Category Archives: Global

Latest Post for the World Bank CGAP: Smartphone-Led Digital Finance: Three Areas to Watch

This post was published on the World Bank CGAP website here.

The rapid uptake of smartphones stands to enable a transformational opportunity for digital finance. Last year, less than a third of all connections in developing regions were smartphones, while in the next five years, four in every five smartphone connections globally are predicted to come from developing regions. While basic and feature phones aren’t going extinct in the near future, smartphone-based connectivity presents an opportunity to drive forward digital finance efforts where they have yet to take off.

GSMA’s “From Feature Phone to Smartphones: The Road Ahead”

This dramatic trend also raises important questions concerning meaningful access and design for lower-income consumers as well as privacy and data security, as flagged in CGAP’s recent publication, Doing Digital Finance Right.Here are three areas in particular for the digital finance field to watch as more smartphones make their way into the hands of financial consumers in the developing world: new functionalities, new players and new risks.

New Functionality

At the end of last year, there were almost 300 million mobile money accounts, but more than 60% were inactive. Mobile money usability research in India found that on average more than 25 errors were made trying to complete a single financial transaction on feature and basic phones. In contrast, smartphones aren’t constrained by USSD-based interactions, which require numerous steps and are prone to timeouts, providing the potential for more intuitive, advanced services.

With the launch of GCash, Lenddo, M-Ledger, pesaDroid and Zuum, we saw the first wave of these more icon-driven and dynamic digital finance apps in emerging markets. More experimentation is under way. For example:

As these apps gain traction, there is an opportunity to move away from error-prone, one-size-fits-all mobile money services and iterate towards more intuitive and and tailored solutions.

New Players

The flourishing Android smartphone ecosystem is not only driving down prices — as low as $40 on India’s ecommerce platform Flipkart — it’s also opening up market entry opportunities to new players. At the beginning of the year, Xiaomi, now the world’s third largest smartphone maker, launched an interest-bearing mobile wallet; Google recently launched Android Payand is in the process of introducing a peer-to-peer payments app; and this month, Samsung has started trialing its new payment service in South Korea.

Visualization of Android operating services across 682,000 surveyed devices by OpenSignal

The financial inclusion field should also be paying particular attention to efforts tackling costly mobile data rates. This area is fertile ground for new business models and partnerships for serving low-income customers. For example:

As more service providers enter the ecosystem and partnerships solidify, there is an opening for competition to not just drive down prices but also continue to catalyze new mobile financial services.

New Risks

In 2015, the amount of mobile data traffic around the world is expected togrow 59%compared to last year. As a main contributor, smartphones raise the stakes on data privacy and security measures, and consumers are worried, at least in some markets and some segments. A survey of more than 11,000 mobile internet users across Brazil, Colombia, Indonesia, Malaysia, Singapore, Spain and the UK found that 83% have concerns about sharing their personal information when accessing the internet or apps from a mobile device; however, 80% of users agree to privacy notices without reading them because they tend to be too long or legalistic.

Smartphone data may become harder to protect in this more fragmented ecosystem and ever-changing value chain. Security mishaps, such as what occurred at Venmo in 2014,suggest a prioritization in some companies of growth over security and privacy, and protective measures remain largely reactionary. In addition, reports of data breaches and malicious malware strains are hard to ignore, including an Android-based mobile payment malware that reportedly “could extort money from users by hijacking personal information and spoofing bank apps into sharing personal data.” This impacted users in more than 100 countries including, for example, over sixty thousand users in Vietnam.

As providers continue to garner richer user data through smartphone apps, the leaders in this mobile ecosystem will need to have better solutions and clearer answers to consumer concerns about the safety and privacy of their data. Last year, 6,000 consumers in 12 countries were asked the question, “If you are considering trying a mobile money transfer service, what would make you try it sooner?” Details of security and privacy measures were the top answers cited, and even more pronounced by those surveyed in emerging markets like India, Brazil and China regarding mobile payments.

