All this will no doubt help Nokia come up with better, if not magic, products. The firm may even reach its goal of 300m users by the end of 2011 because its efforts are not aimed just at rich countries, but at fast-growing emerging economies where Nokia is still king of the hill, such as India. There, services such as Nokia Money, a mobile-payment system, and Life Tools, which supplies farmers with prices and other information, fulfil real needs, says John Delaney of IDC, another market-research firm.
Which only strengthens my view that their path to salvation lies in (yet another) complete re-invention, this time to a 21st century, sixth paradigm, retail financial services platform (built on a mobile substrate.) They might even want to keep (at least some of) their handset engineering know-how: it might come in handy for building handsets that are particularly well adapted to mobile financial services.
In any event, if Nokia want their share price to go up, they better hurry up and change their frame of reference. I mean really, who would you rather compete with? Apple? Google?
I first wrote here about Ken Banks and FrontlineSMS a little over a year ago, after having seen him speak at Supernova in San Francisco where he made a tremendous impression. I remember immediately being excited by the obvious possibility of leveraging the Frontline:SMS platform to provide financial services, not only in developing countries but also in more mature markets. I put ‘try to set up meeting with Ken to discuss’ on my to do list, but it never quite made it to the top as the myriad challenges of setting up our business (and moving house) in the midst of generalized global financial calamity conspired to keep it from becoming an urgent priority. Of course (and thank goodness) the world does not wait for me and an enterprising young man, Ben Lyons, spotted the same opportunity and (much) more importantly has moved to action, teaming up with Ken and FrontlineSMS to create FrontlineSMS:credit:
FrontlineSMS:Credit aims to make every formal financial service available to the entrepreneurial poor in 160 characters or less. By meshing the functionality of FrontlineSMS with local mobile payment systems, implementing institutions will be able to provide a full range of customizable services, from savings and credit to insurance and payroll.
Launching FrontlineSMS:credit a few weeks ago, Ben wrote:
Our mission is simple: leverage the mobile space to extend access to affordable financial services to rural, disconnected and impoverished communities. To achieve this end, we are constructing a series of free and open source financial modules that will allow FrontlineSMS to communicate with mobile payment systems in real time, turning FrontlineSMS in to a microfinance management information system, a payroll center for small & medium enterprises (SMEs), a collection and distribution center for micro-insurance premiums and payouts, and a detailed center for individual credit histories and scores.
Now if this isn’t a massive opportunity, well I don’t know what is. At the risk of sounding churlish, it’s an order of magnitude more substantial and important (socially, financially, economically…) than half the me-too start-ups chasing funding and customers amongst the western digerati. Take another look at Ben’s mission statement:
… leverage the mobile space to extend access to affordable financial services to rural, disconnected and impoverished communities.
I suspect the first time you read that you thought “in Africa”, or perhaps India, or developing countries more generally. But these same under-served communities (alas) exist in every country in the world, and one could even make a case for saying that for those living in a developed economy, the relative disadvantage of not having access to basic financial services is even more damaging. It seems inevitable that the approach taken by FrontlineSMS:credit will become the primary channel through which universal access to basic financial services is delivered in any country or economy. Which leaves the politicians of many European states very little time to figure out what the hell to do with all the postal employees currently cashing cheques and taking payments for utility bills, who will soon need to find more productive work. And I’m not sure how complacent I would be as a shareholder in an incumbent retail banking operation (the top executives I doubt will lose much sleep as the timeline for this kind of transition is probably 10-15 years or so, much longer than their expected tenure…) as this bottom up, platform approach to delivering financial services has the very real potential of blowing a giant hole right in the middle of their business and revenue model.
To further whet your appetite here is an excellent 10 minute introduction to FrontlineSMS:credit by Ben at Africa Gathering in London a couple weeks ago:
I was very kindly invited by Paul and Lee to attend my first ever eComm conference, which will be in Amsterdam from October 28th to 30th.
