Is Poor Internet Access Holding Back Mobile Payments?

November 20, 2018         By: Steven Anderson

With news that banks in Switzerland may actively be hindering the advancement of mobile payments—an investigation is currently active to determine if this is so—it’s clear that there are a lot of potential reasons that mobile payments might not catch on in a region. A new report from PaymentsSource suggests that there may be one other cause: poor-quality internet access.

For anyone who’s ever been to the non-touristy areas of foreign countries, or just been to certain parts of developed nations like the United States, you know that high-end internet access isn’t always readily available. It’s a phenomenon known as the “digital divide”, and it’s actually fairly widespread. It’s also having a significant negative effect on  economic development.

One critical example of this concept was India; its recent demonetization strategy shut down most of its cash supply. That left customers with few options, including moving to e-wallets and other mobile payments systems. Since only 26 percent of Indians actually own smartphones—there are some feature phone-driven mobile payment systems as well, however—it severely curtailed the numbers of people who could actually buy things.

Kenya’s advances in the M-Pesa system, meanwhile, are popular with 37 percent of the country. Yet over 10 percent have no cellphone at all, let alone a smartphone, so they’re simply out of the loop.

New advances may address this point. There’s the potential of 5G, which some have referred to in the past as “fiber-without-the-fiber.” Verizon even released a line of commercials showing how mobile internet can be brought just about anywhere with drone aircraft. Sure, this was designed for “first responders” to get access to connectivity in disasters, but if this is all it takes, then why not just launch several of these and provide high-end internet access anywhere? Additionally, recent advances in connectivity have created what’s known as “gigabit coax,” a system that allows normal cable internet to reach the gigabit level.

Some here will point out “rent-seeking” behaviors and the near-monopoly of certain areas caused by companies like Comcast engaging in covenants with cities for exclusive access rights as problems in establishing connectivity all over. Whether the solution is wireless, wired, or something else again, we need to improve connectivity all over the world. The future of mobile payments in general depends on it.