At a time when western Europe and the US are myopically obsessed with the future of banking, having “Uber moments” and fending off attacks from challengers, other parts of the world are more than happy to use FinTech services that have been around since the mid-2000s and don’t require financial institutions at all.
M-Pesa is a mobile money service that was first launched in Kenya in 2007 by Vodafone and Safaricom, the company in which the former is a 40 per cent stakeholder.
It has become very popular in emerging markets because it does not require its users to have a credit card or be tied to a bank account. Instead, one deposits an amount of cash to a verified agent who then turns the money into M-Pesa, which can then be used via a mobile phone – effectively, one is then texting money.
In regions like Kenya, extensive banking networks are scarce but 80 per cent have access to a mobile phone, according to CBS programme, 60 Minutes and the service is designed to work with “at the lowest level of technology”, Bob Collymore, CEO of Safaricom, told the American programme.
M-Pesa has expanded into countries such as Tanzania, India, South Africa and into eastern European countries such as Romania and more recently, Albania.
Now, Vodafone has launched the service in Ghana, it’s 11th market, under the brand of ‘Vodafone Cash’. The telco giant said that an estimated 15 million people – around 64 per cent of the population of Ghana – do not have bank accounts and that M-Pesa would allow those people to transfer money on the go.
“Vodafone Cash extends the revolution of mobile money to Ghana, liberating our customers from the risks associated with carrying cash at all times. The strong demand for the service following the pilot launched in August shows that Ghanaians greatly value the freedom, peace of mind, security and convenience that M-Pesa offers,” said Vodafone director of Mobile Money Michael Joseph.
Global usage increasing
Worldwide M-Pesa usage has increased 27 per cent year-on-year to reach 23.4 million active customers across Vodafone Group by 30 September 2015, according to the company, and the service now also allows International money transfers between M-Pesa customers in Kenya and Tanzania.
More than 2 billion individual M-Pesa transactions were carried out in the six months to September 2015, up 26% compared to the same period last year.
The big question is, is this service going to dominate the emerging markets or could it continue to grow to dominate the current powerhouses? After all, the services it offers, and the way in which it offers them are highly appealing. Western European and US markets are gradually getting used to making mobile payments, but they have been, as Apple can testify, rather underwhelming so far. That’s more down to the fact that there are other, easier, more trusted ways of paying already, than a difficult to use interface or product flaw.
M-Pesa is different because there is ultimately no credit or debit card and by default bank at the end of the transaction. Apple Pay, for all its supposed innovation, still requires the user to link the service to a card. Vodafone’s service could potentially appeal to people who do not like using their cards or those who want to convert cash into digital formats more easily than by signing up to a bank.
Another reason M-Pesa is an interesting concept is because it works well when it is integrated everywhere. People in Kenya can pay for pretty much anything using M-Pesa – more importantly, people can pay for pretty much anything from the same one point – their mobiles. Simplicity has always been touted as being one of the most important factors for consumers, so by offering a service that works best when being used to pay for everything from a trip to the barber’s to taxis and taxes a lot of people could be attracted by such a gamut.
However, as no doubt many readers have already thought, countries like the UK or the US are not Kenya. In Kenya, M-Pesa is a hegemonic product and with a market monopoly it is easier to thrive, whilst the Western markets are a maelstrom of companies all vying to dominate – a modern Wild West one might say. Therefore, companies would find it harder to roll out digital money systems precisely because the synchronicity and efficiency of a monopolised environment is simply not present. Furthermore, there are also the physical realities of digital money that must be accepted, as well as the more negative consequences.
However, the rise of challenger digital banks such as Atom, Tandem and Tyro is showing that people are turning away from traditional financial institutions. Maybe one day that behavioural shift will move to provide an opportunity for non-bank money services such as M-Pay to thrive in the dominant markets.
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