A few weeks ago, the technology press watched with bated breath as Apple unveiled the new iPhone 5S and 5C. They look like nice products. The 5S has a fingerprint sensor, improved imaging capabilities, and ships with Apple’s new iOS 7 operating system. The 5C is a bit less expensive and doesn’t have quite as many bells and whistles.
But let’s face it: In the multi-decade effort to put what amounts to a fully capable computer in a pocket-sized device, most of the low-hanging fruit has already been picked. Over the next five years, smartphones will get better displays, improved cameras, faster Internet access, and run more innovative apps, but these changes will be largely evolutionary, not revolutionary. If you’re looking for a revolution involving smartphones, you’re unlikely to find one by staking out front row seats at the next new product announcement.
Instead, you should keep an eye on the developing world, where the transition from basic “feature” phones to smartphones is about to reshape how a large fraction of the world’s population engages with information.
Today, high costs have limited smartphone adoption by those at bottom of the economic pyramid. But rates of mobile phone ownership are very high across all income levels, in nearly all countries. And even though feature phones offer far more limited functionality than smartphones, for millions of the world’s unbanked—people who don’t have traditional bank accounts—they have become platforms for accessing an increasingly sophisticated array of financial services. In Kenya, there are now more than 17 million customers [PDF] of Safaricom’s M-Pesa mobile money service—a number equivalent to more than 70% of all adult Kenyans. Mobile money is also popular in Afghanistan, Tanzania, and Uganda, and is experiencing rapid adoption in India. There are now over 200 mobile money services in 80 countries.
“The global spread of mobile money has been phenomenal,” says Seema Desai, Director of GSMA’s Mobile Money for the Unbanked program, which tracks the industry. “In June 2012, there were more than 56 million registered mobile money users in Sub-Saharan Africa, which is more than double the number of Facebook users.”
The bricks-and-mortar component of mobile money systems is the network of shops (also called “outlets” or “branches”) staffed by small business owners who are authorized “agents” of a mobile money service provider. Customers visit shops to convert cash to and from electronic money stored in accounts accessed using mobile phones. While person-to-person transfers are the most common mobile money application, as the industry has matured service offerings have broadened to include bill payment, shopping, payments from employers to workers, cash withdrawal at ATMs, payment and collection of rent, and access to interest-bearing savings accounts and loans.
Over the next two years, significant numbers of the unbanked will start making the transition from feature phones to smartphones. Top-of-the-line smartphones will always be expensive, but by 2015, off-contract prices for the least expensive smartphones will fall into the $30 range, bringing them within reach of a growing fraction of the unbanked. Not too long after that, entry-level smartphones will become less expensive than today’s cheapest feature phones. When they can more easily afford to do so, the unbanked will purchase smartphones for many of the same reasons that everyone else does, including the convenience of a touchscreen interface, access to Internet-based services, the ability to run applications, a more capable display, and status.
But there are also key differences in the role smartphones will play: In wealthier nations, where most people can access digital services using computers in their homes or workplaces, the main benefit of smartphones has been mobility. By contrast, for many of unbanked in developing countries, smartphones will be the primary platform for enabling access to services that were previously out of reach. The more flexible display and user interface options in a smartphone, for example, can be leveraged to help surmount literacy barriers, expanding the reach of mobile technology. Smartphones will also open the door to a more diverse set of service offerings for unbanked populations, benefiting both mobile operators and their customers.
Mobile money is often justifiably lauded for providing a path to financial inclusion for the unbanked. But that’s only the beginning. The combination of growing mobile money adoption and declining entry-level smartphone costs will spur much a broader move towards digital inclusion. Smartphones for the unbanked, far more than any new product announcement, will be the next revolution involving mobile phone technology.