Thus solution (M-Pesa) aimed at improving economic activity for the poor needed ‘non poor’ actors in the ecosystem in order to inject cash into the system and thus make it flow and grow initially. Niti Bhan writing in Afrinnovator, March 5, 2012

This is a continuation in our thinking about how large networks of engaged users will play out in Africa with a look at mobile money and its impact on commerce, trade, aid, philanthropy and host of other topics.

According to recent McKinsey report, in July, 2011, there have been more than 100 mobile-money deployments in emerging markets; at least 84 of them originated in the past three years. Only a handful of these deployments have reached a sustainable scale; some notable examples include M-Pesa in Kenya, MTN Uganda, Vodacom  Tanzania, FNB in South Africa, and GCASH and  Smart Money in the Philippines.  Even these players have not gained much traction for financial services beyond simple transfers and payments.

You can’t read about IT in Africa without reading about mobile money.  The success of Safaricom’s M-Pesa has generated a slew of initiatives and startups that either, want to build mobile money platforms, or want to build features on top of these platforms. Some of the things we find interesting about mobile money as a large network of engaged users is they provide;

1. Access to financial services (banking) that was previously unavailable because of expense, inconvenience or lack of trust.
2. Alternative banking to those that are banked, presumably due to its lower cost and convenience.
3. Large network of engaged users upon which other direct (e-commerce) or indirect (social, entertainment, etc) products and services may be built.

It’s the last point we’d like to explore more fully in this post.  How can these networks offer new products and services and how do they grow and evolve beyond financial transactions?

Diversification

Source:http://technologysalon.org/2011/02/mobile-money-impact-on-women.html

Is mobile money a banking platform or a trading and payment platform?  Mobile Network Operators (MNOs) need to refine their vision, and once positively accepted in the market, develop and deploy “killer applications” that leverage-up mobile money to drive transactions and customer satisfaction.  It’s this area of layering up mobile money from person-to-person (p2p) transactions into utility payments, crop insurance, retail payments,  b2b commerce, and beyond, that can build network engagement and value and provide a springboard to selling more interesting and complex products and services.

Ecosystem

We’re starting to see startups provide integrated services on top of mobile money platforms.  Kopo Kopo, PesaPal, iPay, MPAYER, and Slimtrader to mention a few, are all integrating with one or more mobile money platforms.  Typically, first generation solutions provide corporate and consumer customers an easy-to-use interface to manage their transactions with little add-on functionality. Efforts such as Slimtrader are bit higher up the value chain as they provide integration between corporate client backend and mobile money platforms to enable customers to conduct commerce using SMS.  Another example, Paga of Nigeria is bit different.  As a mobile financial service company, granted a license to deliver its mobile money service to Nigeria by the Central Bank of Nigeria (CBN) in February 2011, Paga has now surpassed 50,000 subscribers and works with all mobile networks in Nigeria.

What appears very interesting to us is; as these providers gain experience and sophistication, and as MNOs open up their platform to integration, the ability to provide end-to-end e-commerce solutions irrespective of the deliver method (SMS, internet, and/or native mobile app) nor limited by transaction type (mobile money, credit card and/or bank-to-bank EFT) become available to others that want to integrate e-commerce into their applications or services.

In essence, these mobile money networks just become integration platform(s) that offer features that can be picked and plugged into by business, government, NGOs, or developers to conduct transactions on behalf of consumer or for business-to-business commerce.

The best thing MNOs could do is open up their platforms to business, government and developers to provide interoperability across mobile money networks and encourage the free flow of transactions between parties and across borders.

Ripples, Regionalism and Remittances

In addition to bringing those previously outside the banking system into the mainstream that encourages savings and facilitates trade; we are starting to to see mobile money networks used to streamline back office processes.  Mobile money greases the rails of commerce and boost intra-nation commerce.  P2p, b2c and b2b transactions within a nation are enhanced by mobile money networks.