The Emerging Communications (eComm) Conference & Awards was created to promote and accelerate communications innovation. Telecom, mobile and to a lesser extent, Internet based communications, had been innovation stagnant for far too long. Yet the opportunities for innovation had never been greater. Those opportunities are only going to grow as drastic changes further impact the multi-trillion dollar a year telecom industry.
Platforms, markets & bytes: the economic landscape of the 6th paradigm(?)
In a world where everything can be expressed as 0s and 1s, are the traditional ways of defining sectors and industries (as verticals) still relevant? If not what new business models and industry structures are likely to emerge? Oh and what’s the difference between a bank and a telecom company really?
Now at the risk that tumbleweeds blow through the comment section, proving once and for all that all my dear readers are in fact spambots (but in which case no one will see this and no embarrassment suffered), I thought I’d take a page out of the legendary Fred Wilson‘s book and ask you all for thoughts and comments on this theme that I might incorporate them into my presentation. (Or not!) So fire away!
If innovation grows at Nauiokas Park, some of the best seedlings come from the fantastic seedcamp nursery. We were particularly pleased that folks like Timetric, CityOdds and GymFu walked away winners from the London Mini Seedcamp in April after we had encouraged them to apply. And so with this in mind I want to encourage ambitious, intelligent and passionate entrepreneurs, young and old(er) to test out their vision, ideas and execution skills at seedcamp week 2009. There is only two weeks left to apply and I sense that the competition for places will be very keen indeed, so don’t leave it until the last minute to get working on your application.
On behalf of Nauiokas Park, I would particularly like to encourage and see more start-ups focusing on disruptive innovation in the financial services arena. There is so much opportunity in this vast sector of our economy and yet it seems as if many or most entrepreneurs tend to avoid applying their technological or business model creativity and innovation to this market. Clearly there are some barriers that don’t exist in other sectors or markets but by the same token, in many instances, the potential rewards are accordingly significantly higher.
In any event, for any ambitious start-up in Europe (or even further afield) today, applying to seedcamp is a no-brainer: even if you aren’t selected as a finalist, the work needed to submit a robust and cogent application will serve you in good stead as you look to build out and finance your new business. If you are a finalist, the contacts you make and the information you will absorb during the week are something that can not be bought for any amount of money. And if you happen to win – well that’s just icing on the cake! So what are you waiting for? Apply! You’ve really got nothing to lose.
Bankers like to talk about channels – branches, call centers, internet, mobile. Sell the same products via multiple channels: adapt to individual customer preferences. Horses for courses. In wealthy developed economies, this way of thinking is mostly correct; or more precisely the resolution of the market renders the fallacies (of this way of thinking) invisible. To see the fundamental differences, to understand why – at sufficiently high resolution – these channels cease to be simply distribution mechanisms and become integral to the service being offered, one needs a better economic lens.
Developing and emerging economies provide just that: a high resolution lens on economic activity: in a developing (ie relatively poor and resource constrained) economy, the concept of a ’rounding error’ is ridiculous: micro-everything matters: pricing, transaction costs, payment media, etc. ‘Newtonian’ economics and finance is insufficient to understand how these economies work; you need to look at “quantum” effects. You need high resolution. Why do I find these markets so fascinating and important? Yes, there are many investment opportunities and this is exciting; but we are not yet in a position to really explore these and take advantage and so that’s not the main reason. Yes, it is clearly rewarding to encourage and marvel at human ingenuity that so often leads to success in what are often enormously challenging conditions. But that’s not it either. The main reason I think these markets – especially ‘frontier’ markets – are important, is that by observing the world through the lens of these economies and markets, one cannot help but gain a deeper, more granular, fundamental understanding of how markets work (or don’t work.) The fundamental forces – the risk quarks – that are invisible to the naked western eye are revealed by the tunneling electron microscope of emerging frontier economies.
