It is a testament to the ubiquity of the mobile industry that the prefix M- is no longer a signifier of novelty in Kenya.
The annual growth rate of the mobile telephony sector across sub-Saharan Africa (SSA) has been an astonishing 44% since 2000, according to figures from the GSMA, the mobile industry trade association.
The spread of the mobile phone on the continent – that came almost from a standing start at the turn of the millennium – has brought with it a host of social and business services that use the network to exchange information and money.
It is the latter that has raised hopes that, just as they leapfrogged from fixed-line telecommunications to mobile, African economies can bypass credit cards and move straight to payments made using mobile phones, disintermediating bricks-and-mortar banking and traditional payment mechanisms.
Estimates from the African Development Bank suggest retail banking will be growing at around 15% per year by 2020, keeping pace with the expansion of the middle classes on the continent. However, it will be growing from a low base, with development agency estimates of the unbanked population on the continent ranging between 70% and 85%.
Mobile phones have penetrated right to the base of the pyramid, and many in both the development and commercial worlds see mobile money as the solution to bringing banking services to previously underserved communities.
Underpinning much of the enthusiasm around mobile money is M-Pesa: the Kenyan service that has become synonymous with Africa’s mobile money industry and mobile innovation more generally on the continent.
The service allows users to deposit and withdraw money from a nationwide network of agents operating out of small shops, petrol stations and other enterprises. M-Pesa has around 17 million registered users and handles around $21 million per day, much of it in peer-to-peer transfers, but it is now being used to pay bills and other small transactions.
Launched in 2007, the service positioned Kenya at the heart of the mobile banking industry in Africa.
"We see a lot of M-Pesa-like services being rolled out all over the world, and some of them are gaining traction," says Sarah Rotman from the Consultative Group to Assist the Poorest (CGAP), a consortium of development agencies working on financial inclusion and hosted by the World Bank. "The speed at which M-Pesa scaled will really never be replicated, and that in my opinion shouldn’t be the measure of success."
That it has prompted a surge in innovation amongst entrepreneurs in Africa – in particular in Nairobi’s evolving Silicon Savannah on Ngong Road – is without a doubt. M-Pesa’s direct descendants are attracting considerable buzz from the growing venture capital and technology-incubator community in east Africa.
"What we are seeing in some of the more developed markets is that M-Pesa is starting to be used by other companies for their own purposes," says Rotman. "And there are businesses that are popping up that base their business models on a new and cheaper way of receiving payments. That’s really starting to happen in the more developed markets, like Kenya."
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M-Pesa is commonly being used to pay small bills, but systems to link the mobile money transfer products into more mainstream transaction mechanisms are also being developed. Technologies such as PesaPal are now in use by financial institutions and other businesses. Some, such as M-Kesho, developed as a partnership between Safaricom and Equity Bank, have been created to link customers’ bank accounts directly to their M-Pesa accounts.
Others, such as Kopo Kopo, which launched in Nairobi in February, work to link small businesses to the mobile money grid and, as CEO Dylan Higgins says, improve "the entire experience of serving SMEs with mobile payments".
On the other side of the continent, in Nigeria, the central bank issued 11 licences for cashless payment services to mobile operators and banks in 2011, with a plan to drive growth in the sector and promote financial inclusion.
Nigeria remains the big prize for mobile operators and retail banks, with a vast population – many of whom remain unbanked – and a relatively high penetration of mobile phones.
Etisalat, one of the country’s operators, together with FirstBank, a local financial institution, launched Easywallet, which links payments to bank accounts and mobile money accounts through a Sim card. Others, such as Pagatech, more closely mirror M-Pesa, launching with cash-transfer and bill-paying functionality.
The central bank has identified mobile money as a fix-all for the issues of making banking for smaller enterprises and individuals cost effective, in a region where the small size of transactions and the cost of operating makes traditional banking products economically unviable for large segments of the population.
As rational as this argument seems, however, the economic impacts are less clear. There is little literature relating to the direct impact of mobile money on economies.
The facility to transact does not, on its own, mean that individuals and small businesses are financially included and there is anecdotal evidence at least that mobile money is not necessarily accessing the bottom of the pyramid at meaningful scale. Rather, it is principally economically active, urban consumers who adopt the services.
CGAP believes, based on its studies in west Africa and south Asia, that around 40% of users come from the poorer segments of society – which is disproportionately small given the demographics in both regions.
The GSMA has put figures on the overall impact of the development and spread of mobile telecoms on the continent. Its Mobile Observatory report, released in October, claims that the direct economic impact of "mobile operators and their associated ecosystems" was around $32 billion in SSA in 2011.
The association predicts that between 2015 and 2020, mobile-related businesses and the impact of technology on commercial activities more broadly will add 1.9 million jobs in Kenya and 9.4 million in Nigeria.
There also remain large questions over the regulation of mobile money payments. Kenya’s system evolved largely outside of the mainstream banking ecosystem, and hence outside of stricter banking regulations, to which some attribute the rapid spread of M-Pesa.
"I don’t know if Kenya is necessarily the standard for how it should be done," says CGAP’s Rotman. "I think most regulators would look at that and say, ‘Oh my goodness, [the Kenyan regulator] was asleep at the wheel,’ but it did enable innovation."