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

Monday, April 27, 2015

Every week the technology world holds its breath with anticipation as the latest tech giants make new strides into the mobile payments sector.

After years of low consumer take-up of services like Google Wallet and Square, the launch of Apple Pay last year was hailed as a pivotal moment, signalling the time when mobile payments would finally go mainstream.

With mega players like Facebook and Microsoft now joining the peer-to-peer money sending and digital payments fray, even sceptics are wondering if 2015 might truly be “The Year of Mobile Payments”.

Yet what many don’t realise is that these services are already lagging 10 years behind. The rest of the world is paying attention to a different mobile payments phenomenon – one that’s been taking place thousands of miles away. Last month, global telecoms body GSMA revealed that the number of active users of Mobile Money – a service which enables users to send and receive money from basic mobile phones without requiring a bank account or payment card – had doubled from 2013 to reach 103 million globally.

How did a population more than twice the size of Spain come to be at the forefront of a global payments phenomenon? And why hadn’t we heard of it until now?

The first answer to that question is that Mobile Money exists almost entirely in the developing world. Many people may already be familiar with M-PESA, Safaricom’s Mobile Money service in Kenya which currently processes $2.1 billion (£1.3 billion worth of transactions a month. 59 per cent of Kenyan adults use M-PESA, and the platform now accounts for two thirds of the transaction volumes processed through the national payments system.

M-PESA users can pay bills, top up their petrol, take out loans, and even have their salary paid directly into their mobile money account.