Bill Gates’ take on frictionless banking with cellphones for all

Bill Gates talks about access to banking for all on Bloomberg Television.
His take: the banking fees from the developed world are just too high for the “rest of the world”.

While pervasive low cost technology like cellphones is the obvious product solution, the business model needs to be different.

It is not as insurmountable as it sounds, because the costs of doing business are also different:

  • marketing can be significantly cheaper: no need to advertise on TV
  • risk is lower: smaller amounts are involved and there is a lot less credit (mostly deposits & payments)
  • regulations can be lighter: see how M-Pesa got local support from the government in Kenya

While this may be too much to ask from large banks from the western world to adapt to, local players can greatly optimize their services and reduce dramatically the number of un-banked in the world.

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Mobile Phones Foster Financial & Economic Inclusion

Apple confirmed yesterday Sept 9 2014 its unsurpassed ability to address the high end smartphone market with the introduction of the iPhone 6 and Applepay.

While there may be 25M people in the US whose contracts are up for renewal and who will jump at (or rather wait in line for) the opportunity to buy a new iPhone, there is a larger number of people for whom a smartphone means a lot more than a 25% gain in screen size or processing power.
They are the economically and financially under-served, or even the excluded.

Two government agencies have published whitepapers about the positive impact of mobile phones on economic and financial inclusion:
Federal Reserve Bank of Boston's Mobile Financial Services Article

FDIC White Paper On Economic Inclusion Via Mobile Phones

  • The FDIC published earlier this year a study assessing the potential impact on economic inclusion of financial services delivered by mobile phone
  • The Federal Bank of Boston just published an article by Elisa Tavilla about expanding financial access an inclusion with mobile financial services.

Download the documents by clicking on the cover pictures.

Both documents point to a promising and positive influence of mobile phones on fostering economic and financial inclusion. The anticipated “Haves versus Have Nots” problem with access to technology does not actually come into play here because under-served people use more smartphones than the average US population.

It is now up to the banking industry to leverage the unexpected penetration of smartphones and the expected positive influence they will have on helping people climb the financial inclusion ladder.

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How to make money by doing right (especially when your customers are broke)

At its most profound, the Internet helps drive global change, toppling dictatorships overseas or, closer to home, assisting people to protest Wall Street’s role in the financial crisis and economic inequality.

On a less grand but just as important scale is the Web’s role changing people’s everyday daily lives.  From researching medication to buying college textbooks, we do most tasks differently on the Internet.

As creators of Web services, we need to think carefully about how our services affect consumers’ overall wellbeing. A business model that provides a decent value proposition for customers and makes money for shareholders is fine. But it’s not enough. A service, even when used a lot, should cause no harm. Even more, a service should help make people’s lives better.

The need to do right is essential in my sector, online financial services, particularly when serving young or financially vulnerable customers. Offline, there’s a raft of businesses created to profit from people on the financial edge – lotteries, payday lenders and shady mortgage providers. When people use these services to an extreme, it hurts them.

Online startups, can do better.  But, how do you make money online and do right, especially with people who are broke? Here are some of the principles we keep in mind:

  1. Charge only for value. Only charge for services that people value enough to explicitly choose to pay for. People value a movie enough to pay $2.99 to rent one. They do not value late fees and would not choose to pay them.
  2. Align pricing with customers’ economics. Say a typical customer’s disposable income is $3,000 annually or $250 a month after normal expenses. What portion of that is fair and reasonable to pay for the value our service provided? Is the service pricing aligned with customer reality?
  3. Drive behaviors in a positive way. Provide a meaningful incentive for a positive behavior rather than a fine for negative behavior.  Offer points, rewards, drawings and prizes. For example, in my industry, electronic payments, debit cards can make it easy to overspend. They also can make it easy to save by automating the process and providing rewards.
  4. Transparency isn’t enough. Transparency is the nom du jour. But customers are busy. Most don’t read our fine print, blogs or even emails. If information is important, it’s up to us to get their attention and engage them, preferably right on the splash screen. Use widgets to take subscribers through objective pricing comparisons. Use videos to help explain any service changes that might otherwise confuse people. Techniques like these save on support costs and help increase customer satisfaction.
  5. Add extras. Sometimes you can partner to add extra value for customers – and give them added reason to stay with you — without adding cost to your company.  For instance, at, we offer subscribers a card that provides meaningful discounts on medications at all major pharmacies in the U.S. at no cost to customers or our company.
  6. Control costs. To keep customer costs down and service levels high, we have to invest where it matters most – in employees and technology — and otherwise run tight ships. Luckily, as engineers, that comes naturally.
  7. Build relationships. We need to treat all customers as we do anyone with whom we have personal, long-term relationships. We should feel proud of the way our dad, college roommate or niece would experience our services on a daily basis.

These are just some of the factors to consider when creating Web services for the  90 percent of Americans, whose average income was $31,244 in 2008.  A few weeks ago, the Center for Financial Services Innovation published its version, called the Compass Principles and I’m sure there are others.

How about you? How do you think about building a business that goes beyond “do no evil” to “do right”?

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