In emerging economies, the debate over consumer adoption of mobile payments has been rendered moot by a dearth of stable financial institutions. Consumers in countries where banks are few or fragile have out of necessity already turned to the one ubiquitous, secure system they have: wireless phone networks. In these markets, consumers are increasingly using their phones as instruments to pay bills, buy groceries and transfer funds for some time.
And the scale of the unbanked in developing countries is enormous. A recent report conducted for Telenor Group by Boston Consulting Group found that 2.5 billion consumers in developing markets, or approximately 72 percent of the adult population in those economies, have no access to financial services.
Several companies have begun providing financial services to the unbanked around the world, but to Redwood City, Calif.-based Obopay Inc., unbanked consumers aren't just a market segment to be tapped, they're the very foundation of its business.
"A few years ago we decided to focus on the unbanked," said Obopay CEO Deepak Chandnani. "We built our platform and processes on the unbanked."
In a recent call with Mobile Payments Today from his office in Mumbai, India, Chandnani said that building a mobile payment system for the unbanked means building a system around the unbanked.
"You build a platform that can take on a lot of transactions and users and an agent network," Chandnani explained, adding that an agent network actually helps get around a lack of infrastructure in those countries.
"Connecting with existing mobile networks is important, but also the agent network — so that mom-and-pop stores that are everywhere in the developing world can participate."
To succeed, Chandnani said, "You have to build use cases (the unbanked) would use."
Obopay currently has mobile payment network in four countries — the United States, India, Kenya and Senegal. Chandnani, who took over as CEO earlier this year, said the company's program in Uganda will be up and running by the end of the year, as well as one in another country that will be announced soon.
Obopay's platform lets consumers load money to a prepaid account. For customers with access to financial services such as credit cards or bank accounts, adding funds can be done online. But for the majority of consumers without access to financial services, a network of independent agents who earn a commission for facilitating transactions is available. Once funds have been added to the account, Obopay then provides the platform for fund transfers between consumers or between merchants and consumers. In some markets like India, Obopay also connects to ATM networks, allowing customers to withdraw funds from cash machines using the mobile phones.
According to Chandnani, one of the reasons for Obopay's ability to build networks in underserved markets has been finding the right corporate partners to take on some of the hard work required to build a mobile payment system.
"There are a whole host of things to do and do well," Chandnani said. "There is no cookie cutter. Every country has its own language, its own telco and its own regulations."
Chandnani said Obopay is working with companies who had a similar vision and to whom mobile payments is key to their success.
In India, for instance, Obopay partners with handset manufacturer Nokia. Nokia announced recently it would install Obopay's application on all of its handsets made for the Indian market. In Sub-Saharan Africa, Obopay has partnered with financial institution Société Générale S.A.
Chandnani also credits the flexibility of the Obopay platform for its ability to fit the realities of each new market. Whether it's accommodating new languages or regulations, Chandnani said the Obopay platform and infrastructure have been designed to take all of those variables into consideration.
"We built a large part of the infrastructure in India," Chandnani explained. He said it was critical to build the platform in India where mobile payments are already a reality that people can see and touch.
India is an important operations center and market for Obopay, he said. "India has 700 million mobile phones," Chandnani said. "But only 200 million people are banked. The numbers in India are huge; the opportunities are huge."
Obopay isn't alone in seeing the potential for reaching the unbanked, according to Chandnani. Already, he said, Obopay faces stiff competition in Kenya and Uganda, and the burgeoning India market is beginning to become very competitive as well.
Beyond the discussions of any individual market, Chandnani said he finds the way people respond to mobile technology to be one of the most interesting parts of discussions about mobile payments. He said he believes that reaction will play a large role in how mobile payments will eventually succeed worldwide.
"What I have found incredible is the adoption rates for mobile technology," Chandnani said. "The highest selling camera in the word is a mobile phone. The highest selling radio in the world is a mobile phone. In the developing world the mobile phone is the radio and camera."
"There is this adoption that is almost infectious," Chandnani continued. "People take to it instinctively. You don't have to explain much to them."
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