The Gutenberg Moment Comes to AfricaKevin Mellyn |
There’s been a lot of talk lately about mobile payments. And while the reality more than lives up to the hype, it’s important to understand why. The future of payments may well come “out of Africa.”
Payment is essentially an “information logistics” problem. Except for specie (gold and silver), all money consists of promises to pay that are exchanged between parties. Mobile devices are simply a more efficient method of solving this problem than paper is or ever could be.
These thoughts arose as I recently worked on a project for MasterCard Advisors at the Central Bank of Kenya. In preparation for the Advisors project, I rang up a former consulting colleague in Cape Town, who had a striking observation: The mobile phone is to Africa as profound a transformative technology as movable type was to Europe over 500 years ago.
He explained that today basic mobile telephones allow ordinary Africans to communicate and, in the process, modernize at a rate they had never known before. Among other benefits, mobile phones gave ordinary citizens increased political and economic power.
Moreover, said my friend, the legacy banking systems imported from the West are likely to be bypassed by indigenous African solutions fit for African life. The exact shape all this will take is unknowable, but any preconceptions based on previous Western experience should be abandoned. The completely digital financial world born in places like Kenya could eventually overturn much of what we take for granted.
Around 1450, Gutenberg’s press started the information age in which we still live by massively reducing the effort and time required to capture knowledge in written documents. One apprentice printer could produce thousands of identical pages a day—a dramatic increase over the one or two pages per day that a scribe labored to produce. Regular mail service followed in around 1500.
These two innovations powered the Renaissance, Reformation, and commercial revolutions of early modern Europe, which in combination overthrew the Church’s monopoly on knowledge. Thus began the still unfolding revolution in “information logistics,” the art and science of capturing, exchanging, and processing information across time, space, and organizational barriers.
Exchanging claims for payment is a very challenging information logistics problem. Printing allowed the large scale production and circulation of standard promissory instruments, especially bank notes. Eventually, specie ceased to be money altogether, leaving pure fiat money issued by governments, which still accounts for about 85 percent of payment transactions worldwide.
While non-cash payments, including card payments, have been eating into this vast mountain of paper promises for generations, they mainly represent the automation of ancient practice and substantial information logistics costs. Mobile network operators bear none of these legacy costs; they provide a technology-driven quantum improvement, still accelerating, in information logistics efficiency and cost effectiveness. The competition between legacy banks and M-Pesa in Kenya is essentially a repeat of Gutenberg versus the scribes.
Topics: Payments Strategy