As African nations get their act together and work on a plethora of problems that stifle regional trade integration of mobile money networks across borders will become a prerequisite.  We quote from recent World Bank Report De-Fragmenting aFrica Deepening Regional Trade Integration in Goods and Service

It therefore called on Africa leaders to improve cross-border trade, especially by small poor traders by simplifying border procedures, limit the number of agencies at the border and increase the professionalism of officials, support traders associations, improve the flow of information on market opportunities, and assist in the spread of new technologies such as cross-border mobile banking that improved access to finance

As MNO (or third parties) hook disparate transactions platforms together one would believe a side benefit will be a tighter integration of other MNO services, such as, voice, SMS or data.  For it appears logical as mobile money networks become meshed that other MNO products and services will equally become more entwined benefiting consumers and business on both sides of a border.

http://www.givedirectly.org/

The clarion call around which the initial M-Pesa story was told “send money home” takes on new meaning when integration of mobile money networks across borders and across transaction types become ubiquitous.  For when the diaspora in the West can just as easily “send money home” as “calling home” by charging a credit card with the money delivered to mobile by SMS the next day that we will have eliminated all kinds of layers, expense, complexity and time from the middle of the process will increasing convenience and lowering cost at both ends.  That is the benefit of these new networks

And, once this image settles in your mind it does not take much imagination to envision other applications in commerce, philanthropy and aid.  If a small holder farmer can publish content to the internet using only a simple feature phone and SMS (which they can) and, that same farmer is on a mobile money network (which they probably are) why do you need aid organizations to help that farmer when “charity can go direct” just like “sources go direct” in news?  Apart from accountability, (which too could be crowd-sourced), why do you need an aid organization that does not provide ancillary services to save the children, help the poor, feed the hungry, clean the water, hire the jobless or myriad of other do-good exercises conducted everyday all over the world.  Think about it.

Its this flattening of layers, elimination of middlemen, wringing out of cost and complexity from a system while boosting its efficiency that is so exciting about large networks of engaged users when applied to fundamental human needs and desires as found in emerging markets.

Virtual Currency

MNOs are under a tremendous pressure.  They are getting creamed by Apple, Google and other players that are moving customers from high-profit, low-cost services (think voice and SMS)  to low (no) profit, high-cost services (think data and VOIP) in an industry that is not known for its creativity or nimbleness.  They are in a commodity business — a terrible business to be in.

A new network we watch and admire is Eskimi that is out of East Europe and has 5 million users in emerging markets.  It has 2.5 million users in Nigeria and is growing fast.  Eskimi is focused on dating (just like 50 million user MXit) but what is interesting to us is they are getting ready to release a virtual currency based on credits against a mobile account.

What if MNOs allowed customers to trade credits on their mobile account like virtual currency?  Not only could you pay by credit but customers could receive credits and use them or cash them out.  Instead of gifting virtual goods why not trade and exchange real goods and pay for them using your mobile bill?  MNOs are already acting like banks why not go all the way and try to eliminate cash altogether?  I am sure there are regulatory considerations and we hope to learn about them in the comments.  And, getting rid of banks, or at least reducing our dependency on them, and their high fees, or at least providing an alternative, is probably a good thing.

Distribution Platform

In creating mobile money networks one of the aspects MNOs need to manage closely is their agent network.  These are physical store fronts where customers can pay or receive funds.  It appears to us that a physical agent network integrated with a virtual network offers the potential for a distribution platform for physical goods.   Imagine, if your customers bought product from you on credit using their mobile.  You would then physically take the product to your nearest agent whom you probably already know where she would sign for it.  Now, what if the agent arranged to ship your product to another agent closest to your customer and  then sent your customer a text message that the she could pick it up?

It’s leveraging these large mobile money networks of engaged users that provide the potential to deliver new products and services to address fundamental needs of consumers and business in emerging markets that we are watching, and hope to participate in, and that keeps us up late and gets us up early, and going — everyday.

If you are a provider, or add-on mobile money service and we have not included you we’d like to hear from you in the comments.

How do you see mobile money networks being used in the future for new products and services?  What other products or services do you see them developing and delivering?   Please give us your insights and opinions in the comments below.  We would love to hear from you.

Some additional reading that we used in writing this article

McKinsey: Mobile money: Getting to scale in emerging markets

Nextbillion.net: The Big Idea: Domestic Remittances in Africa – Demand is There, Will the Teleco’s Step Up?

