Sunday, June 22, 2008

How to turn a cell phone into an ATM

This TED talk was pretty interesting. But the part I found most fascinating is how, in the streets of uganda, they've figured out how to create banking services with a cell phone. The part in question is at about the 8 minute mark.

Let me summarize. If you live in rural Uganda, you don't have access to a personal phone. But someone in your village might have one, and set up shop as a phone kiosk. This is done by purchasing a cell phone, and then selling access to the local residents who want to use the phone. Now if you have some money and you want to send it to your home village (which has one of these cell phone kiosks) what you do is buy cell phone airtime and call up the kiosk in your home village. You read off the numbers to the cell phone provider. Say you bought 1000 minutes for $5. The cell phone provider keeps all the thousand minutes (equivalent of $5), takes about 20% and gives $4 to the person you wanted to give money to. The kiosk owner then resells the minutes to make up that $4.

This is simply brilliant. But the part that's most fascinating to me is that it's doing exactly what Grameen Bank is trying to do - namely provide banking services to the extremely poor. The difference is that there's no central controlling authority. The people who have the most interest in it's success will be the ones who determine whether or not it works. The cell phone as ATM system is simple and elegant, and capital unintensive, and yet achieves much of what Grameen Bank is trying to do with a much bigger capital investment.

It never ceases to amaze me how much can be accomplished without central planning. And how it is usually accomplished much more efficiently.

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