Wednesday, January 23, 2008

Cell Phone Banking in India

The Ideas section of this Sunday's Boston Globe, featured a huge two page
article by Jeremy Kahn titled "Third World First". This article is
about rising cell phone banking in India, something that has not even
caught on in the so called "developed countries" This article claims
that, "The rise of cellphone banking in India highlights a new trend:
technology developed in the Third World is flowing back to the First."

Here is an excerpt from the article --
"New Delhi: Bapi Das, seated next to an open sewer in a teeming slum
on the outskirts of this Indian city, combs his hand through his hair,
smooths his moustache, and prepares to enter the global financial

Das, a 42-year-old commercial painter, grins as a worker for a local
micro-finance group frames his face with a digital camera and zooms
in. It is an important moment. His photo will adorn a smart card that,
with help from a mobile phone and a fingerprint reader, will allow Das
to store money electronically, make small cash withdrawals, and send
money to his family on the other side of the country. It is the first
bank account he has ever had.

This might seem like a classic example of the Third World struggling
to catch up with the First. After all, people in the United States and
Europe have been using ATM cards and the Internet for years to perform
the simple banking tasks Das is only now able to do. But look again:
The technology used to bring slum-dwellers like Das their first bank
accounts is so advanced that it isn't available to even the most
tech-savvy Americans - at least not yet.

Soon, however, it may help you purchase groceries, withdraw cash from
an ATM, or ride the T. Already in the past year, Citigroup has taken a
mobile banking system it pioneered in India and brought it to the
United States. And a host of other companies, from Ford to Microsoft,
are following suit: piloting new technologies and ways of doing
business in the developing world, and only then bringing these
products and services to wealthier consumers in more mature markets.

This represents a stunning reversal of the traditional flow of
innovation. Until recently, consumers in the Third World also had to
tolerate third-rate technology. Africa, India, and Latin America were
dumping grounds for antiquated products and services. In a market in
which some people still rode camels, a 50-year-old car engine was good
enough. Innovation remained the exclusive domain of the developed
world. Everyone else got hand-me-downs.

But today, some emerging economies are starting to leapfrog ahead. Why
build a network of telephone wires out to remote areas when you can go
straight to a cutting-edge mobile network at a fraction of the cost?
Why burn fossil fuels for electricity and cooking if cleaner - and in
some cases cheaper - alternatives, like solar and biogas, are
available? Why electrify rural villages with incandescent bulbs if
longer-lasting, environmentally friendly options like LEDs or new
fluorescent bulbs exist? In many cases, it is mature markets like the
United States and Europe, tethered to older systems, that find
themselves playing catch-up."

Read the full article at --

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