NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, October 9, 2013

It is 11 years since the first mobile payment service was launched in Africa, and it is now transforming economies across the continent. However, in the first five years or so, it was a solution in search of problems, with a scattering of case studies showing how it could make a difference.

Most people associate mobile payments with M-PESA in Kenya, but it was Zambia that really got the ball rolling, when Celpay was launched there by Fundamo, a South African payment technology company now owned by Visa. Celpay was most famous for one thing: it allowed SAB truck drivers to receive payment for their beer deliveries directly on their phones.

That was great as case studies go, but it didn’t fire up the rest of the continent. When M-PESA was launched in Kenya in 2007, it was also without expectations for a market-shifting service. It was originally conceived as a micro-financing offering. The banking regulator allowed it to be piloted without formal approval. When the pilot revealed the service’s potential for money-transfer, the first foot was placed on the financial racetrack.

Tragically, it was Kenya’s post-election violence in early 2008 that got M-PESA firmly on track. Thousands of people were displaced or prevented from moving out of their home districts, and M-PESA became the lifesaver that allowed friends, families and employers to get money to those who had no other access.

This was the catalyst, and within two years, Kenya had more than 10-million users of this mobile money service. The M-PESA platform was rolled out across Africa, but tended to flop in most countries, as the specific needs changed with every border change.