Mobile phones have been a blessing for the unbanked. Services like M-Pesa, which started in Kenya, have allowed millions of people to transfer and save money securely for the first time, and inspired dozens of copy-cat businesses around the world.
Pulse Active Savings is a bit like M-Pesa—but with a narrower purpose. It's a way for people to save money for a specific goal—say, a child's school fees, or meeting hospital expenses—while ensuring they don't spend the money on something else. The founders call it "the world's first commitment savings account."
It works like this. Say someone has 50 rupees left over from a paycheck. They go to an agent participating with the Pulse network and say they want to deposit the money. The agent takes it, then sends a text to Pulse, establishing the transaction. The 50 rupees becomes a credit.
Where Pulse differs from a standard account is that savers can only spend what they save with pre-agreed recipients, like schools or hospitals. That stops the money leaking away for other things.
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"Micro-savings has been in the shadow of micro-finance," says Karl Oskar Teien, one of the founders. "But most people would actually rather save than borrow money. And, actually, they save more when they get an opportunity to label those savings. It prevents it from being spent on booze, or things like that."
Pulse was founded by four business students, who first came up with the concept for last year's Hult Prize, a business plan contest organized by Hult International Business School and the Clinton Foundation. Originally, the idea was based on the observation that vendors in the developing world often don't have the correct change, and substitute a piece of candy for a coin. The Pulse account was a way of converting change into something more useful.
After the contest, the students expanded the plan to include the commitment element. They're now planning a 1,000 person pilot in Pune, a city near Mumbai. That should help to validate the model, and provide data the team can use to find investment. Eventually, they'd like to become part of an established network, so they don't have to build out the agent infrastructure themselves.
Pulse hopes to make money by charging a 3% to 5% fee on each transaction (the same margin phone networks take for topping-up), or possibly by selling advertising. There could also be opportunities to create credit scoring from customer data, which could help members borrow money on the open market. The larger goal, the founders say, is help the poor by encouraging saving, and bringing people into the financial system.