Mobile Gutenberg, Banking Papacy

“The mobile phone is like the printing press, so who’s the Church?” - Emrys Schoemaker

This afternoon I had the pleasure of having lunch with Emrys Schoemaker who used the above metaphor to compare the mobile phone revolution in developing countries with that of the printing revolution in 15th century Europe spurred by the Gutenberg press.

For anyone who needs a refresher, here’s the background from Wikipedia:

A printing press is a mechanical device for applying pressure to an inked surface resting upon a print medium (such as paper or cloth), thereby transferring the ink. The mechanical systems involved were first assembled in the Holy Roman Empire by the German Johannes Gutenberg. His newly devised hand mould made for the first time possible the precise and rapid creation of metal movable type in large quantities, a key element in the profitability of the whole printing enterprise. As early as 1620, the English statesman and philosopher Francis Bacon could write that typographical printing has “changed the whole face and state of things throughout the world”.

The summary of the aftermath is that reality of ‘movable type’ lead to all sorts of movements, from the spread of religious texts like the Christian Bible, to the revolution of science through the publishing and sharing of research, to the spread of philosophy and heresy (which often conflicted with religious ideology). Thus, the printing press not only offered a new form of mass communication, but it totally disrupted the contemporary gatekeeper of knowledge and education…the Church. At the time it was largely the Catholic Church, hence the title of this post.

The comparison to mobile is that for most of the world, the mobile phone is even more of a disruptor than the Internet and the personal computing revolution. Mobile infrastructure, in general reaches more people of varying classes (the poorest to the richest) around the globe than the internet. So if mobile is the great disruptor, then what exactly is being disrupted? I don’t think mobile alone is disrupting governments or news agencies, at least not as much as technologies in use on the Internet. Instead, I think the one institution that’s being totally unsettled by the proliferation of the mobile phone is none other than…the Bank.

Banks exist for two reasons, to store and exchange financial assets. For someone who is unbanked, both of those are extremely difficult. If you store too much money in your house, your neighbor might come in and steal it; if you walk around with too much money in your pocket, you might get robbed on your way to buy something. The Bank makes it possible to divert that risk to an entity that has the resources (theoretically) to protect itself in ways we can’t as individuals. Later credit and debit cards came along and made it even easier for customers make transactions over even greater distances.

Mobile phones, in all regions of the world, are somewhat different than computers because they inherently operate using a form of currency. To talk on a phone, you have to pre-pay for ‘air time’ or credit. A mobile subscription, is just an advance or delayed payment for the same allowance. Thus, every thing you do on a mobile phone is a transaction. (In exchange for talking this long or sending this many messages, I give the mobile company so much money.) What’s unique to the mobile platform is that these transactions can be treated like currency. If I pay for $20 dollars of mobile credit and I send that $20 dollars of credit to a friend, he now has ways of getting $20 of value (either directly or indirectly) from my transaction. He could sell them to another friend for $20. Or he can use $20 in airtime to send messages or talk on his phone.

Simple right? What’s missing from that exchange? The Bank.

Mobile transactions have the potential to marginalize the financial institution known as the Bank entirely because the mobile operator itself replaces the need for a thirdparty to track the assets and complete the transaction. For an example of this look no farther than Kenya where 11% of the country’s GDP now passes through Safaricom, the owner of mPesa. 20% of the country’s GDP is projected by 2011.

In a recent post on ICTWorks Wayan Vota writes “With such success, mPayment innovation will be severely curtailed in other countries. Banks will demand to lead mobile payment processes - they’ll not loose that much business again.”

This might be true, but in admitting that, banks (who don’t own any mobile telephony infrastructure) are admitting that they have to fundamentally change their business, at least as it’s existed until now. They need to own the infrastructure (buy or build a mobile telco), control more of the infrastructure (partner with a mobile telcom) or they need to shut mobile telcoms out of the market entirely (usually by lobbying governments to make mobile banking harder, or impossible to accomplish). By not admitting that, they risk being caught off-guard by the mPesas of the world (the 21st century equivalent of 15th century heretics).

Right now it seems most Banks prefer the last two options. They want a piece of the pie, or they want the whole pie for themselves. Owning the infrastructure, is probably more risk than they are willing to take on (after all it’s not the fundamental nature of their business model), so acquisition of infrastructure isn’t attractive to them.

Now, I’m not suggesting that Mobile phones are the only way to do this. Facebook, with it’s 500 million users and fB credit platform are another way. PayPal is another. But as popular as Facebook and PayPal are, they don’t compare to the 5 billion people using mobile divides worldwide. And no matter how we look at it, banking has to fundamentally change to stay relevant on the face of new mPayment competitors who already offer their customers a form of ‘credit’ and who can complete transactions as quickly, as reliably and as cheaply as they can.

There are other advantages to banks in developed countries, but in developing countries…the restricted access to credit, the lack of a need for mortgages and limited access to international transactions make those advantages entirely irrelevant for the 4 or 5 billion of the world’s poorest.