April 12, 2015 9:23 AM UTC

Phone Companies Should Consider Bitcoin for the “Unbanked”

First, a little background. The Google Play and the Apple App stores were launched a few months apart from each other in the second half of 2008.

Since they were first to market, Apple had the opportunity to define how things should work. Rather than try to work out a deal with AT&T (their only mobile provider via an exclusive contract which involved subscription kickbacks until 2011), Apple decided to go straight to the source. Customers who wanted to install additional apps were required to create an Apple account linked to their credit card, even if they had not previously been iTunes Store users.

The account was required even if the user only intended to download free apps, and the same went for Android Market, creating for these third-party companies entire segments of the market they had not had before. People who’d never owned a Mac were buying iPhones at this time, and people who’d still not started using Google (Yahoo! and Microsoft still providing notable alternatives) were creating Google accounts.

The Android Market (later renamed Google Play) worked on a similar principal, but unlike Apple, which developers had to invest considerable resources into both making viable apps for but also successfully surviving Apple’s approval process, the overwhelming majority of Android Market apps were free or ad-supported. Thus it was that in a short period, despite having launched months later than Apple’s store, the Android Market had a great deal more applications than the App Store.

Before long, someone must have noticed that there was a considerable market of people who pre-paid for their phone service, especially on the Android side, using cash at the store. People who would have to pay an extra fee to a pre-paid debit card provider in order to use such services, a definite consideration for them. Why bother, what app could be that important? A barrier to adoption if there ever was one. So the gift cards were created, and before you knew it, anywhere you went that sold a phone card was also selling iTunes Store gift cards (which were usable on the Apple App Store) and Android Market gift cards. Customers buying this way suffered no loss in value, but there’s a convenience factor that has to be considered in the sale of digital goods. Quality content is far underweight in comparison to hassle when it comes to conversion.



Freemium is Now the Rule, not the Exception

As was stated earlier, free apps were prevalent on the Android Market from the beginning. The contributing factors to the size and scope of the store seem obvious: it was available on a myriad of devices (whereas the App Store was available only for the iPhone at the time), these devices were by and large less expensive, and to top it off, Google’s policies were much easier for developers to comply with, Apple having a drawn-out, widely derided approval process.

According to Juniper Research’s whitepaper “Digital Content – An Over the Top Reaction,” last year at least 99% of all apps were free to download. The business model of pay-to-download seems to be in fast decline, but don’t draw too many conclusions from that – customers are still paying for content, and in many cases they wind up paying a lot more. In-app purchases can be far more profitable, be they upgrades for games or an ad-free experience for other types of applications. Juniper describes something called “the carrier billing opportunity,” which is a research-based opinion that phone carriers have an unprecedented opportunity to get back in on the monetization of their customers.

As its direct role as a content retailer has diminished, direct carrier billing opens up the possibility of generating a revenue stream which, while it will not necessarily provide a wholescale solution to the underlying problems, may at least deliver revenue streams which equal, or even exceed, Mobile Network Operator content revenues pre-storefront. […] The introduction of operator billing can be mutually beneficial. From the perspective of the storefront, it can enable payment for a far wider and diverse user base, both in developed and developing markets. In the latter case, debit and credit card ownership is often extremely low. There are more than 2.5 billion unbanked adults worldwide and more than 80 countries have an unbanked percentage in excess of 50%.

It is well-known that the countries they describe here while indeed “unbanked,” have seen a mobile adoption quantum leap. People who didn’t even have land lines before now have mobile phones, in many cases smart phones. The argument is that this market, as well as that of folks too young to own a bank account, could be greater marketed to if the phone carriers were to provide the billing themselves. By some means, they could provide the user the ability to pre-pay (or if they have an account, to just add to their bill) for digital content, and take a cut of the funds before they ever reached the provider.

Also read: The Cell Phone Connected the Unbanked, Bitcoin Will Bank Them

Want the Unbanked? Consider Bitcoin

While this is a grand idea, and could be beneficial to both providers and those who have to date been unable to participate in many parts of the marketplace, there is an easier way to do this that still isn’t being fully considered. Because this isn’t 2008, and the so-called “unbanked” today have the ability to need no bank. Bitcoin and other cryptocurrencies could provide a streamlined way for the companies to achieve the same purpose. Rather than using a credit card or their bill to pay for the purchases, the user would simply pay with their Bitcoin wallet.

All other parts of the transaction, including whatever fees, could still take place. A payment processor like BitNet could enable this for companies on the fly and for low costs. The whitepaper, of course, doesn’t even consider this possibility, which is why the author felt it necessary to write a sort of addendum. Because while their in-depth research is appreciated, Juniper should be considering all possibilities for those who trust their findings.

Bitcoin is gaining in popularity in the same regions they name as “unbanked” in some cases at a faster clip than anywhere else. Local exchanges enable these people to trade their local currencies for Bitcoin, which can be spent at the global level with relative ease. Unless the banking industry makes fast moves to recapture these potential customers, Bitcoin adoption will happen similar to the way mobile adoption did in these areas. People who never spent money digitally before will skip banks altogether and start using cryptocurrencies.

Phone providers and anyone else trying to capture a share of the massive “unbanked” market should consider the role that cryptocurrency could play. Fewer middlemen, considerably faster fund clearance, and greater fungibility should all be taken into account when considering these markets. As time goes on, cryptocurrency enthusiasts will permeate to all levels of such companies, and the third option, cryptocurrency, will become a more realistic one on a global scale.

Images from Shutterstock.

P. H. Madore @bitillionaire

P. H. Madore has written for CCN since 2014. Please send breaking news tips or requests for investigation to He lives in Maine, USA. A single father of four young children, he does not discourage financial donations, provided they do not come with strings attached.