Why Kenya is One of The Leading Countries Going Cashless
Surprising isn’t it? How Kenya a 3rd World Country is leading the world in becoming a cashless society. You want to know why?
Now before i go to far. I was once asked by a European. Is Kenya a city? Umm No. Africa is a Continent and Kenya is a Country. Now to get to the main point.
Introducing M-Pesa! What is M-Pesa and How Does It Work?
What is M-Pesa?
M-Pesa is a mobile banking service that allows users to store and transfer money through their mobile phones. M-Pesa was originally introduced in Kenya as an alternative way for the unbanked population of the country to have access to financial services. Safaricom, the largest mobile phone operator in Kenya as of 2016, launched M-Pesa in 2007. M-Pesa is a blend of two entities where M means mobile and Pesa means payment in the Swahili language.
How M-Pesa Works
M-Pesa is a virtual banking system that provides transaction services through a Safaricom SIM card. Once the SIM has been inserted into the card slot of the mobile device, users can make payments and transfer money to vendors and family members using SMS messages. Users with no bank accounts(Even those with bank accounts, as almost every Kenyan has access and possibly uses M-Pesa) can access the numerous M-Pesa outlets favorably distributed across the country. The money that needs to be stored is given to the kiosk attendant, who transfers the amount in digital form to the user’s M-Pesa account.
The widespread use of credit and debit cards in the developed world and more recently mobile phone payments in the developing world is bringing increasing attention to the idea that, perhaps not far into the future, we may see the first “cashless society.” Kenya, with the cutting edge M-PESA mobile phone payment service, may leapfrog the card-based path to cashless transactions followed in most developed economies to become one of the first countries to become cashless or at least “cash-lite.” Moving toward a cash-lite strategy may have multiple benefits for the poor, including a one, two, three punch improvement in financial management, security and transaction costs.
But how far away is Kenya from the goal of cash-lite? Between July and August 2011, Bankable Frontier Associates (BFA) conducted an intensive field study within an urban and a rural pilot area to study the mode and size of intra-day cash flows at the customer-to-merchant interface and the merchant-to-supplier interface.
The data showed that even though cash is still king in Kenya. M-Pesa was still the preferred form of payment. Flash forward to 2020 and we can say that Kenya is now a fully cash-lite society and is heading to becoming a cash-less society.
Currently Mobile Money Agents are more than Petrol Stations and Barbershops.
Launched 10 years ago in east Africa’s largest economy, this much-copied platform allows users to send money between mobile “wallets”, pay bills and apply for loans. Nearly 28m phone lines are registered for M-Pesa, and more than 16m transactions happen on the system every day. Over 36m mobile money accounts are registered across all available platforms, making Kenya a leader in digital payments on the African continent.
Through mobile payment services like M-Pesa, the standard of living in Kenya has improved greatly. Market traders, debt collectors, farmers, cab drivers, etc., don’t have to carry around or transact in a large amount of cash. This means that the occurrence of theft, robbery, and fraud is reduced. Also, individuals and business owners don’t have to wait in queues for long hours to make their electricity and water bill payments because these can be made using M-Pesa.
To combat fraud, Safaricom mandates that users of a Safaricom SIM card who want to register for M-Pesa have to do so with a valid government ID such as the Kenyan National ID card or a passport. This way, each transaction is marked with the identification of the party transferring, paying, depositing or withdrawing money from an account.
M-Pesa has spread quickly, and by 2010 had become the most successful mobile-phone-based financial service in the developing world. By 2012, a stock of about 17 million M-Pesa accounts had been registered in Kenya. By June 2016, a total of 7 million M-Pesa accounts have been opened in Tanzania by Vodacom. The service has been lauded for giving millions of people access to the formal financial system and for reducing crime in otherwise largely cash-based societies.
What Can You Do With M-Pesa?
Here are some of the basic things you can do with M-Pesa:
- Send money
- Receive money
- Pay your bills
- Top-up airtime
- Receive salaries
- Get a short term loan
- Manage your finances on your phone
- Pay salaries/wages
M-Pesa is a safe, simple, and affordable way to store money on your phone.
You can get access to M-Pesa by activating the M-Pesa mobile wallet on your phone.
Once you have activated your M-Pesa wallet, you need to deposit money into your wallet.
As soon you deposit money into your wallet, you will be able to send funds from your M-Pesa mobile account on any network and anytime at your convenience.
M-Pesa is a recently developed form of mobile money transfer.
Partnerships with Kenyan banks offer expanded banking services like interest-bearing accounts, loans, and insurance.
The user interface of M-Pesa differs between Safaricom of Kenya and Vodacom of Tanzania, although the underlying platform is the same. While Safaricom uses SIM toolkit (STK) to provide handset menus for accessing the service, Vodacom relies mostly on USSD to provide users with menus.
To conclude go check out these 2 TedTalks
