams, the adoption of digital currencies will accelerate in the next years. This opens the door for the emergence of data related digital currencies, blurring the lines between Data and Money by allocating value to aggregated data. The emergence of a digital currency exchange ecosystems will support this trend and open a “brave new world of digital currencies”.
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