Gines Patag, The Philippines, February 21st, 2009
Right after my recent post where I wondered if business models and payment plans for those who live on irregular and unpredictable incomes could be designed to be as adaptable and flexible as the informal economy, I came across this snippet today that gives much food for thought. Here is a system that fits within the constraints and challenges faced by those whom its meant to serve.
Eagle shared another striking example of the transformative power of
mobile payments during his ETech talk. Rural communities used to have
to pay a lot of money upfront in order to get a modern well capable of
providing clean drinking water. Now, there are companies that install
these wells for free, complete with an integrated cell phone payment
system. Want some water? Just pay as you go with your M-PESA account.
I tried to find more information on these companies mentioned on google but nothing turned up that was directly relevant. Hopefully someone somewhere may know more and can share the links or information with me.
The critical point here though is that this development – that of integrating a payment system on the mobile platform to a utility or service, thus allowing customers to not only pay as they go but to also be able to manage their consumption of said service or utility based according to cash available – is more than simply the adoption of a new technology.
I would go as far as to say its not simply the transformative power of mobile payments per se, but the transformative power of leveraging a payment model that can accomodate the random cash flow in the informal economy. Suppose the mobile payments were fixed, for example, and required a set amount to be paid on a regular schedule – then, regardless of the technology, its convenience or ease of use, the amount would still be a burden to those who must manage on irregular income streams. Its the "pay as you go" aspect that enables this system to work, thus enabling its power to transform.
Taking this thought a step further, examples of such "integrated cell phone payment systems" that are based on the same principles as the prepaid purchase of airtime minutes, could conceivably become the platform for a whole host of goods and services, that is, in effect, the conceptual norm for payment strategies and business models meant to serve the BoP. Once we step away from the technology that enables it, we can see its the principles of the concept that make it work, the technology simply enables it on a ubiquitious platform with minuscule transaction costs thus lowering the barriers to user adoption.
Can then these same principles – "pay as you go" that is, put up the cash that you can spare, when you can spare it, towards the purchase of any product or service OR even to pay back a loan – then be applied to design models that may not always require the technology involved (mobile phone) to make them work?
Or is that its the very qualities of the mobile platform – low transaction costs, ease of use and ubiquitious availability among the bop communities – that are making such payment strategies viable business models?
In which case, just way we don't think twice about the "technology" involved in using our credit cards, ATM cards and what not when making purchases in the real or virtual world, would these emerging payment mechanisms become the accepted norm for businesses that seek to serve these markets?
As an aside, its interesting to note that this kind of a payment model serves the needs of the users within the constraints and challenges they face – that of irregular income streams – whereas the more established conventions of "12 equal easy monthly payments" serve needs of the businesses themselves, since when they were first designed there were no widespread information systems in place to track transactions against customer records and this just made it easier and cheaper to follow.
Today, how difficult or expensive would it be to check the balance of payments made by a customer who is repaying a loan over time? Say a scheme where the duration of the loan itself could be fixed but the flexibility of paying how much and when retained over time as long as the total was met by the deadline?
Taking a leaf from airtime management again, aren't there such applications already available on certain mobile phones that allow you to track how much you've spent and how many minutes you have remaining? What if the tracker was reversed and told you how much you'd paid up and how much you still have to pay by your deadline? What if microfinance business models that offered microsavings and microloans let you track your account on your phone?
Can we build in the convenience of flexibility into these systems?