Bill Maurer and Olga Morawczynski’s blog post from a few weeks ago discussed a topic that seems to be on everyone’s mind: innovation in mobile money…or the lack thereof. This has generated a lot of comments and even follow-up blog posts, like one by Bill Barhydt from m-Via. Bill and Olga made some good points about the nimbleness that MNOs and other players have to exercise in order to stay competitive and generate innovation. However, I’m not so convinced that there is a lack of innovation in mobile money because MNOs are partnering with banks. I’d say that there is at least as much of a lack of innovation in mobile money because MNOs are simply trying to copy M-PESA. The link-up between Tameer and Telenor (a bank and an MNO) in Pakistan has received big acclaim for innovation. It’s easy to blame the regulators, as Bill and Olga say, but it’s also quite easy to blame the banks.

Discussing this with my CGAP colleagues has been helpful in thinking through these issues.  Defining exactly what we mean by “innovation” would probably reveal that it means different things to different people. The initial innovation of branchless banking focused on the channel that was used to “bank the unbanked,” namely the mobile phone. Sending money around or paying bills wasn’t anything new, but the way that you could send money around and pay bills was. It seems that people are getting bored with this channel idea as calls for innovation now focus on the product offering itself. This is where innovation becomes all the more difficult since offering a sophisticated financial service over the mobile phone entails more than just moving money around. Can microinsurance or microcredit be offered in an environment where personal interaction is no longer needed? This is one question that those hoping to be innovative in the branchless banking product design space are trying to answer.

Some may define innovation in terms of the players that are involved. One could argue that the product offering of easypaisa by Tameer and Telenor is not as interesting as the partnership itself that was formed between these two large companies to offer the product.

Maybe the next wave of innovation will still be related to the channel, but just a different channel. Is the hype around mobile technology really panning out?  I would argue that mobile phones still provide incredible leveraging power to most providers, but perhaps there are advantages that card-based systems can provide that mobile phones can’t.  Perhaps internet capability or near-field communication on the mobile phone will make the same mobile channel even more powerful. Or perhaps there’s a channel out there that we don’t even know about yet.
 
 I think Bill and Olga are right when they say that many of our ideas around innovation are likely to come from the customers themselves as we begin to understand their demands and the ways they use products and services. But the thing about innovation is that it surprises us all. The microfinance industry has been redefining itself over the past 40 years. We’re just at the beginning of the branchless banking industry, and only time will tell where innovation takes us.

- Sarah Rotman