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