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Developments in Mobile Payments and Crypto Currencies both scare and rivet me in equal measure. Working within a cyber security company I am all to conscious of the risks of mobile payments, mobile banking and  internet banking.   Digital currencies, too, pose security challenges and the absence of regulation as they continue to win favour globally does, frankly, keep me awake at night.

I look at these security and regulatory challenges, though, as problems yet to be solved. What fascinates and inspires me is the potential for m-payments at least, to be harnessed and deployed to reach the unbanked and underbanked populations  in every country in the world.  I’ll quote a modern cliché, and remind you of the fact that there are more mobile phones on the planet than there are toothbrushes. Clearly, today you don’t need wealth to hold in your hand a means of connecting digitally  to anyone, anywhere and increasingly also to inanimate ‘things’. Eight years ago I revisited some villages in South India where I previously lived. I’d been away for six years and the image that sums up the degree of change that had ensued is that of  3 lean and wrinkled cashew farmers sitting on a wall wearing nothing but a Thalakapatti (turban), a loin cloth on a string with a mobile phone hooked onto it. 

A study by Bank of Indonesia in 2010 states that over half the world’s population do not use formal financial services to save or borrow.  That’s in excess of 2.5 billion adults without formal banking arrangements. The majority of these (62%) are in Asia, Africa, the Middle East and Latin America. So now you can see why I ‘m passionate about the potential of digital finance. It has the capacity to reach the underserved and, in theory, should be far more cost efficient to operate than traditional banking.

Back to the problem situation, and this quote from American author James Baldwin from 1960 still rings true.

“Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor.”

Gosia Glinka, writing on Forbes.com cites the problem of paying $5 to cash a £25 cheque in a minimart.  Glinka goes on to mention the unregulated ‘alternative financial services providers’ such as money lenders, pay day loan providers, loan sharks in other guises, money transfer agents and cheque cashers.  In Arkansas, Dominik Mjartan of Southern Bancorp states that the average underbanked household spends 10% of its income on fees to these unregulated bodies. Add to that the high tariffs for Pay As You Go phones, utilities and other things, and you being to see how a little goes not very far at all.

The upside though, lies in the potential to harness mPayments to disintermediate the sharks and service the underbanked for lower fees thus creating a more level playing field.  Challenger Banks can also play a role in serving the underbanked. Tesco and M&S have a phenomenal distribution network through their store estates. There are most definitely many times more stores than banks in or near most postcodes in the UK. Thus I look forward to seeing a bank counter next to the pharmacy in a supermarket or a post office style booth in a Tesco Local concession at a petrol station.  And, because these organisations have the potential to recycle cash, their cost base could also be lower, allowing this to be reflected in the design of the financial services they offer.

So let’s see how philanthropic the new breed of retail banks are in their attempts to reach out to the underbanked and deliver value, and watch the M-payments story unfolding until the lightbulb moment when it all comes together in a solution that could reach beyond  the fringes to support financial inclusion.