Touch Points by Steve Finikiotis

Last week, Nokia announced a dramatic 85 percent rise in 3rd quarter (’07) profits due to robust demand for low cost phones in emerging markets. This boosts its share of the global pie to about 40 percent.  The biggest surge came in Africa and the Middle East where unit sales topped 45 percent.

It’s easier to install in cellular towers in remote developing areas than to put in land lines, the use of cell phones has been exploding. The stunning growth of mobile services in emerging markets is creating new socio-economic realities for legions of new consumers who are using mobile networks for more than just calling their friends.

We’re talking “cash economies” with little Internet penetration. In remote regions, mobile phones enable the “leapfrogging” of earlier technology by facilitating a growing mobile-banking (m-banking) market. M-banking is actually a case of “double leapfrogging,” – jumping over both landlines and traditional banking. And, it appears to be another example of emerging markets driving global innovation.

It’s not unlike SMS money transferring which was originally developed for emerging markets but is now being adopted globally by telecos and banks to address worldwide gaps in trasmitting funds.

There’s lots of interest these days about m-banking because there are many more people around the world with mobile phones than with bank accounts. Most notably, companies in South Africa, Kenya and the Philippines are extending banking services through the mobile channel to people who previously didn’t have banking access at all.

M-banking enables ”un-banked” populations to conduct financial transactions, providing access to customized information to enable remittances and “micro-payments”. Using mobile channels banks can reduce disbursement and loan collection costs and streamline their operations while enabling customers access to loans and lower borrowing costs.

The fusing of mobile technology with new business practices raises interesting socio-economic as well as business questions. Who is using m-banking and how it changing their lives? How are tech and service providers linking up to deliver solutions to underserved markets?  What other services will be consumed through mobile channels in these markets.

We’re witnessing how the personalization, processing power, and flexibility of mobile technology are opening a potentially vast market of new users, many of whom are gaining access to new services at the same time they are getting their first telephones.

There is a broader question here. How can technology and business practices come together to foster economic development in emerging markets? Ultimately, it’s the new consumers who will decide how to take advantage of mobile-enabled services.

And, it’s more proof that we don’t need a 20th century industrial base to build a 21st century information economy at the “bottom of the pyramid.” As C.K. Prahalad and Stuart Hall famously noted: “The real source of market promise is not the wealthy few in the developing world, or even the emerging middle-income consumers; it is the billions of aspiring poor who are joining the market economy for the first time.”

Here’s the thing. About 85 percent of the world’s population resides in emerging markets. While individuals in these markets have lower purchasing power, their aggregate purchasing power could soon exceed that of developed markets.  This is a fact that hasn’t escaped Nokia or Google, judging by its Android project.

How will this economic reality push global innovation? How will CTI-enabled services affect the economic growth in the developing world?  And, more broadly, what comes next? These are exciting, complicated questions to ponder as we look ahead to the New Year.