Recent news stories in the New York Times, Red Herring, the Economist, and others note new features that allow cellular phones to serve as mobile wallets. While no article has said so explicitly, the potential application to BOP markets is huge. Cell phones are cheaper, hardier, and more functional than ever – and low-income consumers are snapping them up, driving penetration growth rates to astronomical levels in Africa, Asia, and Latin America. Meanwhile, a lack of existing credit card infrastructure opens the door wide for cell phone-enabled wallets, which may leapfrog more naturally than in developed markets. Financial services at the BOP? With apologies to John Donne, the ring tone tolls for thee.

Transforming cell phones into wallets involves embedding contactless chips into the phone during assembly; Nokia is already planning to make this standard on all their handsets. The Economist describes how it works:

“These contactless cards do not need batteries. Instead, when a card is placed close to a reader an electrical current is induced which powers up the card and enables it to exchange short bursts of data with the reader. Such induction happens only over very short distances, which is why close proximity between card and reader is required.”

Last week, John, Cory, and I went to a symposium on the BOP hosted by the Bretton Woods Committee. The symposium was paneled by four individuals from academia, an MNC, a technical assistance non-profit, and a small social for-profit corporation. Kai Schmidtz, EVP and COO of MicroFinance International Corporation (MFIc), delivered a fascinating presentation on MFIc’s conceptualization of remittance flows as a potentially enormous source of capital for MFIs in Latin America. MFIc, a social, for-profit corporation, positions itself as “the natural financial bridge between the developed and developing worlds.” Remittance funds--USD 52 billion in remittances were transferred to Latin America from the US in 2005--typically accumulate in money transfer systems due to the lag of about three days between the time when a remittance is sent and received. These accumulated, “floating” funds could be made available for lending to MFIs. MFIc has developed a simple, web-based platform, the Electronic Settlement System, that allows MFIs to process and administer payments; interact with the US banking system; safely maintain interest-generating remittance funds in the US banking system; and use the capital shared by MFIs to create lending programs for participating MFIs.