Mobile Money

Leo Mirani recently reported on how mobile money transactions are becoming popular in emerging markets. It’s an old story, but it is increasingly relevant as Google falters with Google Wallet and Apple is rumored to enter payments using Touch ID fingerprint scanning.

I’ll just list a few of my observations and thoughts.

  1. The technology for mobile money in emerging countries is very low tech. In fact, it is based on simple text messages.
  2. The US in particular is very slow to adopt mobile money, instead relying on credit cards (and sometimes paper checks).
  3. Although not as spectacular as countries like Kenya and Tanzania, Japan also has quite popular payment systems that are reliant on mobile.
  4. What we are witnessing is a general phenomenon. Countries acquire habits as they grow their economy and these habits persist as they mature. The technical and cultural environment during the growth period strongly affects these habits, and they can be difficult to change later even after environments change.

Africa is growing its economy in an age where almost everybody has a mobile phone. That’s why mobile payments are popular. On the other hand, the US credit card system emerged when magnetic cards were still high-tech (remember the days when we passed credit cards through a carbon copy roller?). Although almost everybody in the US now has a mobile phone, it’s difficult for the US to change its habits despite the benefits that it would bring.

Japan, happily enough, is one of few countries where you could carry large amounts of cash without worrying about being mugged. Because carrying cash was not a concern, credit card adoption was slow and was incomplete. Hence it was possible for mobile payments to thrive in certain niches.

It’s really simple to understand how each country is the way it is. However, it’s very difficult to change.

What this means is that each country has very different requirements for mobile payments. A one-size-fits-all approach is destined to fail. Working with local partners and customizing for the local situation is essential.

Returning to the question of how Google and Apple should approach mobile payments, it’s very clear that trying to be the payment system will only work for a certain market segment. It is more important to empower the system that each country already has through APIs or maybe something like HealthKit. Helping others to succeed on your platform and benefiting indirectly should be the way to go.