My emidaASIA co founder Alexander U Conrad has written The 21st Century Silk Road, a White Paper positioning our new company. I am inviting Alex to include it here as a very special guest contributor on DESIGNING SUCCESS; as after all the very focus of The 21st Century Silk Road is “designing” a better life. Enjoy and please comment below or email me or Alex (@darnoc on twitter)

CASUDI~ Building Bridges Between People ~ Designing Success

THE 21^st CENTURY SILK ROAD

Today we are at the threshold of the 21st century Silk Road. Centuries ago, Asian lands echoed to the sound of trading caravans traversing the Silk Road between east and west. Today, these same lands host the sounds of keyboard taps and mobile handset chirps as a harbinger of contemporary commercial interactions. The historic Silk Road’s legacy of commerce and entrepreneurship is a metaphor for the mobile 21^st century Silk Road; driven by the emergence of mobile payment platforms to spur a new legacy of contemporary innovation. The Silk Road trading routes were a world-changing example of geographically diverse cultures meeting and establishing communication; which ultimately led to broad-scale information exchange and commerce between Asia and Europe. Today we are at the threshold of the 21st century Silk Road. The present day mobile context is really a network of thousands of individual silk road connections, each enabling profitable connections for micro-entrepreneurs in developing markets.

Commercial & Entrepreneurial Legacy of the Silk Road
Although it was already in existence for many centuries, the ‘Silk Road’ was only named as such in the late 19^th century by the German geographer Ferdinand von Richthofen, and refers primarily to the lucrative silk trade that developed during the Han Dynasty (260BCE – 220 CE). The ‘Silk Road’ label is somewhat misleading, as no single route or road existed. Rather, Silk Road refers to a broad network of trading routes, heading east to west via Central Asia, crossing through numerous oasis settlements, and connecting China in the east with Central Asia and west to the European cities of the Mediterranean.

The various “Silk Road” routes shared the common starting point of Changan (modern day Xian) in China. The main northern and southern routes across China eventually converged at Kashgar, in what is today the Xinjiang region of western China. Thus Kashgar became the crossroads city of Asia. And from here, the routes split again, heading north across the Pamirs to Samarkand and to the south of the Caspian Sea, or to the South, over the Karakorum into India; a further route split from the northern route after Kuqa and headed across the Tianshan range to eventually reach the shores of the Caspian Sea, via Tashkent.

Map courtesy: www.silkroadproject.org

Image: Early tee times in China;700 years before the west!

Not only was the Silk Road much more than a single ‘road,’ there was much more to the commercial legacy than only the silk trade. The Silk Road played a unique and central role in the processes of cross-cultural contact and exchange in the Old World.

Goods, technology, ideas, and culture moved back and forth along its length. It was a principal conduit for the spread of Buddhism from India to Central Asia and China. Islam likewise arrived from west to east along the Silk Road. Ideas about mathematics, astronomy, and medicine traveled east and west, along with different forms of music, dance, games, painting, and other artistic media. From China to the west passed silk, furs, jade, bronze objects, lacquer and iron, spices, ginger, tea, peach and pear trees, porcelain, paper making, printing, and gunpowder. From the west into China came gold and other precious metals, ivory, precious stones, grapes, cotton, wool, and larger breeds of horses; greatly sought after and much admired in the east was glass; which was not manufactured in China until the fifth century.

Of all the precious goods crossing from East to West, silk was perhaps the most remarkable for the people of the West especially at the height of the Roman Empire. Once the Romans had obtained samples of this new material it quickly became very popular, for its texture, beauty, and symbol of status. Both the Parthian traders and Roman merchants quickly realized that there was money to be made from trading silk, and both sent trade missions towards the east to try to obtain silk at lower cost. We can be certain that this desirable new product brought with it many new opportunities for traders, merchants, shopkeepers, seamstresses, villa designers and more.

