Just a couple of weeks ago, my local laundry mat in Boston just ditched their old fashioned credit card machine for Square. The little Square card reader combined with an iPad are saving this small business money (by reducing their card fees) and making the whole user experience, on both the staff and customer sides, smoother, faster, and paper-free. Square has recently released an app which can cut out the physical credit card all together and replace it with a mobile phone. With systems like Square, or other mobile payment companies and project, from Google Wallet to LevelUp, Bank Mobile Apps to PayPal, the mobile money sector is changing the way we pay for things in the US, and Boston is an epicenter.
Another mobile money epicenter, perhaps the mobile money epicenter, is Kenya. Kenya is home to M-Pesa, the most widely used mobile money platform in the world. 20 percent of Kenya’s GDP flows through M-Pesa (http://www.thinkm-pesa.com/2012/04/5-things-you-probably-dont-know-but.html), and more than a quarter of the country uses the system. With M-Pesa, people can send digital money to anyone else on the network via a modified SMS or text message. Then individuals can cash out or deposit cash via M-Pesa Agents all around the country. As M-Pesa has grown, it has become even more useful–especially as businesses are brought onto the platform, often via a platform like Kopo Kopo. Mobile payments are becoming the way Kenyans pay.
The scale of M-Pesa in Kenya gives a lot of people working in Mobile Money elsewhere an inspiration. Every time I mention that I do work in Kenya, people ask me about M-Pesa and Mobile Money. In the US, people are especially interested to see what we can learn from Kenya–an vice versa, what opportunities exist there.
My answer is, of course, a lot–Americans have a lot to learn about mobile payments from Kenya, and we also have a lot to share. Already I’ve seen lots of discussions and exchanges, but so far I think they have missed the mark. I’ve seen techies borrowing platforms, companies sharing or “borrowing” strategies and analysts swapping and questioning data. But these types of exchanges won’t lead to the success everyone is looking for. The real secret to transferring mobile money isn’t in the technology or the process, but is instead in the design and experience. And right now, the bottom line is that the baseline experience of buying, selling, or moving money is very different in Kenya than it is in the US. It’s this profound difference that makes the international exchange so valuable, yet also difficult.
In Kenya, most small shops have kept all of their book-keeping by hand–using accounting tables and old record logbooks or the occasional (hand-written) receipt. Credit cards are not commonly accepted for a very local business, and lots of economic activity happens in the informal spectrum. In the US, even small businesses often accept credit cards and use a variety of technologies to manage their business.
These technology are why, in the US, mobile money is really focusing on helping the business–from cutting costs, to cutting time, from generating new business and streamlining back end processes. Many of the platforms dwell on customer loyalty and innovative hyper-local marketing. In Kenya, there is a lot to borrow from these US systems but it will take a lot fo education and growth for the businesses to actually generate value from these approaches and tools–and for many businesses this is far far away. For example, in the informal economy, loyalty is much more authentic and marketing is much less complex. Porting these payment system ideas to Kenya will take a lot of rethinking.
On the reverse, M-Pesa has primarily facilitated money transfers between individuals. M-Pesa has systems that are easy to learn for everyone and easy to monitor or address should something go wrong. In the US, personal checks are still widely used for basic transactions, even though mobile money could easily replace these exchanges. For mobile money to take hold in the US we must understand how someone who is only a little familiar with technology, and has trusted their checkbook for years will switch. In Kenya, M-Pesa convinced lots of people to ditch their cash and trust in a new piece of technology. By making the experience easy, relatively familiar, and extremely useful–it took hold.
Behind these examples are a lot of cultural realities about how and why we move money, whom we trust, and how we analyze our expenses. Moving mobile money around the globe will change the world, but first this programs will have to take the time to understand these contexts in order to develop useful and scalable systems.