Regular followers of mobile payment technology know that Kenya stands as one of the most successful mobile payment stories, thanks to the widespread use of the M-Pesa mobile payment service in that country. Kenya’s success in this area jumped onto the global spotlight this week thanks to a report on CBS-TV’s “60 Minutes.”
Whether or not the “60 Minutes” segment, which gave an overview of how average Kenyans are conducting mobile commerce using their smartphones, catapults M-Pesa as a mobile payment service remains to be seen. The report explores the many benefits that mobile commerce can bring to a developing country, but every country’s circumstances are unique in some ways.
Titled “The Future Of Money,” the segment, narrated by CBS correspondent Lesley Stahl, describes how M-Pesa has become a significant tool for everyday Kenyans, most of whom don’t even have bank accounts. Mobile payments have provided access to basic necessities to this third world country. The segment describes Kenya as a giant laboratory for defining the future of money.
2007: M-Pesa launches in Kenya
In 2007, Safaricom, the nation’s largest cell phone provider, began offering the mobile payment service. More than 19 million Kenyans – 90% of the adults – now use M-Pesa for paying for everything from taxis to taxes. They can load their cell phones with M-Pesa at kiosks and from individuals who sell M-Pesa. There are 85,000 agents selling M-Pesa in Kenya.
According to The Economist, a study found that in rural Kenyan households that adopted M-Pesa, incomes increased by 5% to 30%.
Safaricom makes about a quarter of a million dollars annually in Kenya from M-Pesa transaction fees, according to Bob Collymore, CEO of Safaricom.
Kenyans can have salaries sent directly to their cell phones, open savings accounts with M-Pesa and earn interest.
A dairy farmer sells milk in M-Pesa and pays her workers with it. This farmer even got a loan in M-Pesa to buy cows.
A solar power company installed solar light panels in a slum using M-Pesa. People activate the solar panels using their cell phones. People also pay for water by texting M-Pesa to a meter box that activates the water pump.
A Kenyan instructs Lesley Stahl in using M-Pesa to make a purchase with a cell phone.
The segment includes a trip to an innovation incubator called Silicon Savannah in Nairobi where startups invent new ways to use M-Pesa.
What makes Kenya different?
One reason M-Pesa has succeeded in Kenya could be that “bankless banking” was a bigger challenge in that country, where banks are scarce and people had to send cash by buses, carrying the risk of theft.
The Economist noted that the speed by which money can be transferred using Safaricom has been especially useful in a country where workers in cities send money to their families in rural villages.
The Economist further noted that M-Pesa was helpful for people trapped in Nairobi’s slums during post-election violence in 2008, and some Kenyans came to regard M-Pesa as a safer place to store their money than banks.
There are drawbacks to M-Pesa, the “60 Minutes” segment noted, such as money laundering and scams. It also noted that M-Pesa has not caught on in other countries where it has been launched, such as Egypt, India, Afganistan and Romania.
M-Pesa has its drawbacks
There are other issues with M-Pesa. Users are limited to a maximum daily transfer and a $1,400 balance, according to a Reddit post. The post also notes that when the server is down for maintenance, it is unusable.
Fraud has been a problem as well. The government is investigating Kenyan police for M-Pesa fraud, according to Daily Nation in Nairobi, Kenya.
In addition, two mobile money service providers, Lipisha Consortium Limited and Bitpesa Limited, sued Safaricom for suspending their services through alleged intimidation, the Daily Nation reported.
The service is less likely to be offered in the U.S. in the near future since the banking laws are stricter, according to heavy.com.