Did you know that Kenya, Tanzania, Uganda and Rwanda currently have a combined active mobile subscriber base of 43.3 million?
Did you also know that in Africa, where credit and bank cards are almost at nil use in rural areas, most transactions between individuals and businesses which sell goods to consumers are cash based and as a result, in contrast to mobile subscriptions, there are only an estimated 14.5 million bank account holders in East Africa i.e. for every bank account holder there are three mobile phone owners.
This translates to 90.3 per cent of the total population of 121.9 million people not having a bank account.
Someone, somewhere was paying attention to these numbers and in 2007 a revolutionary mobile payment app was launched in East Africa.
It is said that at least $1.05 billion (more than Sh1.7 trillion) is transferred monthly through the revolutionary payment app, ‘M-Pesa’ in Kenya, Tanzania, Uganda and Rwanda.
What begun as a mobile money transfer program launched by the Kenya’s Safaricom mobile network (affiliate of Vodafone) in March 2007, has now spread across the region, and is replicated by almost all mobile phone companies in Africa.
The initial idea behind M-Pesa was to create a service which allowed microfinance borrowers to conveniently receive and repay loans using mobile network resellers. It was hoped that the users of the service would gain through being able to track their finances more easily. However, when the service was trialled, customers adopted the service for a variety of alternative uses and complications arose with Faulu, the partnering MFI. M-Pesa was re-focused and launched with a different value proposition: sending payments across the country anytime and anywhere.
What M-Pesa has now become is a mobile banking service – designed to enable users to complete basic banking transactions without the need to walk into their branch – a highly popular, affordable payment service with only limited involvement of banks.
Since its launch, M-Pesa has captured a significant market share for cash transfers, and grew astoundingly quickly, capturing over 14 million subscribers and well over 28,000 agents across Kenya alone by November 2011.
The growth of the service forced formal banking institutions to take note of the new venture. In December 2008, a group of banks reportedly lobbied the Kenyan finance minister to audit M-Pesa, in an effort to at least slow the growth of the service. This ploy failed, with the audit finding that the service was robust.
The service has now been transitioned to be operationally run by IBM on behalf of Vodafone.
By being ahead of other parts of the world in electronic money transfers, M-Pesa has made Africa a serious global player in the technology sector in terms of innovation.
Infact at a recent gathering of African leaders, the former deputy governor of the Bank of Tanzania (BoT) floated the idea of establishing a Centre of Excellence in Cyber Science in the region. He said this was a growing field that would require better preparations if the East African region was to fully exploit potentials in the e-business sector.
The main issue facing the popularity of M-Pesa is cyber crime and security. In 2012, key industry leaders in Africa are calling for an effective regulatory framework and a robust cyber laws regime to help underpin this essential service which has big potential in the region’s economic development.
Nonetheless, M-Pesa is making waves across the globe, enabling the further revolution on mobiles and enhancing the lives of millions, especially those in the developing world. Now available in Afghanistan and South Africa, there are plans to expand the service to Egypt and India, while many first world countries rush to embrace the technology, such as Australia’s Commonwealth Bank’s ‘Kaching’ mobile payment app service.