It has become a mantra in financial inclusion circles that innovation in mobile financial services has stalled. Especially when it comes to products, there is a growing frustration about the fact that new offerings have failed to emerge. It remains the case that most new services look dispiritingly like M-PESA in Kenya—and that M-PESA looks dispiritingly like it did five years ago.
What explains the mobile money innovation deficit? I think it’s pretty simple. In most places mobile money is run by MNOs. And by and large, MNOs are not distinguished by their capacity for innovation.
At their core, MNOs offer the same services everywhere in the world: voice, SMS, and data connectivity. Mobile operators think they’re in the business of innovation, of course. First and most obviously, they are constantly upgrading their networks to offer more capacity and better data speeds. But mobile operators don’t drive this innovation agenda; their suppliers, like Huawei and Ericsson, do. (You can measure this investment by the magnitude of these firms’ R&D budgets. MNO’s don’t have R&D budgets.) Some of my readers might protest that MNOs have big product teams that are endlessly churning out new services. This is true, but when you evaluate the relative importance of these services (on the basis, for example, of revenue contribution), you’ll find that they pale in comparison to the old workhorses of voice, SMS, and data.
Some argue that it is for just this reason that we need the banks more involved in mobile money. But this is a non sequitur. Banks show even less of a propensity to innovate than MNOs. The product line of a retail bank in Cambodia is almost indistinguishable from that of one in Nigeria. Incredibly, this homogeneity persists even when you compare developed and developing markets. The products that Citibank offers me in the United States and the United Kingdom are hardly different than those that they offer customers in emerging markets. Product managers at traditional retail banks spend their time doing things like tweaking interest rates—on products that have been around for decades.
Banks and mobile network operators alike have achieved global growth primarily through replication, not innovation. So it’s no surprise that this same approach has characterized the international rollout of mobile money. But replication as a growth strategy only works when customers want basically the same thing everywhere, and when the product you’re selling meets that need. That’s true of mobile connectivity, and it’s true of banking. But if there is such a universally attractive formula for mobile money, it hasn’t yet been found—which means a little less replication, and a little more experimentation in the service of innovation, is called for. But let’s be realistic about where that innovation is likely to come from.