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We might imagine that the greatest spread of mobile technology is among middle-class and wealthy consumers who demand the most advanced phones with innumerable gadgets and added features. But in truth, the biggest jumps might be coming from the opposite site of the economic divide, namely, from some of the poorest consumers in the world.

For people living in extreme poverty, basic, functional phones offer a vast opportunity for consumption. In sub-Saharan Africa for example, consumers rely on text messages to communicate with distant contacts, because texts are less expensive than phone calls.

Woman uses a square card reader to make a transaction through her smart phoneMore notably, mobile payment services allow these consumers to load a little as a dollar on their phones, which they can then use to pay for services that improve their quality of life. One woman described her ability to pay less than 50 cents daily to receive electricity from a solar panel provider. In the past, taking such small daily payments would have been too much work and too inefficient for the service provider. By linking to a mobile payment system, neither the consumer nor the supplier needs to engage in additional effort. And if the consumer isn’t able to load enough onto her phone on one day, she can go without electricity until she can reload her mobile account with funds, without the risk of harming her credit or losing access to her account. As one Kenyan investment firm, which helps poor consumers gain access to micro-insurance and savings plans, explains, “If you’re taking a dollar off a million people, that’s a reasonable revenue stream, but it wasn’t possible to do that without the mobile phone.”

Among these consumers, bank accounts are unusual, so the mobile payment systems allow them to load funds with the assistance of agents that work in local gas stations and stores. Once the funds are loaded, they can pay for groceries at the point of sale by tapping their phones, or they can send funds electronically. This latter functionality is critical, because for many Africans, making a trip to pay a bill might mean an entire day of lost labor due to travel times.

These benefits have turned Africa into the source of some astounding innovations, especially for microbusiness concepts. Sub-Saharan Africa accounts for about 70 percent of the world’s poor population, but nearly 65 percent of these households have access to at least one mobile phone. In addition, Africa is the fastest growing mobile market in the world.

Discussion Question:

What other types of companies might engage with poor consumers through mobile payment systems?

SOURCE: Heidi Vogt, “Making Change: Mobile Pay in Africa,” The Wall Street Journal, January 2, 2015, http://www.wsj.com

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