The Lure & Perils of Mobile Money Platforms

Last week, I went to Kenya and helped a rural school get online with e-readers. As I traveled from the capital Nairobi to Koru, a small town in the southwestern Nyanza Province, my eyes kept landing on the ubiquitous, hard-to-miss, bright green M-Pesa buildings along the highways, nestled between mud huts and on dirt roads near makeshift fruit stands.

After talking with several locals informally and then coming across an article in Kenya Airways' in-flight magazine, Msafari , it hit me: Kenyans have fallen in love with mobile money transfer via their cellphones. Leapfrogging the Western world, this developing East African country, where electricity and running water still does not reach every home, is using technology and mobile services to propel itself forward at an impressive pace.

M-Pesa, which literally means mobile money (pesa is the Swahili word for money), was launched in March 2007 by telecom operator Safaricom, in partnership with Vodafone. The idea behind the mobile money transfer system was to meet the needs of the millions of people, most of them poor and under-served, who do not have bank accounts or access to more formally established financial systems.

While the starting point may have been to provide cash, micro-financing, and money transfer alternatives to those with the most need, the concept has spread like wildfire. The service is used on a daily basis by everyone from goat herders to taxi cab drivers to executives. Text messaging allows them to send and receive money via agents to individuals and companies for services rendered, products bought, and even wages earned. Some people mentioned to me that many small businesses have been launched these last few years, and their success is directly linked to their ability to send and receive reliable payments via mobile money accounts. A BBC post says the mobile wallet has revolutionized the way many Kenyans work.

Beyond the anecdotes, the numbers tell a significant story. According to Safaricom data, in April 2011 (the latest date for which information is listed), M-Pesa had more than 14 million customers, up from the 52,453 users it had five years ago when the program started. It's estimated that 70 percent of all Kenyan households — and 50 percent of poor, rural households — have M-Pesa accounts, notes, a global organization where people exchange ideas about the use of information and communication technologies (ICT) for sustainable agriculture and rural development.

A Financial Times article published this week, citing stats from a 2010 report from the Central Bank of Kenya, pegs M-Pesa's total transactional value at 727.8 billion Kenyan shillings ($8.81 billion). That's big chunk of money in any currency, and it demonstrates the pent up consumer demand for dependable, technologically-based mobile payments.

As noted in the FT story above and in a recent Afrinnovator piece, security and privacy issues, along with the challenge of replicating Kenya's runaway success elsewhere, cause, justifiably, a fair amount of concern among others moving towards mobile money platforms.

However, despite the potential barriers or instinct to dismiss Kenya's model as non-relevant to the global electronics industry, I think it's important for the high-tech supply chain to realize that best-practices no longer emerge only from the Silicon Valley or other developed-world tech hubs. Dynamic trade interactions and innovative supply-demand solutions are happening right now in some of the most remote and under-developed parts of the world, thanks to various technological advancements and sheer necessity.

37 comments on “The Lure & Perils of Mobile Money Platforms

  1. Barbara Jorgensen
    March 22, 2012

    Neat story, Jenn. Makes a lot of sense. I wonder, though, if this ease of doing business might not lead at some point to over-spending. It took consumers a long time to realize credit cards create debt. But if the people using this system have a history of being economically challenged, they probably have better spending habits that their Western counterparts.

  2. Wale Bakare
    March 22, 2012

    Yeah Jennifer, interesting things have been happening in the last few years in Kenya, Nairobi is fronting for software technology. Similar development on the ascendance in Ghana, where many tech firms are focusing in software development – with more attentions channeling towards software enterpreneurship ( mobile applications). 

  3. itguyphil
    March 22, 2012

    This is true but it might also create a kid in the candy store mindset. You're disciplined but want to just 'try things out'. Then that could lead to a slippery slope. I can only imagine that us Western counterparts weren't always this irresponsible financially. It had to start somewhere…

  4. syedzunair
    March 23, 2012

    @pocharle: What you have said is applicable to the developed economies. Where people have the buying power to try new things and then can adjust to its financial implications. 

    What I think is that consumers in the developing countries are already finding it extremely difficult make ends meet. Hence, they know exactly what to buy and in what quantities. Unfortunately, they follow a strict buying schedule unlike our buying habits. 

    I agree with you on the fact that it posess a threat to the consumers. But then again my experience of mobile payments in developing countries says that these people will perform only the necessary transactions like say buying grocery etc. 


  5. bolaji ojo
    March 23, 2012

    Jenn, Developing economies use technology in ways that are often quite unusual to the Western observer. They've had to develop alternatives to systems that aren't serving them. Wireless communications caught established landline phone providers by surprise and liberated the citizens in countries like Kenya. Today, you can go out in places like Kenya and get a mobile phone within a few minutes whereas in the past it could take years to get a landline.

    They use mobile money because the banking system too is stuck in the past. In most places in Africa, banks haven't learned the customer is king. Now they will.

