We often view developed economies as being more technologically advanced, when compared to emerging markets. However, when it comes to mobile payments, it is in fact the developing economies leading the way.

Mobile payments are a big deal, because the ubiquitous smartphone has become the human being’s electronic alter ego, with many people valuing their phone more than their wallet.

A recent global survey found that the fastest-growing companies are those that have the highest acceptance of mobile payments. And it’s those businesses and economies best taking advantage of the immediacy and ubiquity of mobile payments that will be reap the benefits.

In the wider sense, this is just one part of the fin-tech revolution now underway. From loans to wealth management, the functions that have traditionally been managed by banks, insurance and securities companies are going digital and mobile.

Understanding mobile payments is one way to get a sense of this shift.

Two examples that help demonstrate this are the company M-Pesa and the booming mobile transactions economy of China.

M-Pesa is a mobile payments platform developed by the mobile industry that was first tested in Kenya a decade ago with backing from the UK International Development Department. It is now in 100 countries, including two-thirds of all developing countries. In Kenya, it has 20 million users and has been credited with lifting 2% of the population out of poverty.

Similarly, in China, consumers have leapfrogged banks and credit cards and gone straight to online and mobile, using services such as Alipay, with 450 million registered users, and WeChat, with 890 million.

A report by Ernst & Young and DBS points out China is the world’s largest e-commerce market, representing 47% of global digital retail sales. Mobile is the biggest part of that and is growing quickly, expected to account for 68% by 2020.

A number of factors are at work in both China and the wider developing world:

  • Mobile services are a vastly more attractive alternative to the traditional banking system, which can be inefficient in developing economies. Around 2 billion people worldwide don’t even have a bank account, let alone a credit card, although that number is declining quickly thanks to mobile.
  • The technology is simple and accessible. In Kenya, all that is needed is a phone and a mobile data connection. In China, the QR code has become the enabler between the consumer and the merchant. QR codes are now on billboards, offering immediate discounts, product information and connections between consumers, brands and retailers.
  • Differences in financial regulation give developing countries an advantage over advanced economies. Both in Kenya and China, governments have created new regulation to back the new services. By contrast, financial services firms in Europe and North America are bound by complex prudential and compliance regulations.
  • In China, consumers are also much less guarded about their data privacy. They are more prepared to pass on personal data in order to access a service than in many western markets.

With the wide availability of these platforms, we can now see their transformative impact – the ease-of-use and high penetration is enabling innovation.

For example, M-Pesa enables consumers to pay as they go. People who may not be able to afford the upfront cost of new appliances, such as solar-powered lighting, can now pay them off progressively.

Until recently that was impossible. In this way, these kinds of new services are making fundamental difference to people’s lives.

In both China and Kenya, mobile payment platforms are already driving a lot of economic activity, whilst more advanced economies are only just getting started.  When it comes to exciting and impactful innovations in mobile money, the developing countries are leading the world.