Here in Hong Kong we're accustomed to ease-of-payment. The main driver of course is the Octopus card--the most convenient payment-method yet devised.
Octopus is so ubiquitous that other forms of contactless payment hold little appeal. Why bother with NFC when the existing system encompasses transport, supermarkets and many eateries? The latest evolution for Octopus: its incorporation into mainland e-tailer's Taobao payment gateway.
But Hong Kong is a small place with keen logistics acumen. Things get done here, and done quickly. Mobile payment systems make the greatest difference in other regions.
For example, on any given Sunday, check the line of domestic helpers (part of Hong Kong's ecosystem of efficiency) at local overseas remittance offices. Typically, they're sending money to their families back home. The services they're using are decades-old and take a percentage of the payments for secure delivery of the transferred funds.
Now imagine that these people, for whom a transfer-fee represents a significant sum, were able to transfer funds internationally using a secure mobile-enabled payment gateway. That's the goal of many mobile service-providers, and considering the tech innovations of recent years, hardly far-fetched.
As The Economist pointed out years ago, the crucial tech innovation of recent decades is the mobile phone. Yes, our current blinged-out smartphones boast significant compute-power (even though many seem enraptured solely with their ability to shift candy-shaped icons about), but in the developing world, simple comms are the killer apps. An SMS with the latest market prices makes a huge difference to a farmer in rural India, for example.
In greenfield environments, mobile banking flourishes. In much of Africa, where banking infrastructure is dodgy, inefficient, or just plain lacking, it's a game-changer. According to the African Development Bank, sub-Saharan Africa has the lowest deposit institution penetration in the world standing at an average of 16.6&% compared to 63.5% in other developing countries. "It is this gap in the financial services market that is creating a unique niche for mobile phone banking to develop on the continent, enabling a growing number of people to access financial services for the first time," said the ADB in a statement.
And Africans with bank accounts often face high transaction costs for fund-transfers. This creates a unique niche for mobile phone banking to develop both in Africa and in other less-developed areas.
As elsewhere, mobile phone penetration has increased drastically in Africa in recent years. The key to mobile banking isn't the multi-core processor or flashy app store, it's the SIM card. With appropriate security measures, a mobile phone may serve as a POS terminal, a virtual ATM, or Internet banking terminal.
The best-known service in Africa is M-Pesa, described by Wikipedia as "currently the most developed mobile payment system in the world, [it] allows users with a national ID card or passport to deposit, withdraw, and transfer money easily with a mobile device." M-Pesa has expanded to Afghanistan, South Africa and India--it's known as "M-Paisa (the paisa being the largely unused subunit of the Indian rupee)" in India.
How significant is this development? Here's my favorite anecdote from the Wiki entry:
"When the service was launched in Afghanistan, it was initially used to pay policemen's salary, which was set to be competitive with what the Taliban were earning. Soon after the product was launched, the Afghan National Police found that under the previous cash model, 10% of their workforce were 'ghost 'police officers who did not exist; their salaries had been pocketed by others. When corrected in the new system, many police officers believed that they had received a raise or that there had been a mistake, as their salaries rose significantly. The National Police discovered that there was so much corruption when payments had been made using the previous model that the policemen didn't know their true salary."
The reaction? "The service has been so successful that it has been expanded to include limited merchant payments, peer-to-peer transfers, loan disbursements and payments."
While early growth will occur in less-developed environments, given our ecosystem and our hard-working domestic helpers, it's time for Hong Kong to start developing and implementing similar options.