“Individual bees can’t be understood separately from the colony or from their shared, co-created environment. So it is with human networks; bees make hives, we make mobile phones.”
— Clay Shirky
The majority of the global population is now able to afford a mobile device. By 2012, almost six billion people had mobile phone subscriptions worldwide, with eighty percent of the newest subscribers in developing nations. In 2006, there were 200 million devices owned by Africans; today there are 735 million. Tablets sales are set to outpace PC sales by 2016. Statistics, anecdotes and experiences are all pointing to the reality that Information Communication Technology [ICT] is and will continue to dramatically alter life for billions of people.
In today’s economy, knowledge has become as important to economic growth as traditional factors such as capital, labor, or natural resources. Economies of the OECD are more dependent than ever on the production and distribution of services, rather than goods, created by processing the huge amounts of information produced by the global economy – a capability made possible by the development and deployment of high-powered ICT. The flow of goods, services, investment, and human capital work to connect the knowledge-based economy even as the spread of high-tech (and expensive) ICT has made surviving in the knowledge economy more capital-intensive.
A consequence of this economic transition is the aggressive rise of “m-” everything. The rapid rate of global mobile penetration challenges traditional models of economic development, and necessitates a new policy approach in order to allow a fast-changing high-tech sector to thrive. From small start-ups to big-business, mobile development continues to drive development and empowerment around the world, even as it rejects precedent.
One such example of game-changing, runaway success is M-PESA , an eponym for mobile money transfers. SafariComm, the creator of M-PESA and one of the larger African telecomm companies, generates 16 percentof its revenue from the service, and has pioneered the spread of this technology across the world. The social benefits of this are clear: 25 percent of Kenya’s Gross National Product now goes through M-PESA. Afghanistan’s leading telecomm company, Roshan, has mimicked M-PESA with M-Paisa – an example of rural communities gaining access to institutions that were once reserved for urban elites. 97 percent of Afghanistan’s population wouldn’t have access to a bank account were it not for M-Paisa.
The catch? This kind of successful m-banking deployment is scattered and anecdotal. Safaricom controls half of the world’s mobile-money transactions, and few other countries have caught up simply because the company has a huge head start in terms of subscribers and customers – and they are notoriously stingy with their data. Moreover, there are jurisdictional questions, regulatory issues, oligopolistic ties that don’t allow for innovation in certain countries, and security hazards.
These m-commerce platforms are unique because they are addressing the specific issues of developing nations. For example, only 10 percent of remittance recipients in Latin America have a bank account, subjecting families to surcharges and long journeys to a nearby Western Union – imposing significant economic costs. However, mobile money transactions are increasingly beginning to address this. SMART, an operator in the Philippines, claims $50 million of remittances are being sent over mobile phones every month. This innovation is a game changer, considering that some national economies rely more on remittances than foreign direct investment and foreign aid combined for capital flows. Much like the Safaricom story, this innovation is made possible by preexisting, established organizations with the extra capital needed to create new revenue streams such as mobile payment platforms.
These innovations have been successful largely because they typically begin in-country, addressing the issues of local groups rather than replicating market solutions that were successful in other environments. People with few resources, sporadic incomes, and little chance to create savings have never been attractive to traditional banks, cutting this portion of the population off from the flows of credit needed to stimulate economic growth. Changing this equation can lead a subsistence farmer to become a micro-business owner and self-investor, with a season’s-worth of crops no longer being invested in livestock or other unreliable assets, but into a savings account for future needs.
Mobile innovations like these are encouraging GDP growth in developing countries at twice the rate of developed countries, yielding a .6 percent increase in GDP for every additional 10 mobile phones per 100 people. Adoption of mobile technology is what the Gates Foundation has called the most powerful tool to end global poverty, noting that GDP growth happens earlier and faster for mobile penetration than it does the Internet.
As companies plan around the financial needs of developing nations, these disruptive market forces are at risk as they often rely on regulatory and governmental support. Competition specifically increases the chances of mobile penetration, going from 8 percent in a single operator market to 21 percent in markets with more than 3 operators. To harness these benefits, governments, transnational authorities, and private organizations must invest in highly skilled research & development, improving opportunities for global innovation in this sector, and avoid limiting access to the market for potential competitors. This new-found financial power is translating into political and social capital, yielding a second generation of m-growth, and boundless opportunities for sustainable market solutions.