  6. Wale Bakare
    March 23, 2012

    syedzunair i agree with you in reference to the 2nd paragraph of your comment. There is absolute difference in buying culture of developing and developed nations. Are we beginning to see paradigm shift in they way westerners and developing economies consuming technologies?

  7. Himanshugupta
    March 23, 2012

    I am pleasantly surprise that such a service started in Kenya first than it has started in India. Airtel, one of the largest mobile service provider in India, is offering such a service in India. I am not sure how successful they have been as i think they have started this service only recently (if i go by the ad campaign they are running). The success may or maynot be as huge as that of Kenya due to different geographic, economic and political situation but one thing is sure that the mobile phone is not for talking and sending messages anymore.

  8. syedzunair
    March 23, 2012


    Either the banking system in the developing countries is stuck in the past or is not present in the rural areas. Therefore, a suitable alternate was required for the masses. I think mobile payments got adopted early because even in the rural areas the cellphone penetration is exceedingly high. 

    Banks cannot sustain the infrastructure and the running costs associated with opening branches in rural areas. Hence, another common thing you will see in the developing countries is mobile banking units. It could be just a grocery store but on the back end it functions like a bank. 

  9. syedzunair
    March 23, 2012

    Are we beginning to see paradigm shift in they way westerners and developing economies consuming technologies?

    I am not sure about the paradigm shift Wale. But I am certain that necessity is the mother of invention. In the developing countries people often have to adopt to technology/innovation to cater their needs for example banking in this case. 

    Since, they do not have a lot options they tend to adopt to the ones' that are available. 

  10. Wale Bakare
    March 23, 2012

    The aggressive adoption of technologies ( mobile payment, e-payment, cashless transactions) in Africa for instance is gearing towards financial sectors. This due to failure of governments in providing ICT infrastructure which could aid delivery of technologies like ADSL, fiber and other. Those pose far great challenge which, now open door for quick adoption of an alternative schemes like Wimax, Satellite, 3G/4G.

    I think, there are encouraging developments from Africa, though.


  11. Mr. Roques
    March 23, 2012

    I've always been curious about mobile payments. Specially because there's a big percentage of mobile users that not in the bank system and that can take advantage of the mobile network.

  12. itguyphil
    March 23, 2012

    Based on your comment, is it also a safe assumption that those same consumers might not have the resources to use the mobile payments in the first place?

  13. prabhakar_deosthali
    March 24, 2012

    As I understand the mobile money transfers are like debit cards. The money can be trasnferred if there is a balance in the account. So  there is no question of ovespending at any point in time and then get indebted by the high interest cost such as what the credit card companies charge.

    I think this is an innovative way to handle cashless transactions at the retail level. For countries where roadside mugging for a few Pesas is a common thing , such new mode of carrying cash is welcome.

    In India recently a mobile company has started such service , but it has to catch up the imagination of the people but slowly and surely it will – such systems are very useful for small road side vendors who cannot afford to have the costly link ups with payment gateways and such things.

    Mobile money transfers are easy for both the buyer and seller and they can happen on the roadside -that is very important advantage.

  14. syedzunair
    March 24, 2012

    Are you saying that they might not have the resources to purchase cellpones?

  15. syedzunair
    March 24, 2012


    I agree with you on this. Mobile payments usually function like debit card transactions and that ensures consumers cannot overspend in anyway. 

    However, a recent change I have seen here is that. Cellphone companies are offering their post paid consumers the facility to pay their utility bills through their cellphones. Once the utility bills are paid their amount is reflected in the montly cellphone bill. In this case, there might be a possibility of overspending if the cellphone companies keep a deposit that is less than the combined cost of the consumer bills. 

    What do you say?

  16. prabhakar_deosthali
    March 24, 2012


    You are right in that respect that if a mobile payment is allowed on a postpaid connection then it basically becomes a credit and if there is not sufficient  security deposit to cover it then it amounts to overspending.

  17. Taimoor Zubar
    March 24, 2012

    @Himanshugupta: Mobile money transfer is also catching up in Pakistan like other developing countries. Currently a company called EasyPaisa is offering it which is a collaboration between a leading telecom service provider and a bank. So far the service has targeted the rural population working in the cities who have to send funds back home. But their usage and success is limited so far.

  18. Taimoor Zubar
    March 24, 2012

    This due to failure of governments in providing ICT infrastructure which could aid delivery of technologies like ADSL, fiber and other”

    @Wales: I agree with you on this. In countries with weak ICT infrastructure, mobile is doing the job that internet is supossed to do. This is not just restricted to financial transactions. Even education and healthcare services through mobile phones is becoming pretty common in these countries.

  19. Wale Bakare
    March 24, 2012

    Thanks Taimoorz. Yes it's spreading to all other sectors too – boosting this,  direct investments by foreign and indigenous firms.

  20. stochastic excursion
    March 24, 2012

    Mobile money is the next logical step, and a great value-added proposition for mobile devices.  Any kind of banking transaction though has the potential for fraud and unauthorized access.  With worldwide mafias becoming more tech-savvy, more information is forthcoming on how transactions would be safeguarded.

