Pundits like to talk about how developing countries can “leapfrog” rich countries by skipping certain stages of development—for example, by going straight to an economy based on renewable energy without first passing through a phase of messy fossil-fuel based industrialization—but it rarely happens. M-Pesa, the system of mobile payments first launched in Kenya, is an exception.
Begun in 2007 as a way to send people their microloans, M-Pesa has since become the country’s dominant method of sending remittances from workers in the city to relatives in Kenya’s rural areas. Safaricom, the mobile telecommunications company that launched M-Pesa, has 19 million customers, which is nearly every adult in Kenya. Of those, 15 million use M-Pesa, which processes 80 transactions a second and handles transactions responsible for 31% of the $33.62 billion GDP of Kenya, reports the Financial Times (paywall).
There are more than 700 million cell phones in Africa, and 70% of the population has one. Coincidentally, 70% of the population also has no access to a bank. The runaway success of M-Pesa can be attributed to the collision of these forces, though it hasn’t been equally successful in every country in which it’s been introduced, notes Vanessa Clark at TechCrunch. For example, M-Pesa never took off in South Africa, possibly because banks there learned a lesson from what happened in Kenya and began offering similar mobile payment services before it even arrived. In South Africa, mobile payments are dominated by Fundamo, which was acquired by Visa in 2011 for $110 million and is now the basis of mobile payment systems being rolled out in India (where M-Pesa is also establishing a foothold) and Rwanda.
In the US and other rich countries, payments via cell phone are still languishing behind a tangle of standards—Near Field Communication, countless apps and various failed efforts at mobile wallets. In Africa, though, the lack of existing banking and other types of infrastructure have propelled many countries into the payments future that smartphones were supposed to enable—despite the fact that the overwhelming majority of phones in Africa remain low-end “feature phones.”