The increasing global influence of pay as you go OR do you need a ‘top up’?

Fuel is already a pay as you go – or prepaid – necessity just like airtime for the mobile phone. While upto 90% of the African continent is on prepaid mobile plans – Egypt as high as 98% – the average across Europe is unexpectedly high as 70% when you consider that in the US its only 15% that are prepaid.

As fuel prices rise and begin to pinch wallets and the household budget, there will be an increasing need to control your monthly expenditure. The fundamental concept of prepaid is that you top up on the item purchased – for example electricity can be purchased as ‘pay as you go’ in rural south africa – when you have the funds available and make do without when you don’t or until the next paycheck.

Will there be an increasing shift in the US towards prepaid accounts that can be managed and controlled for a variety of services which were earlier billed at the end of the usage period as consumers become more conscious of the need to predict expenditure?

And will this shift occur in the mobile phone space? If it does, is the US wireless industry geared for this shift? If our troubles in April finding a prepaid SIM card in San Francisco any indication, we expect to see some disruption in the market in the near future.

Dave expects a slightly broader shift, perhaps one away from a credit driven economy towards one that is either more cash based or using debit/bank cards instead. So the big picture is a move away from credit, which of course is increasingly obvious, but this is at the micro level of your average consumer since credit isyet another unexpected total at the end of the month rather than some kind of prepaid or pay as you go accessibility to funds such as the debit card.

What does this imply for the ‘market’ or ‘economy’?

This shift away from credit, in an economy designed to run on easy credit and cashless transactions, will create great flux. We think its going to be a big shift, potentially, because as the mindset of the American consumer shifts towards greater risk averseness, due to the economic conditions, they will begin to display many of the traits we have observed in the BoP markets.

While the majority at the BoP display their patterns of purchase and buying behaviour due to the factors of uncertain and unpredictable incomes, thus dependent only on the cash they have on hand, something that the majority of American consumers won’t face, they will still however become increasingly likely to spend only the money they have available rather than take the risk of living on credit. The era of ‘buy now, pay later’ has perhaps ended.

And our prelimenary Google searches show early indications of a far deeper, larger shift. One that perhaps is more akin to an undertow than simply the current tide of economic troubles that face the United States. For example, we discovered that over the same period in the recent past, countries like India and China, with historically significant proportion of their population subsisting below the poverty line, have actually managed to make a as significant difference to the quality of life and economic conditions for a great many of them.

So much so that a recent BBC Radio 4 program aired in Great Britain asked the question – should the UK be sending financial aid to India when today there were not only a greater number of billionaires in India than the UK but also India herself was sending financial aid to many other developing nations.

Dragging this data point back to the US scenario, there has been a greater increase, proportionate to population, of people slipping below the poverty line during this same period, going back quite a few years than simply the recent economic crisis.

So, we ask, what does this mean?

Is it that like water finding its own level, the global income disparity is leveling off? Or is this an early signal of a shift in socioeconomic power balance to the other side? Is the latter, while immensely satisfying to the Indians and the Chinese and a shock to the system that Europe has begin to acknowledge and absorb, necessarily a good thing for the future of our planet? Schadenfreude doesn’t sit well with either karma or the Buddhist philosophy of do no harm.

Perhaps instead we have a global opportunity, at this moment in time, while it is not yet too late for the train that we see hurtling down the tracks, to find a middle path. One where instead of the expected or much feared global jostling match for ever scarcer resources, we learn to share a more balanced or fair portion of the leftovers. Perhaps the time has come to pay as you go rather than buy now, pay later. The bill has come in the mail

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