2015, April, 13

Mobile Money: How Kenya has beaten the world

An exciting theme I talk about in ‘Slingshot’ is that start-up companies can circumvent the traditional practices of incumbent market leaders via the ‘innovation shortcut’ – smart, new combinations of already existing components.   Here is an example with full-society impact from Africa, based on the combination of personal mobile phones and a network of small retail shops.

Per an article from NationalGeographic.com:

“Click a few keys, exchange a few numbers, and it’s done. With just a mobile phone and a registration with Safaricom, Kenya’s mobile service giant, you can pay for anything in seconds – no cash, no long journeys to towns to reach a bank, and no long lines when you get there. This is m-Pesa, the revolutionary approach to banking which is changing economies across Africa. The service allows customers and businesses to pay for anything without needing cash, a bank account, or even a permanent address.

Launched in 2007, by 2010 over 50% of Kenya’s population had used it – this means rural villagers haggling over produce, then using their Nokias to make the final deal. It means Masai herdsmen bringing their phones to market along with their cattle, ready to stock up on essentials to bring back to their homes.

So how does it work? m-Pesa relies on a network of small shop-front retailers, who register to be m-Pesa agents. Customers come to these retailers and pay them cash in exchange for loading virtual credit onto their phone, known as e-float. E-float can be swapped and transferred between mobile users with a simple text message and a system of codes. The recipient of e-float takes her mobile phone into her nearest retailer when she wants to cash in, and swaps her text message code back for physical money. There are already more m-Pesa agents in Kenya than there are bank branches.”

For the full story, click here:


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