Charging the channel: How are we keeping the wallets on?

This post is written by Sam Grant, an SBI consultant based in Brisbane, Australia

Original Drawing by Sam Grant

Low Battery, beep beep beep, power down. It has happened to all of us, out and about during our busy daily lives, conversing with friends or business colleagues, when all of a sudden our mobile phone battery dies, and with it our ability to receive the latest tweet, SMS or Facebook status update. Now imagine that your cell phone is also your wallet and when it turns off so does your access to cash.

One of the benefits of a traditional wallet is that it will never display a “low battery” message and does not require an electrical outlet. A vital, if somewhat peripheral input in every alternative delivery channel (ADC) system is electricity. Without reliable, affordable access to electricity the advantages offered through mobile enabled financial services is severely restrained. If the path to improving access to financial services is tied to portable electronic devices then this path must also encompass issues surrounding access to energy.  Cell phone ownership has permeated most urban environments around the world but growth in rural areas is constrained by network coverage and access to energy. In rural areas where population density is low, villagers often must walk great distances to charge their mobile phones. Many of these cell phone users only turn on their phones when a specific need arises. In order to tap into the expansive amount of activity and innovation taking place in the “banking beyond branches” ecosystem, rural populations and financial service providers must find a way to overcome the charging challenge.

I was recently exposed to an example of this dilemma through my work with SBI in a remote region of Papua New Guinea.  While working with a microfinance client in a small village I was able to witness over the course of two years the change that took place after cell phone network coverage was introduced. We knew from client surveys that once the towers were in place several families were withdrawing money to purchase phones and airtime. While cells phones were relatively easy to purchase, finding a reliable charging source was another matter. Many of the areas inhabitants lived in small villages spread over a wide geographical region. Travelling by canoe and foot to the nearest generator added greatly to the cost of using their phone.  During one of my visits I decided to test the market demand for a line of small-scale solar systems produced by a social enterprise that designs and distributes solar lighting systems in emerging markets. The units were designed to provide high quality lighting and phone charging capabilities at an affordable price.  Within the first day, half the units I stocked were sold. The project demonstrated a strong demand for lighting and phone charging products.

Unfortunately, while the potential application for mobile phones grows each day — and with it the opportunity for ADC expansion — the reach and diffusion of cell phones in many emerging economies is quickly outpacing the growth of electricity infrastructure.  While a handful of social entrepreneurs are working to make solar systems available to low-income families, these companies have only made a small dent in reaching the estimated 1.6 billion people that do not have access to electricity. Which leads ADC practitioners to ponder one more uncertainty in the evolution of the financial intermediation landscape. The gap in electricity infrastructure creates the need for one more “foot bridge” to be built in the quest toward creating a commoditized financial platform.

Going forward, it will be important to find ways for ADC solutions to link with power distribution. In Papua New Guinea, the main mobile network operator (MNO) has already partnered with the government-run electric utility to allow customers to purchase units of power through phone credit. Perhaps power companies will join financial institutions (FIs) and MNOs as the third player or potential partner in the ADC landscape. It is not too hard to imagine a single agent network that provides cash in/out points, phone credit, and power units.

For now, electric utilities in most emerging markets can barely meet the demand in urban environments. As such, rural communities increasingly seek to to generate electricity through disintegrated power systems. My prediction is that as the price of petrol increases, these systems will increasingly rely on renewable sources and the companies providing these systems will likely seek to integrate with financial and telecommunication services. In many rural areas, the demand for cell phones is increasingly driving the demand for power.

In later posts we will explore what business models are emerging to overcome the charging challenge. How are power-companies currently collaborating with FIs and MNOs and what will their role be in the future of ADC evolution?

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12 thoughts on “Charging the channel: How are we keeping the wallets on?

  1. The post touches the subject of “Banking Beyond Branches” from yet another angle and signifies the need for identifying and measuring the multiple risks involved in (BB) branchless banking.

    In a lighter vein, BB customers transacting through cell phones may now need solar energy battery chargers or maybe just “solar” mobile sets in case the other infrastructure for reliable energy is too huge a subject to be dealt with just for the sake of banking beyond branches.

