Mobile payments are changing the world – 600 million people at a time

Harold Montgomery, Chairman and CEO, MoneyOnMobile

During a recent trip to Calcutta, India, I met Mohan, a young man working as a migrant dock worker. As its CEO, I know exactly what MoneyOnMobile is doing … but Mohan reminded me why we do it.

Of the 7 billion people in the world, about 2 billion of them – nearly 30% of all people – don’t have a bank account, and many could not open one if they wanted to. Mohan, is one of 600 million Indians who are unbanked.

He came into one of our MoneyOnMobile retail locations after hearing from co-workers that he could complete all of his financial needs in one place. When I met Mohan, he was topping up his mobile phone and sending money back home to his family – they still live in a rural town, while he came to Calcutta to earn better wages. He also rents an apartment with several other co-workers, and he was paying their electricity bill, as well.

In India, physical infrastructure for banking is not prevalent enough to adequately meet the financial needs of many citizens. There are few copper hard lines to support ATMs, and thus the country would need 2 million more ATMs to match the per capita rate in the U.S. There are very few bank branches outside of major urban centers. So, in spite of efforts by the Indian government, about 90% of domestic transactions are handled with cash – hard currency.

For Mohan, that meant he used to spend one whole potential work day every month traveling around to pay each of his service bills with cash at the service providers’ offices. He had to travel to an office to send money to his family, travel to pay his rent, travel again to pay the electricity bill – in all, he had to make six different stops. Because India has the highest number of unbanked people in the world, the vast majority of his fellow citizens have to do the same, so the queues at each office – every day – are long.

Traveling to each location by bus cost Mohan $2 each day, and he lost the opportunity to make $10 working instead of standing in lines. For Mohan, who makes $200 per month, that $12 opportunity cost equates to a 5% decline in monthly income. Now multiply that by hundreds of millions of Indians who are unbanked or underbanked.

Using MoneyOnMobile on his feature mobile phone, has solved Mohan’s bill-paying problem. You see, when a country doesn’t have the physical infrastructure – copper or fiber ‘phone’ lines and the banks and ATMs supported by them – modern society simply leapfrogs right to wireless solutions. Wireless payment platforms allow consumers like Mohan to turn cash into digital currency that is sent via SMS/text messaging to pay all of their bills, or buy goods online, from one location.

MoneyOnMobile works through physical retailers like mobile phone shops, bus ticket sellers, etc. who opt in to our platform. There’s no cost to use the service for Mohan and other customers because retailers and MoneyOnMobile get payed by cellular carriers for each SMS message sent. With 335,000 physical MoneyOnMobile retail locations around India, that means Mohan can make one stop after or before his work day, without any additional cost or lost wages.

In sub-Saharan Africa, more than 12% of adults use mobile money accounts, compared to about 2% of the worldwide population. With the ubiquity of mobile phones, that means these people in rural areas, with little infrastructure, can participate in the global digital economy anywhere they can get a cellular signal. It’s an amazing development that has far-reaching effects like increased long-term savings, more economic participation for women, and more security for the money and wages people earn.

So, if physical infrastructure is no longer an obstacle to participation in digital commerce, what are the hurdles that we still face to get those 2 billion unbanked or underbanked people into the digital economy? First and foremost is cash. When you’re paid in cash, how do you get that turned into digital currency without visiting a bank? Moreover, when you’ve only ever known physical cash, how do you begin to trust something as ethereal as digital payments?

The answer is not to eliminate cash but to work to make cash-to-digital and digital-to-cash transactions easy and seamless. When smartphones are more affordable in developing economies digital-only transactions can take over. The approach then, must be consumer-first.

Mohan and people like him are going to be dealing with cash for the foreseeable future, with very limited access to banks, and a payment solution that delivers a user experience that meets his needs without requiring big changes to his life. Having a real and trusted person take his cash, make it digital and available, and walk him through making his text payments gave him the confidence to try it. He didn’t have to spend precious money to upgrade a phone or change his financial approach in any way … other than to simplify his life with a one-stop approach. When he has completed a transaction, he gets a text receipt on his phone that gives him added confidence in the service.

Digital-only transactions are the future of finance worldwide, make no mistake. However, recognition of the need for viable and easy cash-digital and digital-cash financial technology to bridge the current gap is recognition that about 2 billion people have a different life experience than we do. Their lives become better when we help them – right now – with financial services that meet them where they are.

Mohan will always be my touchpoint, as a real person who exemplifies why we do what we do.

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