[Dave Birch] I happened to be at an OECD roundtable on innovation in developing countries and therefore had the opportunity to sit in on some fascinating discussions about the relationship between research and development (R&D) and innovation. My reason for being there was to suggest some ways in which developing countries innovation efforts could exploit the mobile phone and, in particular, mobile payments. I hope I was able to communicate effectively just how financial inclusion can transform the lives of the poorest people by using a couple of examples from over at the Digital Money Forum blog, including the very (to my mind) innovative organisation that is sending people work (translating from tribal dialects) via SMS and paying them via the phone as well. My point was that people are themselves very innovative, and the mere existence of a working payment system allows them to exploit their innovation: there's no inherent need to connect R&D around new products and services to the payment system, and there's no need to the developers of the payment system to try and imagine for themselves all of the possibilities. Apart from anything else, they'd be wrong! Why would payments guys like me have any special insight into the new businesses that the users might create?
But what did come through from the various discussions that I was involved with is that whatever innovation takes place around payments there is a long-term downward cost pressure on the mass market payment systems that means that their ability to earn transaction revenues is going to be limited. Thus, long-term business models for the providers of payment services must be more sophisticated.