In Conclusion

With these three trends converging alongside the unprecedented proliferation of smartphones to all corners of the world, what remains to be seen is how digital finance will co-evolve and keep pace with mobile technology’s advancement. However, what is clear is that those in the digital finance space that aren’t experimenting with this new functionality, fostering these new partnerships and coming up with cost-effective and robust ways to mitigate these new risks, may very well be left behind.

The Momentum Behind the Entrepreneur Movement

This article was originally written for Huffington Post.

Still overcoming their sea legs, the founders of 15 social enterprises took to the stage at the State Department to pitch their technology-driven solutions. After travelling to 13 countries with the shipboard program Unreasonable@Sea, they had finally arrived at their last destination and were standing in front of a crowded amphitheater of government leaders, business executives and social innovators.


Their lightning talks, with slides rotating non-stop every 20 seconds, showed their impressive entrepreneurial efforts: capturing carbon pollution from factories in India and processing it into materials used to make Boeing airplanes; expanding a fleet of sailing drones that were used to clean oil spills in the gulf of Mexico to other needy marine environments; spreading teacher training software being utilized in more than 3,000 schools in India to better achieve educational outcomes in other parts of the world; among other bold efforts.

During the event, the State Department’s Director for Global Partnerships, Thomas Debass, announced, “we believe throughout the State Department that these models are game changing.”

In many ways, these hybrid companies are changing business as usual by not only balancing social impact and financial returns but also by blurring borders by prioritizing needs above country’s boundaries. “Communities approach us to develop our products,” Scott Frank, founder and CEO of One Earth Designs, explained to me after his presentation. “We collaborate in the design and ideation, and we work together to test, iterate, and refine in-field to ensure the product meets both the needs and wants of users.”

Working in tangent with Himalayan populations in China, Frank’s company developed a solar-powered cooking stove that can abate approximately four tons of carbon dioxide a year and reduces as much as 70 percent of the fuel they use. The product stemmed from the nomadic populations concern with smoke being emitted from their wood-fired and coal stoves (globally, it is estimated that these pollutants contribute to four million premature deaths a year). One Earth Designs is the first company based in China to be certified as a B-Corp, joining the likes of Patagonia and 732 companies that meet the nonprofit’s legal and performance requirements of “benefiting society as well as their shareholders.”

However, as these social entrepreneurs break the molds of traditional business, they are being confronted with uncertainty that comes with this unchartered domain. “Across many geographies we’ve come to see a variation among definitions of social entrepreneur,” Frank explained to me. “In some cases, people see this term in a positive light. In others, it elicits confusion or skepticism.”

And this confusion is causing some traditional investors to shy away from social enterprises due to an uncertainty, in the end, of how they prioritize both monetary and social returns. However, this sector is also evolving, and increasingly a new type of investor – referred to as impact investing – is building metrics and filling this gap. Last year, an estimated $4 billion worth of impact investments were made, and this amount is expected to reach $1 trillion in the next decade, according to a report by J.P. Morgan.

Although crucial, funding is just one piece of the puzzle. This new breed of entrepreneurs also requires support systems to evolve with them. Unreasonable@Sea is one of the more elaborate programs to rise to the challenge. The business accelerator is focused on building entrepreneurs’ networks by sailing around the world and bringing together a collage of different mentors on the ship including Archbishop Desmond Tutu (Nobel Peace Laureate), Matt Mullenweg (founder of WordPress), and Hunter Lovins (Time Magazine Hero of the Planet), among others.

The bold and borderless endeavors of these social entrepreneurs are also quickly inspiring a larger global movement. And it is these increasingly plugged-in and globally engaged supporters that are proving to be a crucial platform and legitimizing network for these social entrepreneurs. In the end, policymakers, funders, and social innovators are smart to not overlook the momentum behind this increasingly global and connected movement. And although some will dismiss it as naive and youthful, the creative bravery of its pioneers and resoluteness of its supporters will make you reconsider.

Entrepreneurs take to the seas for inspiration

This article was originally written for CNN International.

What happens when you mix 11 budding startups with Google executives, Stanford professors, a Nobel Peace Laureate and 600 college students and put them on a ship to circumnavigate the world?

