Real Impact of Mobile Solutions: managing peaks and troughs on the way to the plateau of productivity

Yesterday I attended a fascinating seminar at the New America Foundation on the subject of “Mobile Disconnect: Can Mobile Solutions Really Combat Global Poverty?”. The room was full of academics, practitioners, donors, regulators, students, as well as a virtual audience of international participants, which reflected the diversity of the panelists. Prior to the seminar, panelists summarized their views on whether or not mobile solutions are overhyped in the article published on CNN’s website. Their responses to this question varied significantly, which made it for a very interesting discussion.

Michael Tarazi, of the Consultative Group to Assist the Poor (CGAP), started by saying that “you can win any argument, depending on how you phrase the question.” Tarazi then stated that the poor already widely use their mobile phones for connectivity but there are still about 1.2 to 1.7 billion people, who have mobile phones but do not have bank accounts. Tarazi emphasized that these are the people who CGAP wants to focus on and maybe not so much on those who still cannot afford a mobile device. Tarazi acknowledged that this sample of financially excluded people with mobile phones might not represent those at the bottom of the pyramid, but this is the sample that can be easily included in the mainstream financial system. Tarazi pointed out that in the last four years, M-Pesa, the world’s largest mobile money network, managed to penetrate the Kenyan market much faster than 40 years of banking services; therefore, mobile solutions offer one the most efficient ways to promote financial inclusion. Additional benefits of mobile financial services, according to CGAP, include: customer adoption is fast (37% of mobile money users were previously unbanked); mobile banking reaches larger numbers of poor people than MFIs; mobile money is cheaper than banking; and it is twice as cheap as informal money transfers (mobile money include such positive externalities as increased security and lower reduction in time spent on money transfers). On the other hand, CGAP recognizes limitations of adopting models, such as M-Pesa, due to varied contexts and regulatory environments.

Maura O’Neil, Chief Innovation Officer at U.S. Agency for International Development, was the only panelist who was strongly supportive of mobile solutions’ potential as a tool to combat global poverty. O’Neil compared the current state of thinking with “computer 1.0” when people were skeptical of the potential that computers could play, and few could predict their overall impact. O’Neil stated that donors need to understand that we are in the experimental stage, or “M4D 1.0,” where we need to take risks to allow failures in order to reap the benefits of successes (“killer apps”). On a cautionary note, O’Neil stated that we still need to understand gaps in adoption rates (due to the fact that the very poor may not be able to afford cell phones or the potential for cultural and gender discrepancies that can exacerbate the haves and have-nots).She recognized there is a risk in further deepening the “digital divide” by offering opportunities like access to formal banking only to those who own mobile phones. Therefore, the “rising tide might not lift all the boats”.

Katrin Verclas, of MobileActive, said that she used to be “bullish” about the impact of mobile technology on reducing global poverty, but now she believes that donors over-hyped the idea that mobile technologies should be used for broader economic development. In reality, mobile technologies penetrated markets because people want to be connected and not due to their great potential as a tool to fight global poverty. So while Verclas believes that usage of mobile technologies could result in important innovations in areas such as public health, financial inclusion, education, value chain developments and democracy, more research should be done to estimate the real impact and costs associated with mobile technologies. Verclas also mentioned to the potential cost of increasing the “digital divide” between those at the bottom of the pyramid and the rest of the world due to the high costs of mobile technologies. She cautioned about the potential negative implications of using mobile technologies for communicating sensitive data and for tracking people, especially in the developing markets where regulatory environments are lax. Verclas referred the audience to the data protection manual, produced by the International Organization for Migration, and to the graph on “hype cycles” in emerging technologies to encourage the industry to move towards a “plateau of productivity”. Further criticizing donors for “hyping” mobile technologies, Verclas stated that such hype could result in resources being allocated to “finding killer apps” and away from investments in infrastructure that are essential for development and poverty reduction.

The panel was concluded with the comments from Kentaro Toyama of UC Berkeley, whose views on the impact of mobile technologies on reducing global poverty are very skeptical. Toyama is known for saying that “increasing human wisdom” should be the focus of international development. He believes we should focus on “human-centered approaches” rather than on the “technology-centered” ones if we want to achieve long-term success in reducing global poverty. Toyama also stated that technology “magnifies underlying existing human intent and capacity.” If such intent and capacity are not positive, mobile technologies will result in net negative impact. Toyama believes that we have utopian views of technology, which is really “value neutral.” He said we made the same mistake in the past when saying that television will “revolutionize classrooms” while now we limit children’s exposure to television. Another interesting point he made was that by giving poor people access to mobile financial services, we in fact “build a pipe into their wallets.” This opportunity can be easily exploited by savvy marketing departments of large corporations, he said. Donors often cite the great success of M-Pesa in Kenya as a reason for promoting financial services to the rest of the world. But Toyama argued there has not been sufficient evidence to prove that increased usage of M-Pesa contributed to increased user welfare. Toyama concluded by stating that the development community should focus on addressing users’ underlying intent and building human capacity instead of building hype around mobile technologies. As long as we have socio-economic inequalities, we will always have divides, be it mobile, PC or tablet, Toyama said.