Perhaps for these reasons, the trade route to the East was often perceived only as a route for silk, rather than the myriad other goods that were traded. Interestingly, there appear to be no records of Roman traders being seen in Changan, nor Chinese merchants in Rome, though their goods were much appreciated in both places. The routes between East and West were long and hard and not without danger during most of history. Caravans of traders and merchants, or individuals seeking their fortunes would often travel back and forth only on a section or part of a route, rather than travel the whole unfamiliar distance; thus many goods were bartered for others along the way, and objects often changed hands several times. These middlemen represented key entrepreneurs of the historic Silk Road. They built their trading businesses on the platform of the Silk Road.

While the history of these entrepreneurs and the development of the Silk Road as their platform for commerce is multi-dimensional and fascinating, fast forward now to the mobile 21st century Silk Road. Who are the analogous entrepreneurs, what is their platform, and what are they building?

What is the 21st Century Mobile Silk Road?
The 21st century Mobile Silk Road is a metaphor for the historical example, which was itself a metaphor for commerce and innovation. Mobile payments are the platform for innovation and commerce in this contemporary usage. Broadly speaking, mobile payments might be better portrayed as the SILK ROAD transactional infrastructure, as they represent a fairly wide range of cash-based payment and value transfer interactions. These include person-to-person, person-to-business and person-to-government payments as key examples. While mobile payments are sometimes defined as inclusive of mobile banking (i.e. mobile capabilities for traditional banking services) products, our focus here is on mobile payments as a proxy for cash-based / value transfer transactions. So taking mobile payments  as the modern ‘platform’ metaphor for the Silk Road, who are the corresponding trading entrepreneurs?

Today’s entrepreneurs are the innovators building niche products on the mobile payments platform. Examples include mobile health, education, agriculture, energy and insurance. The market served by these entrepreneurs is significant. An estimated 70% of the population of BRIC nations do not have a traditional bank account. Seen in dollar terms, the ‘unbanked’ mobile opportunity has been estimated at $1.7B in 2012 alone.¹ How might some of these niche product opportunities built on a mobile payments platform develop in Asia?

Mobile Health²
mHealth has emerged as an important sub-segment of electronic health (eHealth). While there is no widely agreed-to definition for these fields, the public health community has coalesced around these working definitions:

eHealth: Using information and communication technology (ICT)—such as computers, mobile phones, and satellite communications—for health services and information.

mHealth: Using mobile communications—such as PDA’s and mobile phones—for health services and information.

mHealth and eHealth are inextricably linked—both are used to improve health outcomes, and their technologies work in conjunction. For example, many eHealth initiatives involve digitizing patient records and creating an electronic ‘backbone’ that ideally will standardize access to patient data within a national system. mHealth programs can serve as the access point for entering patient data into national health information systems, and as remote information tools that provide information to healthcare clinics, home providers, and health workers in the field. While there are many stand-alone mHealth programs, it is important to note the opportunity mHealth presents for strengthening broader eHealth initiatives.

Mounting interest in the field of mHealth can be traced to the evolution of several interrelated trends. Unchecked epidemics, and shortages of healthcare workers continue to present grave challenges for governments and health providers. Yet in the developing world, the explosive growth of mobile communications over the past decade offers a new hope for the promotion of quality healthcare, and those who had previously been left behind by the ‘digital divide,’ on the order of billions, are now gaining access to reliable technology.

There is a growing body of evidence that demonstrates the potential for mobile communications to radically improve healthcare services, even in some of the most remote and resource-poor environments. So where might a mobile payments platform fit in the mHealth value chain?

- Patient or Citizen (Mobile Subscriber)
Improved health outcomes
- Health Care Provider
More efficient and effective delivery of health services
- Equipment Provider
Device revenue generation, improved brand recognition
- Service Provider
Revenue from service fees, increased subscriber base
- Application Solutions Provider
Revenue from additional applications license fees
- Content Management
Increase in volume of readership or revenue
- Operator/Platform Provider
Revenue from sales

The mHealth ecosystem will develop around stakeholder value as defined above. Just as the silk traders of the Han Dynasty required the trading system of the Silk Road to prosper, the emerging mHealth ecosystem will require a strong mobile payments platform to develop and thrive.

