Mobile Payments and the Third World

“…what’s past i prologue.”

– William Shakespeare, and to a lesser extent, Visa Mobile

In the Emerging Markets section of the Visa Mobile page, Visa states, 

Nowhere is (the power of mobile payments) more apparent than in developing economies where mobile penetration outpaces bank card availability. Using existing mobile devices to access and transfer funds, make payments, pay bills or top-up wireless air time, mobile financial services represent a “leapfrog” technology in these under served regions.

The last significant “leapfrog” event happened with cellular phone networks, and (as Visa suggests) it is happening again with mobile payments. 

Back in the early days of Cellular phones, the networks ran on a technology called AMPS (Analog Mobile Phone Service).  Tens of billions of dollars were spent bringing AMPS networks in major markets in developed countries worldwide. 

Then, a more efficient and less expensive technology was developed. Billions of additional dollars were spent in developed countries upgrading the outdated AMPS networks and paying for rights to use the airwaves (known as “spectrum licensing fees”). Then another, more efficient and higher quality technology was developed.  Then another, and another.
During all of this redundant spending on the building and rebuilding of cellular networks in the developed world, most of the third world build no networks at all, largely because investors considered the technology unproven and patiently waited.  By the time the third world finally started building mobile phone networks, most of the industry agreed that GSM was the standard of choice. The term “Cellular” was being phased out faster than the outdated networks that the term represented.
The result? As recently as 2005, the average mobile phone user in Africa had a mobile device and mobile service that was more advanced than the average mobile phone user in America.
Is the same thing happening in mobile payments?  Absolutely.  Take a look at the work of MIT researcher Nathan Eagle. In an article by Janko Roettgers, Eagle’s work is described:
According to Eagle, local incumbent Safaricom had started a minute-sharing service for its prepaid cell phone plans a few years back. The idea was to enable users to send minutes to family members in rural areas, who weren’t otherwise able to buy prepaid phone cards. However, Kenyans quickly came up with other uses. “Lots and lots of people were using it as a surrogate for currency,” Eagle said. “[You] could literally pay for taxi cab rides using cell phone credit.”

Safaricom realized a huge opportunity and started a mobile payment service called M-PESA. To call M-PESA a success would be an understatement, according to Eagle. “Within about a year, (Safaricom) became the biggest bank in East Africa.” Today you can use your phone to pay for cab rides and electricity, to get money out of ATMs without owning an ATM card or even having a traditional bank account.

Will your mobile phone service replace your checking account? Ask Mr. Eagle (or Mr. Shakespeare).

Published by

David W. Schropfer

David W. Schropfer is the CEO of SAFE (Smartphone Authentication For Everyone), a cybersecurity company in New York (  Every day, he and his team of professionals keep the people who use The SAFE Button protected from some of the most common traps, hacks and attacks that target computer systems of all sizes. David is the author of the bestselling cybersecurity book, Digital Habits: 5 Simple Tips to Help Keep You and Your Information Safe Online. His previous books, including The Smartphone Wallet and industry whitepapers, predicted some of the biggest trends in the payments, mobile, and security industries.  Since graduating Boston College, David earned an Executive MBA from the University of Miami.