Bill Gates wants to tackle mobile banking, but not with bitcoin

Bill and Melinda Gates’ to-do list will probably put yours to shame. This year, in the Gates Foundation annual letter, the duo outlined their long-term, 15-year roadmap for the challenges that they want to solve. Their four main goals:

  • Health: Reducing the number of children who die before the age of five and the number of women who die in childbirth while eradicating diseases like polio.
  • Farming: Educating farmers and advancing farming techniques to curb malnutrition and reduce poverty levels.
  • Finance: Bringing mobile banking to developing countries to help people secure and make spending and sharing money easy.
  • Education: Using smartphones and tablets to bring online education to the poor while empowering women and teachers.

Ambitious is an understatement for the list, but it doesn’t mean it’s unachievable. Whether its drinking purified poop water to draw attention to sanitation problems or helping India eradicate polio, the Gateses have always had a way of putting the spotlight on a few of the world’s problem and bringing government, media and philanthropical attention to it.

This year, though, Bill and Melinda are shifting from backing micro-finance organizations that empower small entrepreneurs to bringing banking to all — from the farmer who keeps his value in livestock to the family that keeps their money stuffed under a mattress. And it won’t be done by installing a Wells Fargo in every corner of Africa.

As they wrote:

[blockquote person=”” attribution=””]”The key to this will be mobile phones. Already, in the developing countries with the right regulatory framework, people are storing money digitally on their phones and using their phones to make purchases, as if they were debit cards. By 2030, 2 billion people who don’t have a bank account today will be storing money and making payment with their phones. And by then, mobile money providers will be offering the full range of financial services, from interest-bearing savings accounts to credit to insurance.”[/blockquote]

And while bitcoin believers have long been touting the power the digital currency could have in transforming remittances and payments in developing countries, that’s not the solution Bill Gates has in mind — although it is a starting place. “We need things that draw on the revolution of Bitcoin, but Bitcoin alone is not good enough,” Bill Gates told Backchannel.

Specifically, he cited bitcoin’s inability to reverse or recall transactions — you can only send bitcoin back to someone if you complete another transaction — and the lack of attribution, which many proponents view as a plus. Gates also seemed wary of bitcoin’s price fluctuations, which 2015 has already shown can plunge bitcoin down 20 percent one day to only have it spike the next.

That brings Gates to mobile phones as the key for bringing banking to frontier markets across the globe. His foundation already invested to expand M-Pesa, the Kenya-based mobile money success story, and bKash, a Bangladesh-based up-and-comer. But those two investments are just the tip of the iceberg for what needs to happen to bring banking, and most importantly, monetary security, to the rest of the world.

Here’s how Bill Gates summarizes his mobile banking goal:

That doesn’t mean it’s going to be easy to get everyone who owns a phone to be banking on it.

Gates acknowledged that regulators can pose a problem, and that his long-term view of bringing banking to developed countries relies on the ubiquity of the cell phone. And even if mobile phones spread, there’s still a challenge of getting one in the hands of everyone, regardless of gender. In Uganda, for instance, 73 percent of males own a phone compared to 52 percent of females in 2013, according to Financial Inclusion Insights. (That also reflects who owns the bank accounts as well, where only 18 percent of Ugandan males have a bank account compared to 6.8 percent of females.)

And then there’s the whole problem of if it’s not bitcoin, then what is the solution? Gates didn’t pinpoint a company or a technology to take this forward — M-Pesa and bKash are just the start. But he has hinted at what he expects the future to look like before. Check out his speech at the SIBOS financial conference in October 2014 and at the 33-minute mark, Gates debuts a video example of how he sees mobile payments working a few years down the road:

Juniper: 1.6B people will make a mobile transaction in 2014

The smartphone may still be a long way from replacing the back-pocket or purse wallet, but people around the world are increasingly turning to their mobile devices to buy goods, transfer money and manage their bank accounts.

The organizational challenge of mobile app development

With mobile application development a persistent priority within the enterprise, most IT organizations find several common challenges among their efforts:

  • The creation of an effective, consumer-level, customer experience is not easy for many traditional developers.
  • Existing enterprise IT infrastructure does not lend itself to mobile applications support.
  • Mobile application development is not a one-time event, but rather a continuing process of ongoing innovation.

Customer experience presents one of the primary opportunities for a business to differentiate itself, and increasingly customers are interacting with companies via a mobile device. In many ways, the challenge is organizational, as IT departments struggle to gather the resources and create the environment required for successful mobile innovation.