Nowhere is this effect more obvious than in the cambrian explosion of innovation in markets and services built on the substrate of mobile networks in emerging markets. From the point of view of someone concerned with envisioning and understanding the future of financial services, one of the most pertinent and exciting laboratories is the explosion of mobile trading, payments and banking systems in Africa and other poor, developing economies. I first wrote about this a few years ago, and since then, many of my expectations have been borne out and the potential for disruption – both at home and abroad (ie in the West) – if anything has grown. Indeed one company I wish I had invested in – Obopay – was founded by Carol Realini (who I would love to meet one day) after having spent some time in Africa where she saw first hand how powerful a mobile approach to payments could be.
Of course, although I may have been among the first, I’m by no means alone in seeing mobile financial services as an enormous opportunity, or in seeing the developing world as a key driver of innovation. This is great news as hopefully it will encourage people and institutions with more capital than I to look seriously at investing in developing innovative business models in this space. A few weeks ago CGAP (a very interesting organization, check them out) published a report predicting that:
The market of mobile financial services to poor people in emerging markets will surge from nothing to $5 billion in 2012.
There are about one billion people in emerging markets who have cellphones, but no bank accounts. CGAP expects that number to rise to 1.7 billion to 2012, with around one in five of them picking up mobile money — and creating the $5 billion market.
Most optimistic researchers expect more than a billion people in emerging markets to start using mobile money within a few years, while some are more cautious than CGAP.
Now a billion potential customers – even if they are relatively poor – is a market opportunity even the most jaded venture capitalist should be able to get excited about. But it gets better. I figure if you can figure out how to profitably provide basic payment and banking services to this billion, you probably have a pretty decent business model with which to take on the billion or so people who already consume banking services in more developed countries (and who by the way all have a mobile phone…) These potential customers in the developing world are a dream come true in the sense that if you solve their problems, you’ve solved everyone’s problems (via Reuters:)
“The Grameenbank model works, but the scalability is limited,” said Hannes van Rensburg, chief executive of mobile financial services provider Fundamo said on Wednesday.
“The problem is about the inertia of money. It’s very difficult to move very small amounts of money fast,” he said in an interview with Reuters at the GSMA’s Mobile Money summit in Barcelona.
Access to financial services could not only remove the need for long, costly and risky journeys to move money around, but also reduce the burden of constant, active money management endured by those living on tiny amounts and in constant danger of financial crisis.
“Poor people are doing a tremendous amount of financial transactions just to survive,” says Stephen Rasmussen, who runs a mobile banking program for CGAP, an association of non-profit organizations under the auspices of the World Bank that seeks to help to increase financial access for the poor.
“People at the very bottom spend far more energy and mental time on managing these systems than we do,” Rasmussen told Reuters.
Mobile money deployments have huge momentum, with the number expected to double to 120 by the end of the year, according to the GSMA.
The more cynical amongst you might say: “..yeah, ok. But so what? The big telecom and financial services providers are just going to carve this up and so where’s the opportunity?” I don’t have all the answers but I am fairly certain that most – especially western – large incumbent industry players (from both sides) are structurally and evolutionarily poorly adapted to harness this opportunity. They already have, and I suspect they will continue to frame this opportunity through the low resolution historical lens of their existing business models and approach. Phrases like “We are a bank. We do ‘x’.” or “We are a telecom operator. We do ‘y’.” will continue to be all too prevalent. And so while the giants sit around haggling amongst themselves as to how they can and will divide this market, there will be ample room for the nimble, energetic and open-minded entrepreneur to make her mark.
Ok…if you (C-Suite executives of Fortune 1000 financial institutions, commanders of capital and asset allocation, etc.) won’t listen to me, at least please listen to Fred. He’s a legend. He’s a star. He’s got 20k+ Twitter followers. And most importantly, he’s bang on:
As some of you may know, I am very interested in how the advent of mobile computing (or as Gilder would say – teleputers) and in particular believe that the iPhone is the first device to really take us past the inflection point and has started to give us a good sense of what the future will look like.
