How Developing Countries Will Be Driving Tech Innovation

Developing countries and tech development

Netflix disrupted the video entertainment industry. Uber disrupted the taxi industry. Airbnb disrupted the hotel and apartment rental industry. The rate of innovation today is incredibly fast, but the center of all of this disruption has by and large come from the developed world.

While industries have been flipped on their heads, with giants like Blockbuster declaring bankruptcy in 2010 and even New York City’s yellow cabs falling into crisis, these disruptive technologies haven’t disrupted the global balance of power at all. Wealthy nations lead the way, and their innovations eventually take root and transform the landscape of their neighbors.

Innovation is the act of creating something new. It of course takes grit and creativity, but boiled down, innovation in large part comes from having access to information and being connected. You can’t transform an industry or introduce a revolutionary way of doing something without having all the facts or channels through which you can widely disseminate your vision for change.

Without having easy access to the internet, it is no wonder that third world countries aren’t paving the way when it comes to disruption.

Commoditized smartphones are shifting this paradigm, making it possible for farmers in the most rural parts of Kenya to access data about market demand and pricing, and budding entrepreneurs to easily stay updated on the latest innovations in Silicon Valley.

A smartphone used to cost as much as a mid-range laptop. They still do if you’re out to get the newest Apple or Android model. However, there are now dozens of smartphones that offer great functionality and connectivity for as little $150. That’s still a lot of money in places where people survive on less than a few dollars a day, and it’s still a lot more expensive than a simple feature phone.

But smartphones today should not be compared to a feature phone. They have more equivalent functionality to a computer, which is far more expensive. Another consideration to keep in mind is that a single smartphone can be shared by an entire family, group of friends, or farm, connecting everyone to the internet.

With all this in mind, cell phone companies like Reliance Jio in India are gearing up to bring widespread penetration of 4G smartphones throughout the developing world. Facebook has also launched its own initiative, Internet.org, which aims to bring the two-thirds of the world without internet access online.

Facebook has already spent over $1 billion building its Free Basics platform, an application which provides free access to dozens of basic websites (including Wikipedia, BBC News, weather sites, and of course, Facebook) to cellphone users without data plans. Facebook has partnered with mobile operators in 37 countries to date, further slashing the cost of connectivity for people in the developing world.

With greater connectivity comes a much larger capacity to innovate. We’re already seeing large-scale innovation completely transform the banking industry in Kenya. The vast majority of Kenyans don’t have bank accounts or credit scores. Eight out of ten Kenyans do, however, have cell phones.

So, in 2007, Safaricom launched a service called M-Pesa, which provides a way for Kenyans to securely transfer money via their cell phones. Nearly a decade later, M-Pesa has helped 19 million Kenyans achieve financial inclusion. They’re using the service to text money, withdraw cash, buy goods and services, and earn interest. All a user needs to do is head to an M-Pesa kiosk, hand their Kenyan shillings to the teller, and then wait for their cash to be transferred into a PIN-secured virtual currency account.

Until now, it’s been the case that in order to achieve financial inclusion, people needed to open a bank account. But in rural Kenya, where most people live on less than 2 dollars a day, there are no banks to be found. As Bob Collymore, Safaricom’s CEO, told 60 Minutes, “People don’t buy a packet of cigarettes.

They’ll buy a cigarette. And so we need to be operating at that level. People don’t buy a tube of toothpaste. If you go into the slums, you will see people buy a squeeze of toothpaste. And so you have to operate at that micro level.” These micro-transactions have deterred major banks from opening up branches in Kenya’s remote communities, which has, in turn, stunted people’s potential for financial inclusion and economic independence.

M-Pesa has done away with that barrier, making the need to use bank accounts no longer a requirement. Just as Venmo users sometimes choose not to “cash out,” opting instead to transfer money from one purchase to the next without passing through their bank, even M-Pesa users who do have bank accounts are choosing to store manage all of their financial transactions through the service. It’s universally trusted throughout the country, easy-to- use, and allows its users to exchange cash on a micro-level.

M-Pesa was developed to operate on the cheapest feature phones so as to have the widest penetration possible. In 2007, that made a lot of sense. The first iPhone wasn’t even on the market until June of that year. But times have changed dramatically. At the end of 2015, there were approximately 1.8 billion smartphone owners worldwide.

By 2017, it is projected that that figure will increase to nearly 2.3 billion, meaning over a third of the world’s population will own a smartphone. With smartphones having reached near ubiquity in the developed world, most of this growth is going to be coming from the developing world, where commodified smartphones are now increasingly affordable.

It seems inevitable that in due course, services like M-Pesa will transition from text-based services on feature phones to apps on smartphones. Other less established mobile services, like M-Farm, a pricing information system for Kenya’s farmers, will become far more accessible to a wider audience, and on the other side, apps from the developed world will make new resources available for the first time in the most remote villages on the planet.

Imagine the day when Amazon solves the distribution issue on a global scale, and teenagers in rural Cambodia can browse and order from the same online bookstore as adolescents in San Francisco. With commodified smartphones, less expensive data, and clear distribution channels, the potential for global connectivity and innovation can actually be achieved.