Bazari - Connect

Logo from Bazarimobile.com

Economies are constantly changing. From mercantilism to Adam Smith then John Maynard Keynes and Milton Freidman, we try to construct models to predict what drives an economy. What is the next iteration of the Economy going to be? Will it be a text economy?  There are some cell phone service providers in developing countries, (ie Africa, Central and South America) that are becoming banks to their customers in addition to a wireless service company.


In these underdeveloped countries, the infrastructure has not been developed to support what we consider 'traditional' monetary exchanges. Often there is an insufficient network of landline telephone lines to verify if a check is real or transfer money from a person's account to the merchant's account. This also rules out any possibility of debit and credit cards being used to facilitate transactions as well.

An innovative solution has been adopted in these underdeveloped countries. Instead of currency, consumers are using cell phone credits.  How is this possible? Well if you take time to think of what the underlying value of a dollar bill is, it begins to make sense. Since the US has gone off the gold standard in 1970, meaning it's currency was redeemable for an equivalent of gold held in the Federal Reserve, we have used Fiat Money. Fiat Money means that money only has value because the government decrees that it has value and will honor it for use in transactions.

As a result, money as we know it only has value because we collectively believe that it has value and trust one another to value it the same as we do. So can the same be said for phone credits? In some ways the intrinsic value of phone credits are more valuable than money. At least I can use them to make calls. The best alternative with money is, I can burn it for heat. Which is what happens in countries with hyperinflation, (i.e. Germany after WWII).

This system works because cellphone plans are based on a pre-paid schedule instead of a post-paid schedule like in the United States.  An interesting evolution is that service distributors have become pseudo-Bank Tellers. Imagine this example. I pre-pay for minutes at the beginning of the month. Halfway through the month I need money to buy groceries. I go to the nearest distributor (which would be on every corner) and show them my balance and get money for it. I am essentially selling back my minutes.

This is genius for the service providers. Minutes are not like regular inventory, the do not get old, they don't get damaged and they don't become obsolete. The infrastructure is already in place so the marginal minutes are probably very cheap for the company. In essence the provider is getting an interest free loan.

This concept of  cell phone transactions is actually closer to home than you might think. Bazari is a local start-up that wanted to run with this idea and actually won 2nd place at BYU Business Plan Competition (BPC). Bazari's idea was to create a SMS or text platform that would act as a marketplace for these transactions. If I was a seller of goods in one of these towns, a customer could purchase my goods by giving me cell phone credits.

After winning 2nd in the BPC, Bazari wanted to put their money where their mouth was and headed to India to discover the market viability of their product. They contacted and were able to meet 2 or 3 of the CEO's of the largest micro-finance institutions (MFIs) in the country (Think Grameen Bank).

The MFIs said they did not know much about the viability of their product but what they would love to have is a product that enabled their field representatives to report loan repayments by SMS or text.

This is where Bazari shines, they were able to scrap their idea they had been working on for almost a year, and had even won a prize with and completely change direction to meet the needs of this new market. This new start-up now has commitments from 10 of the 12 largest banks in India. These aren't small banks either, these are multi-billion dollar, publicly traded companies.

I was introduced to Bazari recently through my Technology Entrepreneurship Lecture Series when the CEO Cody Campbell and CTO Andrew Ray presented to our class.  Because Professor Burton is constantly encouraging us to connect with others I decided to meet up with Cody. I got his card after the meeting and emailed him that night. We set up a time for me to visit him at his office in Orem and talk more about Bazari and venture capital, which I have a great interest in. Cody was extremely nice and very helpful. It was a great learning experience for me to benefit from his advice. He was not a networking dead end either. He gave me other websites and blogs to follow to stay up to date on venture capital topics. They are

1. pehub.com
2. nvca.org
3. techcrunch.com

It was fascinating to speak with Cody and encouraging to make more connections in the future. I even offered to work with him if he has an opening!