I have recently been reading a number of articles about mobile banking innovations in Kenya and what vendors like SAP’s Sybase 365 and other companies are doing to support it. It seems most people in Kenya, and many other less developed countries, don’t own smartphones, however, most do own basic mobile phones with text messaging. As a result, many vendors and banks have built sophisticated text message based banking services. The following is a list of some of the available text message based capabilities and services available in Kenya:
- Person-to-person money transfers
- Fund remittance from the UK to Kenya
- Local and international money transfer
- Loan payments
- Product purchasing
- Airtime purchasing
- Funds transfers from interest-bearing accounts
- Balance inquiries
- Money requests
- Attaching short messages to text based payments
- Sending invites to friends to join mobile banking services
- Many different mobile front-ends available: WAP, SMS, Voice, USSD, and STK
SAP’s Sybase 365 powers many of these text based banking systems. I read about Sybase 365 from time to time, but it deserves to be in the spotlight even more for it has the capacity to help revolutionize many economies.
In the book The Birth of Plenty, the noted financial expert and neurologist William J. Bernstein identifies four conditions that when occurring simultaneously, are the formula for human (economic) progress. They are as follows:
- Respect for property rights (inventors must have proper incentives to protect their inventions)
- Belief in scientific rationalism (society must possess the proper intellectual tools to support innovation and progress without penalty)
- Existing and functioning capital markets (businesses must have sufficient capital to pursue their visions and business plans)
- Effective transportation and communication systems (society must rapidly and effectively move information and finished products)
I believe that mobile technologies can help with at least 2 out of the 4 of these conditions. Mobile text based banking systems can provide trusted and formal banking services where they didn’t formerly exist. They can also provide rapid and effective transportation (of funds) and communication systems (that open up and support free markets).
A couple of years ago I read an article from The Wall Street Journal, written by Ronald Bailey, called The Secrets of Intangible Wealth. In this article he writes about a report from the World Bank called “Where is the Wealth of Nations?: Measuring Capital for the 21st Century.” The bottom line is that a nation’s wealth is greatly determined by intangibles such as:
- Trust among people in a society
- An efficient judicial system
- Clear property rights
- Effective government
Bailey says that these four items, identified as “intangible capital”, boosts productivity of labor and results in higher total wealth. The World Bank concludes the report by summarizing their findings as, “Human capital and the value of institutions (as measured by the rule of law) constitute the largest share of wealth in virtually all countries.”
Mobile banking and mobile technologies can introduce formal banking systems, run by internationally trusted institutions, into economies and regions that previously were under served, or lacked trusted institutions that could support economic development.
If you review the list of services (listed above) now available using simple and inexpensive mobile phones, you can begin to understand that mobile technologies can not only help to improve governments, but also economies.