Afrinnovator.com: Systems Thinking Applied To Why M-Pesa’s Economic Impact and Wealth Creation Lessons Affects the Ecosystem and Not Just the Bottom of the Pyramid

memeburn  How M-Pesa disrupts entire economies 

I’ve been thinking a lot recently about how a ‘network’ architecture of connected users plays out in Africa.

Businessinsider.com did a report The Key Ingredient To Massive Hits Like Pinterest And Facebook That You Should Copy.  It appears quite obvious, but is sometimes overlooked, that one path to success is to take popular things that people do in the real world and make them easy to do online.  Amazon (shopping), Craigslist (classified) Pinterest (Clipping) are all examples of this.

Large African Networks

MXit with 50 million users is probably the largest network in Africa.  In a recent survey the number one thing MXit users want more of was not news, or sports, but help in dating.

The high interest in dating is due to the popularity of MXit among Africa’s youth.  But, it does show how fast growth can be obtained when you help people do something they are familiar with — better.  Safaricom’s M-Pesa, is also a large network, but one built upon giving Africans access to new services that previously where unavailable; or too expensive.

New Networks

How does building networks in western countries compare to building networks in Africa?  There are many similarities to what is happening in the West and what has, and will, happen in Africa.  But, there are some difference too; differences that will have a significant, direct impact on people and society.

Populace

1. Africa surely has enough people to build large networks.  Mobile money’s success in Africa shows that when properly designed and implemented large networks of connected users can appeal to citizens irrespective of socioeconomic status or geography.  Will regional and/or cultural difference isolate network adoption?  Its hard to say, but even with difference between North and South, or East and West, there is commonality between all people when addressing fundamental needs and desires that transcends regional differences.  Further, the continent is so physically large with growing populace that even if regional networks occur they still have the potential to be large and significant networks of users.

Technology Adoption

2. Africans are already connected by mobile.  Can large networks of connected users be built absent data connections?  Can efficient, cost-effective networks be built with high data costs?   Will networks in Africa emerge that are unique to the continent’s technology and infrastructure limitations?  These are all going to be interesting things to watch in the coming months and years.

Institutions

3. African institutions are often weak, ineffective and many times corrupt.  How will building these new large networks of connected users that by-pass existing organizations with new ideas and services operate?  What will be their impact on government, corruption, the media, politics. culture, society?  It is not just a question of if these networks will grow but how they grow; and their impact on existing institutions and society in general.  Will these networks be welcome and fostered and allowed to grow and flourish?  Or, will they be stifled and suppressed?  Their inevitable impact is going to be varied and substantial and cross all aspects of society and daily life.  It will be interesting to see how the rule of unintended consequences manifest itself in these new networks.

Possibilities and Benefits

4. In the absence of strong institution you would think large networks of connected users would flourish.  Its kind of like water.  Water always seeks its on level.  The same with networks. Once they start, and the basic requirements of devices and connectivity are present, due to their viral nature they tend to grow, grow quickly. and are difficult to control; and virtually impossible to stop.  And, they have a tendency to amplify what is already being done by users or society.

1. They have ability to make weak institutions stronger and fundamentally corrupt institution weaker. Will governments and other institutions try to bend networks to their will?  Or, will they use networks to better connect and better inform citizens both up and down the chain.  Will in effect, the networks change existing institutions for the better?

2. They strengthen people to people connections and therefore have impact on economic activity.   Networks have the tendency to flatten levels, to remove middle layers and wring inefficiencies out of markets. Typically all good things (if your not a middle man). Networks could have effect on farmers by connecting them together and to markets and to customers.  They could effect small and medium sized enterprises (SMEs).  They are going to have impact on members of the informal economy by creating new connections and communication channels.  On youth; by allowing them to break some existing ties and make new ones and by opening up economic activity.  On job creation by creating “markets” for both permanent and temporary work.  These are just a few examples.

3. They have the potential for significant and direct impact on African’s lives.  In the West, large networks of connected users targeted consumer applications.  Things like trading pictures, or managing connections to friends, sharing recommendations about restaurants of tastes in music.

In Africa new large networks of connected user have the potential to fundamentally affect peoples lives.  Like growing and selling more food or finding a job, or voting for the right candidate because you understand her vision of the future.  And, to me that is exciting!

You can view Fred Wilson’s talk about large networks of connected users below.