  2. Really interesting topic, thank you Sam Grant.

    Do you have any comparative stats on cost / watt to produce for various small-scale, medium-scale and above electrification solutions? That would be interesting to see…or any non-subsidized models of financing such solutions?

    Thanks! Look forward to future posts…

    • These are great questions, which I will research for the next post. I have found that most small scale electrification projects receive some form of financial support to make them viable either through philanthropic donations, carbon financing or government support.

      Many of the business cases that have been made for small solar lighting systems have compared the costs per lumen (degree of light produced) for candles, kerosene, disposable battery operated lanterns and solar lighting.

      Like many renewable energy products its important to compare lifetime costs.

    • One answer is grandmothers. Yes, grandmothers who have graduated from a Barefoot College. You might like this short TED lecture about solar engineer training taking place in India and Africa. The founder reminds me of you http://www.ted.com/talks/bunker_roy.html

      In my experience the national distributor has a contract to mediate between the product producer and the end user. In Papua New Guinea the national distributor for a line of solar lights has a 100% replacement policy for all faulty products. Typically small lighting units will have a life span of 2-3 years and the solar panel will have a life span of 5-10 years. If you assume that a family spends 1 dollar a week on kerosene or candles then a 20 dollar product will be paid off in 5 months. Everything after that allows money to channel into other activities.

      Product quality will continue to improve as more companies enter the market and compete for 1.6 billion person market.

  3. Bueno Samual, well written about an interesting topic.
    Are we really headed toward wired wallets? I can imagine this in the most technologically advanced cities, but I have questions about the feasibility timeframe for developing countries, and how useful this would be for rural areas. As you highlight, electricity is a huge issue. Beyond that, the desire to move beyond cash money is questionable in most places. I can see banks being eager to profit from electronic transactions, but what benefits do the rural villagers derive?

    I raise this question in part because I know there is resistance to credit cards worldwide, given that local vendors must pony up 4% of their sale to Visa or Mastercard…

    Efficient solar would open up many doors.

  4. Good illustration of the problem of inadequate electricity infrastructure for mobile payments in less developed countries. I’m curious to see whether this problem will be solved faster by technological innovation or by economic development. My guess is that technological progress in battery technology will be the first to solve this problem.

    A recent post in The Economist (October 10, 2011) discuses “Koomey’s law”: “that for a fixed amount of computational power, the need for battery capacity will fall by half every 1.6 years” http://www.economist.com/blogs/dailychart/2011/10/computing-power

    This suggests that future devices may run on “ambient” energy harvested from light, heat, vibration or TV transmitters.”

    • Fascinating article. Thanks.

      I think that you are righting in assuming that innovation will solve many of the current hurdles facing mobile banking platforms

      However I also believe that as computational power becomes more efficient, customers will demand more sophisticated mobile devices. The utility of these devices is increasing everyday. Many consumers in lower-income countries might skip laptop/computer ownership and go straight to smart phones and tablets.

      India has already stepped into this market with the unveiling of the 35$ touch pad. http://www.bbc.co.uk/news/world-south-asia-10740817

      I think this demand for smarter phones will stimulate demand for power solutions before a technological battery solution emerges.

  5. I am happy that you are still working on clean energy and microfinance for disadvantaged people. Our small Green Unit (G-Unit) in XacBank, Mongolia within 2 years has became a Big Green initiative partners with many donor organizations including Millenium Challenge Corporation and with over 100 people involved.

  6. Interesting stuff, Mr. Grant. The social enterprise I am working for in the Philippines distributes solar powered lanterns complete with phone charging capability. Which model of solar light/charging equipment are you working with?

    Luke Gran brought up an important point, which is the maintenance of these devices. We have a network of technicians in the Philippines which provide technical assistance and maintenance services for our solar lanterns. This is a crucial step in delivering a quality product, and is the reason that these devices best serve the needs of the poor when supported by a sustainable business, not by charitable donation.

    Look forward to reading more.

    Best,

    Danny

  7. Pingback: Build it, and they will come… but will they stay? | Banking Beyond Branches

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