The iPhone has become a symbol of something Steve Jobs never envisioned: Chinese sweatshops.
Were the late Apple Inc. co-founder still with us, he would surely dispute that. But facts are facts, and any of us (full disclosure: this includes me) who use one of Apple’s smartphones, iPads or iPods is, at least indirectly, supporting the exploitation of electronics factory workers in China.
Yet what if the iPhone is a key to ending the poverty that forces so many Asians to toil in such abhorrent conditions?
The buzz phrase “financial inclusion” is getting increasing attention these days. It refers to the world’s unbanked masses, what bankers like to call “the other 3 billion.” That’s the estimated number of people who lack access to the most basic of financial services. And in nations such as India and the Philippines, a key answer may be mobile phones. Poor Asians who lack bank accounts often have one.
That has banks turning to experts on mobile-device networking systems, such as Jay Collins. Working for Citigroup Inc. (C) in New York, Collins is one of modern finance’s true alchemists, endeavoring to find ways for the poor to move, pay, collect and store money on mobile devices.
No more wasting an entire day at the bank or paying various bills in person. No more being scammed when remitting cash to families overseas. No more getting robbed while carrying your weekly wages. No more public officials skimming money off the top. No more black-market money changers. No more turning to loan sharks.
Cutting Out Middlemen
That also goes for small and midsize enterprises, which account for almost half of all employment in developing Asia. Owners and managers could make payments to suppliers and employees directly into accounts connected to mobile-phone SIM cards, eliminating any number of middlemen all looking for their cut. The more cash and credit these businesses get their hands on, the more Asians (MXAP) they can hire.
“We view this as our killer app that could transform banking and reduce poverty and corruption at the same time,” Collins says.
Citigroup isn’t an altruistic venture. It’s championing this revolution because of the potential profits: loads of new customers, deposits and, of course, fee income. Just as George Soros’s Quantum (M) Ltd., Goldman Sachs Group Inc. and Nomura Holdings Inc. invested in microfinance, Citigroup realizes there’s money to be made even from those with little of it.
The potential of mobile banking deserves far more attention than it’s getting from governments. It could enable billions to leapfrog from no connection to the global financial system to becoming productive participants. Asia’s poor would suddenly have a way to manage income, build assets, invest in the future and buy insurance to prepare for risks like health crises or natural disasters.
Political leaders should facilitate the technology’s growth with regulations and oversight to ensure security against hacking and scams. They should commit to distribute certain salaries, benefits and subsidies on mobile systems. They should step up efforts to raise financial literacy in the region.