Weekly Trend: How the West Can Learn from Kenya’s Mobile Payments Success
In addition to being the cradle of mankind, Kenya can also be called the “cradle of mobile payments,” as well as a thriving hub for tech startups. Perhaps the ability to pay with your phone is not terribly awe-inspiring, but if you’ve ever been inconvenienced because you didn’t have enough cash or a check to pay for a transaction, prepare to be awed: While cities like Washington, D.C., were eagerly waiting for taxi cabs to install credit card machines as late as the second half of 2013, Kenya’s M-Pesa, a mobile phone-based money transfer application run by Safaricom, a subsidiary of UK’s Vodafone, has been making Kenyans’ lives easier since 2007.
In the past couple of years, Kenya has seen the dramatic rise of mobile-phone-based payments to the point where almost every single money-exchange transaction in this country of over 41 million people happens thanks to a phone. In a one-year period ending in November 2014, 25 million Kenyans transacted over $24 billion USD, according to Xinghua.
How does this compare to ApplePay, one of the newest additions to the company’s stellar lineup? While the list of banks and retailers who can handle ApplePay is impressive and grows every day, the limitations of this payment system for now are obvious ApplePay uses NFC (Near Field Communication technology). Considering that the only phones in the Apple lineup equipped with the NFC antenna are the iPhone 6 and 6 plus, this alienates users with earlier models, as well as non-Apple customers. Android customers can use Google Wallet, which uses the same technology but has the same transmitter-related limitations.
M-Pesa, on the other hand, is easier to operate. It is designed to be used by different carriers and relies on government IDs to verify identity. Since funds can be transferred via text message, it does not rely on sensors or need a special transmitter.
M-Pesa also is designed to thrive in an area where infrastructure is more unreliable and variable. It is more akin to a calling card system than an integrated hardware-software combo. Therefore it’s not just easy to use, but safer than transporting cash with you or going to a bricks-and-mortar bank. This is especially important for people sending money to relatives in rural areas, or for areas where there is civil unrest, as you know that your money is safe. It is also more democratic: No fancy new smartphone is needed to pay your bills.
One of the most exciting things about Kenya’s rise in mobile payments is simply knowing that the developed world can learn a thing or two from emergent economies: It’s important to approach technology with a creative mind. It’s important to focus on what can be done with existing technology and use it to its utmost potential, instead of waiting for the latest and greatest phone to come around.