Mobile broadband + emerging markets = disruptive innovation
The widespread availability of mobile networks and the steady growth of mobile broadband in emerging markets is opening unexpected doors for convenient and affordable societal innovations.
Mobile broadband technology lets people transport data securely, faster and while traveling. Today I want to discuss the transformative and disruptive nature of mobile financial services, and how they are changing one of our most powerful business institutions: the bank.
Financial exclusion is an important obstacle facing emerging markets on their way to societal development. Banks often find little economic interest in serving marginalized populations because it generates little profit. It is not easy for rural people to get bank accounts and access to financial services.
In Kenya, social ties are very strong: families and relatives support each other with lending and/or giving money. In 2007, Safaricom, the largest telecom operator in Kenya, launched its world-leading mobile money system, M-PESA, a convenient, simple and affordable service that lets people transfer cash using their mobile phones. With more than 17 million Kenyan users, the service has become a huge success: it is also being used in Tanzania and Afghanistan, and recently launched in India. M-PESA has helped create many jobs through a growing ecosystem of start-ups and economic agents.
How can a telecom operator be so successful in providing a financial service completely outside its core business? Why is this service disrupting established financial institutions and brokers? In my opinion, this is a typical case of disruptive innovation. You can find all the ingredients of Clayton Christensen’s disruptive innovations theory: a game changer serving an unserved group – a group who historically couldn’t afford to own or use these services – with a simple, convenient and affordable solution.
Another example: India is the second-largest country in the world in terms of population. It has also an enormous number of villages – more than 600,000 – with poor transport infrastructure making the movement of goods and people extremely difficult. The only communication happens with mobile phones. One telecom operator has more than 70 million prepaid customers in rural areas. When a customer runs out of credit, he or she would normally no longer be able to make a call. So the operator developed a product that allows a customer to borrow some money from the operator, or another customer, and be able to make calls in an emergency. This was a true financial innovation that was well received by customers.
Who says that telecom operators are established organizations with complex processes who cannot innovate outside their core business? Who says that Silicon Valley is the only source of innovation? Innovations in emerging markets tend to solve societal problems and create economic value. In some cases, these can be categorized as “reverse” innovations, a concept coined by Vijay Govindarajan to describe where innovation originates in emerging markets and spread to developed markets.
In conclusion, we can see that mobility is not only a driver for growth and societal development, but also a medium for business and industry transformation. Mobile finance is disrupting established financial institutions and helping new emergent financial players.
The million dollar question then: which other industries will be disrupted and transformed in the Networked Society?