The project

An experiment launched this month called Unreasonable at Sea hopes that this eclectic group will unleash global entrepreneurship.

Continue reading Entrepreneurs take to the seas for inspiration

What is the universal impact of mobile technology?

Last week, as part of their Mobile Economy Project, the Brookings Institution invited me to participate in panel discussing the universal impact of mobile technology. The event highlighted how mobile technology is affecting economies, politics, education, and healthcare, and only just getting started. In my remarks, I argued three main points: Continue reading What is the universal impact of mobile technology?

Research Update: A New Direction for Financial Inclusion in India?

After months of research, data collection and interviews with almost 30 of India’s leading financial institutions, colleagues and I released a report this month titled “From Social Banking to Financial Inclusion: Understanding the Potential for Financial Services Innovation In India“.

I was excited to see that The Wall Street Journal wrote up a nice summary of some of the takeaways from the research here: “Why So Few Indians Have Bank Accounts” along with the social enterprise blog, Next Billion: “Innovative Banking Strategies for the BOP in India“.

Continue reading Research Update: A New Direction for Financial Inclusion in India?

Event: Networked Nation – How Technology Is Transforming The Economy

I recently participated in a panel hosted by The Atlantic and National Journal to discuss how technology is transforming the economy and the way individuals interact with companies and institutions. Clive Crook from The Atlantic who was moderating the panel (and did a great job) put me on the spot right at the start by asking how I saw technology disrupting the norm in my work and research. See the video of my panel below: Continue reading Event: Networked Nation – How Technology Is Transforming The Economy

Dialing down corruption in Afghanistan

This article was originally written by Eric Tyler & Anjana Ravi for Foreign Policy

Last week, Afghan president Hamid Karzai surprised U.S. and coalition officials by announcingthe creation of a special tribunal and prosecutor to seek redress for the almost two year old Kabul Bank scandal. And earlier this month, the Afghan House of Representatives rejected the proposed federal budget in part because of the allocation of U.S. $80 million to Kabul Bank. Already, the Central Bank has poured $450 million into the beleaguered bank after it lost almost a billiondollars in the 2010 financial scandal. This money has been traced to interest-free loans given to Mahmoud Karzai, brother of President Karzai, to buy shares in the bank itself, and also to former CEO Khalil Frozi, who used bank funds to finance the President’s 2009 election campaign.

Though Afghan authorities arrested Frozi and Kabul Bank founder Sherkhan Farnood approximately nine months after the crisis, it was recently reported that neither can be found in their jail cells, and both are collecting rent from tenants occupying Dubai villas bought with illegally obtained loans. A year after the debacle, only 10% of the missing money had been recovered.

Kabul Bank is more than a symbol of the pervasive corruption plaguing Afghanistan’s government, it is the largest private financial institution in the country and an integral piece of infrastructure that has direct consequences for the country’s security and financial stability. If Afghanistan is to have any chance at a legitimate economy and stable future, it will need an efficient and trustworthy financial system.

In particular, Kabul Bank is a conduit for government payments to Afghan soldiers, police, and teachers. The United States aims to reduce American troop presence by 2013 and shift security duties to the Afghan military and police force. Absolutely vital to a “successful” drawdown is the establishment of a reliable and transparent payment system.  The rampant corruption plaguing Kabul Bank shows that traditional banking systems may not be suitable for the Afghan economy at all. However, the United States Agency for International Development (USAID) is working with Afghan companies to provide an alternate solution – mobile money.

In the past year, mobile phone-based money transfers have taken off in Afghanistan. Three out of the four largest mobile network operators now offer mobile money services, two of which were launched in the last six months. Roshan, the telecommunication company that deployed the country’s first mobile money product in 2008, M-Paisa (“paisa” meaning money in Dari), has grown to 1.2 million registered customers that can receive salaries, pay bills, and make domestic financial transactions over their mobile phones. Last month, the company announced a partnership with Western Union to allow these customers to receive transfers from around the world directly to their mobile phones.

