At Baird’s CMC, we have been closely following the progress of M-Pesa in Kenya – a mobile phone based payment and money transfer service we predicted would be game-changing when it was first launched in 2007. 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 the most successful service of its kind in the developing world.
In our previous posts, we outlined some of the factors that led to this success and how the service is changing citizens’ lives for the better and boosting Kenya’s economy. So, what does Kenya’s M-Pesa story offers in terms of inspiration and learnings to other countries around the globe?
While the mobile based financial service has seen a great deal of success in Kenya, similar ventures have produced lukewarm results in many other countries in the past. Michael Joseph, Vodacom’s Director of Mobile Commerce, describes mobile money as follows: “There have been about 200 of these experiments around the world, and maybe only 4 or 5 have been successful.”
Mobile money has faced a host of problems in other countries: opposition from banks, regulation and concerns regarding money-laundering and identity theft. Services similar to M-Pesa have been struggling in scenarios where developments is lagging behind regulation – the opposite of the case in Kenya, where development led regulation. Take India, for instance, which has a much larger rural population than Kenya and seems to possess all the necessary factors to succeed. The Reserve Bank of India sees mobile-based financial services as a banking service and regulates it as such, stating that this will ultimately allow for a much larger scale and more complex savings and investment products. There is also a greater focus on consumer protection – a concern Kenya managed to avoid in large part thanks to its national identity database.
Nigeria is facing similar issues, where the Central Bank’s regulation is perceived to be curbing growth and protecting banks’ interests. The Philippines, meanwhile, has had a basic mobile money system in place since 2001, but only approximately 10 percent of Filipino mobile users without bank accounts use the service actively. Africa has seen a number of companies providing similar services across the continent with a good deal of success. The Rwandan government even allows citizens to declare and pay their taxes via mobile phones!
On the one hand, if operators choose to apply some of the lessons learned in Kenya – first mover advantage, development-led regulation – they could meet with similar success. On the other hand, a greater initial emphasis on regulation and protection may ensure a mobile money system that holds up in the long term.