Financial services and mobile computing are a match made in heaven, and the only thing that is surprising about the flurry of activity in this sector over the past 12-24 months is that it took so long. The fact that some of the earliest and most ambitious ventures in this area emerged in developing countries speaks volumes to the fundamental inertia and resistance to change and innovation in large corporations (in particular financial services firms and US/European telecom operators in this case.) People may laugh at the hysterical self-immolating attitude of the traditional media and entertainment industry, but well…you know – ‘glass houses’ and all that…
The innovative web app, which is featured on the Apple website, gives iPhone users an instant view of how financial markets are performing, and lets them place simple bets on whether prices will rise or fall. The app complements gnuTrade’s acclaimed web-based trading platform (www.gnuTrade.com), using its signature graphics to show live market price action, but via a handy touch-screen device.
Why are we excited about this? Well it brings together three big things: increased consumer interest and awareness of financial markets, mobile computing and mobile/p2p gaming. And all of this in a simple-to-understand, easy-to-use, oh-so-not-wall-street/city kind of way. GnuTrade is definitely not your father’s Oldsmobile so to speak. It’s social. It’s fun. It’s about not looking down your nose at people who are interested but are intimidated by traditional banks and brokers and spread ‘trading’ firms. It’s about prizes and play money or real money (only if you live where this is allowed of course.) GnuTrade is a digitally native markets company: they were early on Facebook(become a fan here), they are the UK’s most prolific twitterer (62,000 updates! follow them @gnutrade), and they have a pretty neat set of widgets if you are interested in adding some markets info to your blog or website – basically they ‘get it.’
Now the iPhone app is definitely not perfect. First of all it is a web app (runs in Safari) as Apple does not (yet?) allow ‘betting’ applications in the AppStore (to get the app for free on your iPhone, simply enter http://iphone.gnutrade.com on your iPhone’s Safari browser, and add the app to your homescreen.) Secondly, it’s beta so it has bugs (feedback and constructive criticism welcomed – send to @gnutrade for example) and thirdly – unless you have a blisteringly fast 3G connection – I would stick to wifi only for now.
They also have a very cool and fun beta application called NewsPools (similar to HubDub for example) that I for one would love to see on the iPhone (are you listening Lieven? ) And while you are at it, let’s see a market on when (what year say) the US will wake up and legalize, regulate and tax online gambling!
So the internet destroyed distance. It took a few years but the death of ‘long-distance’ fixed line telecoms pricing but, helped along by the entrepreneurs and engineers behind things like Skype, it was inevitable that the historical business model of telecom monopolies were destined for the dustbin. Yeah, yeah, yeah…ten year old story…so what, boring.
Ok. But why on earth does the parallel extortionate business model live on in the world of mobile telephony? International roaming charges are a joke, especially if you are using the same provider on both sides of a border, but even if you are not; ie they don’t make any economic sense (there is very little incremental underlying costs, at least not any that aren’t artificial) and they are extremely annoying and unfriendly to what are generally these companies best customers. I don’t know anyone who is happy with their mobile phone provider; it goes from grudging indifference through to outright hatred. And yet these companies continue to be successful. How long can this last?
As a frequent traveller within Europe, and a cost-conscious entrepreneur, I find myself very frustrated and limited by this state of affairs and often find myself using texts and missed calls to arrange for later calls (via skype) rather than bleed money to take a roaming call. So when I heard of a new mobile offering that would allow me to use one number, one account, fungible credits across 21 countries, I had to sit up and take notice (via NetworkWorld):
The service allows prepaid subscribers travelling between participating countries to recharge or top up their accounts using airtime vouchers from any participating country. Pre- and post-paid customers will be charged the local rate in the country from which they are calling, and travelers will receive free incoming calls.
