Cellular Phones as Personal Authentication Devices
This past February at the GSM Congress in Barcelona, Spain, 19 global carriers and MasterCard announced an International Remittances Pilot that will enable subscribers (citizens, people, consumers) to send money credits across countries. The impact of a successful pilot could affect 500M people to send money credits at the cost of a cellular instant message plus a fixed fund transfer fee. Banks, Money Transfer Business Operators and others, beware, your efficiency and close loop archaic infrastructure will be threatened. Fix it or become irrelevant!
Mobile devices are becoming "personal authentication" devices. What this means is that the cellular phone or smartphone, is morphing/transforming into your own very "you" -- that is to say these devices are becoming computing powerful just like your favorite laptop (that you take Starbucks, Panera and the likes) or your desktop at home/office (go mobile with a laptop...for now). So what is going on here? Well, simply people want to take their personal records, diaries, secret black book, password, and all kinds of information in a portable easy to use and accessible device on the go. This is where the use of the word mobility comes into its own; allowing people to walk, run, sit and relax knowing they have "access" to their information that makes them active and functional to carry out their personal lives.
To understand the effects of International Remittance, we need to understand human behavior and their habits. The one person habit that is constantly a personal transaction that can be a nuisance, is money! This means managing money when the person is in a mobile state of activity (e.g. purchasing a stereo system at Best Buy or at Starbucks buying six Lattes...for the office that is). The fumbling of the wallet (ladies/men) for cash, checks or credit cards to pay for goods and services can be excruciating. But there is another side of this story that does not click with highly enabled tech and educated people who may read this blog. In other words, I deduct from thinking that those readers who are conditionally inclined to read blogs are highly educated, financially stable and are in demanding professions. But what about the majority of the global population that is not as fortunate as us that can freely purchase anything using technology to make better consumer decisions?
This type of population is the global majority and are classified by the financial systems of the world as "unbankable (really? nice word to use by these guys...how about unprofitable...would prefer "unreachable" by financial pundits"). In any event, these people that emigrated from third world countries to first world countries (e.g. Canada, UK, France, Germany and USA) seek out a better financial and secure social position in comparison to their previous home country. Once acclimated into their new first world country, most of them become hard workers and obedient citizens who have adopted their new home and will make relentless efforts to have their offspring continue to flourish as well rounded citizens. The one daily and ritual behavior of these new potential new citizens is their constant thinking of what and who they had left behind and how to take care of them. With that, the immediate help they feel that can create peace of mind and responsibility to their love ones is "money".
If you read this far, thank you. Needed to provide the above paragraphs to make my point regarding global migration and the affect of money movement by these people and how cellular communications has an important role in their lives. The amounts of movements of money sent by these emigrants herein referred to "International Remittances" from first world countries to third world countries has reached in 2006 over $199B (if high-income countries were included, then remittances would be $268B) where Asia (24%) and Latin America and Caribbean (42%) have the Lion's share (source: World Bank - see URL)! This amount is greater than the foreign direct country sanction investments (source: World Bank http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2007/01/22/000016406_20070122114501/
Making Sense of Cellular Devices and International Remittances
Now here comes the correlation of International Remittances and cellular phones. At the end of 2007 there will be about 1.6B cellular devices (source: CTIA). A high number considering that the world's population end of 2007 will hover at 6.6B (source: http://www.census.gov/ipc/www/worldpop.html ) or 25% of the population are carrying in their person these cellular devices! And this number will get higher as global cellular saturation is years away. Now back to these potential citizens. These potential citizens seek two basic life necessities when arriving in their new country: personal security and communications. Once those achieved, all other human life necessities follow (the stone age human clans established this order). Thus by securing these two life necessities, opportunities abound for selecting one or both of these. For now we will select communications, that is personal cellular communications.
With the easiness of activating a cellular terminal by these new citizens, they have met one of the two life basic necessities: communications. There is a sense of exhilaration by them that they can make at anytime and their leisurely convenience make a voice call to anyone. For some this is the first time they use this type of technology; a phone that we in developed countries take for granted. So now that these new potential citizens have secured both life's basic necessities they can conduct their personal and business activities. We will focus on the personal activity of sending money back to the old country.
Currently, the potential citizen would embark on sending money back home using the traditional and exorbitant expensive money transfer business operators such as Western Union, Money Gram, TransExpress, or banks. Fees from these operators range from 3 - 11% of the transferred value excluding fees paid by the recipient in the home country. Why then is it so costly to send money country-to-country by these simple potential citizens? History has attributed this to perhaps lack of citizen awareness/knowledge, margin greed and inefficient money transfer messaging systems like SWIFT, FedWire, ACH and others, that are not IP (Internet Protocol) standards, but are the standards created by operators and financial systems (archaic and falling apart). So this bring us back of the headline news of this topic that carriers and MasterCard will be embarking on a pilot for transacting International Remittances. The simplicity of this announcement is that telephone operators since the evolution of the Bell telephone system, global operators created harmonious connection standards that are prevalent in more than 180 countries and whereas private and public enterprises have adopted these standards that are lacking int financial system networks. Operators or carriers, have network interoperability that allows them to offer not only voice telephony, but increase their differentiation to their customers by including offers such as messaging, media & entertainment and now remittances services.
In conclusion, I am asked why do I write about wireless payment systems (prepaid, top-off, policy rating, content settlements), specifically credit card associations (Visa, MasterCard) and payment companies (Amex, Discover, JCB)? Simply put, a tired network that has a history of overzealous card associations that goes back to east banks versus west coast banks (and you thought gangsta rap music had their rivalries!).These entities have not evolve to include new type of potential citizens utilizing new methods of moving money between all people and all business. Until these incumbents fix their payment networks, cellular operators will thrive not only in International Remittances, but using remittances to buy good and services via money credits that make sense for multi-industry holding companies like Carlos Slim Helú's group of companies (Grupo Carso, CompUSA, Telmex, América Móvil, Grupo Financiero Inbursa, TracFone, Grupo Sanborns, Sears Outlets). Thus a good balance of physical (retailers) and virtual (telcos) presence. This balance brings a huge opportunity for Carlos and his vision that can truly serve the needs of the unbankable population of new potential citizens of the U.S.A. as well as those in Latin America and Caribbean Nations. Let the games begin!