I recently read a Time magazine article of industry innovation so remarkable that I had to re-read it a couple of times just to ensure I grasped the entire concept. This is a story of how a simple financial product is taking hold and emerging as a potential game changer to the retail banking industry. The most remarkable part to this story is where its occurring, which is not on the corners of Wall Street, but in the main streets of Kenya.
The article centers around Safaricom, the largest cell phone company in Kenya, which has been at the forefront of the growth in mobile phone subscribers in Africa, who now number 506 million people up from zero a decade ago. There are now more mobile phone subscribers than there are landlines, a development that is heavily encouraged since GDP growth in developing nations has been shown to increase from 0.6% to 1.2% for every 10 mobile phones per 100 people.
The major hub of innovation in mobile technology revolves around text messaging, due to its relative simplicity and low cost. Some of the most innovative text message services now available include Mxit, a South African text message-based social network; and mPedigree, a Ghanaian service that determines counterfeit medication based on text messages users send with product bar code information to a central number.
In 2007, Safaricom launched M-Pesa, a money-transfer-by-text-message service. The concept is really simple, "[a] Safaricom subscriber takes cash he wants to transfer to another person, along with the recipient's mobile number, to a Safaricom agent [like Maina]. The agent takes the sender's money and, for a small fee, uploads the value to his or her prepaid phone account, then sends on the credit to the recipient's phone account." A remarkably simple way of transferring small sums of money (as little as $1.20) from one individual to another without the need for a bank account or money transfer agent.
The growth of M-Pesa has been extraordinary. Of Safaricom’s 16 million customers, 12 million have M-Pesa accounts, in a country with 39 million people, which equates to a 30% penetration rate from just one service provider. The company has found that people use their M-Pesa accounts as savings accounts, where they upload money to their accounts and just leave it there, totally secure. This observation has led Safaricom to partner with one the largest regional banks, Equity Bank, to link customer mobile phones to bank accounts which they can then use to access their money from ATM’s and debit cards.
That all this innovation is happening in Africa is perhaps very telling of the direction the world we live in is moving towards. China, India and Brazil today provide the sort of business and technological leadership that was once the exclusive domain of the Western nations. The growth of M-Pesa in Kenya stands in stark contrast to the sub-prime mortgages that ignited the worst recession since the great depression, as the true difference between creating innovative products that can have a dynamic impact on the marketplace, and those that work to produce superficial progress.
The article centers around Safaricom, the largest cell phone company in Kenya, which has been at the forefront of the growth in mobile phone subscribers in Africa, who now number 506 million people up from zero a decade ago. There are now more mobile phone subscribers than there are landlines, a development that is heavily encouraged since GDP growth in developing nations has been shown to increase from 0.6% to 1.2% for every 10 mobile phones per 100 people.
The major hub of innovation in mobile technology revolves around text messaging, due to its relative simplicity and low cost. Some of the most innovative text message services now available include Mxit, a South African text message-based social network; and mPedigree, a Ghanaian service that determines counterfeit medication based on text messages users send with product bar code information to a central number.
In 2007, Safaricom launched M-Pesa, a money-transfer-by-text-message service. The concept is really simple, "[a] Safaricom subscriber takes cash he wants to transfer to another person, along with the recipient's mobile number, to a Safaricom agent [like Maina]. The agent takes the sender's money and, for a small fee, uploads the value to his or her prepaid phone account, then sends on the credit to the recipient's phone account." A remarkably simple way of transferring small sums of money (as little as $1.20) from one individual to another without the need for a bank account or money transfer agent.
The growth of M-Pesa has been extraordinary. Of Safaricom’s 16 million customers, 12 million have M-Pesa accounts, in a country with 39 million people, which equates to a 30% penetration rate from just one service provider. The company has found that people use their M-Pesa accounts as savings accounts, where they upload money to their accounts and just leave it there, totally secure. This observation has led Safaricom to partner with one the largest regional banks, Equity Bank, to link customer mobile phones to bank accounts which they can then use to access their money from ATM’s and debit cards.
That all this innovation is happening in Africa is perhaps very telling of the direction the world we live in is moving towards. China, India and Brazil today provide the sort of business and technological leadership that was once the exclusive domain of the Western nations. The growth of M-Pesa in Kenya stands in stark contrast to the sub-prime mortgages that ignited the worst recession since the great depression, as the true difference between creating innovative products that can have a dynamic impact on the marketplace, and those that work to produce superficial progress.
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