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June 12, 2010 1:34 AM   Subscribe

M-Pesa, the mobile platform based money transfer system launched by Safaricom in Kenya, is changing the landscape of money in Africa, and around the world. Competition is heating up even while the service expands internationally allowing transactions to occur between Africa, UK and Asia. Bankers, regulators, startups and operators all want a piece of the pie as even the phone manufacturers themselves get into this potentially lucrative business.
posted by infini (12 comments total) 7 users marked this as a favorite
I don't see how this is an improvement over normal banking. So, to send money, you "hand over the cash to a registered agent - typically a retailer - who credits your virtual account." In other words, you make a deposit. Then, you can text someone to send them money, which they have to redeem via a secret code. It's basically a mobile phone version of a check or an electronic bank transfer.

Later in the article, it specifies that "In time, M-Pesa will allow people to borrow and repay money, and make purchases." So, it'll fulfill the other roles of a bank as well.

I just don't see the point. Replacing the checks and cards with phones is more convenient, but in a country where mobile phone access is hardly universal there's a pretty hefty price to pay. Furthermore, the low fees and limited regulation are almost certainly just due to people not understanding that this is just a bank by a different name. Call me crazy, but I doubt the fees the banks charge down there are just profiteering - being a third-world bank is risky. It's the same thing with the regulation - this thing isn't so dangerous now because it limits accounts to such small quantities, but once it starts acting more like a traditional bank it'll need to be regulated like one, lest people lose the money in their accounts.
posted by Mitrovarr at 2:30 AM on June 12, 2010

Mitrovarr, most of these people have never had access to any kind of banking services. Mobile phone access is more universal than access to banks.
posted by atrazine at 2:37 AM on June 12, 2010 [4 favorites]

disclosure: I work in this industry, but for a competitor

atrazine is correct, access to banking and electronic commerce is limited not just in developing countries, but even amongst the poor in developed countries like USA. The market is huge, but untapped because the overheads of dealing with customers with small amounts of cash are seen as too big to bother by established banks. This is why you have "cheques cashed" signs and payday loan sharks everywhere.

You're going to start seeing prepaid debit cards backing mobile payments and mobile POS services everywhere soon.
posted by vanar sena at 2:53 AM on June 12, 2010 [2 favorites]

Logically, mobile lending and savings will not be far behind?

Disintermediation implications must be there somewhere, but danged if I can imagine what they are. PayPal created things like eBay and Etsy, where is this going?
posted by warbaby at 5:56 AM on June 12, 2010

I don't see how this is an improvement over normal banking.

Have you tried doing "normal banking" in a remote area of a developing country?

PayPal created things like eBay and Etsy, where is this going?

Hopefully towards PayPal saying "oh shit, we have competition!" and quitting being assholes.

More seriously, I think you raise a very exciting question. The immediate uses are pretty obvious, for remittances and business deals. What it will turn into after that, I don't know. My sense is that this will in some ways leapfrog past traditional banks in the same way that cellular phone networks have leapfrogged past landline networks.
posted by Forktine at 6:14 AM on June 12, 2010 [1 favorite]

where is this going?

i think it would depend on the interoperability between all these transfer systems (scaling the transaction layer which wasn't a problem with the internet due to use of existing tools like credit cards and bank accounts) but will profits permit that to happen anytime soon?
posted by infini at 6:15 AM on June 12, 2010

You're going to start seeing prepaid debit cards backing mobile payments and mobile POS services everywhere soon.

Oh, boy. Prepaid debit cards. You mean, like the ones which gradually eat away the money stored on them with bullshit fees and such? Yeah, it's like having money which decays over time! Just what everyone wants.
posted by hippybear at 7:47 AM on June 12, 2010

Many of the retail stored value cards aimed at the middle class in the West are designed as gift cards, with an expected one or two total transactions. The companies offering those swallow many of the backend fees for the card, hoping that the little bit of money left over makes them a profit.

The ones entering the market now are intended for a different usage pattern, particularly aimed at folks who don't have the option to get a regular bank account but want to send money home regularly or pay utility bills, for example. Those folks aren't going to buy the kind of cards you're talking about, but they're willing to pay per-transaction fees and accept low or zero interest on the balance.
posted by vanar sena at 2:22 PM on June 12, 2010

Does this I'll be able to finally cash out the money I've accrued through prepaid phone renewal at some point?
posted by pwnguin at 8:28 PM on June 12, 2010

or at least start tapping into it to buy stuff - like air tickets for eg?
posted by infini at 1:28 AM on June 13, 2010

blasts in Nairobi
posted by infini at 2:57 PM on June 13, 2010

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