M-PESA, a mobile payment scheme launched in 2007 by Kenyan mobile network operator Safaricom, has fundamentally changed the way Kenyans interact with money, and models like it stand to do so for the rest of East Africa. The service, which allows people to keep and transfer cash through their mobile phones, is used by over two-thirds of the adult Kenyan population (over 17 million people), and about 25% of the country’s gross national product flows through it.
The success of M-PESA (‘M’ is for mobile; ‘pesa’ is Swahili for ‘money’) has opened the floodgates for international corporations to launch mobile payment systems throughout East Africa in partnership with local companies. The following infographic shows the mobile payment deals, beginning with Safaricom and M-PESA back in 2007, and ending with PayPal’s partnership with Equity Bank this October.
As M-PESA saturated the Kenyan market, deal making began in earnest in 2011, with three mobile payment systems agreed upon by MasterCard, Airtel, and Western Union. In 2012, Obopay, Ericsson, Western Union, MasterCard, and Visa got in on the action. This year MasterCard and Visa have signed a new round of deals, and Google, Huawei (a Chinese information and communications technology provider), and PayPal have also gotten in on the action.
With mobile payment systems like M-PESA, one deposits into and withdraws from their account at the corner shop (over 40,000 Safaricom agents in Kenya can perform this service). People can also transfer money to others right on their mobiles.
Part of the reason new mobile finance systems have been so transformative to Kenyans’ personal finance is that it bypasses traditional methods of handling money that are prone to crime – both petty and institutional. In the violent period following the 2008 election, a period in which carrying any amount of money in Nairobi wasn’t safe, people used M-PESA to transfer money to friends and relatives trapped in the slums. M-PESA is also viewed by many Kenyans as being safer than banks, which are often caught up in sectarian divisions and sometimes violence.
PayPal’s partnership with Equity Bank in Kenya will go one step further than simple money transfers. The corporation’s Head of Business Development for sub-Saharan Africa, Malvina Goldfeld, says that PayPal’s new scheme will help further transition East African economies away from cash, allowing business to better integrate into the global marketplace. PayPal and Equity Bank will allow Kenyans to tap into the global PayPal network, with 137 million active accounts in 193 countries.
“Making and collecting payments is often cited as one of the major hurdles to business in Africa,” she says “as the economies are still primarily cash-based… this is also true for e-commerce where the most common payment method is cash on delivery. PayPal presents a powerful alternative.”
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