September 30, 2009 - Boom in SMS digital mobile phones depositing and dispensing electronic currency

The international financial services industry is beginning to leverage the enormous subscriber base mobile network operators (MNOs) command, 4 billion in 2008 according to Wireless Intelligence, the GSMA (the GSM mobile phone operators trade association) research arm in London. Banks are initially targeting consumers in the third world by converting their mobile phones into a mobile wallet where cash can be deposited to and spent from. The mobile wallet has generated great excitement and has demonstrated a huge potential in the third world. Electronic currency enables the mobile handset to dispense cash and accept deposits through a bank-affiliated merchant or MNO airtime reseller, thus enabling customer savings and even microloans. The capability leverages the short message service (SMS) on nearly every mobile phone.

Today, most electronic currency successes have been within national borders, but enabling the 190 million migrant workers—3 percent of the world population—to send electronic currency home via mobile phones is the next application financial institutions and MNOs are targeting. And for good reason, according to the World Bank, in 2008, migrant workers sent $433 billion to their home countries, most in the third world.

What’s surprising is how rapidly electronic currency is taking hold in the third world. At the Mobile Money Summit 2009 from June 22 to 25 in Barcelona, Caroline Pulver, FSD (Financial Sector Deepening) Kenya, an independent trust developing inclusive financial markets reported on the impact M-PESA (mobile, PESA money in Swahili) has had on the country. Pulver’s research found that by May this year, 40 percent of Kenya’s adults had used the service. The table below shows what Pulver found Kenyans spent their electronic currency on.

Usage Percentage
Store/save money for everyday use 14 percent
Store/save money for emergencies 7 percent
Pay bills 2 percent
Send money 25 percent
Receive money 28 percent
Buy airtime for someone else, 8 percent
Buy airtime for myself 14 percent

According to the central bank of Kenya, at the start of 2009, there were over 7000 M-PESA agents. This represented substantially more points of service than the combined number of bank branches (887) and ATM (1,435) in the country—serving 6 million customers or 15.3 percent of Kenya’s 39 million population. Since the program’s launch in March 2007 until February 2009, the cumulative value of M-PESA money transfers had reached $1.5 billion. As of February 2009, the monthly value of person-to-person transfers was $190.3 million.

Sponsored by the UK-based Department for International Development, M-PESA began by using Safaricom’s (a subsidiary of UK-based Vodaphone) airtime resellers to issue microloans that borrowers would repay at an interest rate reduced by eliminating the overhead conventional microloans carried. However, the tech-savvy, skilled worker in Kenya began using the facility to transfer cash from working husbands in the city to their families in the country: Safaricom had unintentionally become a bank with its handset providing a teller function and it airtime resellars dispensing cash. Today, according to Stephen Rasmussen, technology program manager at CGAP, an independent policy and research center housed at the World Bank, 70 percent of M-PESA subscribers are banking customers, not the unbanked customers originally targeted.

The service’s popularity drew the attention the Western Union Company, which has a 17 percent share of the international remittance market. (The World Bank estimated that Sub-Saharan Africa received around $20 billion in remittances in 2008, with Kenya accounting for $1.3 billion.) In December, last year, Western Union partnered with Vodafone, parent of Safaricom, to pilot a cross-border Mobile Money Transfer (MMT) service between the U.K. and Kenya. The service would enable customers to send remittances directly to Safaricom mobile subscribers in Kenya in minutes from the UK. The World Bank estimates the fees for transferring $200 cash from the UK to Kenya at $26.64: $15.25 for the money transfer and $5.69 for the currency conversion. It will be interesting to see if the cost comes down or is increased by $0.11 charge for the SMS message charge for an electronic currency transfer.

In June this year, Western Union expanded its reach in international remittance signing a deal with Zain, owned by Kuwait-based Mobile Telecommunications Company KSC, to enable Western Union currency transfers to Zain handset with the Zap platform. Zain’s service is available in Tanzania, where it’s larger than Safaricom, and Kenya where it’s smaller. Zain other distinction from Safaricom is enabling consumer-to-merchant purchase eliminating the need for a cash transaction. For the unbanked the additional fee will makes the transaction uneconomical. However, for business-to-business transactions, the service will have great appeal.

Celpay, owned by South African FirstRand bank, is the another service that has gotten a substantial following in Zambia and the Democratic Republic of the Congo where the DRC government uses Celpay to distribute government payments to former soldiers who have turned in their guns. Registered customers can use their electronic currency for merchant transactions, monthly bill payments, and fund transfer between participating phones. The company’s model is unique first because it provides solutions to businesses rather than end customers. Second, its nascent P2P model reaches unbanked customers without mobile phones, by sending the payment to agents with phones who perform money transfers or dispense cash. In June this year Celpay was processing $25 million per month in gross transactions.

