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:

New mobile payment contender looms as Rocket and PLDT team up

A few months before its lukewarm IPO late last year, Germany’s Rocket Internet took a $446 million investment from the Philippine Long Distance Telephone Company (PLDT), the largest telecoms operator in the Philippines. At the time, Rocket and PLDT said they were going to work together on mobile and online payment technologies – and now we know more about that arrangement.

On Tuesday, the companies said they will set up a payment services joint venture, with a 50-50 split and a focus on emerging markets. This is already a big area for Rocket, which now touts itself as “the leading internet platform outside the U.S. and China.” The firm made its name as a uniquely aggressive clone factory, rapidly copying established business models from the U.S. and elsewhere and rolling them out in new markets before the original companies had a chance to blink. That’s not to say that the clones don’t sometimes go on to follow their own path, though, and Rocket chief executive Oliver Samwer is these days talking about China’s rapidly growing web services company Alibaba as being the model.

Apart from providing its sprawling network of web firms across 100 countries, Rocket will contribute its “participations” in two of the payment operations it helped set up: Stripe clone Paymill, for giving e-commerce developers a simple way to integrate payments functionality, and Square clone Payleven, which provides mobile point-of-sale terminals. For its part, PLDT will throw in the operations and intellectual property of its Smart e-Money mobile banking and mobile wallet platform, which already has five million active customers and represents the largest “branchless banking” network in the Philippines.

Once the joint venture is created this quarter, subject to regulatory approval, Rocket and PLDT say it will be in a unique position to tackle mobile-first payment services worldwide, and particularly in emerging markets. I would take that as a plausible threat.

The genius of Rocket’s operation has always been the way in which it established operations in various spots around the world, then constantly rolled out new business models in them, seeing what stuck and quickly abandoning what didn’t. By doing so, it became the ultimate internationalization company – a field where rivals from developed markets typically struggle, and where Chinese companies such as Alibaba and Tencent (each of which has a budding payment service of its own) are only starting to dabble.

The combined financial services portfolio of Rocket and PLDT sounds fairly comprehensive, and PLDT has been in the mobile payment game for 14 years – long enough to develop a good understanding of how to use mobile to pull in people without traditional bank accounts (see the Smart Money service pictured above.) If this joint venture scales at typical Rocket speed, it will be formidable.

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