Reality and dreams of mobile finance
“M-Pesa is a great example of how money goes to the mobile, and telcos have a great opportunity to be banks in the emerging economies.” “Telcos are going to challenge banks in the emerging markets when services go to the mobile.” I have heard these sentences many times during the last 10 years. I would like to see something new and more concrete examples of telco forays into financial services. Is it just a nice dream? Or how will it become reality?
M-Pesa started in Kenya in 2007. It has been successful there and expanded to offer more services like Google Play support and overdraft facility. It has expanded to other countries too, including Tanzania, Lesotho and India, where it has seen success too. Vodafone has executed it also together with local banks. But the expansion hasn’t been easy and in many countries the service has struggled and closed.
M-Pesa was an excellent new service 10 years ago. But it alone doesn’t prove anything anymore about telco success in mobile money and payment services. Generally, there are not so many true success stories in this area. Several carriers have launched some mobile money or payment solutions, but we cannot say that telcos have got any significant role in this market. Ericsson and Nokia have also tried to offer platform solutions for this market. Nokia exited the market years ago, Ericsson has some clients for its mobile wallet.
At the same time, new payment, lending and other finance solutions are really emerging in emerging economies. For example, in Indonesia, Vietnam and the Philippines dozens of millions of people are outside finance and banking services. This is a huge opportunity for new mobile and digital finance solutions. But is it realistic to think telcos could compete let alone this market?
Telcos have played an important role in many services until mobile internet and mobile apps really came to dominate the market. Telcos encounter the same challenge if they want to enter the financial services segment. Many other parties already offer mobile apps for payments, banking, lending or money transfer. Feature phone market has been more secured to telcos (with M-Pesa originally especially an SMS based service), but there are also other platform vendors. You don’t need telco infrastructure to offer these services.
Payment services are still the easy part. Real banking services, lending and investing services are much more difficult to execute. They are heavily regulated, require capital and put also capital to risk. Telcos are not really willing or able to take these kinds of risks. There have been a lot of discussions over if Apple or Amazon would start banking services. They have huge balance sheets and they could link them to support their other businesses, but even they seem to hesitate.
Technically it is quite straightforward to implement digital finance services. There are platforms that offer the infrastructure and regulated services, like TagPay for feature phone payments, Difitek for digital and mobile banking, lending and investing services, and several mobile payment solutions from bar code models to blockchain. This means that technology is not really the bottleneck, but the mobile service company must fulfil the regulatory requirements and be able to operate finance business, including risk management.
It is a good question - if finance services are really relevant for telcos to offer. It might be that they are not really for them. But why there are still all these stories and speculations, how telcos could come to the finance business. Maybe it is lack of information, dreaming or too technology oriented thinking.
Probably the most feasible model for telcos to enter the finance business is with good partners that can offer the right technology, take the finance risks and offer the needed capital. Telcos have some interesting projects like the blockchain based settlement that could be expanded one day to global money transfers too. Telcos are not able to become real finance service providers, but they can be in an important role as part of consortia offering future digital and mobile finance services.
The article originally appeared on Telecom Asia.
Serverless cloud services are coming and they will change the way we build software and design services. At the same time, they offer totally new business opportunities, especially for growth companies. Scalability is something very real with serverless, but it is not the only interesting aspect.
AWS Lambda, Google Cloud Functions and Microsoft Azure Functions already offer serverless infrastructure, but most companies are still in a very early phase to really utilize it. One factor is the lack of competent and experienced developers. Grow VC Group already offers a trainee program for developers. At the same time, companies haven’t yet been able to properly consider, how to really get business value from serverless solutions.
Serverless means dynamic allocation of server resources, i.e. no need to pay for dedicated servers, but being able to buy computing capacity, and use it, based on actual needs. Serverless models also change software architecture. The microservices model means that each small task or job is a separate function that works independently. This concept makes it easier to implement API services that can execute a process in the background and an API call doesn’t lock any other services. Serverless solutions can also offer better security against some threats. For example, a serverless solution is more immune to distributed denial of service (DDoS) attacks.
Those are technical benefits, but at the same time, this offers opportunities for new business models. Let’s consider that they:
Micro-functions will probably be the basis for many new opportunities. By offering ready-made micro-functions to other parties and users, they will also become a component to distribute computing and data to many places globally. This is great, for example, for IoT, blockchain and latency critical services.
There is currently a lot of planning and development going into making more distributed services, for example: local AI with local data; smart contracts without central authority; or Edge computing. Some data and computing can be undertaken in user devices, but it is not really the solution for all needs, if solutions need more data, they must be connected all the time or require really high reliability. Then one natural solution is to have more locally distributed cloud services.
Amazon Lambda Layers now offers new opportunities to share common components and code. This includes the opportunity to build services that have a lot of users and can have flexible user-specific and shared components. It enables more local and customer-specific services, but it can open new opportunities for new AI solutions and the development new distributed AI algorithms.
Serverless has also its own issues. It is still in early phase, and it needs more competent developers, better tools to monitor and debug services and better understanding and models to manage data and security aspects. But especially it needs companies to start utilizing its opportunities and offer real value for serverless service users.
Serverless is a much less hyped new solution than AI, blockchain or Edge. Of course, the full potential of AI will be much larger, but AI is still a very unclear area (at least, how the AI term is used), whereas serverless is very concrete and available now. Many companies have looked at it only from a technical point of view, or how much they can save on server costs. They have ignored that the new model also offers new business opportunities.
2019 will bring much more serverless services and much more companies will start to utilize the technology. It is still hard to say, when business people and startups start to really explore its new business opportunities. It can be the crucial next step to more distributed computing, service and data models.
The article first appeared on Disruptive.Asia.
Est. 2009 Grow VC Group is building truly global digital businesses. The focus is especially on digitization, data and fintech services. We have very hands-on approach to build businesses and we always want to make them global, scale-up and have the real entrepreneurial spirit.
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