How Africa Beat The West At Reinventing Money For The Mobile Age

It’s a painfully First World problem: Splitting dinner with friends, we do the dance of the seven credit cards. No one, it seems, carries cash anymore, so we blunder through the inconvenience that comes with our dependence on plastic.

When I returned to the United States after living in Nairobi on and off for two years, these antiquated payment ordeals were especially frustrating. As I never tire of explaining to friends, in Kenya I could pay for nearly everything with a few taps on my cellphone.

Every few weeks, I’d pull cash out of my American bank account and hand it to a contemplative young man stationed outside my local greengrocer. I’d show him my ID and type in a PIN, and he’d credit my phone number with an equivalent amount of digital currency.

Through a service called M-Pesa, I could store my mobile money and then, for a small fee, send it to any other phone number in the network, be it my cable company’s, a taxi driver’s, or a friend’s. Payments from other M-Pesa users would be added to my digital balance, which I could later withdraw in cash from my local agent.

For me, M-Pesa was convenient, often simpler than reaching for my credit card or counting out paper bills. But for most Kenyans, the service has been life-changing. Kenya has one ATM for every 18,000 people -- the US, by contrast, has one for every 740 -- and across sub-Saharan Africa, more than 75 percent of the adult population had no bank account as of 2011.

When Safaricom, the major Kenyan telecommunications firm, launched M-Pesa in 2007, pesa -- Swahili for “money”-- moved from mattresses to mobile accounts virtually overnight. Suddenly, payment and collection of debts did not require face-to-face interactions. Daylong queues to pay electric- or water-utility bills disappeared. By 2012, 86 percent of Kenyan cellphone subscribers used mobile money, and by 2013, M-Pesa’s transactions amounted to some $35 million daily. Annualized, that’s more than a quarter of Kenya’s GDP.