Wednesday, October 27, 2010

Peer powered cash

This piece first appeared in the business blog on 26 October 2010

Remember the good old college days? When time flew, and money was scarce. How many of you borrowed from your friends to fuel endless chai, smokes and dates? You gave back the money when you could and you earned favors when you did the same for your pals. It was a mutually beneficial scheme where trust and faith were currencies on which small sums of money were exchanged.

Fast forward to now. What do you do when you need a small sum of money? Like this morning when I needed 150 bucks to pay for a flat and did not have the desire to go to the ATM on the other side of the road? Would it not have been nice to have a bunch of friends on my mobile phone who could chip in 150 bucks that I could return later in the day when I topped up my wallet? Social Lending? Peer powered cash?

What if there were virtual currency that one loaded onto the phone that one could send out to trusted friends when they needed small sums of money? Not actual cash but redeemable tokens which can be cashed in at cafe chains, restaurants, movie halls, book stores, petrol pumps, or any place that you can think of.

The service could do deals with the outlets and buy the products / service at a considerable discount - for example a cup of coffee at CCD for Rs 45 could be bought at a margin by the service provider and be made available to the consumer at the retail price. If worked upon there can be many models here and it creates a parallel economy of sorts that functions like a virtual wallet. Maybe eventually this can get extended by integrating banking services.

Which brings us to an important application which was the basis on which this piece was being written. There are millions of people without a proper bank account in India who manage to get a cell phone. The very basic cell phone without GPRS, camera and so on. To understand this you need to get that nose out of the metro India and into the interiors - places like Nira in Pune district, which falls off the radar ever so often. Imagine being able to load Rs 100 onto your phone like you deposit money in a bank, earn a small interest on it like you do with a bank and be able to pay, transfer and all that using just your sms enabled device. One might argue that there is too much effort involved in teaching the guy to use sms. My counter to that - trust the common man on the street to evolve faster than you and me. His needs are far greater than ours and he knows he needs to learn fast to survive.

For this idea to work, the telecom companies, RBI and postal service will have to synergise. Every large village has a post office - a perfect place where money cards can be bought and loaded onto the cell phones - like a prepaid card which is used for the calls and smses. I do not have a perfect model on how the relation between telecom ( I keep typing in telecon - a purely Freudian slip :)), postal service and consumer. But I am sure that this is something that will work. Imagine how big this economy can be. Imagine how valuable it will be for the FMCG guys who are trying to expand the rural market.

I am excited with the progress made by the telecom, banking and services sector in the last decade, but the real explosion is yet to come. The rural consumer, the consumer who does not have a banking service is the last HUGE mountain that will need to crossed and the sooner someone cracks it the earlier his IPO!!

This in my mind is more valuable than the hazaar apps and app stores that we spend good time and money building and trying to sell. But hell I am known to be wrong.

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