At Baird’s CMC, we have been closely following the progress of mobile phone based payment and money transfer services in Africa, which we predicted would be game-changing when they were first launched.
In a recent series on this blog, we talked about M-Pesa, a mobile money service. With 17 million users in Kenya (more than two-thirds of the country’s adult population) and 25 percent of the gross national product flowing through it, M-Pesa has become uniquely successful – not just in the developing world, but globally.
Now, we examine Kenya’s M-Pesa story in a broader context – as part of the African digital landscape and in comparison to trends in the developed world.
When it comes to certain kinds of mobile innovation, Kenya and many other African nations have leapfrogged ahead of much of the Western world. In a counterintuitive finding, more technologically advanced nations actually have a smaller percentage of mobile money users than many African countries. According to a study on global financial patterns, the number is below 5 percent in Europe and the Americas; by contrast, over 16 percent of the adult population in Sub-Saharan Africa confirmed that they use mobile financial services.
Innovation is at the heart of this African success story. Third-party mobile applications in the US, for instance, merely replicate desktop-based services; thus, while revenue shares may shift and change, the market is not significantly altered. A good example of the stagnation is PayPal, whose core product has remained more or less the same since it was launched in 1998. Africa, on the other hand, has seen plenty of technological creativity and out-of-the-box thinking in the past decade, of which M-Pesa is an excellent example. When mobile phones first become popular in Kenya, people began to exchange their prepaid “minutes” to purchase goods and barter for things. M-Pesa built on this existing practice, formalising and broadening the scope of such transactions.
The vacuum in Africa’s infrastructure and technological investment provides an ideal space for the digital economy to fill. There was no personal computer or personal banking revolution here – countries like Kenya have completely skipped a few of the stages that the Western world went through, which makes them very different in terms of their openness to new ideas. In a way, development could almost be seen as an obstacle to leaps in innovation!
In our next post, we examine the potential for applications like M-Pesa in the West as well as the related challenges.