Way back in 1994 Bill Gates famously said “Banking is essential, Banks are not“. Over the course of the last 21 or so years, that statement is arguably starting to ring true. There has been a massive transformation in the way we work, rest and play over that period. As consumers we have changed our behaviour dramatically and this has been enabled through the digitalisation of virtually everything we do. In recent years, technology, disruptive innovation and payments have also started to merge in a dramatic way. The resulting disruption is happening globally, but no where more than in the ‘developing world’ where people are having to do more with less. You’re probably wondering what has all this got to do with the 2015 Gates Annual Letter and more over what has the Gates Letter got to do with SEPA for Corporates? This post will highlight 3 reasons why it is important for banks particularly to embrace and take note of the themes within the 2015 Gates Letter.
2015 Gates Letter Overview:
Read the 2015 Gates Annual Letter for full details. In short Bill and Melinda are ‘betting on’:
- The lives of people in poor countries will improve faster in the next 15 years than at any other time in history
- Health will improve dramatically
- Africa will be able to feed itself
- Online education will reach hundreds of millions of people
- Mobile phones will bring mobile banking and payments to the most remote areas
- A call for Action to help make the above HAPPEN
The letter is full of optimism and will help to drive the global agenda over the next few years. But its important to note that its not all rosy, have a read of Why Bill and Melinda’s Annual Letter is both exciting and disappointing to get a balanced view of some of the things that were not mentioned.
I must admit I have limited knowledge about some of the areas mentioned in the Gates Letter so in the interests of relevance, this post will highlight and reference some of the mobile banking and mobile payments examples.
1. The Gates Are Focusing Attention on the Key Issues
Some of the initiatives in the letter are ‘quick wins’ that will make a huge difference to the lives of many people. Collating the information in one place and having people like Bill and Melinda sharing awareness is absolutely huge. The ability to hit primetime television (Bill Gates Viral Video), speak with world leaders and collaborate with industry, corporate and bank chiefs will both share awareness and ultimately make things happen.
For example in May 2014, the Lancet Newborn health: a revolution in waiting shared details of low cost measures that can help save newborn lives. I think its fair to say that most of us missed the Lancet article, but through the Gates Letter in a very short time frame we have become very aware of among other things the 5 ways to save newborn lives for $5 or less; breastfeeding, injectable antibiotics, resuscitation, skin-to-skin contact and umbilical cord care.
When it comes to banks the Gates Letter, referencing the United Nations, highlights Old Methods of Banking Versus New Mobile Banking:
- Old banking method – Cash is kept in the home
- New mobile banking method – money is digitally stored via mobile banking
- Old banking method – Investing in assets like jewellery / livestock
- New mobile banking method – You only spend the amount you absolutely need to
- Old banking method – Money is delivered by hand
- New mobile banking Method – Money can be sent instantly and securely to other users
2. A Mobile Phone and Digital Revolution Is Happening
The Gates Letter predicts that by 2030, 2 billion people who currently don’t have access to a bank account will store money and make payments using their mobile phone. The revolution has started, MPesa in Kenya and bKash in Bangladesh are widely cited examples of mobile payments in action.
Over 70% of adults in developing countries have access to a mobile phone and therein lies the opportunity. Innovation in developing countries is disrupting the status quo and impacting many different areas of day to day life in those countries. Its not just about payments though, mobile phones are enabling access to weather reports, market prices and crop planting tips…. all of which empower farmers with knowledge and information that they currently do not have access to. Mobile Payments are the hot topic today though, the process is transforming lives and communities by giving people access to money transfers – which are low cost, instant and secure.
Specifically the Gates call out that “By making small commissions on millions and millions of transactions, mobile money providers can make a profit serving poor customers, just as brick-and-mortar banks do serving the wealthy”.
3. The Opportunities Are Out There….
Many global banks and indeed corporates divide their business activities into the following regions:
- AP – Asia Pacific
- EMEA – Europe, Middle East, Africa
- LA – Latin America
- NA – North America
Banks / corporates within one or more of those regions need to understand what is happening not only in their respective region(s), but also elsewhere. Industries cannot ignore the disruption that is happening in other industries and countries. Mobile payments arguably rocketed in Kenya, but the repercussions of that initial project are now being felt globally. The Gates Letter speaks of the innovation “trickling up” to developed countries.
Rather than seeing various initiatives as something happening in a remote country far away, banks should look out for opportunities to collaborate with corporates and local communities. Combining banking knowledge and influence and working with local expertise will surely highlight new ways of doing things. For example some companies are piloting paying farmers and their employees in remote regions using mobile payments. This is being enabled through partnerships with in-country mobile operators and major banks. In the article The End of the Developing World, Dayo Olopade highlights the need for ‘lean thinking’, i.e. “translate minimal resources into maximum social impact”. Dayo provides many example of innovative lean thinking, including using shipping containers as health clinics in Khayelitsha, South Africa.
The Gates are laying down a challenge, and I’m guessing that banks particularly will be taking note. Bill famously said “Banks are dinosaurs, they can be bypassed.” (The American Banker, January 9, 1995 from a Newsweek interview in July, 1994). Well that is certainly happening in some developing countries. Couple the growth of mobile payments with the growth of alternative and virtual currencies and you have a real prospect of banks being ‘bypassed’.
The World Bank states there are 2.5 billion adults without a bank account – now there’s an opportunity!
Its also worth noting that the issue of banked versus unbanked is not just a developing country phenomenon. Alfred Hannig, executive director of the Alliance for Financial Inclusion (AFI) is quoted in the Financial Times article Developing world blazes trail for 2.5bn with no banking access by Jude Webber that in the:
- EU there are 58 million (!!) people in the EU without bank access, and another 92 million are underserved
- US nearly 10 million households are believed to be outside of the formal banking system
This suggests that banks aren’t properly serving people in developed countries, and perhaps some of these developing world mobile banking technologies can be deployed to the unbanked / underserved populations in the developed world.
Gates Letter 2015
While the Gates Letter offers a lot of optimism and hope, we should acknowledge as Duncan Green puts it the “messiness of real developing countries”. Internal conflicts, political unity, corporate responsibility are key areas of concern. Clearly, there are huge challenges but also glimmers of hope. Through digital technology the world has become a smaller place. So as we go about our daily lives in the ‘developed world’ we simply cannot ignore what is happening in developing countries. The initiatives outlined in the Gates Letter will, if they happen, dramatically change the way of life in those developing countries and the impact will be felt the world over. It will be interesting to see how the banks respond, if at all, in the coming years.
What do you think about the Gates Letter…