Mobile Education
The explosive use of mobile phones in developing countries is well-documented. Just what this might mean for the delivery of education in developing countries is a little less clear. While the evidence base is still building, some lessons (largely of the anecdotal variety) and usage models are slowly emerging from pilot projects in places as diverse as Thailand and Mongolia.

The increasing ubiquity of mobile phones has enabled pilot projects tasking mobile gaming to support literacy in India. Even the World Bank has got into the act, through funding for a small mobile pilot project in Bangladesh. Another interesting example of mobile education in Asia is the Janala³ service, launched by the charitable arm of the BBC in late 2009. Janala is a fee-based service to teach English to users in Bangladesh. As an indication of the service’s success, high-end expectations for day one demand centered on approximately 25,000 users; whereas 84,000 actually used the service. More than 400,000 used the service for lessons in the first week alone.

Perhaps the most well known, and the biggest, of these pilot programs is the text2teach⁴ project in the Philippines, which provides a way for teachers to request educational videos via text message, with the videos delivered to a television at the school via satellite.

English lessons, mobile gaming, health information…these are but a few examples of the type of education initiatives that are suitable for the mobile framework. Commercialization of each requires a reliable mobile payments platform to support the mobile educator/entrepreneur’s niche.

Mobile Travel
A large percentage of travel services in Asian markets are still transacted on a cash basis. The integration of mobile ticketing with mobile payments will drive significant efficiencies in this sector. One clear-cut example of such integration in the region is the Mobitaka⁵ service in Bangladesh. This is a service of the largest local operator, GrameenPhone⁶, and the national railway service. Since Spring of 2010, users have been able to pre-reserve rail tickets electronically up to ten days in advance. These reservations can subsequently be paid for with the user’s prepaid account for a service charge.

Mobile Agriculture
The information-centric role of mobiles in developing world agriculture is already well understood. Consider this anecdote related via a Grameen Foundation⁷ project:

“My goat is sick. Its neck is swollen. It can’t eat,” complained an old woman in a remote village in Uganda. She spoke to a man passing by with a mobile phone. “Let me see if I can help,” said Laban Rutagumirwa. He sent off a text message that read “goat bloat.”

The message went to an agriculture information service devised by the Grameen Foundation and the Bill and Melinda Gates Foundation⁸. A response came back shortly with instructions to mix a half-kilo of rock salt with a liter of water and have the goat drink it. Two weeks later, she happily reported that her goat had recovered.

The work of Sri Lanka-based LIRNEasia⁹ in the agricultural sector focuses on the nexus between this sector and ICTs. LIRNEasia’s research in this area explores how to move farmers from passive consumption of information via ICTs (agInfo) to integrating ICTs into their livelihood decisions and strategies (agStrategy).

WAP-enabled mobile phones are used by agents to capture the market price information for agricultural produce at DDEC (Dambulla Dedicated Economic Center), which is the country’s largest wholesale market for agricultural produce.

Here an employee of GGS (Govi Gnana Seva) captures the price of a specific trade outside a trader’s shop. The data is sent in real-time to the servers maintained by Dialog from where it is pushed to subscribers via SMS based on their subscription preferences. The prices are also available via the web (http://tradenet.dialog.lk/), USSD (Unstructured Supplementary Services Data ) WAP or via a call center (by dialling 977 from any Dialog phone)

K. P. Dassanayake is the head of one of the local farm groups that LIRNEasia has been working with for the International Development Research Centre (IDRC) sponsored Action Research Pilot (ARP) which is trying to gauge the livelihood benefits for small farmers from the provision of real-time market price information via the mobile phone. Via the phone farmers will also have access to an ICT enabled platform to reach out to buyers and buyers to sellers.
(Images courtesy Sriganesh Lokanathan, LIRNEasia)

As a respected leader in his community Dassanayake is always concerned about mechanisms for providing stable and relatively predictable incomes for farmers – a concern shared by LIRNEasia and GGS. He views the ICT intervention being tested, as an important step in eventually linking the selling decision with the growing decision.

