Scientific and technological progress cannot be stopped, just as the change of day and night cannot be canceled, and technologies, including in the field of payment systems, are coming to the poorest peoples. The M-Pesa payment system is one of the most notable signs of technological progress, which became widespread in African countries, swept Asia, and came to Europe.
It turns out that electronic payment systems can work on the basis of ordinary SMS. Of course, M-Pesa suffers from the drawbacks of conventional centralized systems – there is also a big brother and sending money abroad is a problem, but promising startups make a smooth transition to Bitcoin possible. Further development of communication systems and cheaper mobile devices will help to do without intermediaries at all, and then people themselves will choose what is more profitable and convenient for them.
What is M-Pesa?
Can you imagine a bank branch in the middle of the savannah? Unlikely. Although there are
ATMs. People need money after all. But how to deliver them, how to transfer money to relatives who not only do not have a computer but, often, a bank account? How to make payments for utilities or other services, or just pay in a store that not only does not have a terminal for bank cards, but it is not safe to store cash either?
The solution was found in 2007. From the moment when a mobile phone ceased to be a luxury or a gimmick even in the African hinterland, SMS service has become a reliable assistant in the provision of financial services. Initially, it was assumed that M-Pesa (M – mobile, Pesa – Swahili money) with the help of a mobile operator, would be able to provide microfinance services to borrowers, which was intended to stimulate consumption and, possibly, contribute to the development of small businesses in Kenya.
From the very beginning, M-Pesa has found itself established in numerous industries – from finances to ordinary things. Right now MPesa is used to deposit with Forex brokerages, send money to friends, and fill your bank account. In simple words, this is something that is widely used in Africa, while Kenya is at the forefront of these initiatives.
The advantages of lending in this way were obvious – cost reduction due to the absence of a network of bank branches would save significant funds, and therefore made it possible to provide the consumer with the most favorable lending conditions.
How does M-Pesa work?
With the introduction of the service, simple mobile phones became as accessible as possible, in dealerships they were sold at ridiculous prices, while the service had already been “wired” into a SIM card. Technologically, this is provided by the SIM-Toolkit application in Kenya or the USDD system in Tanzania, which is opened via a menu. Thus, any buyer of the phone became a user, and the dealer had only to persuade the client a little so that he agreed to deposit a small amount in his account, which was activated instantly. It is also interesting that if only a registered user can send money, then the recipient does not have to be a registered subscriber.
Even if the client does not have a bank account, it is possible to withdraw cash from an ATM. To do this, you need to receive a message with a temporary pin-code, the validity of which is limited to 2 hours.
Following its success in the Kenyan market, the system entered the Tanzanian and South African markets, followed by Lesotho and Mozambique in Africa. Later it was the turn of India, Egypt and Afghanistan.
However, in Tanzania, where the financial literacy of the population was significantly lower than in Kenya, implementation of the system was much slower. According to statistics, 54% of the country’s adult population did not use any financial instruments at all (neither official nor otherwise), while this figure in Kenya was no more than 38%. The indicators of economic development are also incompatible. GDP in Kenya was $ 890 per capita, while in Tanzania it was only 520. In addition, as noted above, the level of development of the banking system, without which the introduction of M-Pesa would be impossible, is much higher – as much as 1.38 bank branches per 100,000 people! Whereas Tanzania boasted only a pitiful 0.57.
A similar system, called M-Paisa, recently introduced in a devastated but mobile-equipped Afghanistan, has a number of features. The system was implemented by the Ministry of the Interior in collaboration with mobile operator Roshan, and officials say the success is clear. So, after the payment of salaries to the police, it turned out that the amount was almost a third higher than what they had received earlier! According to representatives of the ministry, this is a serious step to prevent corruption.