Mobile phones are having a profound impact in Africa, and at the forefront of that is the idea that a phone is also a bank. The reason this is occuring is that the mobile network operators (MNOs) have built mobile money networks, and are using startups and other businesses to power value added services on those networks. To give some examples of what I mean, look at the ways people use a phone as a bank in Africa. These services are done without downloading any app. They come built into any phone you buy. I’ve put the global company that is most similar in parentheses.
- People use their phone to send money to friends and families. (Venmo)
- People save on their phone (Bank of America)
- People access credit on their phone (Lending Club)
- People pay for goods and services on their phone (Visa, Paypal)
- Companies pay their employees to their phone (lots of banks)
Of all of these unbundled bank services, the most interesting to me is how a phone can be used to provide credit. Several start-ups in Africa (including the one I work for), are using customer’s mobile phone data to generate credit scores, and then on-lend to that customer. Most of these loans are small, ranging from $3 to $50, but the impact is huge. These start-ups are leapfrogging traditional banks and pulling unbanked customers into the formal financial sector. They use scalable technologies, predictive models, and algorithms to understand customer’s digital footprints. They analyze non-traditional data like customer’s mobile phone records, their payment history, their social media usage and their internet spending to generate insights on customers and provide them with credit scores. They are answering the question, how do you bring billions of people into the financial sector if they’ve never had a bank account?
At the core of all of this is the phone and the data the phone generates. Just like the big themes in the West right now, referred to as the idea that there are “super computers in our pockets”, and “big data”, Africa is experiencing it’s own phenomenal technological revolution. I love that phones are being used to unbundle bank services. The companies that are unbundling banks are doing it with non traditional, scalable data. They are using customers digital footprints, a regular daily offset from anyone with a phone, to create financial products. That is incredible. There is some great innovation in Africa, and I won’t be surprised when American start-ups start looking to Africa for solutions and new products.