Last month, the Bill & Melinda Gates Foundation issued a challenge to enable universal acceptance of payments, as part of its Grand Challenges Explorations (GCE) initiative. The Gates Foundation seeks “new solutions that promote the use of mobile phone-based payments by smaller merchants, service providers, and others serving the poor.”

Two-page proposals are being accepted online until November 12, 2014. Winning applicants will receive a $100,000 grant, with the potential to receive follow-up funding of $1 million.

I caught up with my former colleague, David Lubinski, Senior Program Officer for the Gates Foundation’s Financial Services for the Poor (FSP) group, to learn more and encourage a final push as the window for applications comes to a close.

Mireya Almazán:  I understand this is the first time the Gates Foundation is issuing a financial services-related challenge. What motivated FSP to apply this approach to mobile payment acceptance?

David Lubinski:  For financial inclusion to be meaningful to people without access to financial services we believe two things are essential.  First, financial services must be delivered on a digital platform to recognize the extraordinary economic benefits realized with scale. Second, for these digital services to be a meaningful complement to cash, they need to match the utility of cash by providing daily usefulness. This means there needs to be an ecosystem in place through which people can buy things using this digital platform.  This is a very hard problem that many are working diligently to solve.  We felt we could contribute through issuing this GCE challenge to draw out as many innovative ideas, products, and technologies as possible. Additionally, the GCE is an agile, accelerated grant-making program which aligns well with a digital topic.

MA: Who are you targeting as applicants?

DL: One of most beneficial and critical aspects of the GCE is lowering the burden often associated with seeking funding.  We hope this initiative greatly expands the range of innovators trying to solve the challenge of mobile money acceptance for payments particularly for merchants who serve communities where unbanked people live.

MA: Are you looking for a particular technology, business model, or both?  Can you share some examples of work that would be considered for funding?

DL: The topic is intentionally broad. We are eager to review proposals centered on devices, software and/or business models as long as they are solutions relevant to the world’s poorest in markets where people lack access to formal financial services.  As GMSA and others understand so well, this is a problem that has a number of dimensions and solutions, which will require a blend of technology, processes, advocacy and perhaps even policy change.

MA: We see there’s a strong focus on merchant payments to support “digital liquidity”, or the ability of the local economy to support mobile money staying digital.  The mobile money industry has been struggling with this issue for years. And even developed markets still see a large percentage of transactions take place in cash. Will we ever get to digital liquidity? 

DL:  I’m optimistic. In order for a mobile payments system to enable digital liquidity though, it must be low cost, secure, open and ubiquitous. This GCE topic highlights the need for the last requirement I mentioned: ubiquity, or sometimes referred to as universal acceptance, meaning an organization or merchant that gets paid for something can accept mobile money as a form of payment from anyone, regardless of their mobile money provider. Mobile money has found great success with person-to-person transactions but users must be able to use their mobile wallet everywhere or almost everywhere to match the current utility of cash.

MA:  Assuming the goal is to provide implementation support for winning applicants, in partnership with local stakeholders, will you prioritize markets with existing mature mobile money deployments—that is, where the issuance-side of mobile payments is no longer a barrier? Are there markets in particular you are targeting?

DL:  Our mission at the foundation is to help people who currently lack access to formal financial services benefit from effective and affordable services.  To this end we do not have a preference for a particular market and we hope to see proposals that represent the more mature markets as well as those that are in earlier stages of development.  This initiative is really about unlocking the power of innovation to drive a pro-poor mobile payments system.

MA: What would you consider success for this initiative?

DL:  This initiative is already a success: it has contributed to the dialogue about what a pro-poor digital payments system looks and should look like across many countries, markets, companies and partners.  What does success look like beyond that? A wild success will come if this initiative increases the value-add of collaboration for grantees. For example, a set of grantees that finds even more value in connecting or a grantee that partners with an established player in the industry when a relationship previously didn’t exist. Ultimately, we want people without access to formal financial services to get access and benefit from a rich suite of services to improve their lives and build a brighter future.

MA:  What’s coming next for the FSP team around digital payments systems?

DL:  There is a tremendous interest among commercial providers, donors, governments and NGO’s in leveraging digital platforms for financial services.  We are excited to see this interest grow and the recognition that a healthy commercially viable market depends on a large number of users that engage with digital financial services daily.  Our work includes collaborating with partners in the private and government sectors to contribute to making an inclusive digital economy a reality for people who currently do not have access to formal financial services.