When you scan or read a QR code with your iPhone, Android or other camera-enabled Smartphone, you can link to digital content on the web; activate a number of phone functions including email, IM and SMS; and connect the mobile device to a web browser.  Source

The problem is many people still use simple feature phones that can not access QR codes.  However, even simple phones can access information services using text messaging and Next2′s auto-messaging software.

Quick Response SMS allows anyone to receive your information using even simple phones and text messaging.  Next2′s SMS get  command turns your Next2 identity (user name) into a SMS auto-reply messaging service that has uses similar to QR Codes but without the need for a smartphone.

• Your can provide on-demand content 24/7/365 by text message to your target audience.
• You can create as many “codes” (keywords) as you want that work with our SMS shortcode and your Next2 identity.
• You can update your code content at anytime by logging into your Next2 account.  The new content is immediately available to anyone in any country in which we operate (currently Kenya and USA).
• You can incorporate your QR SMS codes in your printed or broadcast materials or at your store front or office.
• And, Next2 saves the identity of anyone that requests one or your codes so you can follow-up by text message at anytime.

How to get you QR SMS codes?

First signup for a Next2 account. It’s free and you get immediate access to all our software and features. Then use the MyFiles feature to create codes (keywords) to work with your user name (identity). You can create an unlimited number of codes. When you create a code you also create the message that is automatically returned when the code is requested by SMS. Each message can be up to 800 characters in length. That’s five text messages per code.

And, if someone texts get user name to our shortcode Next2 automatically replies with a text message(s) that list all the codes that work with your Next2 account.

How do the QR SMS codes work?

When someone texts get user_name code to one of our SMS shortcodes that code’s message is automatically return by text message. In addition to immediately returning your content we also register the user for the Next2 service, create a temporary user name for them and send them a password to their Next2 account so they can create their own codes. We also save their request to your Next2 account. You can review their request and follow-up by sending a text message right from your Next2 account.

How much does it cost?

There is not cost to send a get request to our SMS shortcode other then standard text message rates as charged by mobile network operator. During our initial release there is no charge to create a Next2 account of provide content using our get SMS command. In the future we will be adding new features and there may be a per message fee to fulfill get request the exceed 100 requests per month.

Can I try it?

Yes!

In Kenya text get Next2 about to 5557 to try the service.

In USA text Next2 get Next2 about to 95495

Image source http://en.wikipedia.org/wiki/File:Wikipedia_mobile_en.svg

Caterine advice seems to contradict common perceptions about how to provide value to users (and investors) in networked based applications. Now when you are proven entity that can raise capital it makes it easier to do it right. And, I think Caterina’s plans, to grow slowly, so you can learn, adapt, set rules, change and not overwhelm your audience makes sense.

However, the problem in building networked businesses is providing value to users from day 1 that is not derived from the “network” of users (ie lots of content from people that have not yet arrived and participated). Very few people take time to contribute to something that may have value in the future.

Likewise, in building networks of users, traction is important to investors — but, I don’t think Caterina has to worry about that.

it will be interesting to see how this story plays out with operators and in the market for number of reasons.   There is not much detail but as I understand it the proposed solution both enhances SMS with features found in instant messaging, such as live, and group chat, and acts as bridge between IP based instant messaging solutions and standard old SMS.

Apparently operators will need to install equipment on their networks and update client handsets to enable richer messaging .   Most likely this will leave out simple, feature phones.

These things should really be done as standards and it looks like Mavenir gets that;

Ideally, a platform like MCM becomes part of a standard, not a proprietary and closed system, and Shubh claimed that Mavenir has the exact same aim. The problem is the standards process is slow and unwieldy.

You don’t need to wait for a standards body to provide a piece of technology that you hope will become a standard.  It will be interesting to see how open Mavenir is by providing full open technical specification and/or software code.

Utilising mobile technology to make a difference during elections by increased advocacy, activism and mobilization: How a mobile application made a difference to the Nigerian 2011 elections. Mobile technology and the potential that exists to increase good governance and public accountability. The story behind ReVoDa – the election monitoring mobile application.

If you would like to learn more about Next2′s projects in Citizen Journalism and African Agriculture, please see Emeka at the conference of leave your contact details here and we’ll arrange a meeting.  Emeka will be departing Nairobi on the evening of the 24th.