China’s Alipay is expanding to European markets, Apple Pay takes on China’s internet kings in mobile payments, banks across the world are launching mobile apps bringing their existing services onto the smartphone. And then, there are all those whose mission is to improve a customer’s in-store and online check-out experience. Oh, let’s also not forget the mobile network operators with their mobile wallet versions facilitating P2P transactions, bill payments, and so on. Most of the $50 billion that has been invested in fintech over the past several years globally is used to improve what we have been doing in the past and to expand these services to new customers. This is all great, it will drive financial inclusion while at the same time reducing costs related to financial services in general.
Now, let’s talk about the not-so-obvious opportunities. There are startups which are real game-changers. Instead of addressing a “problem” in today’s world, they are “creating” something that has never existed in the first place. They are for digital finance what Elon Musk’s SpaceX is for space travel. These players envision how the world will transact tomorrow and they’re building the rails to make this happen.
One category of such startups are those enabling global platforms (Messengers, Social Networks, Mobile Games, etc.) to introduce contextual, non-merchant centric transactions. If Facebook was a country, it would be larger than China. In fact, most social networks and messengers are larger than most countries. Political borders and language are not limiting interactions any longer – it’s the same whether you interact with your neighbor or someone 10,000 miles away. Yet, none of the over 30 platforms boasting a global user base of 100+m people has embedded features to transact seamlessly. If Facebook had its own money transfer capability amongst its users, we could consider Facebook an economy. In Kenya, over 40% of the country’s GDP is already transacted on M-Pesa, the country’s leading mobile money service. What if we were to see similar developments in other countries driven by social networks and messengers? What if people from Myanmar, Kenya, or Brazil could as easily receive money as they can get followers on Instagram? We are still missing the “value”-component in this global P2P world.
According to McKinsey’s Global Institute (MGI), digital finance could add $3.7 trillion to emerging countries’ GDP by 2025. I’m convinced we will see a new type of country-agnostic economies emerge over the coming years, mainly driven by social networks and messengers introducing contextual transactions that bring new use cases beyond e-commerce and remittance. These neo-economies could push the economic impact to emerging countries significantly beyond today’s expectations.
The world is at an inflection point with the majority of people having access to the Internet and over 3 billion using a smartphone. By 2020, there will be over 6.1 billion smartphone users worldwide and over half of them will never have had a bank account. While it’s a good thing to bring financial services to these people, it’s even more impactful to bringing those who never had a job an opportunity to participate in the global economy – and earn beyond Likes and Smileys. Low-value contextual money transfers through social networks could be what the steam engine was to 19th century Europe: the workhorse driving impactful social and economic transformation.
