[heading] Bitcoin & Frontier Markets[/heading]
In the age of paper money, banks essentially dominated the payment system. But, as the world moves into a digital payment based model, the supremacy of these banks have been questioned.
They’re being forced to rethink checking and savings as accounts become payment vehicles. Decentralized payment systems, in my opinion, are the central way way in which bank supremacy is being thrown into question.
But, although Bitcoin is in the process of being acclimated into the fabric of developed society, its’ most significant effects may very well be felt most deeply elsewhere first: namely, in frontier markets. Frontier markets are those markets beyond the purview of emerging markets. They are investable regions with lower market capitalization and liquidity than contemporaneously known “emerging markets.” Perhaps they recently had a currency collapse or a military coup. Whatever it may have been, the general consensus is that there will be a return to order.
The implication of the term “frontier” is that the market will become more liquid and exhibit similar risk and return characteristics as the larger, more liquid developed emerging markets. On the list of frontier markets generally are the nations of Argentina, Bahrain, Bangladesh, Botswana, Bulgaria, Côte d’Ivoire, Croatia, Cyprus, Estonia, Jordan, Kenya, Lithuania Macedonia, Malta, Mauritius, Nigeria, Oman, Qatar, Romania, Serbia, Slovakia, Slovenia, Sri Lanka, Tunisia ,Vietnam.
Many writers have noted the major potential for Bitcoin in Africa. As CoinDesk recently noted places like Kenya are innovating with their digital technology. In that nation, the major mobile operator, Safaricom, introduced a digital payments system called M-PESA back in 2007. The “M” stands for mobile, while “Pesa” is Swahili for money. According to the oficial website, by 2012 M-PESA had over 14 million active users.
The company, with 70% of mobile market share in Kenya, enables its customers to send and receive money using M-PESA. All customers need is a mobile phone and valid ID. The system depends on SMS to allow users to send, receive and pay bills. Vodafone owns the payment service, while Safaricom licenses it from them.
Succesful as a payment platform, the M-PESA is now becoming a system for other financial services in Kenya. Users can opt for things such as savings accounts and even apply for loans with M-PESA.
Bill Gates has tweeted “Kenya’s M-PESA proves that when people are empowered, they will use digital tech to innovate on their own behalf.”
Bitcoin is going to bring frontier markets to emerging market status and then beyond. Further, with corrupt and inept governments in control, Bitcoin won’t be the sort of thing the brute force of banana republics can solve. The NSA will be the central threat to digital payment systems like Bitcoin, but without jurisdiction there is a geographic arbitrage to exploit.