One could be forgiven for assuming the Silicon Valleys, Alleys or Gorges of the world are where mobile payments reign supreme. These technological hubs have long embraced disruptive start-up culture and many VCs have been ‘made’ investing in these organisations.
However, if you cast your eye away from the west, down to sub-Saharan Africa, you may be surprised to find that there is a quiet financial revolution taking place. Where mobile payments are allowing access to financial services for those who traditionally would be denied, without the asterisks of travelling to the nearest metropolis.
As is a common theme throughout history, necessity drives innovation. In the most extreme example, during WW2 we saw the desperate situations of war drive human ingenuity to develop marvels such as penicillin, pressurised air cabins and radio navigation. Now in Kenya mobile payments are serving as the relief for complex problems surrounding access to financial services.
Labelling the issue with the term ‘access’ is admittedly an oversimplification, brushing over topics like living in extremely rural areas, satisfying the bureaucratic requirements of banks and lobbying from financial institutions to maintain market dominance. As much as I’d like to do a deep dive into these issues, they’re regrettably beyond the scope of this blog post.
In Kenya, 73% of the total population (93% of the adult population) have a mobile payment account. This translates to over 40 million people, all with access to financial services who make 17 million transactions a day.
These services have evolved almost hand in hand with mobile phone technology. Originating as a text in service in 2007, the service has been developed into a fully functioning alternative to traditional banking, where users are able to do everything from transferring money to requesting loans and paying bills.
This successful implementation of mobile technology is unfortunately not mirrored in every African nation. An easy counterpoint to this is found in Nigeria, arguably Africa’s largest economy. Where despite deep penetration of mobile technology, 60% of Nigerians still do not have a bank account and only 6% of the population use mobile phones to make transactions.
This unfortunate situation is a result of lobbying from Nigeria’s largest banks who have managed to secure their position in the nation’s economy and exert their authority as market leaders. This impact is felt both legislatively and culturally, where until 2017 any transaction above $10 was required to be accompanied by a paper document. There is also suspicion amongst the population who fear that if their device was stolen, they would lose access to their accounts so prefer to handle any transactions in person. Reaffirming the populace’s confidence in the cash economy.
A silver lining to this is that as we have seen from the 2017 decision, restrictions are opening up and banks in Nigeria are beginning to work with mobile operators as opposed to against them. This, along with experiments in HAPS (high altitude platform stations), such as Facebook’s Aquila and NASA’s Pathfinder, are leading the push to open up access to reliable networks.
With wider reaching, more reliable networks it may be possible for other technologies to help bridge the gap. A perfect example of this would be the Contactless Companion Platform (CCP) developed collaboratively between Samsung, Smartlink and Ingenico. The technology is based on NFC-enabled chips, which can be easily embedded into any number of wearable items allowing payment to be made from digital ‘accounts’. Users can then manage these accounts by either using a smartphone or by visiting a kiosk to load cash onto the chip.
This may help to controvert the fear that losing the device would be tantamount to losing money as there can be pre-conditions set to the uploads. These can be restrictions on where purchases can be made, how long the money sits on the chip before reverting back to the original account, and in the case of loss or theft the chip can be frozen and its contents loaded to a separate chip or reverted back to a traditional bank account.
These conditions make the whole purchasing process more secure and would help to expand services even further. Giving those who may have been turned away by traditional banking the opportunity to access the financial services we all take for granted.