  21. Nemos
    March 24, 2012

    Jennifer very nice blog post and secondly, I want it to ask if I can join you the next time you will go to Africa?

    I was impressed also while I was visiting Nairobi for the World social Forum 2007 about the % of the people that was using mobile phones. It is truly strange feeling to see very poor people, mostly without having the basic for living to carry high-tech devices as the mobile phones are.

  22. Anna Young
    March 25, 2012

    Jennifer, your article clearly highlights the benefits of Mobile money transfer in this part of Africa. It shows that the success lies in the necessity. Faced with limited access to the internet, but greater control and access to mobile phones, has enabled this cash flow technology revolution works. It has liberated the services users. It's fantastic.

  23. Wale Bakare
    March 25, 2012

    Yes Anna i agree with you. That may shift debate focus to identity and access management in mobile devices.

  24. Himanshugupta
    March 25, 2012

    @Stoc.. i agree that making mobile money transaction a safe should be on a high priority for banks and mobile network provider if they want to ride on this wave. Make use of the mobile money transaction can be as friendly as using credit card or debit card. Using mobile money as a debit we need not to have machines to swipe the card for payment and can be used with wider retail network.

  25. ahdand
    March 25, 2012

    I know that this is in operation ight now but it is a high isk feature taking into consideration that the mobile is the most vaulanarable device right now.

  26. Anna Young
    March 25, 2012

    Wale, You're correct. The introduction of technology of this sort brings its challenges.

  27. itguyphil
    March 25, 2012

    Yes. But there are also associated costs: the phone, the plan, and insurance (always a good idea).

  28. Jennifer Baljko
    March 26, 2012

    Wale Bakare – Agreed. Nairobi seems to have “tech hub” potential, based on some conversations I heard recently. Of course, there are still lots of issues to deal with (saftey and corruption immediately come to mind), but it will be an interesting place to watch. And, yes, on Ghana – that's another place on my radar screen.


  29. Jennifer Baljko
    March 26, 2012

    Himanshugupta –   Would you keep us posted about what Airtel is offering in India? Airtel is a major operator in Africa, and have them on my radar screen as well for a host of reasons. Thanks.

  30. Jennifer Baljko
    March 26, 2012

    syedzunair, @Bolaji – The banking situation and money-transfer situations in the developing world always fascinates me, regardless of whether it's in Africa, Asia or Latin America. It's amazing to me that I still  have to beg Western colleagues not to write/send/rely on checks, an arachic system dating back to, what, the late 19th Century? Good grief. I know it's complicated to change, but the slowness at adapting is equaly frustrating.

  31. Himanshugupta
    March 26, 2012

    @Jennifer…as i have not used the airtel money till now, most of the information that i have collected is through website. The concept is quite similar to having debit card or internet banking account. Though if require cash then you need to first transfer money to bank a/c and then go to nearby ATM. But otherwise it seems as convienient as other bank a/c. The only downfall seems to be a bit higher tranaction cost. More info on:

  32. Jennifer Baljko
    March 26, 2012


    @prabhakar_deosthali  –  This is my understanding of how it works as well. It's based on account balances or added money and isn't at all a credit card. Two things you mentioned were also top of mind for people I spoke with – being able to conduct business at the roadside and no longer having to carry cash. Like most developing countries, Kenyan roads are still tough to travel on (one of my colleagues got three flat tires in the same day), so being able to get everything handled quickly off the main highway is critical. Also, because of safety issues, not having cash handy, makes people less of a target for robberies.


  33. Jennifer Baljko
    March 26, 2012

    Himanshugupta  –  Thanks for the info and link. I'll check it out.

  34. Jennifer Baljko
    March 26, 2012

    @Nemos – Will keep you posted about my upcoming travels =). There is a possibility I may be in sub-Saharan Africa again in the not too distant future. 

    You're right in talking about cell phone penetration… I don't know exactly what it is for Kenya, but I know in Ghana, in West Africa, that number is already above 80%. Mobile phones, more than laptops or other computing devices, has revoluntionized developing countries and is empowering people to start moving out of extreme poverty.


  35. elctrnx_lyf
    March 26, 2012

    Even though the investments like mobile and talktime are inevitable, it is very important to understand the benefits of this kind of technology. There are endless possibilitis of business transactions with this mobile money transfers. 

  36. itguyphil
    March 26, 2012

    I completely agree with you. I was simply trying to point out the barriers to adoption for people in low income regions. There have been many initiatives to still lower those economic barriers but it is still a factor.

  37. Houngbo_Hospice
    March 27, 2012

    “best-practices no longer emerge only from the Silicon Valley or other developed-world tech hubs.”

    That is an interesting story about Africa. The use of technology can improve people's lives in developing countries. Way to go Kenya. Hopefully other countries will learn from that success story. 

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