ProInspire Alum Article in NextBillion – Financial Inclusion and the Internet of Things

By Pat Wilson (2013 DC ProInspire Fellow) and Stephanie Pow, Accion’s Frontier Investment’s Group

This post originally appeared on the NextBillion blog.

The Internet of Things (“IoT”) is a term that has been tossed around by tech wonks and futurists alike. Put simply, IoT is the use of technology to automate the transfer of data from one object – man-made or natural – to another via the Internet. Machine-to-machine(“M2M”) technology is an integral component of IoT, which enables data to be communicated from “smart” devices over Internet-enabled networks via chips and sensors without human intervention.

Over the coming years, IoT will undoubtedly have an enormous impact on how we interact with the devices that populate the world around us, from the mundane to the arcane. Billed as one of thedisruptive technologies of the next decade, connected devices are expected to grow from 9 billion today to between 50 billion and 1 trillion within the next decade. By 2020, the IoT sector is projected to create $7 trillion of value, with 45 percent coming from M2M applications.

Fanfare aside, one emerging trend that has not garnered as much attention is IoT’s potential to benefit the poor. More specifically, a growing number of emerging market entrepreneurs are combining M2M technology with new payment mechanisms to create commercially viable ways for the underbanked to access basic products and services like solar lamps and changing stations, water pumps, refrigerators and even on-grid utilities like electricity.

The Opportunity

To date, IoT has largely been a topic confined to the developed world. The sector is rife with activity concentrating on the latest novelty in home automation and wearable fitness devices or cost-shifting innovation in transportation or inventory management. While these are fascinating applications, IoT extends well beyond incremental improvements to daily routines. IoT can disrupt the way products and services are delivered to the poor by piggybacking on another digital revolution occurring at the base of the pyramid – mobile phone proliferation and the nearly ubiquitous global cellular network.

A major impediment to providing the economically disadvantaged with basic services such as electricity, or with devices such as solar lamps is that these populations lack credit and the means to consistently pay for goods and services. By integrating with new payment platforms, M2M technology is expanding access to credit by enabling two new payment methods: pay-as-you-go (“PAYG”) asset financing, which allows consumers to pay for products over time, and prepaid, where consumers pay for services on an as-needed basis.

Read the rest of the article at http://www.nextbillion.net/blogpost.aspx?blogid=4001.