Banks grapple with developing the mobile channel

Retail banking is one vertical where the greatest demands on mobile have converged: banks serve consumer and small business markets with complex, highly-regulated products that have the highest of security requirements.  Though mobile phones are consumer-oriented devices, banks in general have struggled to bring a consumer-level customer experience to their complicated mobile apps. But banks are investing heavily in the channel, and they are learning how to create an environment for successful app development and delivery.

Several recent developments in the financial sector provide indicators of how mobile application development can be both innovative and institutionalized:

  • NASDAQ has recognized the importance of the customer experience in using mobile applications, and as Wall Street Technology reports, has purposely brought in a cadre of designers far afield from banking technology to create their investor relations customer experience. The company decided it is better to bring in top-level designers and introduce them to financial services, than to take experienced financial services developers and introduce them to top-level design. Thus the firm formed a design team with experiences as diverse as online retail, Disney, Broadway theater, design agencies, and nonprofits. The team spent six months learning the NASDAQ business environment before creating its new app for investor relations professionals.  As Michael Cotter, the SVP of corporate solutions at NASDAQ OMX put it, “I think user experience is a strategic differentiator. I fully believe that the end user experience is what drives value.”
  • Similarly, the consumer driver app Uber has become something of a model for bank technologists. Uber was both the highest-rated non-financial mobile app among a panel of bankers and among the inspirations for JPMorgan Chase’s new mobile banking app.
  • From the other direction, banks are finding that aspects of their commercial-level applications can scale down for the consumer mobile banking market. Banks have already built applications that enable their commercial customers to see multiple accounts, keep running balances, make various types of transfers, and the like. Many of these same capabilities can be translated to consumer and small business products, and if they have been developed on a common mobile application platform, that translation is all the easier.
  • Even mid-sized banks are finding value in mobile application platforms. The MA-based Eastern Bank, with $8.7 billion in assets, opted for a mobile development platform to enable the firm to keep innovating with its mobile products. Development platforms will become viable for more SMEs as the tech market packages such innovation engines for smaller and smaller enterprises. This approach can be seen as part of a broader need to update financial services technology infrastructure.
  • A recent report on mobile banking highlights the receptivity found in the small office/home office (SOHO) market.  Just over a quarter of those surveyed were interested in a checking account package that included mobile banking and 62% of those were willing to pay a fee. Although the report apparently concludes that there is a great willingness to pay for mobile services, I expect that once the market (likely quickly) moves to mobile banking as a required, “check off” item, additional fees will not be welcome. A similar report shows that coming into the new year, the mobile channel represented 20% of merchants’ payments. That may not seem like great penetration, but it represents a doubling of volume over a 12-month period, and in that time the share of merchants accepting mobile payments more than doubled from 30% to 66%. Mobile banking as a share of online banking can probably be expected to increase at least as rapidly. And, there is of course a poll showing the importance of mobile to Gen Y’ers when selecting a bank: fully 78% say it is at least somewhat important.
  • Indeed, Bank of the West’s Quick Balance mobile app, which recently won the Monarch Innovation Award for most innovative financial service product/feature, targets the small business market. The app enables a customer to view five accounts simultaneously or, on an iPad, view up to 30 days of pending payments and eBills—capabilities traditionally provided only to commercial customers—as well as customized messages or promotional links. These commercial-level capabilities are combined with a consumer level of simplicity: no traditional login is required to access the multiple account view.


In sum, although banks have some scars for their early efforts and misses in designing customer-friendly mobile apps, their experience shows the following:

  • The mobile channel is inevitable for both consumer and business customers. A rapid adoption curve and changing demographics are transforming markets.
  • Simply assigning traditional engineers to design consumer-level apps is probably not a good solution, with nontraditional design engineers likely needed to provide the level of customer experience required: Consumerization is a trend to which IT departments must proactively adapt.
  • Infrastructure must be updated, and a modern development platform is critical not only for agile, continuing innovation, but also for the efficient leverage and integration of development components across applications and departments.
  • Although these requirements are first realized within large enterprises, vendors are increasingly packaging products to enable development and innovation for lower levels of the SME market as well.
  • Applications and IT departments that can combine sleek consumer design with institutional-level platforms and practices can effectively bring higher levels of products to lower levels of the market more effectively and efficiently.

Facebook is wisely taking a global view in payments

Facebook is reportedly planning to launch a payments offering that will surely include mobile phones. Rather than focusing on proximity mobile payments, though, the social network appears to be developing a banking service targeted largely at emerging markets.

With Mobile Money, T-Mo thinks even further outside the box

T-Mobile introduced a banking service aimed at giving consumers who don’t have traditional accounts an affordable way to manage their funds and cash checks. Mobile Money may not generate much in the way of profits, but it’s a smart move on several levels.