One common element that permeates these successes is that all flourished because they were plowing a green field. Nothing existed before they emerged to provide the service. Another is that each found regulatory agencies willing and able to permit the services to take hold and flourish. In the case of M-PESA, once its popularity got notice, the conventional financial services sector attempted to derail the project only to be rejected by the Kenyan government. In the case of the DRC, electronic currency was an effective means to pacify a military force surrendering its arms.

According to the GSMA, the successes in Africa are being attempted elsewhere in the world. A greenfield deployment in Indonesia, the AXIS mDUIT project, is due to launch in December, 2009. In the Philippines, the SMART Communications’ Island Activations Program hopes to bring electronic banking to isolated customers on remote islands. Mobile network operator Roshan hopes to build an M-PESA-like service in war torn Afghanistan. Electronic currency is taking hold in the third world and in won’t be long before it will get a foothold in the developed world as well.

September 13, 2009 - A short history of consumer driven technology development

We’re in the midst of yet another evolution in communications. This one is the social networking transformation in which mobile devices are not merely used for voice and E–mail but now Internet terminals for the many social networks we all belong to. It’s yet another example of an activity that began on our desktop and notebook PCs that have migrated over to our handsets, just as text messaging and e-mail did before. And as with every disruptive social phenomenon, those trying to serve this fast moving trend have been caught unawares and are trying desperately to catch up.

In the early part of this decade, users in the 100s of millions outside the U.S.—Asia, the Pacific Rim, and Europe—began to use instant text messaging as a lower cost alternative to voice. The carriers supplied this data service in the spectrum unused for voice calls, which cost them next to nothing and for which they reaped large profits. Instant and short text messaging became its own social phenomenon, with a use model unique from voice and e-mail. The messages were likened to whispering in someone ear—especially during meetings or when you didn’t want anyone but the recipient to know what was being said. In The Philippines text-messaging, citizens-organized daily protests resulted in the ouster of Philippine President Joseph Ejercito Estrada in 2001.

While instant text messaging continued building a following in the U.S., Internet-base social networking on a PC started taking off in early 2004 with the debut of MySpace. Membership went from zero to a million users from January to February of that year and the numbers kept rising from there. Social networkers were now hanging out on MySpace with their PC, talking on their cell phone and/or texting on their cell phone. Cellular service providers in the U.S. were oblivious of the trend. They continued making it more expensive to text than talk, while in the rest of the world service providers did the opposite. Is there any wonder European cellphone users were texting more than twice as much as U.S. users (according to Forrester Research reporting in 2005)?

By mid century, U.S. service providers finally realized that data service was a viable business model. In 2005, CTIA-The Wireless Association, cited an installed base of 190 million cell phones and 90 percent could send text messages and 60 percent of those texting were aged 18 to 27. (A great many of the texters were voting for their favorites on “American Idol.”) By this time, too, the Blackberry demonstrated to telephone service providers that there was a business providing e-mail access via a mobile handset for enterprise users. But, who would want to surf the web with a mobile handset?

In January 2007, with the advent of the iPhone, the notion of providing total Internet browsing on a handset took hold. The idea wasn’t entirely foreign to service providers as they had dabbled with the notion by supplying radios you could plug into your laptop and access the Internet over the cellular infrastructure. And the Blackberry could be pressed into surfing duties, but the experience was painful and cumbersome. However, service providers had no idea of what it was going to take to keep up with millions of iPhone users accessing and moving large media files around the 3G network, something they are now reluctantly coming to terms with.

It took a year but the rest of the smart phone vendors with the service providers excluded from carrying iPhones finally caught on to how to provide web browsing and similar handset functionality—a compelling user experience. This is where service providers find themselves today, facing growing numbers of smart phone users disenchanted with the slow response from the web. And it’s only going to get worse as Apple is no doubt on the verge of introducing an iPhone with full 1080p HD video capture and playback, 20-megapixel still image capture, and no doubt higher fidelity audio capture and playback.

For wireless service providers the once the wireless spectrum is completely utilized, there is nowhere to go except to offload traffic onto the wired infrastructure. The handsets and wireless infrastructure will have to contain increased intelligence to route wireless connections so as to preserve bandwidth while still providing a responsive experience to the user. It’s conceivable that, like toll lanes on congested highways, wireless service providers will begin charging a toll for a faster browsing experience. Those unwilling to pay will be subject to operating speeds that will begin to resemble dial-up 64 kbits/s or less as large numbers of users flood the system during prime usage time.

The more things change the more they stay the same.

September 11, 2009 - Augmented Reality, Do I Want to Join in?