Wow sign me up. Vodafone? Orange? T-mobile? O2? Yeah, right… Try MTN! And its just playing catch up with the competition (Zain’s One Network.) MTN’s tag line?
One Africa. One Rate. That’s the Spirit.
Gee, good thing I live in the EU…where I guess the equivalent would be along the lines of:
One Europe. Many Rates. Eat Shit.
But don’t mistake me, it’s not a problem that the bureaucrats in Brussels should be responsible for solving, and I’m not so naive to think that the incumbents will be able to adopt disruptive business models, but where are the entrepreneurs??? There has to be an opportunity here – the number of people who live “in Europe” (as opposed to just withing one European country) is large and growing and will continue to grow.
The challenges faced by entrepreneurs in Africa and elsewhere in the developing world are often formidable and extend beyond the usual (already tough) stumbling blocks that ‘western’ entrepreneurs struggle with. However, the ‘developing’ entrepreneurs sometimes have a small but important advantage – in the markets in which they hope to operate, there often isn’t a “way it is supposed to be done.” They have lots of ways of failing (and lots of people telling them they will) but usually it is not because they are seen to be taking an innovative (read: dangerous) approach to business. I was reminded of all this when I finally got a chance over the past couple days to listen to this great presentation/discussion by Ethan Zuckerman and Eric Osiakwan given last fall at the Berkman Center.(Unfortunately the Berkman website does not offer an embed code, so you can’t watch it here but worth clicking on the link above.) Thanks to my friend Juliana – who is also a newly minted TED Fellow (well done!) – for sending me the link (several months ago!)
I suspect that there may be more than a few talented (financial markets) developers who have now found themselves with more free time on their hands than they would like. Some of that time might even be spent reading this blog, and so with that in mind, I thought it was worthwhile to pass on this exciting opportunity at Mark Davies’ BusyLab in Ghana (who are behind the fantastic Esoko/TradeNet initiative, on which I have commented several times in the past:)
BusyLab is a software company engaged in building innovative mobile web solutions for the African market and beyond. Our main project, Esoko , is a web and mobile based market information system that includes an SMS gateway component, a J2ME mobile application, and an ajax-driven, open API web application. We were recently featured on CNN and in the Economist, and are currently in 12 countries throughout Africa and Asia. Our mission is to improve livelihoods by building healthier and more efficient markets. We believe agriculture in developing countries is one of the final frontiers to benefit from the technology revolution of the last two decades.
We’re looking for an experienced software developer interested in trying something different and sharing knowledge in Africa.
You should be able to teach the processes and best practices of software development with our bright young team, and contribute to a world-class innovative web and mobile application product.
You should know:
- php or java (J2SE/J2ME)
- sql databases (postgres or other)
- software development process
- software testing and quality assurance practices
The position would be for a minimum of six months.
I’m sure for whoever takes up this challenge it will be rewarding in many ways. Good luck!
My desert island business tool would have to be my netvibes homepage: by allowing my to efficiently follow and ingest over a hundred different feeds covering the entire breadth of my varied (and some would say eclectic) interests it has become the substrate upon which much of my work is done. It’s my deck.* Themes emerge and disappear, are reinforced, modified, diverted, consolidated. And sometimes enough interesting pieces of the puzzle emerge, pushing me to anchor them in my thoughts by writing a post here.
I’ve written a number of times on the potential for mobile telephony to shift the paradigm in Africa, but post the SafaricomIPO this is perhaps more of a mainstream view today and needs less repeating.
What is perhaps less talked about is the potential to combine increasing mobile and broadband penetration with robust and inexpensive local networks to transform outcomes even in the most remote environments. One of the major challenges facing the African continent is building out mobile coverage outside of urban areas and increasing access to broadband internet pretty much everywhere. White African frames the problem eloquently here:
While it’s good to talk about mobile phone penetration, I was a lot more interested in seeing the discussion going on around mobile broadband internet and how that is the next big move in Africa for the operators. Passing data, not just voice, is the battleground of the future in Africa – and all the carriers are fighting to position themselves to win.
