Users as Innovators in Developing Countries : The Global Sources of Innovation and Diffusion in Mobile Banking Services

This paper examines the extent to which users in developing countries innovate, and whether these innovations are meaningful on a global stage. To study this issue, we conducted an empirical investigation into the origin and types of innovations in financial services offered via mobile phones, a global, multi-billion-dollar industry in which developing economies play an important role. We used the complete list of mobile financial services, as reported by the GSM Association (GSMA), and collected detailed histories of the development of the services and their innovation process. Our analysis shows that 85% of the innovations in this field originated in developing countries. We also conclude that at least 50% of all mobile financial services were pioneered by users, approximately 45% by producers, and 5% jointly by users and producers. Additionally, services developed by users diffused at more than double the rate of producer-innovations. Finally, we observe that three-quarters of the innovations that originated in non-OECD countries have already diffused to OECD countries, and that the (user) innovations are therefore globally meaningful. This study suggests that the traditional North-to-South diffusion framework fails to explain these new sources of innovation and may require re-examination