The Gates Foundation has developed an open source platform called Mojaloop to promote mobile finance in the developing world. This is a free software available for software developers and banks to adapt to their own needs. It was created in partnership with fintech developers, Ripple, Dwolla, ModusBox, Crosslake Technologies and Software Group.
Mojaloop is similar to the very successful Kenyan mobile finance platform M-Pesa with the key difference being that Mojaloop is open source and M-Pesa is closed loop. A closed loop means that users can only pay others who are using the same system.
Building a platform that combines complex technology whilst remaining low-cost and accessible to poor people is very difficult for the profit-chasing private sector. This is why it required an organisation like the Gates Foundation to build an effective platform that ticks both of these boxes.
It is estimated that 2 billion adults globally do not have a bank account. This number is skewed by very weak account penetration in developing countries. The main reasons for this low account uptake are poverty, distance from banks and the amount of paperwork involved in opening an account. Having a bank account opens up financial tools for insurance, credit and making savings which in turns allows people to start businesses and save for the future in times of plenty.
The number of ‘unbanked’ people dropped by 20% worldwide between 2011 and 2014 – this drop is partially attributed to the uptake of mobile banking. It is estimated that 80% of people in Sub-Saharan Africa, one of the regions with very low account penetration, have access to a mobile phone. These two facts combined suggest that mobile banking could transform financial services in this and similar regions and significantly decrease the number of 'unbanked' people.
The fact that Mojaloop is open and interoperable means that users can interact with others using other systems. Now that banks and financial service providers have free open source software that they can all use, compatibility will increase between different systems. Thus, the uptake in the use of mobile finance could increase exponentially and be a boon for business for rural and poor people. It could also lead to fast and easy money transfer between different countries opening up possiblities for further cross-border trade.