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There is something about being the incumbent in any market, and perhaps particularly so in a trust-based business like banking. In East Africa, where banks had no foothold among the rural poor, Safaricom and other Telcos were the incumbents, and now banks are trying to break in. In developed economies, the reverse is true. Regulation is another challenge - banks are better equipped to deal with (and charge for) regulatory overhead such as KYC and AML monitoring requirements. 

Mobile phone security needs to be addressed for financial inclusion as well, with the added constraint that we can't assume smart phones. Still possession of the phone (or SIM) and a PIN still constitute 2-factor authentication, albeit pretty basic. However, as smart phones become ubiquitous, facial recognition is likely to become more significant for KYC identity purposes (particularly for countries with national ids) - this should be considered for mobile security as well.

Thanks Clive. Regarding pricing there is a delicate balance. If we want sustainable financial services, offered by private institutions (rather than government banks), then they will need to generate adequate return on investment to warrant the investment. This is why consumer advocacy groups and associated legislation are essential, because as you indicate when profit is the primary motive then unnecessarily high prices will result, absent strong competition.Managing transactional costs down to very small amounts is paramount - this is likely to occur only with scale, which is very challenging for small micro-economies. There is undoubtedly great value for the poorest in particular with savings groups and so on, but they have limitations and risks of their own that can sometimes offset the low cost of participation. This is a really complex topic that needs lots of dialogue and experimentation, and has no easy answer.

Good concept. Right now this appears to be primarily a payments-driven account. Does anyone know if Monese plans to expand into any form of savings and lending - these are just as much a challenge for new immigrants (documented or not), as well as for many others with no financial history.

Yes, Jim, I agree. Hence lines of credit like an overdraft line need to be offered with extreme caution, and underwriting of individual loans needs to take into account ability to repay so far as information is available to support it. I suspect there is still a lot of work to do to come up with credit risk management models that protect the customer and the financial institution, while still allowing flexible loan products with acceptable pricing. Even defining what is acceptable pricing is context-driven and can't be easily generalized.

Chris - thanks for a great comment. Do we not have flavors of the risk you describe here in existing consumer loans that are either secured against future income streams, or not secured at all? Having said that, the risk model is going to be different and needs some attention. Underwriting is typically a rather expensive exercise, leading to high loan fees that would not be appropriate for a very small short-term loan. Pricing of the kind of risk you describe is also challenging if we're to avoid prohibitive up-front fees for short-term loans. This is no doubt why true APRs for microloans are so much higher than the advertised nominal interest rates would suggest.

Interesting post, Dan. There is a clear distinction between crypto-currencies and digital money. Actually it could be argued that digital money has been around at least since SWIFT was created 40 years ago - after all the FIN service allows for notional electronic movement of funds through from a consumer or commercial account at one FI to an account at another FI, via correspondent bank relationships, without any cash or paper involvement at all. Actually telegraphic transfers go back to the 19th century, though there was some printing of telexes in that process - but no cash. The emerging technology that supports digital money - such as mobile, enhanced security, and blockchain - is where the innovation is occurring. So Citi are right - adoption of digital money is not only inevitable, it is already ubiquitous in commercial banking.

Charmaine, interesting point. We'll see some strange bedfellows before we're fully done with financial inclusion! I wonder how well telecommunications and banking regulators are getting on together too in some places?

Jim historically you have been right that banks have shown no interest in meeting the needs of the poor. I think there are many reasons. Understanding of what financial inclusion will take has evolved steadily over the past couple of decades, and only recently have there been solid attempts to design appropriate products. But more significantly, we simply haven't had the technology necessary to make unit costs for small transactions viable from a commercial bank's shareholders' perspective So while there have been some microfinance investments, and other experiments by banks such as Citi and Barclays, there hasn't been a shareholder-friendly business case. That starts to be possible with emerging technologies.

I don't know that it is fair to say the banks have "no interest" in trying to serve the poor. They do, though, have a primary focus on managing return on capital according to market and shareholder expectations. The potential contribution of the technology industry is creation of tools and products that actually serve the poor in a way that at least meet the minimum returns the banks' masters require. We're still quite a way from that though.