technology trickles down: where to place our bets?

SmartphonesFintechOpen APIs

Technology Trickles Down

What do they mean forFinancial Inclusion?

Are they likely to reach poor customers?

1. Smartphones

GSMA: 55-60% of SSA/Asia by 2020 will be smartphones

Source: GSMA Intelligence, “Smartphones in emerging markets”, 2014

Four things to think about

Readiness Affordability Connectivity Relevance


Why would a poor person want a smartphone?

Sharing, social connection: Facebook, WhatsApp (Philippines)Entertainment: Videos and audio clips (India)Intuitive Interface: Wave Money 2x-3x training speed (Myanmar)1st time setup difficult: Navigating first time / discovering, downloading apps Slow responsiveness in cheap smartphonesText and complex icons are barriers /vs. numeric keypad



Will smartphones and data plans be affordable?


Device manufacturers (DM) leverage local mfng/distrib., use license-free Android, to achieve low price point (Micromax India, Symphony in Bdesh)Some DM subsidize cost through add-on services (e.g., Xiaomi in China)Easy to buy cheap smartphone in second-hand marketBeyond initial price, battery lasts too little, expensive to recharge constantlyData plans are often expensive, though that is changing rapidly


Will there be relevant broadband coverage?


73% of global population covered by 3G/4G…including 29% of global RURAL pop’n covered by 3G/4G

GSMA projects significant investment by industry in 3G upgrade by 2020Drones, balloons, low-altitude satellitesIn addition to coverage, quality of connection is also importantA rural tower costs 2.5 to 3 times that of urban

?


Will there be enough relevant content to make investment worth it for poor people?


Languages supported: Facebook (139), Android (76), Wikipedia (55)WhatsApp, Facebook,… daily usage ~70% of monthly usersNews, media, music drive usage for local contentDifficult for local developers to produce applications focused on local market


Are smartphones likely to reach poor customers?

Fintech Startups

Will they bring disruptive innovation in financial services?

School savings scheme & top up (credit); monitor

performance & attendance

Real time credit score (incorporates data from all my financial services)

Pre-purchase solar credits & manage

daily/weekly plans

Help buy a house, bike, or a

cow

Lending to & borrowing from social

network

Asking for and making social contributions

Smartphones enable a broad range of B2C applications (through apps)

Manage monthly water usage and

payment

Education

Basic Services

Social commitments

Business & trade

Finance

Manage goal-savings plan for personal and

business

These applications can be meaningful to poor customers

• Provider specializationProviders leverage their assets uniquely to deliver narrow, though meaningful solutions

• DiversificationCustomer can access many potential solutions

• Self-selectCustomers can choose what makes sense for them

• Tailoring & adaptationCollectively produce a uniquely tailored offering that can adapt over time

See the Theory of the Long Tail. By Chris Anderson. http://www.longtail.com/about.html

Broad range of providersBig & small, financial and non-financial

“Storefront”

http://www.longtail.com/about.html

Fintechs can play a role introducing new solutions

• Specific purpose/business• Legacy technology, difficult to change• Staff focused on running biz day to day• Opportunity cost to invest in new ideas is

too high compared to investing in known business

• Can build solution of any kind• Ability to test new ideas, build and test

rapid cycle• In some cases, deep knowledge of a

particular theme, segment or topic in population

• Only focused on new idea

Fintech startup

vs

Established providers

• Will local entrepreneurs have the ability / skills to produce new solutions?

• Will they have access to digital payments platforms?

• Will these solutions be relevant to poor people?

• Will people pay for these solutions?

Will Fintech Startups bring disruptive innovation in financial services?

Can they accelerate “next generation financial services”?

Open APIs

Defining what is an API

An Application Programming Interface (API) allows two systems to interact, to complete a specific task (i.e. exchange of data, exchange of payments). Through APIs, companies can expose valuable business assets.

“I’ll take your order.”

“Enjoy your meal.”

KitchenDining Room

APIs enable broader ecosystem of payments

Digital Payments Service

APIS

Third parties

School

BankUtility

• Mostly one-way paymentsAllows others to be paid via wallet

• Add-hoc connectionsTime consuming/costly

• SelectivityDirect connections only with big players

• Add-hoc business processAddhoc negotiations, terms, conditions

Few Big players Many Small players

School

Service

Other

Retailr

But…

“Open APIs” enable more streamlined technology & business process

Digital Payments Service

APIS

Third parties

School

Bank

Utility

Energy Co.

Service

Other

Retailr

Other

Service

Bank

MFI

IdentityAuthen-tication

Money flows

TX History

MetaData

“OPEN”• Standard and documented• Streamlined, quick processes

(tech, commercial, legal)• Open rules and conditions• Broad eligibility based on open

rules

Can Open APIs accelerate“next generation financial services”?

• Will payments providers “open” their platforms?

• Will there be chicken-and-egg problem? Not open because not startups and no startups because not open

• Will competition drive useful innovation on benefit of poor?

technology trickles down: where to place our bets?

Economy & Finance