“People are often forced to save their cash under the mattress. These people use cash for all their transactions. They can only buy things from people close to them.”
By Katie Collins
Ismail Ahmed, CEO, and founder of WorldRemit has serious business to do with the two billion unbanked people in the world. Speaking at WIRED Money 2015, Ahmed explains how mobile money is transforming not only his own company, a platform for families to send money to one another across geographical boundaries but whole economies. “For millions of people in developing countries, their lives revolve around cash,” he says. “People are often forced to save their cash under the mattress. These people use cash for all their transactions. They can only buy things from people close to them.”
Enter the mobile phone
A lot of these two billion unbanked people have access to mobile phones, which are enabling people to access financial services for the first time. Even for people using a very basic feature phone, their mobile numbers become their bank account. In 2014 there were 103 million active mobile bank accounts, up from 30 million in 2012. “These are services that are truly transforming the economies of developing countries,” says Ahmed. “These countries are becoming truly cashless.”
M-Pesa in Kenya is the mobile banking service that everyone knows, but in fact these days there are 261 different services across the world and they enable in total around 480 million transactions per month.
Mobile money not only makes it is easier for those to get hold of their payments, but it increases audit traceability. Cash, and therefore cash payments are difficult to track, says Ahmed. “Mobile wallets are changing that because with mobile it is possible to take an audit trail of the transaction.” The services then have a wealth of data that banks don’t normally have, making it much easier to ensure that money doesn’t end up in the wrong hands.
WorldRemit has been sending money to Zimbabwe for the last 4.5 years now. As soon as the company introduced mobile money payments, they not only quickly overtook cash, but the total number of payments being made peaked dramatically. Part of the reason that growth has been so dramatic is the fact that it is not only easier, but cheaper for people to get hold of their money. Previously they would have had to travel to the main city to pick up $100 but would have to pay $20 to get there. Using a mobile wallet, on the other hand, requires no transport and is free.
When we talk about mobile money, we often confuse it with mobile payments — things like Apple Pay, says Ahmed. “Those are not as transformative as mobile payments in Africa.” You can find people who have lived in cities in Somaliland, where Ahmed is from, who haven’t touched cash for months. “All of those transactions that used to take place within a cash setting, it is now possible to measure the GDP,” he says. “In Westgate Mall siege in Nairobi, Kenya, in 2013. In recent weeks, they have carried out a spate of attacks in Kenya where you have 45 percent of GDP going through M-Pesa, a large part of the informal economy has switched to formal.” The result of this is that the government has revised the country’s GDP upwards.
Not only are the lives of individuals being affected by mobile banking, says Ahmed, but it is proving itself to be “a service which is changing the world, which is changing the economies of developing countries”. The unbanked are becoming the mobile banked, and as informal cash-based economies become cashless, they are also becoming formal.
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