M-pressive prospects

A new report has given some insights into Kenya’s burgeoning mobile payments market. First launched by Vodafone and Safaricom in October 2005, the country’s M-Pesa scheme has grown rapidly ever since. But what is most striking is the potential for such a service to not just facilitate smoother transactions—but perhaps to replace banks altogether. 

Users of the service can deposit and withdraw funds in much the same way they top up their mobile phones. Money can be instantly sent to any phone, which the recipient can then cash in—and it can also be used to buy goods and services. In short, it acts much like a virtual bank card, with Safaricom resellers acting as bank branches. Users don’t even need a bank account.

The need for this is great. In a country with some 36 million people, there are just 450 bank branches. The North Eastern part of Kenya, home to some 587,000 people, has just three branches. Being able to easily send and receive money from any part of the country, via one’s mobile phone, provides a major benefit to locals.

There are many examples of how it is being used: remote truck drivers being sent money for lorry repairs; travellers depositing money at home and withdrawing it at their destination, as a protection against theft; and even taxi drivers preferring M-Pesa for payment, rather than having to carry lots of cash.

Mobile payment systems may not have gained much currency in developed markets, where banking services are easily available and most transactions can be done easily online. But for developing markets, with poor infrastructure, few banks and bigger security risks, the potential seems very great indeed.