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Banks and mobile network operators are working in an environment that is constantly evolving with the addition of new competitors, new regulations (or lack thereof), and new markets. The mobile payments world in emerging markets is experiencing explosive growth and widespread support, as evidenced in the following articles.

“First universal mobile payments platform goes live” on Mobile Money Africa
Luup is now providing universal mobile payment systems through a combination of Microsoft BizTalk Server and Temenos T24, a core banking software used around the world. Luup CEO Martin Wilson claims that the platform can serve corporate and retail users in both developed and developing markets on any mobile device on any mobile network. Successful mobile payment platforms are scalable and fall in line with regulatory and security requirements. Luup believes their service meets these criteria, “connecting senders and receivers of funds across the globe.” The integration of Temenos T24, a technology used in “over 1000 financial institutions in more than 125 countries across the world,” implies that Luup is highly adaptable and is likely to be successful globally.

“Banks have some good news… are they listening? by Kabir Kumar on CGAP
Although these are tough times for banks, a recent research project on branchless banking by CGAP, the Inter-American Development Bank, and Akya (a banking consultancy) found some good news. Branchless banking, though fiercely competitive in emerging markets between banks and MNOs, can present new and opportunistic business cases for banks. There are five key findings regarding the business case for banks in the collaborative report. First, a critical factor to success in branchless banking is a strong agent network. At low transaction volumes, in rural areas for example, an agent is the most economical option. Second, banks offer branchless banking because it is an additional and efficient channel to reach unbanked or under banked segments. This allows them to grow their market share, while increasing cash flow activity. Third, a strong agent network adds value for a branchless banking customer by offering a new level of convenience. Fourth, branchless banking promotes growth of the bank and markets, and also reaches new geographies and customers. Finally, banks practicing branchless-banking practices will find that payments can make a substantial contribution to profit. The full presentation, “Understanding the business case for banks in branchless banking” is available here.

“Liberate mobile payments for more inclusive economy” by Wesley Lynch on Mobile Money Africa
Despite the tremendous adoption of mobile money penetration in Africa, South Africa’s rate of adoption has been lagging in comparison. Wesley Lynch, CEO of Realmdigital, blames this on the regulatory environment in South Africa. The restrictive banking regulations also limit innovation from MNOs who could offer cheap and easy mobile transaction services to customers at the BoP. M-PESA’s famous success in Kenya has not been repeated in South Africa, “a country with 13 million unbanked citizens.” The major obstacle for mobile network operators to behave as banks has been government regulation. Once mobile network operators can obtain banking licenses in South Africa, the mobile payment ecosystem will open up a new, liberated economy.

“Nigeria: GSMA to Partner State on Mobile Money” by Obinna Chima on AllAfrica
The mobile payment industry in Nigeria has the support of the Global System for Mobile Communication Association (GSMA). The GSMA promises to ensure the successful adoption of mobile money in the country by working closely with the federal government and key banks and mobile network operators. Mobile payments transactions could improve trade and commerce significantly in Nigeria thanks to the high level of mobile penetration and the high number of unbanked citizens. Mr. Ross Bateson of the GSMA stated that mobile money would increase productivity and improve the Nigerian economy. Additionally, there are other opportunities beyond mobile payments that access to mobile can offer to enable development.

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Every week we speak to entrepreneurs who are eagerly seeking financing for their start-ups. Despite the start-up moniker, many have been struggling for months and even years. They have probably passed up jobs, ended significant relationships, faced the ridicule of family and friends, and lost sleep over bills and bank accounts. They are, in a word, desperate.

It’s important for investors to recognize this. Look past the calm exterior, the confident pitch face, the exaggerated success claims, and the impressive resumes. More often than not, entrepreneurs are highly intelligent, wholeheartedly passionate, and despairingly insecure people who desperately need approval. We say this with the utmost respect for the entrepreneurs. It takes a tremendous amount of courage to walk into the lion’s den, especially with a preexisting defeated and desperate mindset. Nevertheless, investors should not coddle and string along every entrepreneur that pitches to them. On the contrary, these entrepreneurs need a healthy dose of reality that an investor has the power, and responsibility, to provide. They’ll thank you for it later.

In some circles, ID has developed a reputation as being “straightforward” (to use a pleasant euphemism) and maybe even a little harsh. That wasn’t always the case. In the beginning, like many other impact investors, we were quickly enamored with entrepreneurs’ “narratives” in pitch sessions. Therefore, our hearts didn’t let our mouths utter what our minds were thinking. We let the entrepreneurs leave meetings with a glimmer of hope that we would be following up with an investment, even when we knew that we wouldn’t. However, this does no good for the worn-out entrepreneur, who could be compared to a starving artist. Over time, we have discovered that a firm “NO” coupled with actionable advice for moving forward helps an entrepreneur much more than false hope. We have learned our lesson and we hope that other investors will follow suit.

As investors, we have a responsibility to be upfront and honest (call it harsh if you like). With all due respect to the entrepreneur, investors should follow a simple set of rules to manage mutual expectations:

1. Know your own investment criteria: If you really don’t invest until they have trailing revenue, don’t “diligence” the kids that just won the MIT $100K. If you only invest in financial inclusion, don’t chat up solar energy start-ups (even if their founder did just speak at TEDx). 
2. Speak your mind: If the business model fails to impress you, tell them why. If the entrepreneur fails to instill confidence, let them know. It will probably be uncomfortable, but shouldn’t be confrontational. 
3. Limit letters of commitment: LOIs are an easy way to buy time for your investment committee to continue to deliberate, but they set expectations for entrepreneurs that are often not met. If you’re going to invest, just do it. If not, just say it. 
4. Just say “No”: It’s not only a bastion of Reagan era drug policy, it’s also a great way to keep expectations in check. Don’t waste time if you’ve already made your decision. Offer a referral, constructive criticism, and a genuine smile, but don’t waiver, don’t defer, and don’t let the entrepreneur wedge the door back open if you really aren’t going to follow through. 

Last week, our Weekly Review highlighted articles that spoke to the great sense of responsibility that rests with impact investors and social entrepreneurs. An investor’s responsibility begins with the entrepreneur. However, in addition to being responsible to entrepreneurs, impact investors must be mindful of the future impact of their investments on the environment, local communities, and individuals. It’s not an easy task and it’s one that the investor and entrepreneur tackle together. To manage their responsibilities effectively, the pair needs to have a strong relationship made possible with honesty and trust from the start. This means clearly communicating interests and expectations and that starts with intent to invest (or not).

Image Source: Samsung

There’s never a shortage of news surrounding mobile technology. This week we read about new applications and smartphones, mobile money launching in Liberia and Zimbabwe, and the changes in the relationships between banks and telcos because of the growing popularity in mobile payments globally.

As usually is the case before a SOCAP conference, ID’s RSS reader is filled with news, thoughts, and opinions on impact investing, where “money meets meaning.” Here are some highlights that we found interesting, and watch for a post next week on why ID is attending SOCAP.

via Amazon