USAID has made mobile money central to Afghanistan’s financial development. According toUSAID, while less than five percent of Afghans have access to a bank account, more than 60 percent of the population has access to a mobile phone. To accelerate the pace of its development, USAID has allocated more than $2 million to mobile network operators as part of itsMobile Money Innovation Grant Fund, and spearheaded the forming of the Afghan MobileMoney Operators Association. Currently, there are five USAID mobile phone payment projects underway, which range from the payments of teacher stipends to police force salaries, and 14 more mobile transfer projects in planning, according to a USAID official who spoke off-the-record. With the scaling of mobile money, an estimated $60 million annually could be retrieved that had been lost to corruption and fees.

Although promising, mobile money is not entirely immune to the harsh realities on the ground. In 2009, the Afghan government worked with Roshan to pilot a mobile phone-based salary payment system to 54 officers of the Afghan National Police Force who had previously received cash from their superiors. When the policemen took their SIM cards to the local M-Paisa offices to directly collect their entire salaries, they thought they had received a 36 percent raise, while what they were really seeing was a full salary untouched by crooked officials, according to a U.SAir ForceColonel overseeing the project.

However, a confidential State Department cable released by Wikileaks revealed that a corrupt Afghan commander, frustrated that he was no longer able to skim off the top, fraudulently registered phones and collected his officers’ salaries. In a separate incident, the same commander ordered subordinates to handover their SIM cards and attempted to retrieve the salaries himself. Though the local M-Paisa employee refused to hand over the salaries to the commander, he was forced to go into hiding for fear of retribution. Despite direct reports to the Ministry of Interior and pressure from the U.S. Government, no one has been prosecuted.

The ability to efficiently pay Afghanistan’s security apparatus is critical to any post-war strategy, especially in the face of a U.S. drawdown and the ousting of private security firms. It is especially important for USAID efforts because $899 million worth of development programs they administer are in jeopardy without a functioning security force, according to a recent letter from Steven Trent, the acting Special Inspector General for Afghanistan Reconstruction. Though USAID says this claim is exaggerated, it still highlights the significance of dealing with the systemic corruption within Afghanistan’s financial system and in particular Kabul Bank, given its central role in government payments to soldiers.

Despite the importance of anti-corruption measures to security efforts, a clear disconnect between Afghan and U.S. officials gives reason to believe that Karzai’s recent announcement to prosecute those involved in the Kabul Bank crisis will not amount to much. As Afghans rushed to withdraw$800 million in deposits in the two weeks following the scandal’s breaking, Mahmoud Karzaiinsisted the bank was stable and not in danger of collapse while simultaneously asking the U.S. Treasury for monetary help in averting a crisis. When the U.S. refused a direct injection of capital, President Karzai publicly blamed the collapse on a lack of foreign technical support rather than the illegal activities of the bank’s leadership. A few months later, he banned U.S. government advisers from working with the country’s central bank, as they attempted to assist Afghan officials in regulating the financial system and tracking foreign aid, both of which were conditions for releasing$1.8 billion of donor funds.

While the ideal situation for USAID is an end to corruption’s hold on financial infrastructure, the reality is that they are working within a delicate political climate. According to a NYT/CBS Newspoll released this month, almost 70% of American respondents want an end to U.S. military efforts in Afghanistan. With this dramatic fall in American public opinion and election year politics putting the focus on a swift withdrawal of U.S. troops and transition to Afghan forces, the Obama administration is loath to engage in a battle with the Karzai government over corruption that is almost guaranteed to fail. Yet there are still ways for USAID to recognize the restraints of corruption and push forward; one of the promising solutions involves integrating mobile money to build a stronger financial system and more transparent post-transition payment system.

After all, the reality is also this: the results of development projects will have significant bearing on America’s legacy in a country where it has spent over 10 years, half a trillion dollars, and countless lives. USAID’s success, and ultimately that of the entire U.S. mission in Afghanistan, will depend on our ability to acknowledge that “success” is not an all or nothing proposition. Corruption exists but that doesn’t mean that the development community cannot adapt to work within its confinements.