Mobile Bill Pay: NOT a Solution in Search of a Problem

In the developed world, mobile payments often get criticized as “solutions in search of a problem;” however, in the developing world, this is definitely NOT the case.  While much has been written on the benefits of mobile money, this post will focus, in particular, on one use case—mobile bill pay, which has been a tremendous step forward in removing much consumer pain.

How most utility bills are paid in developing countries

It may seem strange to those in the developed world that hundreds of millions of people around the world must pre-pay their utility bills… and the huge majority do this by paying in person with cash.  Since billions do not have bank accounts and may not meet traditional definitions of credit worthiness, utilities and other entities require that these people pay for services in advance.

Unfortunately, this regular payment process is painful, especially for those living in remote areas.  Even for those living in urban areas with relatively close bill payment locations, they must take time to walk and/or incur the expense of getting transportation to the location, then wait in line to pre-pay their monthly bills with cash.  This process is a significant burden to those who can least afford it.

To make matters worse, in large parts of the developing world, a long walk to pre-pay a utility bill is not the consumer’s most significant concern.  The more real problem is the security risk posed by thieves.

“The Economist” wrote an excellent piece describing how the world’s poor need the stability and security—for utility payments, for example—that banks have traditionally offered.  However, banks have not yet been able to offer their services at affordable prices for this market segment… and still make a profit.  (Note:  newer, highly efficient mobile money/digital payment platforms offer banks a viable solution… more on this later.)

How mobile bill pay improves lives

Depending upon the particular mobile money solution, mobile bill pay enables a consumer to pre-pay their utility bill by simply sending an SMS message with the amount to the utility or other entity.  This capability saves significant time and money.  It is a mobile payment solution that has solved a significant problem.

GSMA sponsored a significant research study showing how mobile payment solutions can positively impact poor people’s ability to access sustainable water services.  This 35-page report documents the time and cost savings to water users in Kenya, Uganda, Tanzania, and Zambia.

Opportunities for next-generation of mobile money

Most European governments have either forced banks to offer free “basic” accounts to the poor or have done so themselves through state-owned institutions, such as post offices.  Other governments are creating innovative policies, like The Reserve Bank of India recently announced, to incent banks and others to provide these services to increase overall financial inclusion within their countries.

While the benefits from mobile bill pay and first-generation mobile money can be significant, even the GSMA research report summarized this situation as follows: 

“Despite its significant potential, mobile money is only an instrument for transferring and storing money in a secure and low-cost fashion. Ultimately, any transformational change will depend upon the institutional, financial, operational and regulatory responses that put this tool to good effect.” 

The advent of newer highly efficient mobile/digital payments platforms afford banks the opportunity to profitably serve the unbanked segment.  In addition, we believe next-generation mobile money solutions will be bank-led, interoperable and even more useful to consumers (recognizing that 90+% of mobile money transactions today are for mobile top-ups and P2P transfers).

In closing, beyond the significant benefits realized by millions of people around the world who are now able to conveniently and securely pre-pay their utility bills, studies in the developed world show there are positive unintended consequences for pre-paying utility bills:  consumers who pre-pay their utility bills use 5-14% less energy.  This is a win/win/win scenario:  good for poor people, good for solution providers, and good for our planet.  Let us know what you think.