Why Kenya Is Ahead of the U.S. in Mobile Payments

The United States is a global leader on many fronts, but when it comes to adopting mobile-payment technology, it’s lagging behind. In fact, it’s trailing behind developing nations like Kenya, where more than 50 percent of the adult population uses the digital technology (compared with about 12 percent of Americans).

Why is that? The U.S. is too developed.

Mobile Payments for the “Unbanked”

Think about it: Most Americans already have bank accounts and/or credit cards. The most common payment methods in the U.S. are credit and debit cards. A quick swipe at a terminal transfers the money from the buyer’s account to the seller’s account.

But Kenya is a different story. The African nation has an unemployment rate of more than 40 percent, and the per capita annual GDP is only $1,800. The infrastructure for bank branches and automated teller machines is far less advanced than that of the U.S. Many Kenyans don’t have bank accounts or credit cards, but they still like to pay for goods and services without using cash. The solution? A mobile-payment and wallet service known as M-Pesa.

What Is M-Pesa?

M-Pesa (the M stands for mobile, and Pesa is the Swahili word for money) was created in Kenya in 2007 by Safaricom, that nation’s largest provider of cell phone service. With M-Pesa, Kenyans can “store” money on their mobile phones, transfer it to merchants or other individuals to pay for goods and services, and obtain cash from their accounts when needed.

Despite the small fees charged for using the mobile money-transfer service, more than 15 million Safaricom subscribers had opened M-Pesa accounts as of October 2012. The service has become so popular that versions of M-Pesa have been created in Afghanistan, India, South Africa, and Tanzania.

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