Nick pointed out to me that another key constituent in the race for identity and payment. Cell phone providers have an existing billing relationship and can provide two form authentication via SMS. With the success of M-Pesa in Kenya achieving total population penetration on the order of 25% of the Kenyan population, there’s great evidence that carriers can provide the payment infrastructure. M-Pesa is a payment service that started about 10 years ago in Kenya. It is provided by Vodafone via Safaricom, acting in a new role as a bank for its subscribers.


Instead of depositing funds at a teller or ATM, one buys top up minutes at any of hundreds of thousands of locations, punches a code into the phone and instantly is provided with currency for texting and calling, but also for person to person payments, which can form the basis of remuneration for transactions on the street and in stores. A highly disruptive innovation, M-Pesa obviates the need for traditional bank branches and ATMs dramatically reducing the cost of running a bank while greasing the gears for commerce in a secure way. This type of business model innovation is very likely to happen in countries where banking infrastructure is underdeveloped or non-existent. In more developed countries, where banking infrastructure is ubiquitous, you can bet the incumbents will embrace this technology slowly, until forced to by a new, more efficient competitor, much in the same way the internet-only banking era was ushered in by ING Direct and others.