thenextwave

Mobile money – from Africa to the UK?

Posted in banks, business, digital, finance, innovation, technology, trends by thenextwavefutures on 28 April, 2008

Kenya’s mobile phone-enabled payment system M-Pesa has grown explosively over the last nine months, according to Russell Southwood’s Balancing Act newsletter, which has been tracking the African mobile and internet markets for something like four years now. According to the newsletter the operator, Safaricom, gained 150,000 users in the three months to June last year, topped the million mark by December, and had reached 1.6m by January – despite, or perhaps because of, the country’s election-related violence. [Update: Now 2m – see Comment below]. Southwood describes it as a ‘breakthrough moment’ for mobile payments – one that’s being watched in the UK.

M-Pesa was developed by Vodafone, which has a minority interest in Safaricom, and it’s already been rolled out to Afghanistan as M-paisa. Plans to roll it out in Tanzania are going ahead, although a local operator, Zantel, has just beaten them to it, launching a service that appears to be slightly simpler but still designed to enable transactions via mobile.

Obviously it shouldn’t be surprising that mobile transactions are a successful service in places where financial infrastructure is poor. As Dave Birch has observed on his blog, “The M-PESA model works, the technology works and the business works, so I’m sure it’s going to go from strength to strength”. It also fulfils a social need.

But so far, mobile payments haven’t taken off in richer markets, despite the apparent attractions of putting a contactless card (like an Oyster card) into a device that you tend to carry with you everywhere. Some user research the Henley Centre did for an operator a few years ago suggested that the operators hadn’t gained ‘permission’ from users to be a payments authority, and given the widespread penetration of debit cards, and their associated infrastructure, it’s possible to see why this might be a problem.

Dave Birch reports a conversation with someone in the UK from a regulatory background who suggested that the M-PESA model might work here not among consumers who were well-connected to financial institutions, but to people who weren’t – for example for thise living where rural banks or post offices were closing. I can see the logic, and it would save the regulators having to take tougher action when market failure (or political failure) created ‘financial services deserts” (especially since in rural areas broadband connections are also poor).

I’ve not got the time here to go into how the diffusion of innovation plays out in the successful adoption of new technologies, but the fact that it works, and that there is a need, isn’t the whole story. Users have to be confident with the technology as well. Many of the adopters in Kenya have been in business. To make it work in the UK’s ‘financial deserts’, you’d almost certainly need to enrol the informal support networks which help to include the excluded – but that’s a post for another day.

Note: Balancing Act has published a recent report, M-money, covering all aspects of payments through mobile phones in Africa.

2 Responses

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  1. Dave Birch said, on 29 April, 2008 at 9:57 am

    Just as a data point Andrew, at this week’s Digital Money Forum we heard that M-PESA has more than 2 million users (joining at a rate of 200,000 per month) and is now carrying 15 transactions per second at peak times.

  2. Global mobile « thenextwave said, on 3 February, 2010 at 11:57 pm

    […] over the course of the decade, down from around £100). The most successful mobile payments system, M-Pesa in Kenya, now has five million subscribers, and is being widely copied […]


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