Micropayments: a fair solution for people living in developing countries.
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When we talk about Micropayments today we are necessarily talking about a whole new world inside the payments system´s world. Micropayments system aren´t new, but in practice, have been applied successfully for a relatively short time. So what we have today are complete systems allowing people and companies to stream small amouts of a given asset to pay for something (something usually accessed in real time but not necessarily). :)
This article is closely related to other articles written in this blog. In fact, it is the second part of an article titled “Micropayments: beyond content creators.” where is covered what is a micropayment and give some examples of real use cases for micropayments. Something introductory and easily explained to get people quickly introduced to this incredible world.
The second part of this series of articles deals with one specific use case of Micropayments: improving the life of poor people in developing countries. We will see Micropayments from the point of view of the poor people, people living in developing countries where those systems, if correcly applied, could be a way to access some things that otherwise could not be possible accessed by them, mainly by turning the spending of a given asset into something more fair and humanized, allowing them to spend according to what they obtain or access without blowing up their regular income.
Micropayments field experts have identified several use cases for this not so new technology. From streaming digital media to publishing and advertising sector, Micropayments can be applied in a wide range of sectors of society and the economy as well. Back in 1998, MP3.com president Michael Robertson put in context the idea of paying only for what you want when he said: “it’s ridiculous to spend $16 on a CD if all you want is one song.” – yes, it is ridiculous and, strange as it may seem, some visionary people and poor people always tend to think the same: the first because they see a great bussiness opportunity here and the later because given the low income they have, they only spend the minimun covering basic need;, they need what they need, nothing else. :)
Can Micropayments help poor people in developing countries?
Poor people need better payment services, that´s a fact. That´s why some people and companies around the world work together to bring the poor the possibility to spend huge amounts of money(comparing with their anual income) diluted over time or give people the ability to pay for time or megabyte consumed in other cases.
We can find remarkable examples in some African countries like Uganda and Kenya where M-Kopa, a revenue-generating social enterprise that sells lighting systems to the rural poor, sells a home solar energy system valued in $200 USD which is too much to cover for any of its customers to pay at one time, but the same as what a household could expect to spend on kerosene in a year to get their homes illuminated with kerosene lanterns. To help people get access to those lighting systems, the company charges customers a small payment up front, followed by micropayments of about 46 cents made daily by cell phone over the course of a year. After 12 months, customers own their systems outright—or can continue paying and get an upgraded version. Daily payments are made through M-Pesa, a mobile phone based money system.
Fig 1. *M-KOPA company offers electrical energy in African homes through micropayments. In the photo, part of the equipment distributed by M-KOPA (https://www.smartgridsinfo.es)*
Many developing countries are using digital payment providers to process government paychecks, pensions, and social benefits by depositing them directly into digital accounts and most of those payment providers allow remmitance of micropayments like PromptPay, which is an E-payment launched by the Bank of Thailand early in 2017. PromptPay allows almost instant and fee free micro transfers of digital money helping millions of users to set up their own small bussiness and process small digital payments in exchange for products and services offered.
Digital micropayments can also be used to help poor people to pay their debts in a more fair way. Making multiple, small payments each month can help you pay down debt sooner or keep your balances in check in the first place. And you’ll likely find it much easier to manage small payments than one large payment when your bill arrives.
Fig 2. *Not only for poor people...Micropayments can help ALL people to to pay their debts in a more fair way. (https://www.forafinancial.com)*
Allowing poor people to pay for things in a micro-digital recurrent way could allow financial institutions the ability to advance funds into remote areas and have regular repayments that do not significantly inconvenience the user and still let those institutions to profit on their funding activity while help less favored people. It is a fact that financial institutions do not care about financial inclusion of poorest mainly because they stated that those people are unable to pay the agreed amounts on time...but what about if those agreed amounts could be streamed digitalized and splitted in several tiny payments? It is a possibility that today´s technology allow, even in remote areas, but some people(and companies) refuse to accept.
Financial inclusion has always been a dream for many people around the world. According to some studies, the world presently has around 1.7 billion financially excluded adults. Some statistics provided by FINCA International tell us that 76% of the poorest people, in 20 countries across Africa, Eurasia, Latin America, the Middle East and South Asia, are financially excluded. Digital-based micropayment systems can provide to people living from lower income to have access to a means of payment for buying microproducts as well as to store, send and receive payments of small amounts in their community.
Micropayments for poor people could be a source of income even by giving them the possibility to save the proper way by not spending money in things they do not need or do not want, like a full music CD if they only want a single song :) This technology can prove to be an alternative for banking services for the lower strata of society, and all that´s needed is a cellphone, Internet conectivity and and the goodwill of institutions and governments backing up the people.
Final thougths...by now
Micropayments can help poor people to have a better way of life. Because their income is too low, spending must necessarily be made in small amounts. It is a world still unexplored by many companies but can be profitable for both sides. As the M-Kopa example show us: there is no way both sides(companies and poor and unbanked people) could not benefit from each other while using this technology.
Maybe we could see in a near future more and more companies using micropayments to get to those people banished from traditional banking systems while helping each other to build a better world for the entire human race...it costs nothing to dream!
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