I’ve been interested in the next big enablers of the mobile Internet and I keep reading that they are likely to be LTE—the 4G wireless replacement for 3G and location technologies—augmented reality (much more intriguing). LTE is simply next generation technology replacing the previous and we can take that as a given. Everything will run faster; you’ll be able to move large files around quicker, etc.

Augmented reality, on the other hand, suggests something unique. According to Wikipedia, AR is a “real direct or indirect view of a physical real-world environment whose elements are merged with, or augmented by, virtual computer-generated imagery.” Your phone knows where you are using its on-board GPS and by accessing Google maps, it can determine what’s around you and can—with a touch-enabled screen—tell you about what’s around you.

I connected the term, which I heard today, with the Apple iPhone 3GS ad "Travel" in which the voice over asked if you want your own personal tour of Paris and declares “there’s an app for that” at which time the iPhone articulates “you’re standing at the center of Paris…” with a picture on the iPhone of the front of Notre Dame and the legend below “Point Zero & Notre Dame.” The iPhone app has a series of sites installed which pops up when the phone comes within range of the landmark (using its onboard GPS location finder) and voila!

I get the impression that the ultimate realization of AR will be a phone that is tied into a cloud-resident data base of all landmarks—not a preselected few a free app on the iPhone can store away. With the right app on your portable device, you will be able to ask the phone about anything you’re in the vicinity of—natural or man made—and it will give you all the relevant facts.

The reason AR will be successful is because of the enormous commercial potential the technology affords. The system that knows the exact location of Notre Dame in Paris will also know the location of nearby coffee shops, restaurants, and every other commercial establishment. Furthermore, the software that can tell you about the world around you is also cleverly evaluating you to determine whether to present you an offer for 10 percent off on a Latte from a nearby merchant or a special deal on a French author the software has determined you might like.

The great problem of becoming an integral part of an AR is that you’re being marketed to by the behavior you exhibit in the augmented reality. And the phone is the device that’s enabling it to happen. The device has not become big brother yet. All it currently has is GPS—the network knows where you are at all times (ironically, the average honest citizen is better monitored than nearly every parolee from a correctional institution), a compass—so the network knows which way you’re going, and an accelerometer which could detect if you’re moving or stationary. In the future, the plan is to attach biometric monitors—great for detecting medical emergencies, but wonderful for marketing to you if your blood sugar is low and you need a sugar fix—the patisserie is offering croissants at 10 percent discount with coffee purchase.

I begin to feel as if I’m part of a closed loop feedback system in which I respond to stimuli that are then readjusted to achieve some kind of behavior in me. The Stimuli are marketing incentives and the response from me is the purchase of a good. Great, I’ve become an element in a machine works that’s designed to endlessly cycle virtual coinage.

September 8, 2009 - Presenting our lives for the social graph to view in full 1080p HD

Presenting our lives for the social graph to view in full 1080p HD

I’ve had a chance to read through a number of articles this Labor Day Weekend on the next generation of smart phones. I’ve been struck by the innovation that chip suppliers and mobile handset makers are cramming into these small portable devices. All this innovation aims to serve users increasingly employing handset as a terminal into the “social graph.” I love the term social graph as it connotes a collective consciousness: what all the connections on all the on-line social networks have become.

And what are we putting into our on-line social networks: pictures, video, audio, and lots of text. These multimedia and text files provide tangible evidence of the significant as well as trivial moments of our lives: reminding ourselves as well as our connections of that trip to London, Paris, Taipei…; the birth of our first, second,… child; the Duran Duran, Grateful Dead,… concert…; the minutes and seconds of our lives.

Up until the first decade of the 21st Century, most of these memories resided in our mind, on paper, or stored away in boxes of photographs, 8-mm film, or VHS cassettes and DAT tape. Now, all of that emotional memorabilia has found a home in the social graph, stored away for as long as we keep our accounts active and available for others to view.

What’s making all this possible is the continuing availability of low cost silicon. This eighth most common element in the universe by mass, a tetravalent metalloid with the symbol Si, atomic number 14, and atomic mass 28.0855, has become to the information age what coal was to the industrial revolution. For the social networker silicon is providing the continuous improvement in the fidelity of these captured moments.

Texas Instruments’ new OMAP chip is promising to allow HD quality image and video capture and playback. The specs call for 20-megapixel photographs and 1080p HD video capture in handheld smart phone. How incredible is that! You will be able to capture an unheard of amount of visual detail to share with your connections. Though the images and moving pictures will only be as good as the eye that captures them, the detail will be there in every frame.

What’s propelling the continuing drive to electronically capture and share these transient moments? Are we all modern day Robinson Crusoe’s stranded on planet earth and needing the affirmation of our man Friday that our lives are meaningful, that what we do is contributing to some collective good for the world around us, and—most important of all—that we’re not alone in our small part of the infinitesimal huge universe?

Or maybe we just need to hangout and brag about what we've done.