Unbanked Africa is way ahead of Facebook's libra

30 June 2019 - 05:07

Among Facebook's justifications for introducing a new digital currency, libra, the company has offered one pious rationale: to connect the 1.7-billion adults who lack bank accounts to the global financial system. That's certainly one way for the "unbanked" to enjoy the convenience of digital money. Or they could just use a DeathAdder Elite.The DeathAdder is a high-performance gaming mouse made by Razer. The Singapore-based gaming company recently entered a partnership with Visa that will allow players to go to a convenience store and buy prepaid credits to load onto their phones, which they can then use to buy goods not just within Razer games but in the real world, at millions of merchants who accept Visa.The credits effectively do what Facebook claims the libra will - provide electronic money to those without bank accounts or credit cards. And though the Razer-Visa partnership is new, this prepaid model is relatively mature compared to libra and other digital currencies. Facebook may well find that those it's supposedly trying to help don't need its help after all.The idea of allowing consumers to top up their smartphones with prepaid credits originated in Kenya more than a decade ago. During the mid-2000s, executives at Safaricom, the country's largest telecom company, noticed that Kenyans were bypassing the traditional banking system and travelling long distances to deliver cash to family members. So they developed M-Pesa, a system whereby Safaricom customers could buy mobile-money credits from agents who already sold Safaricom airtime. Those credits could be transferred via SMS and withdrawn as cash from another agent. Today, 74% of Kenyans have mobile-money accounts. And the trend has spread well beyond Kenya. As of 2018, there were more than 866-million mobile-money accounts in 90 countries.The uses for such products have multiplied as the customers have. Mobile money has contributed to the financing of micro-enterprises and small businesses. Interoperability between services facilitates remittances and trade across borders. Mobile money is also enabling e-commerce. Alibaba recently opened up its AliExpress international platform to M-Pesa payments. In Southeast Asia a lack of credit cards and bank accounts limits the ability of companies to sell in-game products. To counter this, Razer came up with the Visa deal, in which a system called Razer Pay can be used at 54-million merchants globally.The libra has advantages in the battle for the unbanked, starting with its perceived security in emerging markets where fraud has damaged the reputation of mobile money. More important, Facebook is already a crucial tool for small businesses and entrepreneurs in the developing world. By integrating libra with Facebook Messenger and WhatsApp, it is positioning itself to become the first and easiest payment option for emerging-market consumers.But for many consumers, the libra doesn't offer anything mobile-money services don't. More local alternatives have the advantage of familiarity. Meanwhile, governments struggling to manage mobile-money services are likely to favour those local champions rather than a transnational global behemoth. Facebook may find that doing good is harder than it looks. - Adam Minter, Bloomberg

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