This is important and I think the tipping point has (or is about to be) passed, but for a variety of economic, political and regulatory reasons it is difficult to predict how and when a more robust and ubiquitous broadband access will be available to most Africans. In the mean time, it would seem to me that a great opportunity exists to build (tens of) thousands of small, local, ‘community’ networks using a combination of technologies such as wireless mesh and femtocells connecting mobile phones and sturdy “appliance computers”(via Emeka):
Aleutia’s currently working to integrate ZigBee into our desktops, a new wireless mesh-networking technology that doesn’t drain batteries like Wi-Fi does and has a range of up to 1km. In areas where connectivity is expensive and hard to obtain, this would allow one computer to share its Internet connection with hundreds of others, and, in areas without Internet connectivity, would enable free email, file transfer, and messaging over an enormous geographic area.
All powered by renewable (solar, wind, micro-hydro) local power sources, which besides being more robust and sustainable (in the economic sense), should also help underwrite the capital costs of building the network through sales of imputed carbon credits.
These networks would be valuable on their own – providing an information and communications backbone for education, health and markets for the local community – but also would serve as excellent platforms (in terms of building knowledge and acceptance of these tools) ahead of the local network being tied into the rest of the world via broadband internet when the infrastructure and pricing permits. In fact, by building up the network infrastructure in this way – ie by creating a network of networks – Africa has a chance to actually create a more robust infrastructure than currently exists in most of the developed world, without the need to re-engineer; another leapfrogging opportunity…As John Robb continues to powerfully argue, “smart local networks” are crucial to creating a more resilient societal infrastructure, tolerant to faults, accidents and attacks – black and white swans alike:
Most of the local loops (from telco fiber to cable company coaxial) currently in place and/or being installed in the US are dumb (I suspect it is the same globally). They simply route data from local customers to regionally clustered corporate server farms and then outwards/back. This means that any disconnection (physical or logical fault) between local customers and these remote systems will result in a complete cessation of service. To correct this deficiency, communities need to start to think more like a corporation: security of data services are considered central to a company’s survival. So, as part of future negotiations with cable/telcos, communities should request that companies allow them to piggyback on their “dumb” networks to create a smart local loops.
Just the sort of infrastructure that is needed in the all too often hostile (political and natural) environments in which these networks need to operate. And it ties in well with the idea of a resurgent localism, a theme that motivated Stowe to create a new blog, /Ground:
One of the most salient trends — one that I think trumps others — will be the rise of localism. As nation states increasingly falter, and lose relevance we will see people shifting their sense of belonging away from mass organizations and political constructs, like nationalism and global religions.
Layer on top (of these networks) the best that Web2.0 has to offer in terms of social software (wikis, twitter, blogs, freebase, etc .), along with solutions unique to Africa (FrontlineSMS, Ushahidi, etc.); mix in the strong culture of communal and family identity and… voila! You have a potentially very powerful and transformational piece of kit. Alpha this, beta this, build, iterate, build again… and I’m pretty sure that once you’ve industrialized the process, you will have a very exportable proposition: a turn-key solution for installing a smart (and green) local network.
In fact, I think this is a very real and interesting commercial opportunity. Maybe even a candidate for an X-prize in Global Entrepreneurship? I’d love to find a credible, motivated team that has the skills and the vision to make this happen and take us one step closer to the sixth paradigm. Looking forward to seeing the business plan!
*Cyberspace Deck: Also called a “deck” for short, it is used to access the virtual representation of the matrix. The deck is connected to a tiara-like device that operates by using electrodes to stimulate the user’s brain while drowning out other external stimulation. As Case describes them, decks are basically simplified simstim units. Another way to think about it might be like a lineman’s telephone—a tool used to actively maneuver through cyberspace rather than to passively perceive pre-recorded physical and emotional sensations (like a simstim unit).