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This is a personal blog. Although the authors are affiliated with Coda Payments, the views expressed here are their own.



If you spin the virtual globe on GSMA’s Deployment Tracker and take note of the names of mobile money services around the world, you may find yourself with a sense of dejà vu.  There are no fewer than six countries where the name of a mobile money service includes the word “pesa” or some variant of it. Here’s the list:

  • M-PESA in Kenya
  • M-PESA and Z-PESA in Tanzania
  • Tigo Pesa in Ghana
  • M-Paisa in Afghanistan
  • M-Paisa in Fiji
  • mPeso in Nicaragua

What’s remarkable is that these services are scattered across East Africa, West Africa, the Pacific Ocean, Asia, and Central America. How can the word “pesa”, or some variant of it, possibly mean the same thing in all of these places? To answer this question I consulted Ignacio Mas, master of global languages. His answer is below, and we invite any linguists to provide their grand theories in the comments.

From Ignacio:

“There seem to be two roots for this collection of seemingly-related words. One is from the Latin "pensum" for weight, from which you have the modern Spanish word "peso." Developing standard weights was of course essential in commerce. "Pesos" were the pieces of metal that you'd put on the other tray in the scale to balance out whatever it was that you were weighing. It's easy to see how you'd go from a "peso" representing a standard measure of weight to representing a standard measure of value. By the way, naming currencies after standard measures of weight seems to be a well trodden etymological path: think of the British "pound."

Interestingly, we never had the "peso" as currency in Spain, even though the term became a unit of currency throughout Latin America and the Philippines (too bad you couldn't add "Smart Pesos" or "G-peso" to your list) in Spanish colonial times. But in fairly modern times we did have the "peseta" in the metropolis, before we had the euro (which I hope we will still have when your blog post gets published). It is thought that the "peseta" does not in fact derive from the Spanish word "peso" but rather is a diminutive of the Catalan word "peça" (pronounced "pesa") for "piece." You'd quote something as costing a few little pieces...

The second root I find is from the Sanskrit word "pȧd," meaning "one fourth" -- kind of like the US "quarter," I suppose. This led to the Hindi word "Paisa" and then traveled across the Indian Ocean to East Africa and seeded the Swahili word "Pesa."

I have not been able to uncover a link between the (presumably older) Sanskrit "pȧd," and the Latin "pesum." I’d assumed the link was Arabic, and that Arab traders popularized the eastern term wherever they went, but that doesn’t seem to be the case. There appears to be much more phonetic resemblance in present-day derivations of these words than between the root words themselves, so it could be coincidence.”


Glimpsing another path to digital financial inclusion

Last month I had the privilege of attending a meeting of the Alliance for Financial Inclusion’s Mobile Financial Services Working Group, a group of financial regulators from emerging markets that are dedicated to improving the policy environment for mobile financial services in their jurisdictions. The meeting was held in Moscow, which gave me an opportunity to learn more about the mobile payments landscape in Russia.

What I learned was astonishing. In Russia, customers can make a wide range of payments directly from their prepaid airtime balance: they can pay utility bills, purchase goods and services, repay loans, and even send money domestically or internationally. Here is the list (albeit in Russian) of a mind-boggling 10,000 merchants which allow customers to make payments from the prepaid airtime accounts of one operator, Megafon.

I have spent the last three years of my life helping mobile operators build and scale mobile money services. The two most difficult things in traditional mobile money services are building a cash distribution and collection network and acquiring customers—particularly since signing up new customers necessitates putting them through an often onerous CDD process. By using customers’ airtime accounts as a payment instrument, these challenges vanish. A cash collection network—the airtime distribution network—already exists, and everyone with a mobile phone already has an account.

Operators in Russia find the idea of mobile money as it exists in the rest of the world rather bizarre—why create an entirely new infrastructure for mobile payments, they ask, when one already exists? I understand their perspective. Imagine: were this approach to spread to other parts of the world, financial inclusion would take a big step forward. Roughly half of the world's population is financially excluded. Five years after M-PESA launched, only a tiny fraction of this group has been reached by mobile money. Alternative approaches like this one might help us bridge the gap faster.

To move in this direction will be hard. It will require a shift in perspective by mobile operators, who will need to think about their business model differently than they do today, and by financial regulators, who will need to weigh the risks and the benefits of this kind of payment. It will also require a new payment-processing infrastructure. But it seems to me these are obstacles worth trying to overcome.


Putting airtime top-ups into reverse

Nearly every mobile money service offered by a mobile operator allows customers to top up their airtime balance from their stored value account, i.e., to convert e-money into airtime. But none allow the reverse. That should change.

Allowing customers to convert airtime into e-money would be handy when customers need to cash in, but can’t find a liquid agent nearby; even in countries where mobile money has really taken root, there are still many more airtime retailers than mobile money agents, particularly in rural areas. Customers might even be willing to pay a fee, which would compensate operators for the fact that their costs of airtime distribution are usually a bit higher than cash in.

