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 U.S., 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.
M-Pesa isn’t the first mobile-money service. The Philippines has had at least rudimentary mobile money-transfer systems since 2001, but nine years later, fewer than 10 percent of Filipino mobile users without bank accounts actively used them, while the long tail of mobile-payment systems has already transformed Africa. Parrot programs like Paga, EcoCash, Splash Mobile Money, Tigo Cash, Airtel Money, Orange Money, and MTN Mobile Money have sprung up in several African countries. Even government has elbowed its way in: the Rwanda Revenue Authority has introduced a service that allows citizens to declare and pay taxes right from their cellphones.
Mobile money exploded in Africa because the continent’s cash economy was ripe for disruption. Even as the number of city dwellers wishing to send money to rural relatives surged, the prevailing technology was still pressing an envelope of cash into the hands of a bus driver or trusted friend heading home. Some paranoiacs would wedge a parcel above the wheel of a bus, sending the intended recipient instructions for how to retrieve it many dusty miles later.
Money transfer was just one problem for the millions of informal-sector workers who had no standardized tools for managing cash flow—no checking or savings accounts, no credit cards. “You have a huge informal economy—a lot of people who are not part of the banking system,” Lohini Moodley, a co-author of McKinsey’s “Lions Go Digital,” a report on technology in Africa, told me. This gray economy has historically operated using a blend of ad hoc and do-it-yourself financing processes, with cash and IOUs featuring prominently.
But, first in Kenya, then around the continent, mobile money has changed everything. Perhaps most important, M-Pesa and its cousins offer a long-sought ability for individuals in poor countries to build assets. If you squint, digitally stored currency looks like a simple checking or savings account. M-Pesa has nearly 80,000 agents, like my man at the grocer, who function as tellers for a massive virtual bank.