This research is conducted in partnership with Govi Gnana Seva (GGS)¹⁰, a not-for-profit started by some LIRNEasia researchers, which is engaged in the collection and dissemination of agricultural produce price and trade information. The research and the implementation of the GGS ICT intervention has been funded amongst others by IDRC of Canada, USAID, Dialog Telekom as well through private donations. And in China the Chinese government has invested US$1.13 billion in establishing a mobile infrastructure for about 26,000 villages in recent years through the state-owned China Mobile, to enable farmers to keep track of weather conditions or forecasts and product prices. In 2006, China Unicom launched an agricultural wireless information project for farmers in 26 provincial districts. This program helped farmers access useful information for efficient crop planning and production.¹¹

The food security/mobile payments nexus is particularly strong at the base of the pyramid; as noted in the recent State Department ‘Tech@State’ event, 70% (2.5B) of the people at the base of the pyramid rely on the “food value chain” for their income. While most do not have traditional bank accounts, they do have access to mobile phones. Areas of opportunity for mobile payments platforms include:
- Pricing optimization
- Crop insurance
- Upstream and downstream payments
- Access to microfinance loans

Distributed Energy in the Developing World
‘Distributed energy’ is power that is generated locally, as opposed to the more typical central grid scenario where power is generated regionally at a power plant, and distributed down to users via the grid. Distributed energy can be quite small in scale. For example, a farmer in a rural area that produces biogas from his locally produced agricultural waste is generating distributed energy.

Over time, technology and resource constraints will collide to make various types of distributed energy more prevalent in the developing world. Local producers and consumers will need ways to pay for, and be paid for, such power generation. Mobile payments represent the ideal platform for such interactions. Person-to-person payment capabilities will allow small scale rural power generation to be an ‘income generator’ for farmers and other producers. Integrated mobile applications that monitor power generation and usage will be built upon the mobile payments platform to further enable these innovations.

A caveat: The 21^st century Mobile Silk Road cannot become a Toll Road!
The historic Silk Road and its entrepreneurs prospered because of the flexibility of the trade network. Multiple routes and diversified goods combined with entrepreneurial traders created wealth and utility for stakeholders. Innovators and entrepreneurs on the 21^st Century Silk Road have a similar opportunity for wealth generation. However, this opportunity will be lost if the transactional (mobile) payments platform is designed as a toll on the mobile Silk Road. Successful transactional payment systems will be built as platforms to sustain niches similar to some of the examples reviewed in this paper. As such, the rate structures must bear in mind utility status as distinct from rent collector. Aggressive rent collection will destroy the sustainability of the ecosystems, and niches like mHealth and mEducation will not prosper. There are ample recent examples in the developed world, of both mobile operators and financial services firms that strayed from their utility roots. In these cases, the damage to the very ecosystems that they supported is self evident. Developing markets must have the ability and capacity to develop differently.

The 21^st century Mobile Silk Road will drive innovation and remarkable change

If I had picked up a crystal ball along the Silk Road of legend, surely not an uncommon commodity through the years; what insights would I have into the future?

(Note: crystal balls are really not appropriate for white papers, so take this with a ‘grain of glass’, and understand that my excitement derives from being a part of sharing the vision and making it happen).

I see the technological divide between the developed and undeveloped regions of Asia narrowing, as populations become connected on the mobile silk road and understand the value of and actually engage in mCommerce.

I see entrepreneurial micro-businesses driving the desire for improved health and education for families; or is it the other way ‘round, that individuals and families desire for better health and better education will motivate and propel mCommerce to the forefront to make that difference?

I see Asia’s rich history of entrepreneurship playing a significant role in the development of mobile commerce innovations. Within five years, innovations from the developing regions of Asia will be deployed in other regions, including Western markets.

What is the most exciting to me personally is knowing that ‘I’ have the opportunity to really make a difference, and the ‘I’ is a team of motivated entrepreneurs facilitating the technology on the one hand, and more importantly, the entrepreneurial consumers who are making use of this technology for a better life.

Alexander U Conrad
Managing Director and Co Founder
emidaASIA
auconrad@emidaasia.com
Singapore
September 2010