Why isn’t this already possible? It’s conventional wisdom that converting airtime into e-money shouldn’t be allowed because it would mean operators would be creating e-money that wasn’t properly matched on a 1:1 basis. But this is a myth. Before enabling this feature, an operator would pre-fund an account in the e-money system that is 100% backed with cash in the bank. Then, any time a customer sought to turn airtime into e-money, the operator would simply transfer the correct amount of value from their pre-funded e-money account into the customer’s e-money wallet. No e-money is created; it’s just moved from one account to another. Simultaneously, the operator would decrement the same amount from the customer’s airtime balance. The whole transaction could be triggered by an option on the user’s interface, just like airtime top-ups are today.

I have a hunch that this is an idea whose time has very nearly come.


NFC and the importance of timing

Last month Juniper announced that by 2015, consumers around the world would be tapping their phones and making NFC payments to the tune of $74 billion. To be sure, that’s one enormous market.

I’ve always followed NFC out of personal curiosity, and am generally imaginative enough to accept that someday, many people will make a large value of proximate payments using this technology. But I can’t help but feel that I’ve been reading the same headline every day for the last few years telling me that “NFC is an enormous opportunity, and its only a few years away”. In fact, it was Juniper who told me in November 2009 that NFC would be a $110 billion market by 2014. By my calculation, this suggests that last month Juniper actually lowered their forecast for the NFC market size by 33%, and pushed it out by 12 months. Juniper’s projections about the number of NFC-enabled handsets fell off an even steeper cliff between 2008 and 2011 (see chart).


I have first-hand experience in the fine art of guessing when a market will mature – and I can confirm that it’s very, very hard. The timeline for NFC’s rollout is especially difficult to predict because it will require a variety of players in a complex value chain comprising ~12 parties to synchronize their efforts. No one wants to be late to the party—but when it comes to NFC, it increasingly appears that the bigger risk is showing up too soon.

Arguably this is most problematic for new ventures, because they’re most vulnerable to the risk of simply running out of money before the rest of the ecosystem matures. VCs should be aware (and most probably are) that an NFC investment is unlike a consumer web investment: the value chain is complex and there are critical dependencies that even the most talented teams can’t themselves avoid.

Timing matters for industry giants, too. This recent post on Nokia’s blog reminds us that their first NFC prototype was released in 2003, which means that Nokia has been investing in NFC for well over a decade now. Presumably a few people in their finance department are wondering when they’ll actually earn a return from these investments.

I have no doubt that customers will someday enjoy rich NFC-enabled experiences. But I don’t envy the many companies whose success hinges on predicting just when that day will come.



Breaking the bottleneck

Last month Globe announced that it was launching GCash apps for BlackBerry, Android, and iOS devices. Aaron Oliver notes that because “feature phones are disappearing in urban areas and being replaced by Chinese, Indonesian, and Indian low-cost Android or BlackBerry handsets,” it is now possible for Globe to improve on its existing “nightmare” of a user interface for an increasingly large share of the user base.

This is true, but I think this news signals something more profound for the future of mobile financial services.

Today, mobile money for the unbanked is the domain of mobile network operators. Despite the wishful thinking of some financial regulators, it is nearly impossible for players other than mobile operators to offer mobile payment services that are accessible to low-income customers. A few months ago, I explained the principal reason for this on the MMU blog: operators control the SIM and the USSD channel, which are the two ways to present a secure user interface (albeit a clunky one) to customers with low-end handsets.

But in the not-too-distant future, the poor in developing countries are going to have more powerful devices that feature a data connection and a web browser. Some of them already do. According to Frost & Sullivan, 80% of mobile phones sold in Indonesia in 2010 were internet enabled, and they estimate that mobile data penetration—i.e., the percentage of mobile customers actually using data connections—was 21% in 2011. As handset costs and data tariffs continue to fall, these figures will continue to tick up.

In other words, it will soon be possible to deliver rich user interfaces, to the mass market, for payment services, either with native apps or on the mobile web. And while incumbent mobile operators like Globe will no doubt choose to do this, the real story is that non-operators will be able to do so, too.

Now the user interface is only one part of a credible mobile money service. You need to build a cash distribution and collection network, for example. Operators, with their existing airtime distribution networks, have an advantage over other players here. But it is not an insuperable advantage. With enough time and money, non-operators can build functional cash collection and distribution networks (in India alone, several have already done so).

This will reshape the entire mobile applications landscape, not just payments. Today, value added services for low-income customers is the exclusive domain of mobile operators. (That’s why the GSMA’s Development Fund is such an interesting place to work.) But this will change. Operators will have to compete with other companies and entrepreneurs to deliver compelling services to their customers.

Operators, quite naturally, view this impending change warily. Although they will be able to charge customers for the data they consume when accessing services offered by third parties, proprietary service offerings like mobile money will almost always have greater profit potential than undifferentiated data connectivity.

The next couple of years will be a “make or break” phase for operators in mobile money: only the ones that can build up a critical mass of users today will be well-placed to fend off competition from non-operators tomorrow.

But this development is unquestionably good news for customers. Imagine if the only websites you could visit were provided by your internet service provider. That is basically the position the poor find themselves in today when it comes to mobile applications. That day is drawing to a close.